2014 Annual Report

Transcription

2014 Annual Report

Stock Code: 3481
Innolux Corporation
2014 Annual Report
Taiwan Stock Exchange Market Observation Post System:
http://mops.twse.com.tw
2014 annual report is available at: http://www.innolux.com
Printed on April 30, 2015
Notice to readers
This English-version annual report is a summary translation of the Chinese version and is not an
official document of the shareholders’ meeting. If there is any discrepancy between the English
version and Chinese version, the Chinese version shall prevail.
A. Spokesperson & Deputy Spokesperson information.
Spokesperson
Name: Jyh Chau Wang
Title: President
Tel: 886-37-586000
E-mail: [email protected]
Deputy Spokesperson
Name: Chien-Lang Lo
Title: General Director
Tel: 886-37-586000
E-mail: [email protected]
B Headquarters, Branches and Plant.
Headquarters: No.160, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park
Branch: 9 Ditanggang, Building B, 21 Zidong Road, Fenghuali, Xinshi District, Tainan City
Plant
Fab T1: No.160, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park
Fab T2: No.168, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park
Fab T3: No. 12, Kejung Road, Jhunan Township, Miaoli County, Hsinchu Science Park
Fab Pingzhen: No. 458, Pingjen Sect., Jung Shing Road, Zhenxing Village, Pingjen City, Taoyuan County
STSP Touch Fab 1: No.12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science Park
STSP Touch Fab 2: No.3, Sect. 1, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science
Park
Fab A: No.1, Ciye Road, Sinshih District, Tainan City, Southern Taiwan Science Park
Fab B: No.2, Sect. 2, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science Park
Fab C: No.12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan
Fab D: No.3, Sect. 1, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science Park
Fab F: No.11, Luke 10th Road, Kaohsiung City, Southern Taiwan Science Park
Touch Module Fab : No. 12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science
Park
C. Stock Transfer Agent
Grand Fortune Securities Co., Ltd.
Address: 3rd Floor, 51 Mingsheng E. Rd, Sec. 1, Taipei, Taiwan
Tel: 886-2-25621658
Website: http://www.gfortune.com.tw
D. Auditors
PricewaterhouseCoopers
Auditors: Han-Chi Wu, Sheng-Chung Hsu
Address: 27th Floor, 333 Keelung Rd, Sec. 1, Taipei, Taiwan
Tel.: 886-2-27296666
Website: http://www.pwcglobal.com.tw
E. Overseas Securities Exchange
Luxembourg Stock Exchange
Disclosed information can be found at http://www.bourse.lu
F Corporate Website: http://www.innolux.com
Tel: 886-37- 586000
Tel: 886-6- 5889998
Tel: 886-37- 586000
Tel: 886-37- 586000
Tel: 886-37- 586393
Tel: 886-37- 586000
Tel: 886-6-5051880
Tel: 886-6-505 1880
Tel: 886-6-5051881
Tel: 886-6-5051889
Tel: 886-6-5051880
Tel: 886-6-5051888
Tel: 886-7-6278888
Tel: 886-6-5051888
Innolux Corporation
Chairman: Hsing-Chien Tuan
Contents
I.
Letter to Shareholders..............................................................................................................1
II.
Company Profile .......................................................................................................................4
2.1 Date of Incorporation ........................................................................................................ 4
2.2 Company History .............................................................................................................. 4
III. Corporate Governance Report................................................................................................9
3.1 Organization ...................................................................................................................... 9
3.2 Directors, Supervisors and Management Team............................................................... 11
3.3 Remuneration of Directors, Supervisors, President, and Vice President ........................ 21
3.4 Implementation of Corporate Governance...................................................................... 28
3.5 Information Regarding Innolux’s Independent Auditors ................................................ 54
3.6 Replacement of independent auditors: ............................................................................ 55
3.7 The Company’s chairman, general manager, or any managerial officer in charge of
finance or accounting matters has in the most recent year held a position at the
accounting firm of its CPA or at an affiliated enterprise................................................. 55
3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major
Shareholders .................................................................................................................... 56
3.9 Information Disclosing the Relationship between any of the Company’s Top Ten
Shareholders .................................................................................................................... 57
3.10 The number of shares held by the Company, the Company’s directors and
supervisors, managerial officers and enterprises under control, either directly or
indirectly, with consolidated calculation of the comprehensive shareholding ratio. ...... 58
IV.
Capital Overview ....................................................................................................................59
4.1 Capital and Shares........................................................................................................... 59
4.2 Issuance of Corporate Bonds .......................................................................................... 65
4.3 Preferred Shares: None. .................................................................................................. 65
4.4 Issuance of Global Depositary Shares............................................................................. 66
4.5 Employee Stock Options................................................................................................. 67
4.6 Status of Employee Restricted Stock .............................................................................. 69
4.7 Status of New Share Issuance in Connection with Mergers and Acquisitions................ 71
4.8 Financing Plans and Implementation. ............................................................................. 71
V.
Operational Highlights...........................................................................................................72
5.1 Business Activities .......................................................................................................... 72
5.2 Market and Sales Overview ............................................................................................ 81
5.3 Human Resources............................................................................................................ 88
5.4 Environmental expenditures Information ....................................................................... 89
5.5 Labor Relations ............................................................................................................... 89
5.6 Important Contracts......................................................................................................... 94
VI.
Financial Information ............................................................................................................96
6.1 Five-Year Financial Summary......................................................................................... 96
6.2 Five-Year Financial Analysis ........................................................................................ 104
6.3 Supervisors’ Report in the Most Recent Year ............................................................... 113
6.4 Financial Statements for the Years Ended December 31, 2014 and 2013, and
Independent Auditors’ Report ....................................................................................... 116
6.5 Consolidated Financial Statements for the Years Ended December 31, 2014 and
2013, and Independent Auditors’ Report....................................................................... 116
6.6
Disclosure of the Impact on Company’s Financial Status Due to Financial
Difficulties..................................................................................................................... 116
VII. Review of Financial Conditions, Operating Results, and Risk Management ................. 117
7.1 Analysis of Financial Status.......................................................................................... 117
7.2 Analysis of Operating Results....................................................................................... 118
7.3 Analysis of Cash Flow .................................................................................................. 119
7.4 Major Capital Expenditure Items .................................................................................. 120
7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement
Plans and the Investment Plans for the Coming Year ................................................... 120
7.6 Analysis of Risk Management ...................................................................................... 121
7.7 Other Important Matters................................................................................................ 125
VIII. Special Disclosure .................................................................................................................126
8.1 Summary of Affiliated Companies................................................................................ 126
8.2 Private Placement Securities in the Most Recent Years: None. .................................... 136
8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent
Years.............................................................................................................................. 136
8.4 Special Notes................................................................................................................. 136
IX.
Materially might affect shareholders' equity or the price of the company's securities, has
occurred during the most recent fiscal year or during the current fiscal year up to the
date of printing of the annual report, such situations shall be listed one by one............136
I.
1.1
Letter to Shareholders
2014 Operating Report
It is an improvement and achievement year in 2014, we achieved record-breaking gross
profit margin, operating income ratio and net margin since the merger. Inventory turnover
days and net debt ratio also hit a new low. Especially net debt ratio down to 27.2% in the end
of 2014 compared to 153.2% debt negotiation in Q1 2012, improved significantly and better
than the same industry. All the way along, our management team worked tirelessly and
employees go all out in the work.
We keep working on financial constitution improvement in 2014 and integrate
manpower, production capacity and technique effectively. Through the success both in
development of new products and the strategy on products differentiation, we have
established our competitiveness among the global panel market. In 2014 our total
consolidated revenue was $428.7 billion which increased 1.40% by compared with 2013
revenue of NT$422.7 billion. The increase mainly due MP business growth, Full High
Definition (FHD) product development and introduce Touch On Display (TOD) product
successfully to Europe and America clients. The gross profit of year 2014 is NT$ 50.3 billion
and the gross profit margin of year 2014 is 11.7%, which is massively improved compared
with the 8.9% gross profit margin of year 2013. The net operating income of year 2014 is
NT$ 28.1 billion and the net operating income ratio of year is 6.6%. Both are keeping
improved comparing to the NT$ 15.3 billion operating income or 3.6% operating income ratio
for the year 2013. The annual profit after tax is NT$ 21.7 billion for year 2014, the annual
earnings per share is NT$ 2.31. Above all, the operating performance of the Company in the
year of 2014 has surpassed the same line of work in Taiwan, which demonstrated our
resolutions to operate the Company and the results of turning the tide.
As for the research development and market segmentation, we deem the continuous
development of the technology as the long term competitive advantage in our business
operation. We are highly recognized by the market with outstanding growth for our products
in the aspect of ultra-high resolution, ultra-thin, wide viewing angle, narrow frame, low power
consumption, wide color gamut, and LED backlight. Moreover, with the innovative thought
brought by the Company, we have introduced the whole new LCD TV panels in size 39
inches, 50 inches, 58 inches, 65inches, and panels in 4K2K ultra high resolution. Such
products are highly preferred by the consumers. We therefore successfully set the products
and specifications of the market, created market segmentation, surpassed and came out first in
the same line of work.
As we move forward, we will continue to endeavor, to concentrate and to innovate for
the best interest of our shareholders.
(I)
Result of Business Plan
In 2014 our consolidated revenue was NT$ 428,661,898 thousand, which increased
1.4%, which is NT$5,931,398 thousand by compared with 2013 yearly revenue of NT$
422,730,500 thousand.
In 2014 Net income was NT$21,676,759 thousand and earnings per share were
NT$2.31.
(II) Budget Implementation
No financial forecast disclosed for 2014, therefore not applicable to disclose budget
implementation.
1
(III) Financial Analysis from 2013 to 2014
Capital
Structure
Analysis
Liquidity
Analysis
Profitability
Analysis
Debt to Asset Ratio (%)
Long-term Capital to Fixed Asset
Ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (Times
Return on Total Assets (%)
Return on Equity Attributable to
Shareholders of the Parent (%)
Operating Income to Paid-in Capital
Ratio (%)
Pre-tax Income to Paid-in Capital
Ratio (%)
Net Margin (%)
Earnings Per Share (NT$)
2013
67.71
2014
52.50
75.91
121.31
57.12
39.92
2.12
1.72
95.10
77.41
7.28
4.98
2.79
10.23
16.85
28.30
6.20
22.64
1.21
0.57
5.06
2.31
(IV) Research and development
We keep helping client to intensify product competiveness, fit market demand and be
friendly to the environment as our main objective of display technique development. About
the development, mainly include environment protection material, electronics saving and low
power consumption, high pixel, high chroma, thin, narrow frame, high dynamic display, touch,
wide viewing angle and all-around system services integration, we all obtained remarkable
achievement. Also, the development achievement of each techniques, fully apply to TV,
desktop monitor, notebook, tablets, cell phone, medical application and industrial display
products. Moreover, the integrated development on the touch components and panels of more
advanced techniques and portable and wearable products application are the key points of our
future product design and development.
1.2
Summary of 2015 Business Plan
(I)
Enhancement of quality and improvement of technique
1. Strength quality
The key point of improvement is to improve the yield rate of middle and small
products and set the target for yield rate.
2. Process/ Product technique improvement
Shorten the Cycle time to mass production.
Improve IPS production capacity and improve TOD technique.
Increase the proportion of high resolution (FHD/HD) product.
(II) Continuous growth on middle and small size products
1. Speed up the process from new product development to mass production
2. Continuous improve market share
(III) Tablet Integration
Through bundle Sensor Glass and TFT business, to intensify the Touch total solution,
and to cooperate with clients of terminal brand.
2
(IV) Automation upgrade
1. Keep constructing automatic production line and improving the competitive
advantage.
2. While upgrading the equipment (from manual to automatic), reduced the Assembly
Times of the Company.
(V) Sourcing initiative and control and manage expense
In year 2015, the entire staff will also to fully devote themselves to work. Please
continue to give us your support and encouragement. Lastly, I wish everyone a good
health and the best of luck. Thank you. Lastly, I wish everyone a good health and the
best of luck. Thank you.
Manager: Hsing-Chien Tuan Chief Accountant: Chin-Yuan Chang
3
II. Company Profile
2.1
2.2
Date of Incorporation: January 14 2003
Company History
January 2003
Inception and registration of the Company
March 2003
Invested in a subsidiary, Innolux Holding Ltd.
May 2003
Ground breaking ceremony for the TFT and Color Filter Plant In Jhunan
August 2003
The TFT and Color Filter Plant In Jhunan commenced construction
March 2004
Entered into a 7-year NT$20 billion syndicated loan contract with a syndicate including Bank of
Communications
June 2004
Machinery installation started in the TFT factory and Color Filter Plant In Jhunan
September 2004 Birth of the first TFT-LCD panel
October 2004
Invested in Innocom Technology (Shenzhen) Ltd. in China
January 2005
Public issuance of the Company’s shares approved by the Financial Supervisory Commission
February 2005
Invested in Innolux Corporation Ltd. in the U.S.
March 2005
Obtained ISO 9001 certification
Granted the “2005 Outstanding Award in Makingthe Science Park Green by Planting Trees” by the
Science Park Administration
July 2005
Registered as an emerging stock on the GreTai Securities Market
Obtained ISO 14001 and OHSAS 18001 certifications
August 2005
Ranked 51st nationwide in actual import/export performance in 2004
Granted the Excellent Award in Import/Export Performance by the Ministry of Economic Affairs
and Bureau of Foreign Trade
November 2005 Recognized as an outstanding waste disposal model factory by the Environmental Protection
Administration, Executive Yuan
December 2005 Recognized as an Occupational Safety and Health Administration Voluntary Protection Unit by the
Council of Labor Affairs, Executive Yuan
October 2006
Shares became listed on the Taiwan Stock Exchange on 24 October
November 2006 The Board passed the resolution of merging with Jemitek Electronics Corp. on 21 November
March 2007
Completed merger with Jemitek Electronics Corp.
June 2007
Invested in InnoJoy Investment Corporation
August 2007
Invested in InnoFun Investment Corporation
November 2007 Global Deposit Receipts became listed on the London Stock Exchange on 7 November
June 2008
Topping out ceremony for the sixth generation factory of the Company
July 2008
Granted the “Outstanding Award in Making Green by Planting Trees” by the Science Park
Administration
Recognized as one of the TOP 10 Leading Companies among the “Taiwan Technology Top 100”
Ranked sixth among Deloitte Technology FAST50 Taiwan in terms of profit growth
September 2008 Entered into a 5-year NT$24 billion and US$200 million syndicated loan contract with a syndicate
of 20 banks including Mega International Commercial Bank
Selected as one of the 12 units in the national industrial group by the Water Assessment Programme
organized by the Ministry of Economic Affairs
October 2008
Received the Bronze Award of the National QCC Competition from the Corporate Synergy
Development Center of the Industrial Development Bureau, Ministry of Economic Affairs
Granted the 2008 Excellence Award in Recycling and Reducing Waste Production by the
Environmental Protection Administration, Executive Yuan
4
November 2008 Recognized as a nationwide friendly workplace in 2008 by the Council of Labor Affairs, Executive
Yuan
December 2008 Granted the 2008 Outstanding Water Conservation Award by the Water Resources Agency,
Ministry of Economic Affairs
Honored with the "2008 Taiwan CSR Awards-Silver Award" by the Taiwan Institute for
Sustainable Energy
February 2009
Innolux Display’s Fab T1 passed and obtained the Taiwan Occupational Safety and Health
Management System (TOSHMS) certification
April 2009
Innolux Display’s Fab T1 was granted the excellent award in achieving zero work accident hours by
the Council of Labor Affairs
May 2009
Innolux Display’s Fab T2 obtained ISO 9001/ISO 14001/OHSAS 18001/QC 080000 4-in-1
management system certification
June 2009
Granted the 2008 excellent personnel award by the National Labor Safety and Health Partnership of
the Council of Labor Affairs
September 2009 Issued the 2008 Sustainability Report of Innolux Display
Innolux Display’s Fab T0, T1, and T2 obtained the TS 16949 quality system certification
October 2009
Innolux Display announced a merger with TPO Displays Corp.
Honored with the “Energy Conservation Outstanding Innovation Award” by the Bureau of Energy,
November 2009 Innolux Display announced a merger with Chi Mei Optoelectronics Corporation
Entered into an NT$48 billion syndicated credit facility with a syndicate of 19 banks including
Mega International Commercial Bank
Received two Bronze Awards of the National QCC Competition from the Corporate Synergy
Development Center of the Industrial Development Bureau, Ministry of Economic Affairs
Granted the excellent award in low carbon production and waste reduction by the Industrial
Development Bureau, Ministry of Economic Affairs
December 2009 Innolux Display was honored with the "2009 Taiwan CSR Awards-Bronze Award" for its 2008
Sustainability Report by the Taiwan Institute for Sustainable Energy.
Received the outstanding award in the “2009 Outstanding Energy Saving Companies Selection”
from the Science Park Administration
Recognized as the Best Managed Company in Taiwan by Asiamoney
Granted the excellence award in environmental protection by the Science Park Administration
January 2010
Obtained “Labeling of Energy Saving Action” from the Environmental Protection Administration
February 2010
Granted the excellent award for outstanding achievement on training and management for
occupational health by the Council of Labor Affairs, Executive Yuan
March 2010
Completed the merger with Chi Mei Optoelectronics and TPO Displays
Innolux Display renamed as Chimei Innolux
Granted the outstanding performance award in occupational safety and health on the occasion of the
2009 Nationwide Occupational Safety and Health Week, held by the Council of Labor Affairs,
Executive Yuan
May 2010
Winner of Taiwan's Environmental Protection Administration's 2009 Enterprise Green Procurement
Performance Award.
Recognized as an outstanding unit in achieving zero work accident hours by the Council of Labor
Affairs, Executive Yuan
June 2010
18.5-inch LCD panel is awarded 2009 FPD green quality certification.
42-inch 120Hz+ MEMC is awarded the best integrated LCD panel at the Taiwan Gold Panel
Awards 2010 with the 13 th Annual Outstanding Optoelectronics Product Awards.
September 2010 Awarded the Outstanding Energy Conservation Award by the Department of Energy, Ministry of
Economic Affairs
October 2010
Passed DNV third-party independent verification for its 18.5-inch LCD flat panel monitor
5
(M185B1-L02), making CMI the first panel maker to receive a supply chain “water footprint”
verification statement
Granted “the Excellent Environmental Protection Award” by the Science Park Administration
November 2010 Granted the 2010 excellence award in recycling and reducing waste production by the
Environmental Protection Administration
Completed the merger with Chi Mei Energy
December 2010 Granted “the 2010 Outstanding Energy Saving Award” by the Science Park Administration
Granted “the Excellent Award in Low-Carbon Management” by the Science Park Administration
Granted “the 2010 Outstanding Award in Making Green by Planting Trees” by the Science Park
Administration
January 2011
Became the first manufacturer to obtain “water footprint” verification for its product supply-chain
with regard to its desktop LCD monitors and LCD TVs.
March 2011
2.65-inch and 5.3-inch Memory-In-Display (Midis) technology, which was a new energy-saving
panel technology, obtained the Best Paper Award of the 17th IDW (International Display
Workshops), Japan.
April 2011
Honored with the 2011 Taiwan Excellence Gold Awards for its ultra-thin 13.3-inch HD notebook
display module.
May 2011
Kobe site was awarded the Best Safety & Hygiene Company by the Safety Management Committee
of Kobe, Japan.
June 2011
Won the Outstanding Photonics Product Award 2011 for its 21.5-inch PCT (Projected Capacitive
Touch) display module by the Photonics Industry & Technology Development Association (PIDA).
Honored with the “2011 Contribution to Job Creation” award by the Ministry of Economic Affairs
and Council of Labor Affairs, Executive Yuan
August 2011
Ranked third among the “2010 Outstanding Export Growth Companies” by the Bureau of Foreign
Trade, Ministry of Economic Affairs
September 2011 Granted the 2010 Enterprise Green Procurement Performance Award by the Environmental
Protection Administration, Executive Yuan
October 2011
STSP Branch was honored with the “Jin-Jhan Award” by the Council of Labor Affairs, Executive
Yuan.
Honored with “National Industrial Safety and Health Award” by the Council of Labor Affairs,
Executive Yuan
April 2012
Entered into the Joint Debt Restructuring Agreement with the syndicate
June 2012
Won the Outstanding Photonics Product Award 2012 for its 50-inch 3D Direct-Type LED panel by
the PIDA.
August 2012
Honored with the “Taiwan Excellence Silver Award” for its 23.6-inch USB super energy-saving
LCD screen
September 2012 Recognized as an outstanding unit for hiring disabled persons by surpassing the target
Granted the 2011 Enterprise Green Procurement Performance Award by the Environmental
Protection Administration, Executive Yuan and the only panel factory granted the award for four
consecutive years and fulfilling its responsibility of a sustainable environmental protection
enterprise
Chi Mei Optoelectronics UK Limited revoked
December 2012 Changed its name to “群創光電股份有限公司” with the English name of “Innolux Corporation”
January 2013
Global depository receipts listed and traded on the Luxembourg Stock Exchange on 23 January
Merger of the subsidiaries InnoJoy Investment Corporation and InnoFun Investment Corporation, in
which InnoJoy Investment Corporation was the surviving company
Eastern Vision Co., Ltd. Liquidated
March 2013
Trading Limited liquidated
Dragon Flame Industrial Ltd. liquidated
6
April 2013
Nanhai Plant took the lead in obtaining the first MFCA material flow cost accounting certification
in the world
The Company’s 65-inch 4K2K TV module was awarded the 21st “Taiwan Excellence Gold Award”
The Company’s 4.3-inch active organic light emitting display (TRUEOLED) was awarded the 21st
“Taiwan Excellence Silver Award”
The Company's 50-inch ultra-high resolution (4K2K) thin narrow frame LCD TV module was
awarded the 21st "Taiwan Excellence Award"
The Company’s 30-inch six million pixel medical monitor was awarded the 21st "Taiwan
Excellence Award"
The Company’s 5-inch Full HD LCD panel module was awarded the 21st "Taiwan Excellence
Award"
The Company’s 3.4-inch active organic light emitting display was awarded the 21st "Taiwan
Excellence Award"
June 2013
The Company's 65-inch ultra-high resolution thin narrow frame LCD TV module was recognized
by the 16th “Annual Outstanding Optoelectronics Products Awards”
Granted the first “National Environmental Education Award – Excellence Award for Private
Enterprises Group” by the Environmental Protection Administration
Innocom Technology (Jiashan) Co., Ltd. liquidated
September 2013 Ningbo Chi Mei Electronics Ltd. renamed as Ningbo Innolux Optoelectronics Ltd.
Nanhai Chi Mei Optoelectronics Ltd. renamed as Ningbo Innolux Technology Ltd.
Ningbo Chi Hsin Electrics Ltd. renamed as Ningbo Innolux Display Ltd.
Ningbo Chi Mei Logistics Corp renamed as Ningbo Innolux Logistics Ltd.
October 2013
The Company’s “Intelligent Automation” team was granted the “Annual Innovative Pilot Award”
of the Industry Innovation Award for theone-stop touch innovative operating model by the Ministry
of Economic Affairs
Foshan Chi Mei Logistics Co., Ltd. renamed as Foshan Innolux Logistics Co., Ltd.
TPO Displays (Nanjing) Ltd. renamed as Nanjing Innolux Optoelectronics Ltd.
November 2013 Awarded the 2013 Green Building Gold Mark by the Ministry of Economic Affairs
Awarded the “Premium” honor of the 2013 Taiwan CSR Awards
Full Lucky Investment Limited liquidated
December 2013 Selected as an outstanding water saving unit for 2013 by the Water Resources Agency of the
Dongguan Chi Hsin Electrics Ltd. revoked
TPO Displays (Shanghai) Ltd. renamed as Shanghai Innolux Optoelectronics Ltd.
Global Deposit Receipts listed on the London Stock Exchange delisted
January 2014
Plant T1 and Plant B, D, TOC, F (Tainan) awarded Health Promotion Label of Healthy Workplace
Certification
Chi Mei Optoelecttonics (Singapore) Pte. Ltd. revoked
Innocom Technology (Xiamen) Co., Ltd. revoked
Merger of Nanhai Chi Mei Electronics Ltd. and Nanhai Chi Mei Optoelectronics Ltd., in which
Nanhai Chi Mei Electronics Ltd. was the surviving company
February 2014
Foshan site awarded as an Advanced Corporation in Promotion of Environmental Protection in
Si-shan town
Ningbo site awarded as an Advanced Corporation in Safe Production and Workplace in Ningbo
City 2013
March 2014
Honored with the Healthy Corporation Award for the 2014 Southern Science Park Ecological and
Humanistic Marathon
April 2014
Nanhai Chi Mei Electronics Ltd. renamed as Foshan Innolux Optoelectronics Ltd.
The Company’s 65-inch ultra-high-analytic 3D TV panel
Awarded a certificate of recognition for offering disability employment opportunities to realize
corporate social responsibilities by the Southern Taiwan Science Park Administration, Ministry of
7
Science and Technology
Won the“Taiwan Excellence Silver Award”
September 2014 Chi Mei Optoelectronics USA, Inc. renamed as Innolux Optoelectronics USA, Inc.
TPO Displays USA Inc. renamed as Innolux Technology USA Inc.
October 2014
TPO Displays Japan K.K. renamed as Innolux Technology Japan Co.,Ltd.
November 2014 Chi Mei Optoelectronics Europe B.V. renamed as Innolux Optoelectronics Europe B.V.
TPO Displays (Shinepal) Ltd. renamed as Nanjing Innolux Technology Ltd.
Chi Mei Optoelectronics Japan Co., Ltd. renamed as Innolux Optoelectronics Japan Co.,Ltd.
TPO Displays Hong Kong Ltd renamed as Innolux Hong Kong Ltd.
December 2014 Health Management Award and Nutrition Health Award by the Health Promotion Administration
Granted 2014 Taiwan Sustainable Development Awards by National Council for Sustainable
Development
TPO Displays Hong Kong Holding Ltd. renamed as Innolux Optoelectronics Hong Kong Holding
Ltd.
TPO Hong Kong Holding Ltd. renamed as Innolux Hong Kong Holding Ltd.
TPO Displays Europe B.V. renamed as Innolux Technology Europe B.V.
February 2015
Signed an agreement for a syndicated credit line of NT$68.5B with Bank of Taiwan and 15 other
banks
March 2015
The company terminated the debt restructuring negotiation and canceled the debt negotiations
April 2015
The Company’s 100% high color saturation 4K2K TV module was awarded the 21st “Taiwan
Excellence Gold Award”
Awarded a certificate of recognition for social responsibilities by the Global Views
8
III. Corporate Governance Report
3.1
Organization
3.1.1 Organization Chart
9
3.1.2 Major Corporate Functions
Divisions
Main duties
Manage the businesses of the Company according to the resolutions passed by the
shareholders’ meetings and the Board and the orders of the Board
Responsible for assessing the soundness of the internal control system and all the
standards, checking whether the internal control system is operating effectively on a
Auditor's Office
continual basis, measuring the operating results of the departments and providing
improvement recommendations for efficient operation
Set up business and support units for different types of customers to provide a one-stop
Global Sales Business Center
solution for all customers’ needs
Integrate the research and development of technologies and products, and assess and
Product Technology Center
introduce new technologies and new products
Production Technology
Responsible for process technology, automation technology and initial equipment and
Center
material purchase, etc.
LCD Panel Manufacturing
Responsible for the production of large-size LCD panel products.
Center
Module Manufacturing
Responsible for the production of LCD module products
Center
Responsible for the sales and marketing, technology development and production of
Touch Panel Business Unit
touch panel products.
Mobile Device Business
Responsible for the sales, marketing, and product development of LCD wireless
Unit
communication and audio-visual systems as well as production of panel production
Sales & Marketing
Responsible for market development, promotion, and customer service
Technology Development
Develop, improve, verify, and test new technologies and new processes
Development and improvement of new products; design, development, verification, and
Product Development
testing of products
Manufacturing
Production, packaging, and repair of products
Responsible for handling company-wide issues including environmental protection,
Environmental & Safety
occupational safety, damage prevention, and risk control of the factories, staff health
Division
management and workplace improvement, and greenhouse gas reduction; implementing
and managing the environmental safety and health policies of the Company.
Responsible for the quality management of the Company; providing the best and the
most efficient quality management services (including quality control, product quality
Quality Management Center
guarantee, quality system, and documentary management); and promoting the concept
of total quality control
Coordinate the capital operating system of the Company, provide financial and
Finance & Accounting Center accounting information, manage investment plans and risk aversion, and manage overall
financial, investment, accounting, and tax matters.
Responsible for drafting and reviewing contracts; providing business-related legal
Legal and Intellectual
consultation services; and coordinating local and international intellectual property
Property Center
matters of the Company
Responsible for the overall procurement strategy of the Company, strategic planning of
Strategic Procurement Center important parts and components, material preparation for the introduction of products
and standardized cost management
Responsible for the operation and management, industrial engineering and information
system of the Company; profits and losses of cost accounting, business strategy
Business Management Center consultation, work-flow efficiency improvement, capacity expansion planning,
production efficiency enhancement, hardware and software infrastructure, and
information system construction
Responsible for overall human resources policy, promotion of talent selection,
Human Resources
education, deployment and retention, employee communications, general administration
Management Center
and corporate social responsibilities, etc.
President’s Office
10
3.2
Directors, Supervisors and Management Team
3.2.1 Directors and Supervisors
April 10, 2015
Title
Citizenship
Name
Note 1
Date
Elected
Term
(Years)
Date
First
Elected
Shareholding
when Elected
Shares
％
Current
Shareholding
％
Shares
Spouse & Shareholding
by Nominee
Minor
Shareholding Arrangement
Shares
％
Shares
Experience (Education)
Executives, Directors or
Supervisors who are
Other Position spouses or within two
degrees of kinship
％
Title Name
Relation
Taiwan
Hsing-Chien
Tuan
Jun 19,
2013
3
Nov 21,
2002
17,166,567 0.19
17,611,561 0.18
－
－
－
Chairman of the Board and
CEO, Chimei Innolux
Corporation
Ph. D, Electronic Engineering,
－ Stanford University (U.S.A.)
Note 2
General Manager, AU Optronics
Corp.
General Manager, Unipac
Optoelectronics Corp.
Taiwan
Hyield
Venture
Capital Co.,
Ltd
Jun 19,
2013
3
Nov 21,
163,989,223 1.8
2002
176,311,219 1.77
－
－
－
－
Representative
Taiwan
Hong-Jen
Chuang
Jun 19,
2013
3
Jun 29,
2012
N.A.
－
－
－
－
Institutional
Director
Taiwan
Jialian
Investment
Co., Ltd.
Jun 19,
2013
3
Jun 29,
2012
9,926,773
0.11
－
－
－
Chairman
&
Chief Executive
Officer
Institutional
Director
Representative
Taiwan
Independent
Director
Hong Kong
－
－
10,672,661 0.11
－
－
－
－
－
－
－
－
－
－
Master of Accounting, Soochow
University
－
Note 3
Chairman of Innolux
Corporation
－
－
－
－
－
－
－
－
－
－
－
－
Jyh-Chau
Wang
Jun 19,
2013
3
Jun 29,
2012
N.A.
－
673,067
0.01
607
－
－
M.S., Materials Engineering,
National Tsing-Hua University
Vice President, Chi Lin
Technology Co., Ltd.
Deputy Plant Director, Unipac
－
Note 4
Associate Research Fellow,
Material Research Laboratories,
Industrial Technology Research
Institute
Stanley Yuk
Lun Yim
Jun 19,
2013
3
Jun 19,
2013
－
－
－
－
－
－
－
－ High school graduate
11
－
Note 5
Title
Citizenship
Name
Note 1
Date
Elected
Term
(Years)
Date
First
Elected
Shareholding
when Elected
Shares
Independent
Director
Supervisor
Taiwan
Taiwan
Chi-Chia
Hsieh
Ren-Guang
Lin
Jun 19,
2013
Jun 19,
2013
3
3
Jun 19,
2013
Jun 29,
2012
Supervisor
Taiwan
Yi-Fang
Chen
Jun 19,
2013
3
Jun 29,
2012
Supervisor
Taiwan
I-Chen
Investment
Ltd.
Jun 19,
2013
3
May 19,
2004
Representative
Taiwan
Te-Tsai
Huang
Jun 19,
2013
－
Jul 1,
2010
－
－
－
％
－
－
－
25,611,545 0.28
N.A.
－
Current
Shareholding
％
Shares
－
－
－
－
－
－
27,535,972 0.28
－
212,619
Spouse & Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares
－
－
％
－
－
Shares
Executives, Directors or
Supervisors who are
Other Position spouses or within two
degrees of kinship
％
Title Name
－
Ph. D of Mechanical
－ Engineering, Santa Clara
University, USA
－
－
－
－
Professor at
National
Bachelor of Laws, Soochow
Taiwan
University,
University
Master of international banking
School of Law
law, Boston University, USA
－
Director of
Master of Law, Duke
Securities and
University,USA
Futures
Ph. D of Law, Duke
Investors
University,USA
Protection
Center
－
－
－
－
－
－
－
－
－
－
Note 8
－
－
－
Note 6
－
－
－
M.S., Accounting, Soochow
University
－ Lecturer, Accounting Soochow Note 7
University
Former PwC Partner
－
－
－
－
－
Graduated from National Chiao
Tung University
Manager, Philips Taiwan Ltd.
－ CFO, Vanguard International
Semiconductor Corporation
CFO, Foxconn Precision
Components Co., Ltd.
－
－
Relation
－
Note 1: Existing Directors and Supervisor as of the date of the annual report.
Note 2: Concurrently as chairman of the board: Innolux Holding Ltd., Rockets Holding Ltd., Stanford Developments Ltd., Nets Trading Ltd., Mega Chance Investments Ltd., Main
Dynasty Investment Ltd., Best China Investments Ltd., Asiaward Investment Ltd., Lakers Trading Ltd., Magic Sun Ltd., Sun Dynasty Development Ltd.
Note3: Concurrently as chairman of the board: AOT, FuChu Technology, General Interface Solution (GIS) Holding Limited, Rchiuan Investment, HungWei Investment, LianJiu
Investment, HungHan Investment, YungLi Investment and YiGuei Investment
Concurrently as director: UER Technology Corporation (Statutory representative)
Note4: Concurrently as chairman of the board: Landmark International Ltd., Gold Union Investments Ltd., Keyway Investment Management Ltd., Toppoly Optoelectronics (B.V.I.)
Ltd., Innolux Hong Kong Holding Ltd., Innolux Optoelectronics Hong Kong Holding Ltd., Innolux Hong Kong Limited, Bright Information Holding Ltd., Toppoly
12
Note5:
Note 6:
Note7:
Note8:
Optoelectronics (Cayman) Ltd., Leadtek Global Group Ltd., Innolux Technology Germany GmbH, Innolux Technology Europe B.V., Innolux Technology USA Inc., Yuan
Chi Investment Co., Ltd.(Statutory representative)
Concurrently as director: Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co.,Ltd., InnoJoy Investment Corporation(Statutory representative), FI
Medical Device Manufacturing Co., (Statutory representative)
A founder and Executive Director of S.A.S. Dragon Holding Limited, a member of Justices of Peace in the Government of the Hong Kong Special Administrative Region,
the deputy chairman of Hong Kong Electronic Industry Association, a permanant member of Hong Kong Trade Services Council, a member of Hong Kong Professionals
and Senior Executive Assoication; the chairman of District Fight Crime Committee,
Tsuen Wan District Office; a counselor for Coucil of Yan Chai Hospital, a committee member of Political Consultative Conference Shanghai Committee; and a honoary
member of Junior Police Call Committee, Tsuen Wan District.
Concurrently as chairman of the board: Microelectironics Technology Inc., IQE Taiwan Corporation, Jupiter Network Corp., Jupiter Technology (Wuxi) Co., Ltd.
Concurrently as independent director: AcBel Polytech Inc.
Concurrently as director: Taiwan Cement Corporation (Statutory representative), E-ONE MOLI ENERGY CORP. (Statutory representative), Advanced Wireless
Semiconductor Company, Bright Led Electronics Corp., Kobrite Taiwan Corporation (Statutory representative), Bright Crystal Company Limited (Statutory representative),
Advanced Crystal Application Technology, Inc. (Statutory representative), KoBrite Corp., Sasson Capital (Statutory representative)
The convener of the 11th supvervision meeting for the Allied Association for Science Park Industries
A lead accountant of YiFang CPA firm, and a Supervisor of YKK Taiwan Co. and NatureWise Biotech & Medicals Corp.
Concurrently as chairman of the board: Hyield Venture Capital Co., Ltd. (Statutory representative)
Concurrently as director Director position in HungChi International Investment (Statutory representative), Pao Shin International Investment Co., Ltd. (Statutory
representative), HungChiau International Investment, FuRuei International Investment; and Fuxuntong Trading, ShenZhen.
Concurrently as supervisor: Hold a concurrent Supervisor position in: HungJing International Investment (Statutory representative), LiYi International Investment (Statutory
representative), HungYuan International Investment (Statutory representative), Advanced Optoelectronic Technology (Statutory representative), and Pan-International.
13
Major shareholders of the institutional shareholders
April 10, 2015
Name of institutional shareholders
Major shareholders of the institutional shareholders
Hyield Venture Capital Co., Ltd.
Hon Hai Precision Components Co., Ltd. (97.95%), Chiu-Lien Huang (0.20%),
Hsiang-Fu Yu (0.20%), Terry Tai-Ming Gou (1.23%), Pao Shin International
Investment Co., Ltd. (0.41%)
Jialian Investment Co.,Ltd.
Super Venture Investments Limited, Samoa（100%）
I-Chen Investment Ltd.
Company Objective Developments Limited, Samoa (100%)
Major shareholders of the major shareholders that are juridical persons
April 10, 2015
Name of juridical persons
Major shareholders of the juridical persons
HON HAI PRECISION IND. CO., LTD. (Note)
Terry Tai-Ming Gou (12.28%), JPMorgan hosting Saudi-Arabia Central Bank
investment account (2.11%), Citi Managed Government of Singapore
Investment accounts (1.94%), Citigroup hosting Hon Hai Precision Ind. Co.
Ltd. Depositary Receipts account (1.81%), Standard Chartered hosting Vatican
Gardner emerging market equity index fund account (1.56%), JP Morgan
Chase Bank hosted Abu Dhabi Investment Authority invested more than
accounts (1.29%), JP Morgan Chase Bank hosted Norges Bank Investment
account (1.17%), JPMorgan Managed STICHTING Depositary APG
investment account (1.14%), Standard Chartered Hosting Fidelity light called
Trust: Fidelity Low of shares of the Fund (1.07%), Cathay Life Insurance Co.,
Ltd. (1.00%)
Pao Shin International Investment Co., Ltd.
Hon Hai Precision Industry Co., Ltd. (100%)
Super Venture Investments Limited, Samoa（100%）Diamond Luck Enterprises Ltd（100%）
Company Objective Developments Limited, Samoa
Perfect Impulse Investments Limited（100%）
(100%)
Note: The information is derived from the close of registrar information of the company dated 27 April 2015.
14
Professional qualifications and independence analysis of directors and supervisors
April 10, 2015
Meet One of the Following Professional Qualification Requirements, Together with at
Least Five Years of Work Experience
A Judge, Public Prosecutor,
Criteria An Instructor or Higher
Attorney, Certified Public
Position in a Department of
Have Work Experience in
Accountant, or Other
Commerce, Law, Finance,
Professional or Technical the Areas of Commerce,
Accounting, or Other
Specialist Who has Passed a Law, Finance, or
1
Academic Department
National Examination and Accounting, or Otherwise
Related to the Business Needs
been Awarded a Certificate Necessary for the
of the Company in a Public or
in a Profession Necessary Business of the Company
Private Junior College,
for the Business of the
College or University
Company
Name
Independence Criteria (Note)
2
3
4
5
6
7
8
9
Number of Other
Public Companies in
Which the Individual
is Concurrently
10
Serving as an
Independent Director
Hsing-Chien Tuan
－
－
V
－－ V
V
V
V
V
V
V
V
－
Hyield Venture Capital Co., Ltd
Hong-Jen Chuang
Jialian Investment Co., Ltd.
Jyh-Chau Wang
－
－
V
－－ V
V
V
V
V
V
V
－
－
－
－
V
－－ V
V
V
V
V
V
V
－
－
Stanley Yuk Lun Yim
－
－
V
V
V
V
V
V
V
V
V
V
V
－
Chi-Chia Hsieh
－
－
V
V
V
V
V
V
V
V
V
V
V
1
Ren-Guang Lin
V
V
V
V
V
V
V
V
V
V
V
V
V
－
Yi-Fang Chen
V
V
V
V
V
V
V
V
V
V
V
V
V
－
Te-Tsai Huang
－
－
V
V － V
V
V
V
V
V
V
V
－
Note: Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or
during the term of office.
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an
independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than
50% of the voting shares.
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person
under someone else's name(s), in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking
in the top 10 in holdings.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the
15
5.
6.
7.
8.
9.
10.
preceding three subparagraphs.
Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of
the Company or that holds shares ranking in the top five in holdings.
Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution that has a financial
or business relationship with the Company.
Not a professional individual or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or
institution that provides commercial, legal, financial, accounting services, or consultation to the Company or to any affiliate of the Company,
or a spouse thereof.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person, or its representative as defined in Article 27 of the Company Law.
16
3.2.2 Management Team
April 30, 2015
Title
Citizenship
Name
Note 1
Effective
Date
Shareholding
Shares
％
Chairman
&
Chief
Executive
Officer
Taiwan
Hsing-Chien
Tuan
President
Taiwan
Jyh-Chau
Wang
Mar 18,
2010
673,067 0.01
Vice
President
Taiwan
Wen-Jyh Sah
Mar 18,
2010
1,255,963 0.01
Vice
President
Taiwan
Chin-Lung
Ting
Mar 18,
2010
964,063 0.01
Vice
President
Taiwan
Yao-Tong
Chen
Mar 18,
2010
Vice
President
Taiwan
Assistant
Vice
President
Taiwan
Chen-Hua Luo
Shareholding
Spouse & Minor
by Nominee
Shareholding
Arrangement
％ Shares ％
Shares
－
－
－
607
－
－
－
9,543
－
－
－
－
－
－
－
1,744,644 0.02
16,422
－
－
－
Chih-Hung
92/1/14
Hsiao (Note5)
3,930,480 0.04
－
－
－
－
Feb 6,
2006
1,081,843 0.01
－
－
－
－
92/1/14 17,611,561 0.18
－
17
Chairman of the Board and CEO, Chimei
Innolux Corporation
Ph. D, Electronic Engineering, Stanford
University (U.S.A.)
General Manager, AU Optronics Corp.
General Manager, Unipac Optoelectronics
Corp.
M.S., Materials Engineering, National
Tsing-Hua University
Vice President, Chi Lin Technology Co., Ltd.
Associate Research Fellow, Material
Research Laboratories, Industrial
Technology Research Institute
Ph. D, Electrical Engineering, National
Taiwan University
Senior Consultant, Chi Lin Technology Co.,
Ltd.
M.S., Graduate Institute of Electronics
Engineering, National Taiwan University
Manager, Unipac Optoelectronics Corp.
Master of EMBA, Sun Yat-sen University
Manager, Hitachi Electronics Co., Ltd.
B.S., Industrial Engineering, Tunghai
University
Plant Director, AU Optronics Corp.
Supervisor, Center for Measurement
Standards (CMS), Industrial Technology
Research Institute
M.S., Computer Science, University of
California (U.S.A.)
Associate Vice President of Marketing &
Sales Department, BENQ
RD Engineer, Siemens Telecommunication
Systems Ltd.
Assistant RD Engineer, Apple Computer
Other Position
Managers who are
Spouses or Within Two
Degrees of Kinship
Title Name Relation
Note 2
－
－
－
Note 3
－
－
－
－
－
－
－
－
－
－
－
－
Note 5
－
－
－
Note 6
－
－
－
－
Note 4
－
Title
Citizenship
Name
Note 1
Effective
Date
Shareholding
Shares
Assistant
Vice
President
Taiwan
Hung-Wen
Yang
Jun 1,
2007
％
660,769 0.01
Spouse & Minor
Shareholding
Shares
59,002
％
－
Shareholding
by Nominee
Arrangement
Shares ％
－
Other Position
－
M.S., Chemical Engineering, National Cheng
Kung University
Plant Director, Sintek Photronic Corp
Deputy Plant Director, AU Optronics Corp.
Manager, Unipac Optoelectronics Corp.
－
－
－
－
－
－
－
Note 7
－
－
－
Director of Chi Mei
El Corporation
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
Assistant
Vice
President
Taiwan
Chu-Hsiang
Yang
Mar 18,
2010
1,064,585 0.01
7,953
－
－
－
Director of Chi Lin
M.S., Chemical Engineering, National
Optoelectronics
Central University
Director of FI
Deputy Section Manager, Chunghwa Picture
Medical Device
Tubes, Ltd.
Manufacturing Co.
Assistant
Vice
President
Taiwan
Kuo-Hsiung
Kuo
Mar 18,
2010
594,100 0.01
295,540
－
－
－
B.S., Mechanical Engineering, Waseda
University, Japan
Ke-Yi Kao
Mar 18,
2010
Assistant
Vice
President
Taiwan
Assistant
Vice
President
Taiwan
Assistant
Vice
President
Taiwan
Assistant
Vice
President
496,488
－
－
－
－
－
－
－
－
－
Chung-Kuang Mar 18,
Wei
2010
606,395 0.01
Tai-Chi Pan
Mar 18,
2010
1,066,880 0.01
58,680
－
－
－
Taiwan
Chih-Ming
Chen
Mar 18,
2010
521,193 0.01
863
－
－
－
Assistant
Vice
President
Taiwan
Jia-Pang Pang
Nov 8,
2010
2,325,089 0.02
－
－
－
－
Assistant
Vice
President
Taiwan
Nai-Jian
Zheng
Sept 23,
2013
－
－
－
－
305,837
－
18
M.S., Chemical Engineering, University of
Florida (U.S.A.)
Assistant Manager, Unipac Optoelectronics
Corp.
Ph. D, Institute of Photonics, National Chiao
Tung University
Electronics Research Laboratories, Industrial
Technology Research Institute
Graduated in Electrical Engineering of
National Cheng Kung University
Assistant Manager, Unipac Optoelectronics
Corp.
Graduated from Metallurgy and Materials
Science Research Institute of National Cheng
Kung University
Engineer, Shyen Sheng Fuat Steel & Iron
Works Co., Ltd
Senior Engineer, Unipac Optoelectronics
Corp.
Ph. D, Electronics Engineering, University of
Tokyo, Japan
Deputy Director of TFT Manufacturing Plant,
AU Optronics Corp.
Master of Industrial Engineering and
Management, Southwest Louisiana
University
General Manager of Nine Dragons Paper
(Holdings) Limited
Managers who are
Degrees of Kinship
Title Name Relation
Chairman of the
Board of Chi Mei El
Corporation
－
Note 8
Title
Citizenship
Name
Note 1
Effective
Date
Shareholding
Shares
％
Assistant
Vice
President
Taiwan
Zheng-Xia
Kuo
Sept 23,
2013
Assistant
Vice
President
Taiwan
Tian-Ren Lin
Sept 23,
2013
Assistant
Vice
President
Taiwan
Yu Shui Kuo
Dec 1,
2014
80,000
－
Finance
Supervisor
Taiwan
Chien-Lang Lo
May 7,
2014
177,431
－
Account
Supervisor
Taiwan
Chin-Yuan
Chang
Jan 9,
2009
408,192
－
389,802
－
1,065,554 0.01
Spouse & Minor
Shareholding
Shares
％
Shareholding
by Nominee
Arrangement
Shares ％
22,000
－
－
－
311,081
－
－
－
－
－
－
－
－
－
－
－
－
－
198
－
General Manager of
TPO Displays (Nanjing) Ltd.
General Manager of Flash Electronics Inc.
(Shanghai)
Operating Officer of Solectron Co.
Bachelor of Industrial Engineering and
Management, National Chiao Tung
University
Person-in-charge of BU, GIO Optoelectronics
Corp.
Manager of Chi Mei Lighting Technology
Corporation Engineer of Chunghwa Picture
Tubes, Ltd. Engineer of Behavior Tech
Computer Corp.
Master of Electrical Engineering, National
Taiwan University
Advisor to General Manager's Office, Unity
Opto Technology Co., Ltd.
Director of Head Office of Product
Development, Chi Mei Lighting Technology
Corporation
Master of Mechanical Engineering, Yuan Ze
University
Associate President of Entire Technology Co.
Ltd.
Manager of AU Optronics Corp.
Associate Manager of Prodisc
Master of Business Administration, Baruch
College, College of the City of New York
Assitant manager of Sumitomo Mitsui
Banking Corporation.
Deputy manager of HSBC
Master of Business Administration, National
Chengchi University
Vice President of Finance, Xiamen Overseas
Chinese Electronic Co., Ltd.
CFO, Information Product Business Group,
BENQ
Other Position
Managers who are
Degrees of Kinship
Title Name Relation
Director of Ampower
Holding Ltd.
－
－
－
－
－
－
－
－
－
－
－
Note 9
－
－
－
Note 10
－
－
－
Note 1: Existing Managers as of the date of the annual report.
Note 2: Concurrently as chairman of the board: Innolux Holding Ltd., Rockets Holding Ltd., Stanford Developments Ltd., Nets Trading Ltd., Mega Chance Investments Ltd.,
Main Dynasty Investment Ltd., Best China Investments Ltd., Asiaward Investment Ltd., Lakers Trading Ltd., Magic Sun Ltd., Sun Dynasty Development Ltd.
19
Note3:
Concurrently as chairman of the board: Landmark International Ltd., Gold Union Investments Ltd., Keyway Investment Management Ltd., Toppoly Optoelectronics
(B.V.I.) Ltd., Innolux Hong Kong Holding Ltd., Innolux Optoelectronics Hong Kong Holding Ltd., Innolux Hong Kong Limited, Bright Information Holding Ltd.,
Toppoly Optoelectronics (Cayman) Ltd., Leadtek Global Group Ltd., Innolux Technology Germany GmbH, Innolux Technology Europe B.V., Innolux Technology USA
Inc., Yuan Chi Investment Co., Ltd. (Statutory representative)
Concurrently as director: Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co., Ltd., InnoJoy Investment Corporation (Statutory representative), FI
Medical Device Manufacturing Co. (Statutory representative)
Note 4: Concurrently as chairman of the board: GIO Optoelectronics Corp.
Concurrently as director: Innolux Optoelectronics Japan Co., Ltd., TOA Optronics Corporation (Statutory representative)
Note 5: Promoted to deputy Vice President on 9 May 2013
Concurrently as chairman of the board: Suns Holding Ltd., Warriors Technology Investments Ltd., InnoJoy Investment Corporation (Statutory representative)
Concurrently as director: Yuan Chi Investment Co., Ltd. (Statutory representative)
Note 6: Concurrently as chairman of the board: Innolux Corporation (U.S.), Foshan Innolux Optoelectronics Ltd, Foshan Innolux Logistics Co., Ltd.
Note 7: Concurrently as chairman of the board: Ningbo Innolux Logistics Co., Ltd., Ningbo Innolux Technology Ltd., Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux
Display Ltd.
Concurrently as director: Chi Mei Frozen Food Co., Ltd.
Note8: Concurrently as chairman of the board: Nanjing Innolux Optoelectronics Ltd., Kunpal Optoelectronics Ltd., VAP Optoelectronics (Nanjing) Corp., Shanghai Innolux
Optoelectronics Ltd.
Note 9: Concurrently as director: Ningbo Innolux Logistics Co., Ltd., Ningbo Innolux Technology Ltd., Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd.,
InnoJoy Investment Corporation, Yuan Chi Investment Co., Ltd.
Note 10: Concurrently as director: Innolux Optoelectronics Europe B.V., Chi Mei Optoelectronics Germany GmbH
Concurrently as director: Innocom Technology (Shenzhen) Co., Ltd., Nanjing Innolux Optoelectronics Ltd., Kunpal Optoelectronics Ltd., Nanjing Innolux Technology
Ltd., VAP Optoelectronics (Nanjing) Corp., Shanghai Innolux Optoelectronics Ltd.
Concurrently as supervisor: Ningbo Innolux Logistics Co., Ltd., , Ningbo Innolux Technology Ltd., , Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd.,
Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co., Ltd., Foshan Innolux Optoelectronics Ltd., Foshan Innolux Logistics Co., Ltd., Chi Mei El
Corporation, InnoJoy Investment Corporation
20
3.3 Remuneration of Directors, Supervisors, President, and Vice President
3.3.1 Remuneration of Directors
Director Remuneration
0.06
－
－
All companies in the
financial report
0.06
The company
financial report
330
financial report
The company
330
The company
financial report
4,636
Stock
financial report
The company
4,636
Cash Stock Cash
The company
financial report
－
financial report
The company
－
The company
financial report
8,045
financial report
The company
8,045
The company
financial report
Chairman
&
Chief
Executive
Officer
Name
The company
Title
Pensions (B)
－
－
1,200
1,200
800
800
0.31
0.31
Any remuneration received from Recipients
other than subsidiaries
Compensation
(A) (Note 1)
Ratio of total
Profit
Salary,
remuneration
Service
distribution as
Bonuses, and
(A+B+C+D)
to
execution fees
remuneration
Allowances (E)
(D) (Note 3) net income (%)
(C) (Note 2)
(Note 4)
Unit: NT$; Shares: thousands
Remuneration received as an employee
Number of
Number of new Ratio of total
shares
shares obtained compensation
Profit distribution as
Pensions (F)
subscribed
with restrictive (A+B+C+D+E
employees’ bonuses (G)
+F+G) to net
(Note 5)
under employee
rights of
(Note 2)
income (%)
stock options
employees
(Note 7)
(Note 6)
All companies
in the
The company
financial
report
Hsing-Chien
Tuan
Hyield
Venture
Capital Co.,
Ltd
Hong-Jen
Representative
Chuang
Jialian
Institutional
Investment
director
Co., Ltd.
Jyh-Chau
Representative
Wang
Independent Stanley Yuk
Director
Lun Yim
Independent
Chi-Chia
Director
Hsieh
Institutional
director
25,137 25,137
29,868
Note 1: Refers to directors’ remuneration paid in 2014.
Note 2: The proposal of 2014 profit distribution has not resolved by the shareholders‘ meeting as of the Annual Report date.
Note 3: Refers to the relevant service execution fees of directors in 2014.
Note 4: Refers to the salaries, bonuses and special disbursement, etc. received as employees by directors in 2014.
Note 5: Refers to the amounts transferred to government authorities in 2014.
Note 6: Number of shares subscribed under employee stock options excludes the exercised portion.
Note 7: Number of shares subscribed under restrictive rights of employees excludes the exercised portion.
21
29,868
－
Range of remuneration table
Name of Directors
Total of (A+B+C+D)
Range of remuneration paid to each
director of the Company
The company
Under NT$ 2,000,000
NT$2,000,000 ~ NT$5,000,000
NT$5,000,000 ~ NT$10,000,000
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
Total
Hong-Jen Chuang
Jyh-Chau Wang
Stanley Yuk Lun Yim
Chi-Chia Hsieh
Hsing-Chien Tuan
Total of (A+B+C+D+E+F+G)
All companies in the financial
report
The company
All companies in the financial
report
Hyield Venture Capital Co., Ltd Hyield Venture Capital Co., Ltd Hyield Venture Capital Co., Ltd
Hong-Jen Chuang
Hong-Jen Chuang
Hong-Jen Chuang
Jyh-Chau Wang
Jyh-Chau Wang
Jyh-Chau Wang
Stanley Yuk Lun Yim
Stanley Yuk Lun Yim
Stanley Yuk Lun Yim
Chi-Chia Hsieh
Chi-Chia Hsieh
Chi-Chia Hsieh
Hsing-Chien Tuan
7
7
22
Jyh-Chau Wang
Hsing-Chien Tuan
Jyh-Chau Wang
Hsing-Chien Tuan
7
7
3.3.2 Remuneration of Supervisors
Unit: NT$; Share: thousands
Title
Name
Supervisors’ Remuneration
Bonus to Supervisors (B)
(Note 2)
Ratio of total remuneration
(A+B+C) to net income (%) Any remuneration
received from
Recipients
other
All companies in
The
All companies in
The
All companies in
The
All companies in
The
than
subsidiaries
the financial
company the financial report company the financial report company the financial report company
report
Base Compensation (A)
(Note 1)
Allowances (C)
(Note 3)
Supervisor
Supervisor
Ren-Guang Lin
Yi-Fang Chen
3,122
3,122
2,318
2,318
180
180
Supervisor
Te-Tsai Huang
Note 1: Refers to the remuneration paid to supervisors in 2014.
Note 3: Refers to the relevant service execution fees of supervisors in 2014.
0.03%
0.03%
Range of remuneration paid to each
supervisor of the Company
Under NT$ 2,000,000
NT$2,000,000 ~ NT$5,000,000
NT$5,000,000 ~ NT$10,000,000
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
Total
Name of Supervisors
Total of (A+B+C)
The company
All companies in the financial report D
Chen Investment Ltd. Te-Tsai Huang, Ren-Guang
Chen Investment Ltd. Te-Tsai Huang, Ren-Guang
Lin, Yi-Fang Chen
Lin,Yi-Fang Chen
4
4
23
－
3.3.3 Compensation of President and Vice President
Salary (A) (Note 1)
Title
Name
Chief
Executive
Officer
Hsing-Chien
Tuan
Pensions (B) (Note 2)
Bonuses and special
disbursement, etc.
(C) (Note 3)
All
All
All
The
companies in
The
The
companies in
companies in
company the financial company the financial company the financial
report
report
report
Unit: NT$ thousands
Number of new shares
Number of employee
Amount of profit distribution
obtained with restrictive
stock options obtained
Any
as employees’ bonuses (D) (Note 4)
rights of
(Note 5)
remuneration
employees(Note 6)
received from
All companies in
All
All
All
Recipients other
The company
the financial
The
companies in
The
companies in
The
companies in than subsidiaries
report
company the financial company the financial company the financial
report
report
report
Cash
Stock
Cash
Stock
Ratio of total
compensation
(A+B+C+D) to net
income (%)
President Jyh-Chau Wang
Vice
President
Wen-Jyh Sah
Vice
Yao-Tong Chen
President
24,121
24,121
216
216
30,227
30,227
44,631
－
44,631
－
0.46
Vice
Chin-Lung Ting
President
Vice
President
Chih-Hung
Hsiao
Note 1: Refers to remuneration paid in 2014.
Note 2: Refers to amounts transferred to government authorities in 2014.
Note 3: Refers to the bonuses , special disbursement and 491 tousand for a car and oil costs for CEO & President.
Note 5: Number of shares subscribed under employee stock options excludes the exercised portion.
Note 6: Number of shares subscribed under restrictive rights of employees excludes the exercised portion.
24
0.46
2,475
2,475
1,468
1,468
－
Name of President and Vice President
Range of remuneration paid to each president and vice president
The company
Under NT$ 2,000,000
NT$2,000,000 ~ NT$5,000,000
NT$5,000,000 ~ NT$10,000,000
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
All companies in the financial report
Yao-Tong Chen
Yao-Tong Chen
Wen-Jyh Sah, Chih-Hung Hsiao, Chin-Lung Ting Wen-Jyh Sah, Chih-Hung Hsiao, Chin-Lung Ting
Jyh-Chau Wang
Jyh-Chau Wang
Hsing-Chien Tuan
Hsing-Chien Tuan
Total
6
25
6
3.3.4 Names of managerial officers who received employees’ bonuses in the preceding year
and the distribution
Title
Unit: NT$ thousands as of April 30, 2015
Amount of
Ratio of Total
Amount of
cash bonus
Total
Amount to Net
stock bonus
(Note 2)
Income (%)
Name
(Note 1)
Chief Executive Officer Hsing-Chien Tuan
President
Jyh-Chau Wang
Vice President
Wen-Jyh Sah
Vice President
Chin-Lung Ting
Vice President
Yao-Tong Chen
Vice President
Chih-Hung Hsiao
Associate Vice President Chen-Hua Luo
Associate Vice President Hung-Wen Yang
Associate Vice President Ke-Yi Kao
Associate Vice President Chih-Ming Chen
Managerial
103,225
103,225
0.48%
Associate Vice President Chu-Hsiang Yang
officers
Associate Vice President Tai-Chi Pan
Associate Vice President Kuo-Hsiung Kuo
Associate Vice President Chung-Kuang Wei
Associate Vice President Jia-Pang Pang
Associate Vice President Nai-Jian Zheng
Associate Vice President Zheng-Xia Kuo
Associate Vice President Tian-Ren Lin
Associate Vice President Yu Shui Kuo
Manager
Chien-Lang Lo
Manager
Chin-Yuan Chang
Note 1: Refers to current managerial officers as of the printing date of the annual report.
Note 2: The proposal of 2014 profit distribution has not resolved by the shareholders‘ meeting as of the Annual Report
date.
26
3.3.5 Comparison of Remuneration for Directors, Supervisors, Presidents, and Vice
Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors,
Supervisors, Presidents, and Vice Presidents
A. The ratio of total remuneration paid by the company and by all companies included in the
consolidated financial statements for the most recent two fiscal years to directors, supervisors,
presidents, and vice presidents of the Company to the net income.
Ratio of total remuneration paid to directors, supervisors, presidents, and vice
presidents to net income
2013
The company
2014 (Note)
Companies in the
consolidated financial
statements
0.42
0.06
The company
Companies in the
consolidated financial
statements
0.31
0.03
Directors
0.42
0.31
Supervisors
0.06
0.03
Presidents &
Vice
0.64
0.64
0.46
0.46
Presidents
Note 1: The proposal of 2014 profit distribution has not resolved by the shareholders‘ meeting as of the Annual
Report date.
The remuneration payment policy of the Company is determined in accordance with the actual profit of the
Company for the year and the ratio as required under the Articles of Association of the Company for distribution as
remuneration to directors and supervisors and as bonuses to employees. For payments made to presidents and vice
presidents, different levels of remuneration are set after considering their job positions, responsibilities undertaken,
job achievements and contributions made to company operations, and with reference to industry standards, the
remuneration payment policy is considered to be reasonable.
B. The policies, standards, and portfolios for the payment of remuneration, the procedures for
determining remuneration, and the correlation with business performance.
Remunerations of directors and supervisors of the Company are determined in accordance with the Articles of
Association of the Company, their participation and value of contributions made to the operation of the Company
and with reference to industry standards. For years when the Company has a final net profit, after offsetting losses
and making transfers to legal reserves or special reserves, distribution of special stock dividends and employees’
bonuses, the Board will recommend a profit distribution proposal, including remuneration for directors and
supervisors, at its own discretion after considering the industry environment and capital requirements of the
Company and distribution payments will be made after approval by the shareholders.
Remuneration of presidents and vice presidents includes salaries, bonuses, special disbursements, employee
bonus, employee stock options, and new shares with restrictive rights of employees, etc. which are determined after
considering the nature of work, responsibilities, job positions, and duties undertaken and with reference to industry
standards of similar job positions. The amount of employees’ bonuses, after the relevant resolution has been passed
by shareholders, will be reviewed by the remuneration committee according to the bonus distribution mechanism for
employees of the Company on individual basis, and a proposal will be made to the Board for a decision and will be
implemented upon passing the Board resolution.
27
3.4 Implementation of Corporate Governance
3.4.1 Board of Directors
A total of 7 meetings of the board of directors were held in the previous period. Director and supervisor
attendance was as follows:
Title
Name
Chairman
Hsing-Chien Tuan
Hyield Venture Capital
Co., Ltd
Hong-Jen Chuang
Jialian Investment Co.,
Ltd.
Jyh-Chau Wang
Director
Director
Attendance
in Person
(B)
7
0
Attendance
Rate (%)
[B/A]
100%
7
0
100%
-
7
0
100%
-
By
Proxy
Remarks
-
Independent
Stanley Yuk Lun Yim
7
0
100%
Director
Independent
Chi-Chia Hsieh
5
2
71.40%
Director
Other mentionable items:
1. If the circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions
of the directors’ meetings objected to by Independent Directors or subject to qualified opinion and
recorded or declared in writing exist, the dates of meetings, sessions, contents of motions, all
independent opinions, and the Company’s response to the independent directors’ opinions should
be specified: None
2. If the Directors avoid motions in a conflict of interest, the Directors’ names, contents of motions,
causes for avoidance, and voting should be specified:
Voting
Name
Contents of motions
Causes for avoidance
Hsing-Chien Tuan The Compensation The board member Hsing-Chien Tuan and Did not for the
Jyh-Chau Wang Committee is
board member and manager Jyh-Chau
disucssion
proposing manager Wang have a vital interest in the items on
bonus for the year of the agenda, therefore they avoided
2013.
participating in the voting process in
accordance with the regulations specified
in Article 178 of the Company Act.
Hsing-Chien Tuan The Compensation The board member Hsing-Chien Tuan and Did not for the
Jyh-Chau Wang Committee is
board member and manager Jyh-Chau
disucssion
proposing manager Wang have a vital interest in the items on
bonus for the year of the agenda, therefore they avoided
2014 and
participating in the voting process in
amendment the rule accordance with the regulations specified
of Reward System in Article 178 of the Company Act.
of executives.
3. Measures taken to strengthen the functionality of the Board:
(1) The Compnay has set up a Compensation Committee on August 25, 2011 for assisting the
Board to conduct regular compensation review and set up compenstation standard for the
Directors and managers. The Committee is also in charged of making regular review of
performance of the Director and managers, and the related remuneration policy, system,
standard, and structure. Please see page 36 for the detail of the Committee’s operation.
(2) The Company has re-elected its Board Director on 19 June, 2013. The new Board is made of
five board member, including two independent directs and three supervisors fors strengthening
the Board function and Corporate Governance.
28
3.4.2 Audit Committee
A. Audit Committee: N.A.
3.4.3 Attendance of Supervisors for Board Meetings
A total of 7 meetings of the board of directors were held in the previous period. Supervisor
attendance was as follows:
Title
Supervisor
Supervisor
Name
Attendance in
Person (B)
5
7
Attendance rate (%) Remarks
[B/A]
71.40%
100%
-
Ren-Guang Lin
Yi-Fang Chen
6
85.70%
Supervisor
Te-Tsai Huang
Other mentionable items:
1. Composition and responsibilities of supervisors:
(1) Communications between supervisors and the Company's employees and
shareholders (e.g. the communication channels and methods, etc.): Our Supervisor
could communicate with employees and shareholders at any time if necessary.
(2) Communications between supervisors and the Company's Chief Internal Auditor
and CPA (e.g. the items, methods, and results of the audits of corporate finance or
operations, etc.):
A. Communications with the Chief Internal Auditor: The Company holds a Board
Meeting each quarter and keeps the meeting minutes. The Directors, President,
and the company's management are then notified of important discussions and
resolutions. All Supervisors had attended on each occasion, and the Chief
Internal Auditor was also present at the meetings to report on the audit
operations and major internal auditing matters, including execution, reporting,
and monitoring of Supervisors’ instructions. In addition, Supervisors obtained
audit reports on a monthly basis, which were submitted by the Chief Internal
Auditor.
B. Communications with the CPA: The Company holds a Board Meeting each
quarter and keeps the meeting minutes. All Supervisors had attended on each
occasion, and the CFO, Chief Internal Auditor, and CPAs were also present at
the meetings to discuss the related subjects, including execution, reporting, and
monitoring of the Supervisors’ instructions.
2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the
dates of meetings, sessions, contents of motions, resolutions of the directors’ meetings,
and the Company’s response to the supervisor’s opinion should be specified: None
29
3.4.4 Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission
Operation
Item
Yes
I.
Has the Company enacted and
disclosed Corporate Governance
Best-Practice Principles in
accordance with “Corporate
Governance Best-Practice
Principles of Companies Listed on
the Taiwan Stock Exchange or
Over-the-Counter Securities
Exchange”?
II. Equity structure and shareholder
rights
(I) How the Company handles
shareholder suggestions of
shareholders and disputes.
(II) Company’s control of the list of its
major shareholders and final
decision-makers
(III) How the Company establishes its
risk management mechanism and
firewalls involving related
enterprises.
(IV) Has the Company enacted the
internal regulations to ban the
personnel inside the Company from
buying, selling negotiable securities
by taking advantage of the
information which has not yet been
made public in the market?
Yes
Yes
Yes
Yes
No
Reasons
No
The Company has not yet enacted “Corporate Governance Best-Practice Principles” for
the time being. In accordance with the philosophy of “Corporate Governance
Best-Practice Principles of Companies Listed on the Taiwan Stock Exchange or
Over-the-Counter Securities Exchange”, nevertheless, the Company has, case-by-case
one after another, updated (enacted) “Procedure Rules for Shareholders’ Meeting”,
“Regulations Governing Transactions with the Enterprises within the Conglomerate and
Related Parties”, “Procedure Rules for Board of Directors Meeting ”, “Operating
Procedures for Management over Major Internal Information”, “Guidelines for
Employee Behaviors”, “Policies of Responsibility Toward the Society”, “Code of
Ethical Conduct for Directors and Managerial Officers” and such rules and regulations
to put into implementation thoroughly the spirit of corporate governance. For hands-on
performance by the Company in corporate governance, please refer to the present
Annual Report “Performance of Corporate Governance”, page 9 to page 58 for details.
(I)
The Company has enacted “Operating Procedures for Management over Major
Internal Information” and has, besides, set up spokesman and acting spokesman to
take charge of proposals or disputes from shareholders.
(II) The Company is in a position to dominate the name lists of the key shareholders
and the terminal controllers of the key shareholders and has duly input such
information to public into the Market Observation Post System (MOPS)
promulgated by the Securities and Futures Bureau, Financial Supervisory
Commission, Executive Yuan
(III) The Company has duly enacted the “Regulations Governing Transaction with
Related Parties”, “Regulations Governing Supervision over Subsidiaries” and has,
besides, set up relevant departments with sound mechanisms to evaluate and
monitor potential risks with affiliated enterprises.
(IV) The Company has duly ancted the “Operating Procedures for Management over
Major Internal Information” and further in accordance with the Company’s
internal control system, enacted “Operating Procedures to Prevent Inside Trading
and for Management over Major Information” to ben inside personnel from
buying, selling negotiable securities by taking advantage of the information which
has not yet been made public in the market.
30
Difference from corporate
governance practice principles for
TWSE/GTSM-Listed companies
and reasons
No significant difference
compared to corporate
governance practice principles
Operation
Item
Yes
III. Organization and responsibilities of
the Board of Directors
(I) Has the board of directors worked
out diversified, comprehensive and
multifaceted policies aiming at its
members and put into
implementation thoroughly?
No
Yes
Yes
IV. Has the Company set up sound
Yes
channels to communicate interested
parties, or set up special zone for
interested parties through the
Company’s website to appropriately
respond to interested parties
regarding the key responsibility
toward the society issues?
Reasons
(I)
Yes
(II) Other than the Remuneration
Committee and Audit Committee,
has the Company taken the
initiative to set up a variety of other
function committee?
(III) Has the Company set up regulations
and methods to evaluate the
performance by the board of
directors and conduct evaluation of
performance on an annual basis?
(IV) Regular assessment on
independence of CPAs
No
and reasons
The board of directors is composed of 5 members with a professional background
and who are technically experienced, two independent directors, and 3
supervisors. They are well-balance and also have multiple part related expertise to
raise stockholders’ interest. The Company’s independent directors and supervisors
are well known for their hands-on experiences accumulated in the profssion and
individual expertises to firmly safeguard the interests of all the Company’s
shareholders. Meanwhile, the board of directors has taken into independent and
objective account the key issues which would affect the successful development
by the Company.
(II) Exactly as resolved in the board of directors on August 25, 2011, the Company
already set up the Remuneration Committee where the Company’s independent
directors and experts hired from outside the Company serve as the Committee
members. For more details regarding the business performance of the
Company’s Remuneration Committee, please refer to page 36 of this Annual
Report. The Company, nevertheless, has not yet set up committee of other
functions to date.
(III) The Company has not yet conducted self-evaluation of the Company’s board of
directors, functional committees and individual directors. We have only
conducted evaluation through colleagues, retained outside professional institutions
to evaluiate performance or conducted evaluation of performance in other means,
nevertheless. ..
(IV) The Company’s board of directors evaluates the Certified Public Accountant’s
independence on a regular basis, say, on an annual basis, and retains creditworthy
Certified Public Accountant(s) to certify financial statements. The Certified Public
Accountant(s) so retained has (have) been free of any interested party involvement
and has (have) independent as the strict requirements.
Innolux offers a variety of features including investor services, supplier area, sales
services, product inquiries, media communications, anti-corruption reporting and so
forth in order to communicate and respond to shareholders‘ needs and expectations by
strengthening communications with stakeholders and thereby meeting their expectations.
31
Operation
Item
Yes
V. Did the company engage a
professional agency to handle
shareholder services for Innolux?
VI. Disclosure of information
(I) Establishment of a Website where
information on financial operations
and corporate governance is
disclosed.
(II) Use of other methods for
information disclosure (such as
setting an English website,
appointing personnel in charge of
collecting and disclosing
information, implementing a
spokesman system and publication
of shareholder meeting records on
the Company’s website).
VII. Other important information for
better understanding the Company’s
corporate governance operation
(including but not limited to the
interests and rights of employees,
care for employees, relations with
investors, relations with suppliers,
relations with materially related
parties, further study of directors
and supervisors, execution of risk
management policy and risk
measuring standards, execution of
customer policies and liability
insurance for the Company’s
directors and supervisors)
No
Reasons
Yes
Innolux has appointed a professional agency to handle shareholder related services for
the company.
Yes
(I) Through the company’s website (http:// www.innolux.com) with Chinese and
English versions, we provide financial, business, and corporate governance
information and keep updating.
Yes
(II) The company’s Business information department, Stock department, and the related
department responsible for collecting and disclosing the related information also set
up positions for its spokesperson in accordance with the regulations and the
company provides live shareholder meetings on the official website.
Yes
(I) Employee's Rights: Please refer to page 84 “5. The industrial relations of an
overview of business” of the annual report
(II) Employee Care
The company values employees’ mental and physical balance and provides
hardware which can release stresses, such as “Le Qun Guan” and “Huo Li Guan”.
Innolux also holds different kinds of activities to provide physical and mental
relaxation for our employees. We encourage our employees to join clubs (44 clubs
in Taiwan factories and 28 in China in 2014) to create an active and positive
working environment by supporting those clubs with resources.
Innolux cares for our employees from healthcare to daily lives. We not only
introduce all-you-can eat organic fruits and vegetables and weekly non-meat-day to
the group meals, we also conduct an expanded diet plan. We had been awarded as
“Health Management Award” and “nutritious Health Award” from Bureau of
Health Promotion in 2014. We care about the health of mothers in the workplace
and provide a friendly working environment such as lactation room，mothers’
classroom, new parent lessons, special parking spaces, and support for lactation
during work, maternity leave, birth benefits, and parental subsidies. We also
established mothers’ healthcare protection measures and rules.
32
and reasons
Operation
Item
Yes
No
Reasons
(III) Maintaining good relations and interactions with investors, suppliers, and interested
parties.
According to different interested groups, Innolux has established multiple and
unobstructed communication channels, such as investors’ service on company’s
webpage, suppliers zone, business service and product consulting, media
communications, so that we can keep communicating and getting feedback from
those interests groups’ needs and expectations.
1. Investors: the company treats our shareholders with the principle of fairness and
openness. We call the stockholders meetings according to the Company Act and
other related laws every year, encourage stockholders to actively participate in
the stockholders meeting with proposals and questions, and set up the role of
speakers or deputy speakers to deal with the suggestions from stockholders
properly. We appoint special personnel to collect Innolux’s information and to
revise it, and apply the information published on the TSEC Market Observation
Post System according to the related regulations.
2. Customers: we have salespeople and customer service units to reply to
customers’ demands effectively, establish a CRM system, monitor the progress
of handling issues, field audits and questionnaire feedback, and customers’
satisfaction survey.
3. Employees: we set up a direct employee line, mobilization meeting, Innolux
mailbox, interactive factory meeting (Labor-Management Meeting, the
Employee Welfare Committee, management interview, Industrial Safety),
employee questionnaires (group meals, activities, training), and opinion
collection mail box.
4. Suppliers: setting up an interactive platform for supplier purchasing and
procurement management, and a buyer and procurement management
department to host ad hoc meetings with other departments and suppliers
5. Communities: Having departments or individuals to be responsible for the
communications with community residents, visit the district officers and
residents from time to time, caring, and being kind to the neighbors
6. Governments: actively participate the regulation public hearing and seminar that
host by the governing departments, maintain good interactions with the
governments, and follow the government’s environmental protecting actions.
7. Non-governmental organizations: participating the professional seminars host
by NGOs, listening to the suggestions from outsiders, keep tracking with the
industrial changes, become the reference of CSR policy planning, organizing
projects that supporting weakness and promoting environmental protection.
33
and reasons
Operation
Item
Yes
No
Reasons
(IV) Directors and Supervisors Profession Enhancement Status
Innolux’s shareholders and monitors have both professional background and
practical experience. The company arranges further studies for shareholders and
monitors every year. For the latest further study updates please refer to page 37 of
this annual report.
(V) Risk Management
Running a company may face risks like economic recession, regulation
changes, markets with grueling competition, damage to the company’s reputation,
and business suspension. Innolux has established a risk management system to
regularly monitor the related financial risks, regulation risks, climate change risks,
water resource risks, supplier chain risks, information safety risks, and the
environment, safety, and health risks.
We implements Business Imp act Analysis (BIA) and risk Assessment (RA)
concepts from 2012. We analyze major business activities and organization
management, and carry out BIA and Business Continuity planning. The factories in
Taiwan and mainland China have reduced the risks of business suspension and
improved the survival capability to face hazard incidents by implementing business
continuity plans, including the subjects of earthquake, fire, information interrupts,
and infectious disease in 2014.
(VI) The implementation of customer policy
1. The customer satisfaction service
The company upholds the principle of “the highest quality” to carry out
social responsibility and business continuity, practice the quality policy, and
views customer service as the core value of this company. We continuously
implement improvement plans for our internal process, such as the quality
concepts of product design, manufacturing, information systems, and logistic
cooperation, to provide the most competitive service in order to reach the
highest customer satisfaction. Therefore, we can pursue the final win-win-win
goal for customers, Innolux, and suppliers.
2. Customer satisfaction
The company values the customer’s needs. We collect the KPI of services,
and we monitor, analyze, and improve the feedback from customers. We also
keep interacting with customers pro-actively.
34
and reasons
Operation
Item
Yes
VIII. Are there corporate governance
evaluation reports done by the
Company itself or outsourced to
professional agencies? If yes,
please state the evaluation result,
major shortcomings or
recommendations, and
improvement:
Yes
No
Reasons
and reasons
(VII) The company implements and maintains D&O insurance for its Directors,
Supervisors, and key officers by the company
Innolux maintains D&O insurance for its Directors, Supervisors, and key officers
The company’s corporate governance evaluation reports already review the
implementation status item by item aiming to ensure the stockholder’s equity, the
board’s function, supervisor’s function, information transparency, internal control
systems, operating strategy, and interested parties and company social responsibility.
About corporate governance evaluation reports done by the Company itself, please refer
to Company’s website.
35
3.4.5 Composition, Responsibilities and Operations of the Compensation Committee
A. The Compensation Committee Members’ Professional Qualifications and Independent Analysis
Criteria Meet One of the Following Professional Qualification Requirements, Together with at Least
Five Years of Work Experience
Name
(Note 1)
An Instructor or Higher
Position in a Department of
Commerce, Law, Finance,
Accounting, or Other
Academic Department
Related to the Business Needs
of the Company in a Public or
Private Junior College,
College or University
A Judge, Public Prosecutor,
Attorney, Certified Public
Accountant, or Other
Professional or Technical
Specialist Who has Passed a
National Examination and been
Awarded a Certificate in a
Profession Necessary for the
Business of the Company
Have Work Experience in
the Areas of Commerce,
Law, Finance, or
Accounting, or Otherwise
Necessary for the Business
of the Company
Number of Other Public
Companies in Which the
Individual is Concurrently
Serving for Compensation
Committee(Note3)
Independence Criteria(Note 2)
1
2
3
4
5
6
7
8
Independent
Director
－
－
v
V V V V V V V V
V
Chi-Chia
Hsieh
External
－
－
v
V V V V V V V V
V
Expert
Chi-Lin Wei
External
Expert
－
－
－
v
V V V V V V V V
Guan-Jun
Wang
Note 1: Director; Independent Director or others.
Note 2: If Compensation Committee Members, during the two years before being elected or during the term of office, meet any of the following situations, please tick the
appropriate corresponding boxes:
1. Not an employee of the company or any of its affiliates;
2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the
company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under someone else’s name(s),
in an aggregate amount of one percent or more of the total number of issued shares of the company or ranking as one of its top ten shareholders;
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of any of the above persons in the preceding three
subparagraphs;
5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the
36
company or ranking as one of its top five shareholders;
6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business
relationship with the company;
7. Not a professional individual or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial,
legal, financial, accounting services, or consultation to the company or to any affiliate of the company, or a spouse thereof;
8. Has not been a person under any conditions defined in Article 30 of the Company Law.
Note 3: If the identity of the member is a board member, please state if that meets Article 6 Section 5 of Regulations Governing the Appointment and Exercise of Powers by the
Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
B. Compensation Committee Meeting Status
Mr. Chi-Chia Hsieh, Chairman of the Compensation Committee, convened 3 regular meetings in 2014. The Committee members’ attendance
status is as follows:
Title
Name
Attendance in Person (B)
By Proxy
Attendance rate (%) [B/A]
Remarks
Chair
Chi-Chia Hsieh
3
Member
Member
Chi-Lin Wei
Guan-Jun Wang
3
3
－
－
－
100
100
100
-
Annotation:
1. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of
Directors in 2014.
2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a
dissenting opinion or qualified opinion.
37
3.4.6 Social Contributions
Item
I.
Implementation of Corporate
Governance
(I) Corporate social
responsibility policy and
performance evaluation
(II) Has the company been
routinely organizing CSR
trainings?
Difference from
company social
Operation
responsibility
practice principles for
TWSE/GTSM-Listed
Reasons
Yes No
companies and
reasons
Compared to the
CSR guidelines and
(I) Innolux has established relevant CSR
Yes
practices adopted by
policies that have not only been authorized other OTC/listed
by the highest management and
companies, Innolux’s
announcement internally at the company. In CSR policies have no
addition, relevant policies and guidelines
distinctive
have also been made available on the
differences.
company’s website as a declaration of
Innolux’s committment and obligation to
fulfilling its corporate social
responsibilities.
Yes
(II) In the orientation training for new
employees, Innolux Code of Conduct
training has been incorporated as a
component.
In addition, the company has also
incorporated concepts of CSR by
emphasizing values such as labor rights in
the trainings for assembly line foreman and
supervisors.
(III) Has the company established Yes
a designated unit in charge of
promoting CSR that consists
of members of senior
management authorized by
the board and report to the
board regarding its operation?
(III) Innolux has established a designated unit
responsible for the promotion and planning
of CSR in addition to the formulation of
approaches and objectives for sustainable
development. Innolux also convenes CSR
committee meetings on a quarterly basis,
although the company has not yet to report
and CSR issue to Board of Director meeting
directly but the President serving as the
management representative. The meeting is
attended by senior supervisors from various
business divisions, HR, EHS department,
green product management department and
so forth to discuss the performance of CSR
promotion and rate of object
accomplishsment in an effort to fulfill the
company’s corproate social responsibilities.
(IV) Has the company established
reasonable salary and
renumeration policies that
incorporate employee
performance evaluation and
CSR policies to create an
definitive and effective
system of merits/demerits?
(IV) Innolux takes the issue of employee benefit
and welfare very seriously and has taken
steps to ensure that factors such as gender
would result in different wage/benefit for
employees. By taking various factors (such
as employees‘ academic backgrounds,
professional experience and surveys of
reasonable market salaries) into
consideration, Innolux is able to offer
competitive salaries. Through „Preliminary
Goal Setting“ „Performance management
and development“ was implemented with
Yes
38
Operation
Item
Yes No
Reasons
Difference from
company social
responsibility
TWSE/GTSM-Listed
companies and
reasons
the pilot incorporation of „Daily
Management Record“ in 2014 to
accomplish the objective of „Identifying
and Developing Talents“. Employees found
violating the „Employee Code of
Conduct“ would receive appropriate
disciplinary action in accordance with the
„Employee Reward/Punishment
Procedure“ depending on the severity of
their offenses.
II.
Sustainable Environment
Development
(I) Commitment to improving
resource utilization and the
use of renewable materials
(II) Environmental management
system designed for industry
characteristics.
Yes
Compared to the
CSR guidelines and
(I) Through improvement in relevant
technologies, Innolux has not only reduced other OTC/listed
its discharge of contaminants from the
source but also reduced the quantity of
CSR policies have no
pollutants in its waste water discharge to
distinctive
increase its recycling rate. Innolux has
differences.
continued to improve upon its recycling
rate in 2014.
Yes
(II) The company has been actively promoting
relevant EHS management systems such as
the ISO 14001, TOSHMS, OHSAS18001
and so forth in order to Facilitate a positive
cycle of gradual improvement for green
sustainability and safety culture.
(III) Company strategy for climate Yes
change, energy conservation,
and greenhouse gas reduction
to reflect the affects on
operating activities.
(III) Starting from 2005, Innolux has completed
its GHG inventory and 3rd party audit as
prescribed by ISO 14064-1. Innolux has not
only managed its GHG emission
information through a GHG Information
Platform but also actively participated in
the international Carbon Disclosure Project
(CDP). Innolux scored 96 points for
disclosure in 2014 (a 7-point improvement
compared to 2013) and was the top-ranking
company in the panel industry. On top of
that, Innolux was also selected as Asian
Region’s (excluding Japan) top 10%
company for carbon disclosure in the
Carbon Disclosure Leadership Index
(CDLI).
III. Maintaining social services
(I) Has the company established Yes
relevant management policies
and procedures for social
services in accordance with
pertinent regulations and
international conventions on
human rights?
(I) Innolux makes an effort to adhere to
pertinent regulations prescribed in the
Labor Standards Act. In addition, specific
regulations on labor rights have also been
established in accordance with the
Electronic Industry Code of Conduct in the
company’s CSR Management Handbook,
which states that employees shall be free
from harrassments or discriminations for
reasons including (but not limited to) race,
skin color, age, gender, sexual orientation,
39
Compared to the
CSR guidelines and
other OTC/listed
CSR policies have no
distinctive
differences.
Operation
Item
Yes No
Reasons
disability, martial status and so forth in their
employment and benefits. In addition,
Innolux also implements methods such as
legal verification and internal audits to
ensure compliance with pertinent labor
rights requirements.
(II) Has the company established
systems/channels for
employee complaints and
handle the complaints in an
appropriate manner?
Yes
(II) Innolux has established a number of
channels for employees filing complaints,
including „Communication Hotline“,
„Employee Communication Email“ and
„Suggestion Box“ that have been setup at
various facilities for employees to voice
their opinions/thoughts with/without stating
their names.
(III) Does the company offer a safe Yes
and healthy working
environment for its employees
and conduct safety and health
education for employees on a
regular basis?
(III) The company has also established its EHS
Division to take charge of operations
including loss and risk aversion and EHS
management. The Facility EHS Committee
is responsible for reporting to the highest
ranking supervisor, relevant competent
units and labor representatives on a
quarterly basis. The disabling frequency
rate (F.R) has lowered from 0.52 in 2010 to
0.20 in 2014 (equivalent to a margin of
61.5%). The disabling severity rate (S.R)
has also fallen from 11.59 in 2010 to 4.30
in 2014 (a margin of 62.9%).
Yes
(IV) By establishing comprehensive channels of
communication and convening
labor-management meetings and employee
welfare commitee meetings on a quarterly
basis, representatives of management
(consisting of senior-ranking supervisors)
and labor representatives (elected by
employees) are able to engage in direct,
bi-lateral communications. With regards to
the notice of labor contract termination,
relevant notification procedures are fully
compliant with pertinent regulations.
(V) Has the company established Yes
effective career competence
development/training plan for
its employees?
(V) Guided by the philosophy that „talents are
the foundation of the company’s
development“, Innolux has established the
„Employee Career Development
Roadmap“ so that all Innolux employees
are adeuqately informed regarding the
prospects of their career development. In
addition, it would also enable supervisors to
manage their subordinates efficiently and
cultivate Innolux’s DNA of
„self-monitoring and
self-management“ among all employees. At
the same time, the company also offers a
a system for routine
communication with its
employees and to inform
employees regarding
significant changes to the
company’s operation in a
reasonable manner?
40
Difference from
company social
responsibility
TWSE/GTSM-Listed
companies and
reasons
Operation
Item
Yes No
Reasons
Difference from
company social
responsibility
TWSE/GTSM-Listed
companies and
reasons
list of qualifications that correspond to
specific positions, legal certificates and
other diplomas in order to boost
employees‘ vocational tenacity, competence
and competitiveness.
(VI) Has the company established
relevant policies and
complaint procedures for
operations such as R&D,
purchasing, production,
operation and services to
safeguard consumers‘ rights?
Yes
(VI) Innolux has established operating principles
that are customer-oriented and through
means of telephone calls, email exchanges
and face-to-face meetings, we are able to
have solid grasp of customers‘ needs so as
to formulate improvement strategies to
respond to customers in a timely manner.
(VII) Has the company adhered to Yes
pertinent regulations and
international standards for the
marketing and labeling of its
products and services?
(VII) Product safety has always been the most
important consideration for consumers. And
as such, safe product design and a series of
safety specification accreditations have
been incorporated at the early stage of
proeduct design to ensure the safety of
consumers. Innolux has taken the initiative
to apply for international standard
accreditation labels for its LCD panels in
order to help consumers identify safe
products at a glance.
(VIII)Does the company evaluate
suppliers‘ past records of
environmental/social impacts
before forming partnerships
with them?
Yes
(VIII)With regards to new suppliers, Innolux
will refer to relevant guidelines on
social/economic/environmental and supply
chain assessment along with adequate risk
evaluation to screen candidates before
choosing official suppliers. Suppliers with
actual/potential flaws in operation that have
failed to show effective improvement
despite notification and guidance from
Innolux would be included in the list of
forbidden/restricted suppliers.
(IX) Does the company’s contract Yes
with its key suppliers include
specific clauses that entail
immediate termination or
rescission of the contract
should the supplier be found
to violate the company’s CSR
policies or cause significant
impact on the
environment/society?
IV. Enhanced information
disclosure
(I) Has the company disclosed
Yes
relevant and reliable
information relating to
corporate social
responsibilities on its website
and/or MOPS?
(IX) Innolux reserves the right to halt
payment/immediately terminate or rescind
any contract of transaction/order and revoke
the undersigned vendor or its affiliated
businesses‘ qualification as an authorized
supplier. Innolux would also be entitled to
file for compensation for any losses
incurred on the company’s part.
Compared to the
CSR guidelines and
Innolux has established a „Corporate Social
Responsibilities“ section on its official website other OTC/listed
Website:
(http://www.innolux.com/Pages/TW/CSR/Repor CSR policies have no
t_Download_TW.html)
distinctive
differences.
41
Difference from
company social
Operation
responsibility
Item
TWSE/GTSM-Listed
Yes No
Reasons
companies and
reasons
V. If the company has established its CSR guideline in accordance with the „Corporate Social Responsibility Best
Practice Principles for TWSE/GTSM Listed Companies“, please describe the differences in the actual operation
and principles established:
The Company has not yet enacted “Corporate Governance Best Practice Principles for TWSE/GTSM Listed
Companies” for the time being,but has established „Innolux Corporate Code of Conduct“ as a working guideline
that prescribes the philosophies and behaviors that are expected of all Innolux employees. The code of conduct
serves as a reminder that in the face of different challenges from compeititons, no one shall engage in amoral or
illegal business activities for the sake of company profit or growth and that everyone at Innolux must adopt higher
standards of self-expectation in order to create greater values to contribute to the society. Using tools such as PC
startup screen, posters and relevant promotional platforms, Innolux has disseminated the contents of the code of
conduct and incorporated CSR and employee code of conduct courses in the new employee orientations.
VI. Other important information that help to shed light on the company’s status of CSR fulfillment:
Innolux publishes its CSR Report annually. The report features relevant chapters and contents on Innolux’s CSR
commitment, corproate governance and development, initiatives such as „To Earth, with L.O.V.E“ and „To
People, with S.M.I.L.E“ to offer comprehensive disclosure of relevant strategies, directions, measures and
performance indicators for issues that were of concern to shareholders. As for Innolux’s CSR performance, in
addition to the publication of the report, relevant information is also made available on the company’s website at
(http://www.innolux.com/Pages/TW/CSR/Report_Download_TW.html).
VII. A clear statement shall be made if the products or corporate social responsibility report of the Company pass the
inspection of the relevant certification agencies:
Innolux’s CSR Report for 2014 has been verified by 3rd party institute SGS Taiwan for full compliance with the
AA1000AS (AccountAbility 1000 Assurance Standard) in Category II high assurance level and GRI G4’s
requirement for comprehensive disclosure.
42
3.4.7 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan
Financial Supervisory Commission
Difference from
corporate integrity
TWSE/GTSM-Listed
companies and
Reasons
reasons
Conformity with the
Integrity Operation
Integrity and honesty are the groundwork Practice Principles for
of Innolux’s management and operation. TWSE/GTSM-Listed
The company has clearly laid out the
Companies
management’s philosophy of honest
management in the „CSR Management
Handbook“ and „Code of Moral
Conduct“. These documentations strictly
require all employees to adhere to the
company’s policies on honesty.
Additionally, Innolux’s honest
management policy and implementations
by the board and management are duly
disclosed in both the annual report and
CSR report.
Operation
Item
Yes
Set up operational integrity
policy and programs
Yes
(I) The company clarifies the
integrity operation policy in its
regulations and external
documents and the
commitment of the board of
directors and managers to
active implementation.
No
I.
(I)
solutions for the prevention of
dishonest behaviors and
specify relevant operating
procedures, guidelines,
disciplinary actions for
violations and system of
complaint and carried out
relevant operations
accordingly?
Yes
(II) With regards to the prevention of
dishonest behavior, Innolux has
established clearly defined regulations for
appropriate behaviors in the „Code of
Moral Conduct“, which states that any act
of violation shall be subjected to
corresponding punitive actions in
accordance with pertinent regulations and
work regulations. In addition, Innolux has
also established relevant systems for
loding complaints as a means for
offending employees to seek aid.
(III) Has the company taken
preventive measures for
operations specified in item 2,
Article 7 of the Corporate
Social Responsibility Best
Practice Principles for
TWSE/GTSM Listed
Companies and other business
activities of higher risks of
dishonest behaviors?
Yes
(III) Should any Innolux employee be found to
take part in any act of dishonesty, the
offending employee shall receive
corresponding disciplinary actions.
Should said employee be found to be
involved in incidents of corruption,
receiving bribery/commission, theft,
misappropriate/embezzle company
property to result in loss of
property/significant damage to the
company’s reputation would face
dismissal. Should any supplier be found
to violate the commitment to honesty and
integrity (including the
offering/acceptance of bribery, offering
illegal political contributions and so
forth), Innolux would revoke the
supplier’s status as a qualified supplier
and cease all collaboration with said
supplier.
43
Difference from
corporate integrity
TWSE/GTSM-Listed
companies and
Reasons
reasons
Conformity with the
Integrity Operation
The company request for global suppliers Practice Principles for
has a cooperation relationship to follow TWSE/GTSM-Listed
the Supplier CSR Code of Conduct
Companies
Operating Standards and sign the
Supplier's Undertaking About the Code of
Conduct Integrity, the company request
suppliers to guarantee that they will
refrain from bribes or offering to bribe
Innolux's employees. Suppliers shall also
not offer bribes or benefits to political
parties or candidates.
Operation
Item
Yes
Putoperation integrity into
practice
(I) Does the company evaluate
Yes
past records of businesses that
deal with the company and
incorporate terms of honest
behavior in relevant contracts?
No
II.
(I)
(II) Has the company established a Yes
designated unit or personnel in
charge of promoting corporate
ethical management and
reporting the status of
implementation to the board on
a routine basis?
(II)
The company has not yet established a
designated unit or personnel in charge
of promoting corporate ethical
management for the time being. In
accordance with the philosophy of
“Corporate Integrity Practice Principles
of Companies Listed on the Taiwan
Stock Exchange or Over-the-Counter
Securities Exchange”, nevertheless, The
company has established an Audit
Office, which is directly subordinate to
the board. The Audit Office performs an
audit business report on a quarterly
basis.
(III) Has the company established
relevant policies to prevent
conflicts of interests and
offered suitable channels of
communication? Has the
company conducted relevant
operations according to said
policies?
Yes
(III) The company clearly makes rules about
preventing conflicts of interest in the
Code of Conduct. If there is any
violation, the company also provides a
proper way to report, including a Mailbox
for Anti-Corruption Reporting
([email protected]) and staff
complaint mailboxes.
Yes
effective systems of
accounting and internal control
in an effort to achieve honest
management? Has the
company designated internal
audit unit or appointed
qualified accountants to carry
out routine audits?
(IV) Based on the annual audit plan approved
by the Board of Directors, perform the
internal audit's fieldwork auditing or
review depending on the risk. Report of
the audit results on a regular basis to
ensure that the board and managers are
aware of the level of goal achievement in
the fields of operational results and
efficiency, financial reports are reliable,
and the company complies with the
relevant decrees.
(V) Does the company conduct
Yes
internal/external training on
honest management routinely?
(V) We have made all of our various policies
available through easy access on our
intranet and require all employees to be
trained on corporate social responsibility,
also promoted via internal computer boot
screens, newsletters, and posters to
enhance the staff’s understanding of these
44
Operation
Item
Yes
No
Reasons
Difference from
corporate integrity
TWSE/GTSM-Listed
companies and
reasons
policies. We also require our
stakeholders, such as our suppliers and
vendors, to accept and abide by the
integrity policy
III. Implementation Status of the
Company establishes the
channels for reporting any
ethical irregularities
(I) Has the company established a Yes
concrete whistleblowing and
reward system? Has the
company established a
convenient reporting channel
for whistleblowers and
assigned appropriate personnel
to handle the personnel being
reported?
standard operating procedures
for whistleblowing and
relevent confidentiality
system?
Yes
(I)
Innolux has implemented a Mailbox for
Anti-Corruption Reporting and staff
complaint mailboxes to encourage
employees and related people to report
evidence. For anti-integrity and
anti-corruption incidents, investigators
will conduct confidential factual
investigations. The investigation reports
are submitted to the Integrity
Commission for resolution and penalties
are imposed internally or the incident is
prosecuted.
Conformity with the
Integrity Operation
TWSE/GTSM-Listed
Companies
(II) Innolux Corporation ratified the
“Operating Standards for the
Investigation and Management of
Corruption Cases” as the investigation
standard for incidents and related
confidentiality systems.
(III) The company designed a confidentiality
(III) Has the company adopted any Yes
system to protect the informants and
measures to safeguard
employees from being
listed it in the Code of Conduct; the
subjected to inappropriate
company will protect employees from
treatment due to accusations of
any revenge due to reporting an incident.
misconduct?
IV. Enhanced information
Yes
The company discloses the Code of Conduct Conformity with the
disclosure
on the Company’s official website
Integrity Operation
(I) The company discloses the
(http://www.innolux.com) and Taiwan Stock
code of operational integrity
Exchange's Market Observation Post System. TWSE/GTSM-Listed
and implements the results in
It also discloses related information about
Companies
its website and the Taiwan
operational integrity and implements results in
Stock Exchange's Market
the official website and corporate social
Observation Post System.
responsibility report.
V. If the company makes its own integrity operation according to the Integrity Operation Best Practice Principles for
TWSE/GTSM-Listed Companies, please state the differences.
The Company has not yet enacted “Corporate Integrity Practice Principles for TWSE/GTSM” for the time being,
guided by the spirit of Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed
Companies, Innolux has been updating relevant regulations such as the „CSR Management Handbook“ and „Code
of Moral Conduct“ and taken practical approaches to champion the spirit of honest management.
VI. Other important information for better understanding of the integrity operation (such as the company’s review and
revise the regulations on integrity operation).
In order to ensure full compliance to the company’s policies for honest management, all newcomers are required
to sign a „Honesty, Integrity & IP Protection Agreement“ and suppliers over the world that collaborate with
Innolux to sign the „Vendor Commitment“ in the hopes of helping all employees and collaborating partners of
45
Difference from
corporate integrity
Item
TWSE/GTSM-Listed
companies and
Yes No
Reasons
reasons
Innolux to understand and respect the company’s moral standards. In addition, the company has also been
disseminating relevant concepts via workstation startup screens along with routine publication of legal-affairs &
IP newsletters containing relevant legal issues so that „Honesty and Integrity“ would become the core of Innolux’s
fundamental corporate culture. In addition, Innolux conducts business ethics regulation risk assessment on a
yearly basis to monitor the company’s management of business ethics through internal control whilst verifying
and updating pertinent regulations on business ethics.
Operation
46
3.4.8 Corporate Governance Guidelines and Regulations
Please refer to the Company’s website at www. innolux.com
3.4.9 Other Important Information Regarding Corporate Governance
1. Standard operating procedures for the handling of vital internal information: Innolux has established its
„Vital Internal Information Handling Procedure“ that clearly regulates the handling of important
internal information and system of disclosure as a working reference for board members, supervisors,
managers and employees to follow. Relevant procedures have been submitted to the board for approal
and internal announcements have been made in the company along with relevant trainings for all
employees.
2. Status of Directors and Supervisors' participation in corporate governance related courses and trainings
as of the deadline of annual report publication;
April 30, 2015
Title
Chairman
Director
Director
Name
Hsing-Chien
Tuan
Hyield venture
Capital Co., Ltd.
Hong-Jen
Chuang
Jialian
Investment Co.,
Ltd. Jyh-Chau
Wang
Independent
Chi-Chia Hsieh
Director
Date
Sponsoring Organization
Sept 26, 2014 Securities & Futures Institute
Mar 20, 2015
Taiwan Corporate Governance
Association
Mar 20, 2015
Association
Mar 20, 2015
Association
Mar 20, 2015
Association
May 05, 2014 Securities & Futures Institute
May 06, 2014 Securities & Futures Institute
Independent Stanley Yuk Lun
Director Yim
June 24, 2014 Securities & Futures Institute
Mar 20, 2015
Association
Supervisor Ren-Guang Lin
Mar 20, 2015
Association
Supervisor Yi-Fang Chen
Mar 20, 2015
I-Chen
Supervisor investment Ltd.
Te-Tsai Huang
Association
Mar 20, 2015
Association
47
Course
Business Operation and
Related Tax discussion
Audit Committee
Practice Discussion
Audit Committee
Practice Discussion
Audit Committee
Practice Discussion
Audit Committee
Practice Discussion
Parent company
business structure and
division of power
related to directors and
supervisors
Case of public
company insider
manipulate market
The function of the
Board of Directors and
the competence of the
Committee belongs
Audit Committee
Practice Discussion
Audit Committee
Practice Discussion
Legal liability and risk
control of Finance
Report for directors and
supervisors
Audit Committee
Practice Discussion
Audit Committee
Practice Discussion
Training hours
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3. Status of managers‘ participation in corporate governance related courses and trainings as of the
deadline of annual report publication;
April 30, 2015
Title
Name
Date
June 11, 2014 Innolux Corporation
Chairman
Hsing-Chien
Tuan
Securities & Futures
Institute
Taiwan Corporate
Mar 20, 2015
Governance Association
Sept 26, 2014
President
Jyh-Chau Wang
Securities & Futures
Institute
Taiwan Corporate
Mar 20, 2015
Sept 26, 2014
Vice
President
Wen-Jyh Sah
Aug 12, 2014 Innolux Corporation
Vice
President
Chin-Lung Ting
Mar 20, 2015
Taiwan Corporate
Vice
President
Yao-Tong Chen
Mar 20, 2015
Taiwan Corporate
Vice
President
Chih-Hung
Hsiao
Mar 20, 2015
Taiwan Corporate
Apr 10, 2014 Innolux Corporation
Manager
Chien-Lang Lo
Course
Obligation and
Responsibility of board
member and supervisor
under Security Exchange Act
Audit Committee Practice
Discussion
Obligation and
Discussion
Obligation and
Compliance with Anti-Trust
Law
Obligation and
Law
Discussion
Obligation and
Law
Discussion
Obligation and
Law
Discussion
Positive Discipline Training
Obligation and
Law
Taiwan Corporate
Mar 20, 2015
Governance Association Discussion
48
Training hours
1.5
3
3
1.5
3
3
1.5
0.42
1.5
0.42
3
1.5
0.42
3
1.5
0.42
3
1
1.5
0.42
3
Title
Manager
Name
Chin-Yuan
Chang
Date
Course
Training hours
Obligation and
Law
Taiwan Corporate
Mar 20, 2015
Governance Association Discussion
1.5
0.42
3
4. Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial
Information
Certification
Certified Public Accountants (CPA)
Certified Internal Auditor (CIA)
Chartered Financial Analyst (CFA)
Financial Risk Manager (FRM)
Senior Securities Specialist
Securities Specialist
Internal controller test of Securities &
Futures Institute
Number of Employees
Finance&Accounting
Internal Audit
1
2
1
1
6
6
1
49
-
3.4.10 Internal Control System
1. Statement of internal control system
Innolux Corporation
Statement of Internal Controls
Date: Feb 10, 2015
According to the examination on internal control systems done by the Company itself in 2014, we
hereby state as follows:
I.
The Company’s board of directors and management team understand their responsibilities of
developing, implementing and maintaining the Company’s internal control system, and such a
system has been established. The purpose of establishing the internal control system is to
reasonably assure the following objectives: (a) The effectiveness and efficiency of business
operation (including earnings, operation performance, and the safeguard of company assets);
(b) The reliability of the financial and related reports; and (c) The compliance of the relevant
laws/regulations and company policies;
II.
Due to the innate limitations in designing a faultless internal control system, this system can
only assure that the reasonableness of the above three objectives has been fairly achieved. In
addition, the effectiveness of the internal control system may change over time due to the
change of the business environment or situation. Since the Company’s internal control system
has included a self-examination capability, the Company will make immediate corrections
when errors are detected.
III. The evaluation of effectiveness of the internal control system design and implementation is
made in accordance with the “Guidelines for the Establishment of Internal Control Systems by
Public Companies” (the Guidelines). The Guidelines are made to examine the following five
factors during the management and control process: (1) control environment, (2) risk
assessment and response, (3) control activities, (4) information and communication, and (5)
supervision. Each factor also includes several items. Details of each factor can be found in
the Guidelines.
IV. The Company has examined the effectiveness of each respected area in the internal control
system based on the Guidelines.
V.
The examination results indicated that the Company’s internal control system (including
subsidiary governance) dated December 31, 2013 had effectively assured that the following
objectives had been reasonably achieved during the assessing period: (a) The degree of
effectiveness and efficiency of business operation; (b) The reliability of the financial and
related reports; (c) The compliance of the relevant laws/regulations and company policies
VI. This Statement is a significant part of the Company’s annual report and prospectus available to
the general public. If it contains false information or omits any material content, the Company
is in violation of Article 20, Article 32, Article 171, and Article 174 set forth in the Taiwan’s
Securities and Exchange Act.
VII. The Company hereby declares that this statement had been approved by the Board of Directors
on Feb 10, 2015. Among the 5 attending Directors, no one raised any objection to the contents
of this statement.
Innolux Corporation
General Manager: Hsing-Chien Tuan
2. Hire an accountant to audit the Company’s internal control system and disclose the audit
report made by accountants: None.
50
3.4.11 Lawful punishment inflicted on the Company, and/or disciplinary action taken by the
Company against its employees for violating internal regulations in the latest year and
up to the printing date of this Annual Report); important errors committed; and
correction and improvement procedures: None.
3.4.12 Major Resolutions of Shareholders’ Meeting and Board Meetings
1. Important resolutions and implementation made by the Shareholders’ Meeting and Board
of Directors by the end of 2014
(1) Adoption of revisions to the 2012 Deficit Compensation Statement
Status of execution: Resolution carried
(2) Adoption of the 2013 Business Report and Financial Statements
(3) Adoption of the Proposal for Distribution of 2013 Profits
(4) Carried the resolution to distribute new stocks and overseas depository receipt or
private placement of securities dependning on the market status through domestic
cash capital increase.
Status of execution: Resolution carried and the Board has been authorized to conduct
fund raising; According to the letter No.1030042223 on Oct. 31, 2014 from FSC,the
company is permitted to raising funds by issuing new shares through public offering
or issuing new shares to sponsor overseas GRD offering set at NT $ 9,360,000
thousand, approximately equivalent to U.S. $ 312,625 thousand. The Company has
made the bank group agreed to extension for cash replenishment, due to the
shareholders equity position, the company is permitted to abolish raising funds by
GDR offering and consent by FSC.
(5) Carried the resolution to make cash remittance for capital surplus
Status of execution: Resolution carried and remittance completed.
(6) Resolution to revise Innolux’s charter carried.
Status of execution: Resolution carried and implemented in accordance with the
revised procedure
(7) Resolution to revise Innolux’s „Operating Procedures of Acquisition or Disposal of
Assets“
Status of execution: Resolution carried and implemented in accordance with the
revised procedure
51
2. Important resolutions by the Board for 2014 prior to the deadline of annual report
publication
Item
February 17, 2014
March 24, 2014
May 6,2014
June 20,2014
July 28,2014
September 26,2014
Major resolutions
Innolux’s Individual Financial Statement and Consolidated Financial Statement
for 2013
Proposal to increase cash capital for the distribution of new stocks
Proposal for Innolux’s Internal Control Declaration for 2013
Innolux’s Operating Plans for 2014
Innolux’s Budget for 2014
Prepare and compile Innolux’s Account of Business for 2013
Revision of Innolux’s Deficit Compensation Statement for 2012
Draft of Innolux’s Dividend Remittance for 2013
Proposal for Capital Surplas Cash Remittance
Proposal to revise Innolux’s „Operating Procedures of Acquisition or Disposal
of Assets“
Proposal to convene Innolux’s 2014 Annual Meeting of Shareholders
Proposal to enter into short-mid term credit line contract with banks
Proposal to enter into foreign exchange and derivative product credit contract
with banks
Proposal to write off Innolux’s new restricted employee shares distributed for
2013 Q4 and 2014 Q1
Proposal to acquire machinery for operational use from stakeholder Contrel
Technology Co,. Ltd.
Internal rotation of accountants at the accounting firm
Status of private placement capital increase for 2013
New proposals at the 2014 Annual Meeting of Shareholders
Proposal to change the company’s financial supervisor
Proposal to enter into short-mid term credit line contract with financial
institution
Proposal to enter into foreign exchange and derivative product credit contract
with banks
Proposal to adjust stock prices for Innolux employee stock options
Proposal to submit an application for a 3-month extension for cash capital
increase fundraising to the FSC
Proposal to acquire machinery for operational use from stakeholder Contrel
Technology Co,. Ltd.
Proposals to adjust cash capital for the distribution of common stock
Innolux’s cash capital increase employee stock option and the quantity of stocks
purchased by managers
Write off of Innolux’s new restricted employee shares purchased/distributed for
2014 Q2
Proposal to change the custodian bank for overseas depository receipt
Proposal to enter into contract for guaranteed distribution commercial paper
credit with bills finance company
The Company’s Remuneration Committee already duly proposed the allocation
of remuneration to directors and supervisors and other remuneration for 2013.
The Compensation Committee is proposing manager bonus for the year of
2013.
The proposal for the Company in capital increase through cash injection to issue
common shares and to issue overseas deposit receipt certificates (DRC).
The Company conducted capital increase through cash injection to issue
common shares and to issue global depositary receipts (GDR), adjustment of
employee stock option certificates.
Proposal for the Company’s “Full-award remuneration system for managerial
officers” and proposal for full-award remuneration for managerial officers
2013.
52
Item
October 30,2014
February 10,2015
March 20,2015
April 28,2015
Major resolutions
Proposal to revoke the Company’s repurchase/redemption of restriction upon
employees’ right for new shares in Quarter III, 2014.
Proposal of the Company’s Audit Plan 2015 and amendment of the internal
control system.
Proposal for execution of short-term credit line agreement(s) with financial
institution(s).
The Company’s individual financial statements and consolidated financial
statements, 2014.
Proposal to execute agreement with Bank of Taiwan and ohter financial
institution(s) for NT$6.85 billion syndicated loans.
Revocation of the Company’s capital increase through cash injection to issue
common shares and issue global depositary receipts (GDR).
Proposal for syndicated loans for the capital expenditures for the Company in
2015
In line with the Company’s investment deployments in Taiwan and the
Company’s need for land for Tainan Plant regions, it is proposed that the
Company should obtain assets required for business operation through auction
by court.
Proposal to revoke the Company’s restriction upon employees’ right for new
shares issued in Quarter IV, 2014.
Proposal for execution of short-term loan agreements with financial institutions.
Declaration of the Company’s internal control system 2014.
Amendment of the Company’s “Full Incentive System along with Appendix for
Managerial Officers” and submittal of the “Full Incentives for Managerial
Officers 2014”.
The Company’s Business Plan 2015.
Amendment of the Company’s “Procedure Rules for Shareholders’Meeting”.
Amendment of the Company’s “Regulations Governing Election of Directors
and Supervisors”.
Proposal to convene the Company’s regular shareholders meeting 2014.
Proposal for execution of short-term loan agreements with financial institutions.
Prepare and compile Innolux’s Account of Business for 2014
Draft of Innolux’s Dividend Remittance for 2014
Proposal to process domestic capital increase by cash to issue common shares,
to issue new shares as a result of cash capital increase for sponsoring issuance
of GDR
Amendment to Articles of Incorporation of the Company
New proposals at the 2015Annual Meeting of Shareholders
Proposal to supplemental public issuance of Private Equity
Proposal to revoke the Company’s repurchase/redemption of restriction upon
employees’ right for new shares in Quarter I, 2015
53
3.4.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor
Dissenting to Important Resolutions Passed by the Board of Directors
None
3.4.14 Resignation or Dismissal of Personnel Involved in Preparation of Financial Reports
3.5
TITLE
NAME
DATE OF
APPOINTED
DATE OF
TERMINATION
Finance
General
Director
Jimmy
Chiu
January, 09,
2009
05, 06, 2014
March 31, 2015
REASONS FOR
RESIGNATION
OR DISMISSAL
Plan of Personal
Career.
Information Regarding Innolux’s Independent Auditors
Accounting Firm
Name of CPA
Audit Period
Pricewaterhousecoopers Wu, Han-Chi Sheng-Chung Hsu Jan 1, 2014 - Dec 31, 2014
Note
Unit: NT$ thousands
Items
Amount Range
1 Below 2 million
2 2 million to 4 million
6 Above 10 million
Audit Fee
V
Non-Audit Fee
Total
V
V
V
3.5.1 Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than
one-fourth of total audits Fees should disclosure the audit fee and non-audit fee amount
and non-audit service content
Audit Fee: NT$ Thousands
Accounting
Firm
Name of CPA
Audit
Fee
Pricewaterho
Han-Chi Wu
12,000
usecoopers Sheng-Chung Hsu
Non-Audit Fee
Audit Period Note
Human
System Company
Others Subtotal
Design Registration resource
Jan 1, 2014
200
200
Dec 31, 2014
3.5.2 Replaced the audit firm and the audit fee paid to the new audit firm was less than the
payment of the previous year: No.
3.5.3 Audit fee reduced more than 15% year over year, required to disclose the reduced
amount, proportion, and reason: Audit fee in 2014 reduced NT$8,110 Thousands due to
GDR audit fee payment of NT$8,110 Thousands in 2013
54
3.6
Replacement of independent auditors:
3.6.1 About predecessor CPA
Date of change
Reason for Replacement
Descriptions whether the
Company terminated or the
CPA did not accept the
appointment
March 24, 2014
Due to accounting firm’s job rotation in accordance to relevant
regulations, the CPA Hsiao Chun-Yuan & Wu Han-Chi replaced to
Wu, Han-Chi & Hsu, Sheng-Chung since Q1 2014.
Parties
CPA
The company
Status
Termination of appointment －
－
No longer accepted
－
－
(continued) appointment
Other than unqualified issues
in the audit reports within last None
two years
－
Differences with the
Company
Yes
Accounting principles or
practices
Disclosure of Financial
Statements
Audit scope or steps
Others
－
－
－
None V
Descriptions
Other Revealed Matters
(Required to be disclosed by
Accounting Standards Article None
20 section 2 first paragraph
item 4)
3.6.2 About the Successor CPA:
Accounting Firm
Name of CPA
Date of appointment
Consulting results regarding accounting
methods or accounting principles to specific
transactions or opinions on the financial
statements before appointment
Successor CPA written disagreements to
former CPA
Pricewaterhousecoopers
Wu, Han-Chi & Hsu, Sheng-Chung
March 24, 2014
None
None
3.6.3 Reply of the Previous Accountant: N/A
3.7
The Company’s chairman, general manager, or any managerial officer in charge of
finance or accounting matters has in the most recent year held a position at the
accounting firm of its CPA or at an affiliated enterprise: None
55
3.8
Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders
3.8.1 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders.
Unit: Per share
Title
Chairman & CEO
Institutional
Director
Representative
Institutional Director
Representative
Supervisor
Supervisor
Supervisor
Representative
Vice President
Vice President
Vice President
Vice President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Manager
Manager
Name (Note 1)
Hsing-Chien Tuan
Hyield Venture Capital Co.,
Ltd
Hong-Jen Chuang
Jialian investment Co., Ltd
Jyh-Chau Wang
Stanley Yuk Lun Yim
Chi-Chia Hsieh
Ren-Guang Lin
Yi-Fang Chen
I-Chen investment Ltd.
Te-Tsai Huang
Wen-Jyh Sah
Chin-Lung Ting
Yao-Tong Chen
Chih-Hung Hsiao
2013
2014
As of Apr. 30, 2015
Pledged
Pledged
Pledged
Holding
Holding
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase
Increase
Increase
(Decrease)
(Decrease)
(Decrease)
(Decrease)
(Decrease)
(Decrease)
－
(750,000) (5,000,000)
1,414,994
90,000 (4,000,000)
－
－
12,321,996
－
－
－
－
－
(9,000)
－
－
－
－
－
(54,000)
210,000
(145,000)
420,000
120,000
－
－
－
－
－
－
－
－
－
－
－
－
－
－
745,888
121,179
－
－
－
－
1,924,427
14,859
352,000
165,068
(255,196)
872,544
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
167,000
－
－
－
－
－
－
18,000
(378,000)
80,000
(70,000)
－
－
－
－
－
－
－
－
－
－
－
－
－
Chen-Hua Luo
(473,000)
－
443,690
－
140,000
－
Hung-Wen Yang
(509,000)
－
23,846
－
160,000
－
－
－
198,554
－
111,000
－
Chih-Ming Chen
233,000
－
(45,807)
－
67,000
－
Chu-Hsiang Yang
249,000
－
406,537
－
113,000
－
Tai-Chi Pan
170,000
－
412,423
－
70,000
－
－
－
188,005
－
120,000
－
(53,000)
－
(64,508)
－
93,000
－
Jia-Pang Pang
－
－
308,980
－
120,000
－
Yu Shui Kuo (Note 2)
－
－
－
－
80,000
－
Nai-Jian Zheng(Note3)
－
－
988,837
－
92,000
－
Zheng-Xia Kuo(Note3)
－
－
229,802
－
34,000
－
Tian-Ren Lin(Note3)
－
－
526,353
－
64,000
－
－
280,000
－
－
－
32,339
－
－
1,000
42,000
－
－
Ke-Yi Kao
Kuo-Hsiung Kuo
Chung-Kuang Wei
Chien-Lang Lo(Note4)
Chin-Yuan Chang
Note 1: Refers to current managerial officers as of the printing date of the annual report
Note 2: Appointed to office on December 1, 2014 thus the change in equity in 2013 was not calculated.
Note 3: Appointed to office on September 23, 2013 thus the change in equity in 2013 was not calculated.
Note 4: Appointed to office on May 7, 2014 thus the change in equity in 2014 was not calculated.
Note 5: The increase(decrease) of the shares held includes the inward or outward transfer of the trusted shareholding..
56
3.8.2 Shares Trading with Related Parties
None
3.8.3 Shares Pledge with Related Parties
None
3.9
Information Disclosing the Relationship between any of the Company’s Top Ten
Shareholders
Name
CHIMEI CORPORATION
Representative:
Hsu Chun-hua
Terry Gou
Hyield Venture Capital
Co., Ltd
Representative:
Te-Tsai Huang
Standard Chartered Bank
hosting Sanskrit Vanguard
Emerging Markets Equity
Index Fund account
Cathay Life Insurance
Co.,Ltd.
Representative:
Tsai Hong-Tu
JP Morgan Hosting ABP
pension fund account
Standard Chartered Bank
hosting Credit Suisse
Securities Europe
investment accounts
Shareholding
Shares
570,929,561
－
Spouse & Minor
%
Shares
5.74% －
The relationship between any of
the Company’s Top Ten Share
holders
Name
Relation
N.A.
N.A.
－
－
－
－
N.A.
N.A.
2.45%
－
－
－
－
HON HAI
PRECISION
IND. CO., LTD.
Chairman
176,311,219
1.77%
－
－
－
－
HON HAI
PRECISION
IND. CO., LTD
Subsidiary of
HON HAI
PRECISION
IND. CO., LTD..
212,619
－
－
－
－
－
N.A.
N.A.
169,754,726
1.71%
－
－
－
－
N.A.
N.A.
－
－
－
－
N.A.
N.A.
－
－
－
－
N.A.
N.A.
－
－
－
－
N.A.
N.A.
N.A.
N.A.
Terry Gou
Chairman
Subsidiary of
HON HAI
PRECISION
IND. CO., LTD.
243,964,977
－
%
－
Shareholding
by Nominee
Arrangement
Shares
%
－
－
163,964,330 1.65%
－
－
163,355,929
1.64%
156,321,881
1.57%
HON HAI PRECISION
IND. CO., LTD.
147,965,363
1.49%
－
－
－
－
Representative:
Terry Gou
243,964,977
2.45%
－
－
－
－
134,877,335
1.36%
－
－
－
－
HON HAI
PRECISION
IND. CO., LTD.
N.A.
－
－
－
－
N.A.
N.A.
－
－
－
－
N.A.
N.A.
Compal Electronics, Inc.
Representative:
Hsu, Sheng-Hsiung
Specially designated
(earmarked) account of
Citibank (Taiwan) for the
delegated custody of
Newly Emerging Market
Evaluation Fund
2,517,754
134,699,544
－
1.35﹪
57
Hyield Venture
Capital Co., Ltd
Chairman
N.A.
Remarks
%
3.10 The number of shares held by the Company, the Company’s directors and supervisors,
managerial officers and enterprises under control, either directly or indirectly, with
consolidated calculation of the comprehensive shareholding ratio.
As of 12/31/2014
Long-term Investment
Ownership by INX
Shares
%
Asiaward Investment Ltd.
Best China Investments Ltd.
Bright Information Holding Ltd.
4,910,000 100%
Chi Mei Optoelectronics Germany GmbH
Gold Union Investments Limited
31,783,000 100%
Golden Achiever International Limited
39,250 100%
InnoLux Corporation
Innolux Holding Ltd.
246,768,185 100%
Innolux Hong Kong Holding Limited
1,158,844,000 100%
Innolux Hong Kong Limited
Innolux Optoelectronics Europe B.V.
180 100%
Innolux Optoelectronics Hong Kong
Holding Ltd.
Innolux Optoelectronics Japan Co., Ltd.
80 100%
Innolux Optoelectronics USA, Inc.
Innolux Technology Europe B.V.
Innolux Technology Germany GmbH
Innolux Technology Japan Co., Ltd.
Innolux Technology USA Inc.
Keyway Investment Management Limited
5,656,410 100%
Lakers Trading Ltd.
Landmark International Ltd.
693,100,000 100%
Leadtek Global Group Limited
50,000,000 100%
Magic Sun Ltd.
Main Dynasty Investment Ltd.
Mega Chance Investments Ltd.
Nets Trading Ltd.
Rockets Holding Ltd.
Stanford Developments Ltd.
Sun Dynasty Development Ltd.
Suns Holding Ltd.
Toppoly Optoelectronics (B.V.I.) Ltd.
144,447,000 100%
Toppoly Optoelectronics (Cayman) Ltd.
Warriors Technology Investments Ltd.
Shanghai Innolux Optoelectronics Ltd.
Yuan Chi investment co., Ltd
100%
Foshan Innolux Optoelectronics Ltd.
Foshan Innolux Logistics Ltd.
Chi Mei EL Corp.
155,500,000 97.19%
VAP Optoelectromics (NanJing) Corp.
Kunpal Optoelectronics Ltd.
Nanjing Innolux Technology Ltd.
Nanjing Innolux Optoelectronics Ltd.
InnoJoy Investment Corp.
167,405,392 100%
Innocom Technology (Chengdu) Co., LTD
Innocom Technology (Shenzhen) Co., LTD
Ningbo Innolux Technology Co., LTD
Ningbo Innolux Optoelectronics Co., LTD
Ningbo Innolux Display LTD
Ningbo Innolux Logistics LTD
-
58
Ownership by Directors,
Managers, and
Total Ownership
Directly/Indirectly
Owned Subsidiaries
Shares
%
Shares
%
77,830,001 100%
77,830,001 100%
10,000,001 100%
10,000,001 100%
4,910,000 100%
250 100%
250 100%
31,783,000 100%
39,250 100%
2,000 100%
2,000 100%
246,768,185 100%
1,158,844,000 100%
35,000,000 100%
35,000,000 100%
180 100.%
162,897,802
1,000
375,810
100,000
201
1,000
1
38,000,001
139,623,801
18,000,000
900,001
226,504,550
164,000,000
295,969,001
18,177,052
144,417,000
18,177,052
-
100%
162,897,802 100%
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%
80
1,000
375,810
100,000
201
1,000
5,656,410
1
693,100,000
50,000,000
38,000,001
139,623,801
18,000,000
900,001
226,504,550
164,000,000
295,969,001
18,177,052
144,447,000
144,417,000
18,177,052
155,500,000
167,405,392
-
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%
97.19%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
IV. Capital Overview
4.1
Capital and Shares
4.1.1 Source of Capital
A. Type of Stock
Authorized Capital
Share Type
Common
Shares
Issued Shares
Outstanding
Unlisted
Total Shares
Un-issued
Shares
Total
9,383,294,416
570,929,561
9,954,223,977
545,776,023
10,500,000,000
Remarks
B. Issued Shares
Unit: Shares Thousand; NT Thousand
Authorized Capital
Paid-in Capital
Remark
Capital Increased
by Assets Other
than Cash
Month/
Year
Par
Value
2003.01
-
120,000
1,200,000
35,000
2003.05
10
120,000
1,200,000
100,000
1,000,000
65 million shares from cash
capital increase
None
2003.10
10
1,000,000
10,000,000
300,000
3,000,000
capital increase
None
2004.04
10
1,000,000
10,000,000
900,000
9,000,000
capital increase
None
2004.09
12
2,500,000
25,000,000
1,500,000
15,000,000
capital increase
None
2005.06
14
2,500,000
25,000,000
2,100,000
21,000,000
capital increase
None
2006.01
-
2,500,000
25,000,000
2,106,624
2006.04
-
2,500,000
25,000,000
2,111,856
2006.09
-
2,500,000
25,000,000
2,112,129
2006.10
41
3,300,000
33,000,000
2,312,129
2007.01
-
3,300,000
33,000,000 2,326,056
2007.03
-
3,300,000
33,000,000 2,331,706
2007.04
-
3,300,000
33,000,000
2,331,761
2007.08
-
3,300,000
33,000,000
2,340,765
2007.09
-
3,300,000
33,000,000
2,442,155
2007.10
-
3,300,000
33,000,000
2,442,372
Shares
Amount
Shares
Amount
Sources of Capital
350,000 Created at inception
6.624 million new shares issued
21,066,240 upon the exercise of employee
stock options
stock options
273 thousand new shares issued
stock options
23,121,290
capital increase
13.927 million new shares
23,260,560 issued upon the exercise of
employee stock options
5.650 million shares from
23,317,062 capital increase in connection
with merger
stock options
stock options
capital increase through
24,421,550
capitalization of retained
earnings
stock options
59
None
None
None
None
None
None
None
None
None
Other
2003.01.14
Yuan-Shang-Zih No.
0920001669
2003.05.30
Yuan-Shang-Zih No.
0920013164
2003.11.07
Yuan-Shang-Zih No.
0920030835
2004.05.24
Yuan-Shang-Zih No.
0930013914
2004.10.26
Yuan-Shang-Zih No.
9300030355
2005.07.22
Yuan-Shang-Zih No.
0940019992
2006.02.13
Yuan-Shang-Zih No.
0950002674
2006.05.09
Yuan-Shang-Zih No.
0950011150
2006.10.16
Yuan-Shang-Zih No.
0950026853
2006.12.04
Yuan-Shang-Zih No.
0950032417
2007.02.09
Yuan-Shang-Zih No.
0960003715
2007.05.30
Yuan-Shang-Zih No.
0960014540
2007.05.31
Yuan-Shang-Zih No.
0960014605
2007.08.30
Yuan-Shang-Zih No.
0960023196
None
2007.09.19
Yuan-Shang-Zih No.
0960025459
None
2007.10.29
Yuan-Shang-Zih No.
0960029080
Authorized Capital
Month/
Year
Par
Value
Shares
Amount
Paid-in Capital
Shares
Amount
Sources of Capital
capital increase to participate in
the issuance of overseas
depositary receipts
upon the exercise of employee
stock options
stock options
issued upon the exercise of
earnings
stock options
stock options
stock options
earnings
stock options
4,778,089,000 common stocks
from capital increase in
connection with merger; private
placement of 731.707 million
preferred shares
stock options
stock options
Reduced capital by 731.707
million shares through private
placement of preferred shares
stock options
stock options
stock options
stock options
stock options
Remark
Capital Increased
by Assets Other
than Cash
2007.11
146
3,300,000
33,000,000
2,742,372
27,423,720
2008.02
-
3,300,000
33,000,000
2,751,026
27,510,260
2008.05
-
3,300,000
33,000,000
2,757,583
27,575,830
2008.08
-
3,300,000
33,000,000
2,770,270
27,702,700
2008.09
-
4,500,000
45,000,000
3,112,297
31,122,970
2008.11
-
4,500,000
45,000,000
3,113,147
31,131,470
2009.03
-
4,500,000
45,000,000
3,123,695
32,236,950
2009.05
-
4,500,000
45,000,000
3,128,546
31,285,460
2009.07
-
4,500,000
45,000,000
3,138,537
31,385,370
2009.09
-
4,500,000
45,000,000
3,243,122
32,431,222
2009.11
-
4,500,000
45,000,000
3,244,596
32,445,960
2010.02
-
4,500,000
45,000,000
3,254,841
32,548,410
2010.03
-
10,500,000
105,000,000
8,032,930
80,329,300
2010.04
-
10,500,000
105,000,000
8,040,837
80,408,370
2010.08
-
10,500,000
105,000,000
8,043,497
80,434,970
2010.11
-
10,500,000
105,000,000
7,311,789
73,117,890
2011. 01
-
10,500,000
105,000,000
7,311,809
73,118,090
2011. 03
-
10,500,000
105,000,000
7,312,674
73,126,740
2011.05
-
10,500,000
105,000,000
7,312,804
73,128,040
2011.07
-
10,500,000
105,000,000
7,312,904
73,129,040
2011.11
-
10,500,000
105,000,000
7,312,970
73,129,708
2012.10
9
10,500,000
105,000,000
7,912,970
79,129,700
capital increase
None
2013.02
12.98
10,500,000
105,000,000
9,037,970
90,379,700
1.125 billion shares from cash
capital increase to participate in
None
60
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Other
2007.12.10
Yuan-Shang-Zih No.
0960033616
2008.02.12
Yuan-Shang-Zih No.
0970003364
2008.05.14
Yuan-Shang-Zih No.
0970012623
2008.08.21
Yuan-Shang-Zih No.
0970023231
2008.09.09
Yuan-Shang-Zih No.
0970025445
2008.11.18
Yuan-Shang-Zih No.
0970032346
2009.03.02
Yuan-Shang-Zih No.
0980005613
2009.05.18
Yuan-Shang-Zih No.
0980013470
2009.07.23
Yuan-Shang-Zih No.
0980020313
2009.09.07
Yuan-Shang-Zih No.
0980024824
2009.11.19
Yuan-Shang-Zih No.
0980032198
2010.02.12
Yuan-Shang-Zih No.
0990004357
2010.03.30
Yuan-Shang-Zih No.
0990008717
2010.04.29
Yuan-Shang-Zih No.
0990011506
2010.08.26
Yuan-Shang-Zih No.
0990025097
2010.11.11
Yuan-Shang-Zih No.
0990033742
2011.01.03
Yuan-Shang-Zih No.
1000000178
2011.03.25
Yuan-Shang-Zih No.
1000007874
2011.05.04
Yuan-Shang-Zih No.
1000012352
2011.07.26
Yuan-Shang-Zih
No. 1000021596
2011.11.28
Yuan-Shang-Zih
No. 1000035175
2012.10.15
Yuan-Shang-Zih
No. 1010031831
2013.02.18
Yuan-Shang-Zih No.
Authorized Capital
Month/
Year
Par
Value
Shares
Amount
Paid-in Capital
Shares
Amount
2013.02
5/-
10,500,000
105,000,000
9,100,272
91,002,720
2013.04
5/-
10,500,000
105,000,000
9,101,960
91,019,600
10,500,000
105,000,000
9,101,670
91,016,700
2013.08
2013.11
-
10,500,000
105,000,000
9,100,892
91,008,920
2013.12
5/-
10,500,000
105,000,000
9,109,428
91,094,280
-
10,500,000
105,000,000
9,106,457
91,064,570
2014.09
10
10,500,000
105,000,000
9,956,457
99,564,570
2014.09
-
10,500,000
105,000,000
9,955,407
2014.11
-
10,500,000
105,000,000
9,954,536
2015.03
-
10,500,000
105,000,000
9,954,224
2014.04
Sources of Capital
the issuance of overseas
depositary receipts
Issuance of 31,151,000 new
shares with restricted employee
rights at positive consideration
rights at nil consideration
Issuance of 844,000 new shares
with restricted employee rights
at positive consideration
Issuance of 844,000 new shares
with restricted employee rights
at nil consideration
Capital reduced by 290,000
new shares with restricted
employee rights
employee rights
rights at positive consideration
rights at nil consideration
Capital reduced by 2,970,000
employee rights
capital increase
Capital reduced by 1,049,000
99,554,070 new shares with restricted
employee rights
employee rights
employee rights
C. Information for Shelf Registration: None
61
Remark
Capital Increased
by Assets Other
than Cash
Other
1020005087
None
2013.02.21
Yuan-Shang-Zih
No. 1020005099
None
2013.04.16
Yuan-Shang-Zih
No. 1020010954
None
None
None
None
None
None
None
None
2013.08.23
Yuan-Shang-Zih
No. 1020025484
2013.11.27
Yuan-Shang-Zih
No. 1020036156
2013.12.27
Yuan-Shang-Zih
No. 1020040096
2014.04.10
Zhu-Shang-Zih
No.1030009955
2014.09.05
Zhu-Shang-Zih
No.1030026932
2014.09.05
Zhu-Shang-Zih
No.1030026932
2014.11.19
Zhu-Shang-Zih
No.1030033761
2015.03.17
Zhu-Shang-Zih
No.1040007082
4.1.2 Status of Shareholders
Item
Number of Shareholders
Shareholding (shares)
Percentage
Government
Agencies
8
106,789,730
1.07%
Financial
Institutions
Other Juridical
Person
125
537
486,026,176 2,194,194,944
4.88%
22.04%
As of 04/10/2015
Foreign
Domestic
Institutions &
Total
Natural
Natural
Persons
Persons
337,133
1,133
338,936
3,141,208,497 4,026,004,630 9,954,223,977
31.56%
40.45%
100.00%
4.1.3 Shareholding Distribution Status
A. Common Shares (The par value for each share is NT$10)
As of 04/10/2015
Class of Shareholding
(Unit: Share)
1 ~ 999
1,000 ~ 5,000
5,001 ~ 10,000
10,001 ~ 15,000
15,001 ~ 20,000
20,001 ~ 30,000
30,001 ~ 50,000
50,001 ~ 100,000
100,001 ~ 200,000
200,001 ~ 400,000
400,001 ~ 600,000
600,001 ~ 800,000
800,001 ~ 1,000,000
1,000,001 or over
Total
Number of
Shareholders
Shareholding (Shares)
100,833
151,270
39,345
15,020
8,367
8,358
6,497
4,876
2,147
961
338
198
101
625
338,936
62
31,680,118
349,169,889
295,254,533
182,053,494
151,316,029
207,403,628
255,284,687
343,701,888
298,190,808
264,460,383
166,362,563
138,802,969
90,859,163
7179,683,825
9954,223,977
Percentage
0.32%
3.51%
2.97%
1.83%
1.52%
2.08%
2.57%
3.45%
3.00%
2.66%
1.67%
1.39%
0.91%
72.12%
100.00%
4.1.4 List of Major Shareholders
As of 04/10/2015
Shareholding
Shareholder's Name
CHIMEI CORPORATION
Terry Guo
Standard Chartered Bank hosting Sanskrit
Vanguard Emerging Markets Equity Index Fund
account
Cathay Life Insurance Co.,Ltd.
JPMorgan Chase Bank N.A. Taipei Branch in
Custody for Stitching Depositary APG Emerging
Markets Equity Pool
Standard Chartered Bank hosting Credit Suisse
Securities Europe investment accounts
HON HAI PRECISION IND. CO., LTD.
Compal Electronics, Inc.
Specially designated (earmarked) account of
Citibank (Taiwan) for the delegated custody of
Newly Emerging Market Evaluation Fund.
Shares
570,929,561
243,964,977
176,311,219
Percentage
5.74%
2.45%
1.77%
169,754,726
1.71%
163,964,330
1.65%
163,355,929
1.64%
156,321,881
1.57%
147,965,363
134,877,335
1.49%
1.36%
134,699,544
1.35%
4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share
Unit: NT$ Thousand share
Year
2013
Item
2014
As of 03/31/2015
Highest Market Price
20.95
15.95
17.60
Market Price
Lowest Market Price
9.75
10.05
15.00
per Share
Average Market Price
14.91
12.77
16.02
Net Worth per
Before Distribution
21.19
22.87
23.61
Share
Weighted Average Shares
8,967,080
9,377,302
9,916,297
(thousand shares)
Earnings per
Diluted
Share
Adjusted Diluted
Earnings Per
0.57
2.31
0.87
Earnings Per Share
Share
Cash Dividends
0.15
0.7(Note)
N.A.
Dividends from
－
－
－
Stock
Retained Earnings
Dividends per
Dividends Dividends from
Share(Note2)
－
－
－
Capital Surplus
Accumulated Undistributed
None
None
None
Dividends
Price/Earnings Ratio
N.A.
N.A.
N.A.
Return on
Price/Dividend Ratio
N.A.
N.A.
N.A.
Investment
Cash Dividend Yield Rate
N.A.
N.A.
N.A.
Note: 2014 Distribution of Dividends already gets approval from the Board of Directors, subject to shareholders’
approval in Annual General Shareholders’ Meeting.
63
4.1.6 Dividend Policy and Implementation Status
A. Dividend Policy
When allocating the net profits for each fiscal year, the following order shall be followed:
(1) To cover losses
(2) To transfer 10% to the legal reserve account
(3) To transfer the others to the special reserve account or reverse special reserve account pursuant
to the regulation
(4) To pay dividends on preferred shares
(5) To pay not less than 5% of the net income as employees’ bonuses. The Company’s employees
should meet certain criteria to be entitled to the bonuses. The Board is authorized to determine
the relevant criteria
(6) To distribute the remaining pursuant to the profit distribution proposal of the Board in
accordance with the second dividend policy listed above, of which 0.1% shall be paid as
remuneration to directors and supervisors and the remaining as dividends to shareholders.
The Company is growing stably in a fast-growing and capital-intensive emerging industry. The
Board shall prepare a dividend distribution proposal that caters to the future long-term financial
planning of the Company, the investment environment and industrial competition, by taking into
account the future capital expenditure and capital requirements of the Company, subject to the
approval of the shareholders’ meeting. Nevertheless, the amount of dividend distributed to the
shareholders shall not exceed two-thirds of the total amount of dividend during the year.
B. Proposed Distribution of Dividend
The Board adopted a proposal in Apr 28, 2015 for profit distribution as follows: Cash
Dividends to Common Shareholders from retained earnings: NT$ 0.7(Per share). The proposal is
subject to shareholders’ approval at the 2015 Annual Shareholders’ Meeting.
4.1.7 Effect of 2014 Share Dividends to Operating Performance and EPS Not applicable.
No financial forecast disclosed for 2015, therefore not applicable.
4.1.8 Employee Bonus and Directors' and Supervisors' Remuneration
A. Information Relating to Employee Bonus and Directors’ and Supervisors’ Remuneration in the
Articles of Incorporation
The annual budgeted net income of the Company shall be distributed in the following order:
(1) To cover losses
(2) To transfer 10% to the legal reserve account
(3) To transfer the others to the special reserve account or reverse special reserve account pursuant
to the regulation
(4) To pay dividends on preferred shares
(5) To pay not less than 5% of the net income as employees’ bonuses. The Company’s employees
should meet certain criteria to be entitled to the bonuses. The Board is authorized to determine
the relevant criteria
(6) To distribute the remaining pursuant to the profit distribution proposal of the Board in
accordance with the second dividend policy listed above, of which 0.1% shall be paid as
remuneration to directors and supervisors and the remaining as dividends to shareholders.
B. Estimate Foundation of Employee Bonus and Directors’ and Supervisors’ Remuneration
The Company’s bonus to employees and remuneration to directors and supervisors shall be
64
estimated and entered in accordance with the requirements set forth under Letter (Year
2007)-Chi-Mi-Zi 052 of Certified Public Accountant Research & Development Foundation and
shall be recognized as the operating costs or operating expenses as the actual attributes of the bonus
to employees and remuneration to directors and supervisors may justify. The gap between the
decision resolved in the shareholders’ meeting and the amount estimated in the financial statements
shall be recognized as the expense of the current year.
C. Profit Distribution of 2015 Approved in Board of Directors Meeting for Employee Bonus and
Directors’ and Supervisors’ Remuneration
(1) Recommended Distribution of Employee Bonus and Directors’ and Supervisors’
Remuneration: (NT$)
Employee Bonus – in Cash
$1,436,186,891
Directors' and Supervisors' Remuneration
$6,954,142
(2) Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings:
Not applicable as the Company did not allocate stock bonus to employees in that year.
(3) Recounted EPS after Recommended Distribution of Employee Bonus and Directors’ and
Supervisors’ Remuneration: (NT$ thousands)
Not applicable. Since 2008, employee profit share and remuneration to Directors and
Supervisors required expensing.
D. Information of 2014 Earnings Set Aside to Employee Bonus and Directors’ and Supervisors’
Remuneration:
Distribution of 2014 Earnings (NT$)
$0
Stock Dividends
Cash Dividends
$0.15
Directors' and Supervisors' Remuneration
$90,587
Employee Bonus
$343,921,549
Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $172,217 and
$4,004, respectively, for the year ended December 31, 2013. The amount was accrued by
considering the period’s net profit after tax, legal reserve amongst other factors and the Company’s
Articles of Incorporation. As resolved by the stockholders in June 2014, employees’ bonus and
directors’ and supervisors’ remuneration were $343,922 and $90, respectively, resulting to a
difference of $167,791 from the amounts in 2013 financial statements. The difference was caused
by different accrual ratio which has been processed as accounting estimates after being approved at
the stockholders’ meeting and recorded as expense in 2014. (NT$ Thousand)
4.1.9 Buyback of Common Stock: None
4.2
Issuance of Corporate Bonds
4.2.1 Corporate Bonds: None.
4.2.2 Convertible Bonds: None.
4.2.3 Exchangeable Bonds: None.
4.2.4 Shelf Registration: None.
4.2.5 Bond with Warrants: None.
4.2.6 Private placement of Corporate Bonds: None.
4.3
Preferred Shares: None.
65
4.4
Issuance of Global Depositary Shares
Issuing Date
01/23/2013
Item
Issuing Date
01/23/2013
Issuance & Listing
Luxembourg Stock Exchange
Total Amount (US$)
453,701,250
Offering Price Per GDS (US$)
4.481
Units Issued
101,250,000
Underlying Securities
Common Shares
Common Shares Represented
1,012,500,000
Rights & Obligations of GDS Holders
Same as those of Common Share Holders
Trustee
Not Applicable
Depositary Bank
Citibank, N.A. – New York
Custodian Bank
Citibank, N.A. – Taipei Branch
ADSs Outstanding(units)
69,181
Apportionment of Expenses for Issuance &
Borne by INX
Maintenance
Terms and Conditions in the Deposit Agreement &
See Deposit Agreement and Custody
Custody Agreement
Agreement for Details
High
5.20
2014
Low
3.35
Closing Price Per
Average
4.18
GDS(US$)
High
5.68
Jan 1, 2015
Low
4.78
April 30, 2015 Average
5.06
66
4.5
Employee Stock Options
4.5.1 Issuance of Employee Stock Options
Type of Stock Option
Regulatory approval date
Issue date
Units issued
Option shares to be issued as a percentage of
outstanding shares
Duration
Conversion measures
Conditional conversion periods and
percentages
Converted shares
Exercised amount
Number of shares yet to be converted
Adjusted exercise price for those who have yet
to exercise their rights
Unexercised shares as a percentage of total
issued shares
Impact on possible dilution of shareholdings
2009
Aug 4, 2009
May 13, 2010
20,000,000
Unit: NT $: per share
2010
Jun 9, 2010
May 19, 2011
50,000,000
0.20%
0.50%
5 Years
New Common Share
2nd Year: 30%
3rd Year: 60%
4th Year: 100%
－
－
20,000,000
5 Years
New Common Share
2nd Year: 30%
3rd Year: 60%
4th Year: 100%
－
－
50,000,000
32.59
22.85
0.20%
0.50%
Dilution to
Shareholders’ Equity is
limited
Dilution to
Shareholders’ Equity is
limited
Note: The aggregate total of issued and outstanding shares represents the aggregate total of issued and
outstanding shares having been reported to and registered in the Ministry of Economic Affairs as of
the Annual Report date.
67
4.5.2 List of Executives and the Top 10 Employees Receiving Employee Stock Options
Apr 30, 2015; Unit: Thousand
Employees
Employees
Employees
Employees
Employees
Employees
Employees
Employees
Converted
Shares as a
Percentage of
Shares lssued
Employees
Amount
(NT$ thousand)
Employees
Strike Price
(NT$)
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Managerial
Officer
Managerial
Officer
No. of Shares
Converted
Vice President
Converted
Shares as a
Percentage of
Shares lssued
Vice President
Amount
(NT$ thousand)
Vice President
Strike Price
(NT$)
Vice President
No. of Shares
Converted
President
Unexercised
Option Shares as a
Percentage of
Shares lssued
Chairman
Name
No. of Option
Shares
Title
Exercised
0.06%
－
－
－
－
5,485
22.85
~32.59
141,744
0.06%
0.02%
－
－
－
－
1,750
22.85
~32.59
46,319
0.02%
Hsing-Chie
n Tuan
Jyh-Chau
Wang
Wen-Jyh
Sah
Chin-Lung
Ting
Yao-Tong
Chen
Chih-Hung
Hsiao
Chen-Hua
Luo
Hung-Wen
Yang
Ke-Yi Kao
Chih-Ming
Chen
Chu-Hsian
5,485
g Yang
Tai-Chi
Pan
Kuo-Hsiun
g Kuo
Chung-Kua
ng Wei
Jia-Pang
Pang
Nai-Jian
Zheng
Zheng-Xia
Kuo
Tian-Ren
Lin
Yu Shui
Kuo
Chien-Lang
Lo
Chin-Yuan
Chang
Jian-Ting
Lai
Qiu-Lian
Yang
Zheng-Xu
Zhou
Kun-Feng
Huang
Zong-Ren
Kuo
1,750
Hao-Kun
Liu
Shu-Fu
Hsu
Yang-Feng
Lin
Fu-Shou
Wu
Min-Zheng
Wang
Note 1: Refers to the current management officers and employees up to the date of the Annual Report
Note 2: The total number of issued shares represents the number of issued shares registered with the Ministry of
Economic Affairs as of the date of the printing of the Annual Report.
68
4.6
Status of Employee Restricted Stock
4.6.1 Status of Employee Restricted Stock
Class of new restricted shares
Effective date of registration
Issue date
Number of new restricted shares issued
Issue price
Number of new restricted shares issued
as a percentage of the total number of
issued shares (Note 4)
Vesting conditions for new restricted
shares
Restrictions of new restricted shares
Custody of new restricted shares
If the vesting conditions are not
fulfilled after employees are placed
with or subscribe for new shares
Number of new restricted shares
reacquired or repurchased
Number of shares without restrictions
Number of shares with restrictions
Number of shares with restrictions as a
percentage of the total number of issued
shares (%)
First time
New restricted shares
Jan 30, 2013
62,302,000（Note1）
0.63%
0.02%
30 April 2014
Third time
Dec 12, 2013
8,536,000（Note 3）
0.09%
Employees shall be in active service during each of the following vesting
periods since the capital increase base date with the attainment of the annual
individual performance appraisal result of Grade B or G or above over the
years. Besides, they shall have fully complied with the service code and have
not violated the Company’s service agreement and integrity and intellectual
property agreement, work rules, stipulations in contracts with the Company or
the regulations of the Company. The percentages of shares in which the vesting
conditions are fulfilled are set out below.
Upon expiration of one year: 20% of the number of shares subscribed
Upon expiration of two years: 40% of the number of shares subscribed
Upon expiration of three years: 40% of the number of shares subscribed
(1) shall not be sold, pledged, transferred, given to others as gifts, attached or
otherwise dealt with.
(2) no voting rights at general meetings.
(3) not entitled to participating in the placement (subscription) of shares,
dividend distribution for the original shareholders.
(4) From the book closure day for the placement of shares at nil consideration,
the book closure day for cash dividends, the book closure day for share
subscription in connection with a cash capital increase, the book closure
period for general meetings as stipulated in Paragraph 3 under Section 165
of the Company Law, or other statutory book closure periods based on the
occurrence of facts to the entitlement distribution date, shares without
restrictions of employees who fulfill the vesting conditions in this duration
are still not entitled to any voting rights, surplus distribution rights, share
placement (subscription) rights, and/or dividend distribution rights.
Custody of shares in trust
Being placed with new shares: Shares will be reacquired by the Company at nil
consideration for cancellation.
Subscribing for new shares: All shares will be repurchased by the Company at
the closing price or the original subscription price, whichever is lower, on the
expiry dates of the respective periods for cancellation.
6,017,600
318,000
426,000
33,828,800
22,455,600
817,200
552,800
1,616,800
6,493,200
0.23%
0.01%
0.07%
The impact is limited as The impact is limited as The impact is limited as
the dilution ratio is low the dilution ratio is low the dilution ratio is low
Allotment of 31,151,000 shares at nil consideration; subscription of 31,151,000 shares at a consideration.
Allotment of 844,000 shares at nil consideration; subscription of 844,000 shares at a consideration.
Allotment of 4,268,000 shares at nil consideration; subscription of 4,268,000 shares at a consideration.
The total number of issued shares represents the number of issued shares registered with the Ministry of
Impact on interests of shareholders
Note1:
Note2:
Note3:
Note4:
Second time
Dec 13, 2012
Mar 29, 2013
1,688,000（Note 2）
0.00/5.00
69
4.6.2 Employee Restricted Stock Granted to Management Team and to Top 10 Employees
30 April 2015: Unit: in dollars, in thousand units
Employees
Employees
Employees
Employees
Employees
Employees
Employees
Employees
Number of shares
with restrictions as a
percentage of the
total number of
issued shares
Employees
Subscription amount
(in thousand dollars)
Employees
Issue price
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Associate Vice
President
Managerial
Officer
Managerial
Officer
Number of shares
with restrictions
Vice President
Number of shares
without restrictions
as a percentage of
the total number of
issued shares
Vice President
Issue amount (in
thousand dollars)
Vice President
Issue price
Vice President
Number of shares
without restrictions
President
Number of new restricted
shares acquired as a
percentage of the total
number of issued shares
(Note 2)
Chairman
Name
With restrictions
Number of new restricted
shares acquired
Title
Without restrictions
7,930
0.08%
4,686
0/5
11,715
0.05%
3,244
0/5
8,110
0.03%
2,710
0.03%
1,506
0/5
3,765
0.02%
1,204
0/5
3,010
0.01%
Hsing-Chien
Tuan
Jyh-Chau
Wang
Wen-Jyh Sah
Chin-Lung
Ting
Yao-Tong
Chen
Chih-Hung
Hsiao
Chen-Hua
Luo
Hung-Wen
Yang
Ke-Yi Kao
Chih-Ming
Chen
Chu-Hsiang
Yang
Tai-Chi Pan
Kuo-Hsiung
Kuo
Chung-Kuan
g Wei
Jia-Pang
Pang
Nai-Jian
Zheng
Zheng-Xia
Kuo
Tian-Ren Lin
Yu Shui Kuo
Chien-Lang
Lo
Chin-Yuan
Chang
Mao-Sheng
Hong
Yong-Yu Cai
Chao-Jun
Zhong
Zheng-Xu
Zhou
Jun-Yi Yu
Dong-Rong
Wang
Geng Ron Xu
Zan-Ren
Chen
Min-Zheng
Wang
Kun-Feng
Huang
Note 1: Refers to the current management officers and employees up to the date of the Annual Report
Note 2: The total number of issued shares represents the number of issued shares registered with the Ministry of
70
4.7
4.8
Status of New Share Issuance in Connection with Mergers and Acquisitions: None.
Financing Plans and Implementation: Not applicable.
71
V.
Operational Highlights
5.1
Business Activities
5.1.1 Business Scope
1. Major business operation Scope of business
The combined operating revenue of the Company is derived from TFT-LCD Flat Panel
Displays and its main commodities include large-sized and small-to-medium-sized TFT-LCD
related products. Large-sized products are generally applied to Liquid Crystal Displays,
Billboards, Desktop Monitors, and notebooks. Small-to-medium-sized products are used to
manufacture tablet computers, portable audio players, GPS for automobiles, aviation, and
mobile phones, while various types of touch-control panels could be selected. Besides, for the
purpose of special usage, the Company also provides products used for medical, industrial, and
educational purposes. Given that the business of the Company covers the entire world and the
size mix of panels is complete, the Company is a comprehensive LCD provider.
2. Combined Weighing of Different Business Operations in the Year of 2013
Unit: NT$ thousand
Major Divisions
TFT-LCD
Total
Total Sales in 2014
428,661,898
428,661,898
(%) of total sales
100%
100%
3. Current commodities (services) items
The Company’s main products are TFT-LCD panels and touch-control modules. The
products lines cover small, medium, and large sized panels mainly for a wide range of
applications, such as LCD televisions, desktop monitors, notebook computers, mobile phones,
portable audio players, automobile accessories, medical, industrial, aeronautic, and educational
products.
4. Planned Development of New Commodities (Services)
The Company is planning to develop new commodities with its main focus on Flat
display-related products, while continuing to delve into key products such as Mobile Phone
Panels, medium-sized Display Panels, Electronic Book Panels, Notebook Computer Panels,
Desktop Monitor Panels, and large-sized LCD Television Panels. Meanwhile, the Company
will continue expanding the product scale and product application and development of
capacitor-based touch-control panels. The Company will also keep investing into the field of
non-consumption applications, and launch new products fit for industrial specification panels,
medical, and public display panels.
5.1.2 Industry Overview
1. Current situation and development of industry
Owing to excellent product properties and improving costs and image quality, TFT-LCD
has become the mainstream of various kinds of flat displays in recent years. The application
coverage of TFT-LCD is extensive, of which, large-sized products are being applied to the
manufacturing of LCD Televisions, Desktop Monitors and Notebook Computers while
small-to-medium-sized products are being applied to Flat Panel Computers, portable audio
players, and GPS for automobiles and mobile phones. Large-sized TFT-LCD products will
move towards the goals of energy-saving, better images, and narrower frames, thereby offering
an incentive to consumers to upgrade the existing product lines. As the applications of smart
72
phones become more and more popular and the touch-control technology is gradually mature,
small-to-medium sized products will become the fastest growing category with the most
diverse products in recent years.
The Company adopts the forward–backward integration manufacturing model in response
to the development of TFT-LCD Industry, and comprehensively arranges the early phrase
glass of every product generation and the later phrase of all-sized modules and integrates IDM
product lines, including 3.5 generation, 4.5 generation, 5 generation, 5.5 generation, 6
generation, 7.5 generation and 8.5 generation TFT-LCD plants, 2.5 generation, 4.5 generation,
and 5 generation touch-control sensor plants and production lines and later phrase module
plants for IDM products such as later phrase product lines, Light Guide Plate/Backlight
modules, PCB manufacture, assembly and pressing type paints. The production capacity and
scale of every production line are comprehensive and flexible, matching a-Si, p-Si, LTPS,
OLED processing and VA, AAS, TN Fringe field Switching and therefore all-sized products
can be produced effectively.
2. Association of upstream, mid-stream, and downstream industries
The Company is an IDM product manufacturer which covers the upstream TFT-LCD
Panel production and the downstream System Assembly, the association diagram of upstream,
mid-stream and downstream industries which the Company belongs to are shown below:
Glass Panel
Reticle
ITO Conduct
LCD
Up stream
Driving IC
Polarized
PCB
Backit Modules
Colour Filter
Middle
stream
INX Electronics
LCD Panel
LCM Modules
Downstream
LCD Monitor
LCD TVs
NB
Mobile, PDA
Others
Consumers
(1) Development trend of products
TFT-LCD has a low energy consumption rate, small size, low weight, and low
radiation features. Japan, Korea, and Taiwan have actively invested in the production
technology for many years, and the technology is getting mature. Now it is widely applied
to flat panel displays; especially for notebooks and desktop displays, most of them using
TFT-LCD. In the home appliance market, flat screen TVs are the mainstream. The future
73
developing trend of these products are listed below:
(i) Mobile Computers (Notebooks & Tablets)
Due to fair prices and computational efficiency increasing substantially, rapid growth
in sales of mobile computers has already become the biggest sales scale under the
personal computer category. As the market expands, manufacturers keep releasing
differentiation product lines aiming to stimulate different user demands. The design
direction focuses on mobility, word processing, and audio performance to meet the
needs of every type of customer for market segmentation. LCD panels also have
differences in size and resolution. The smallest size is the Tablet; the main market is
customers who focus more on personalization and entertainment. Emphasizing small
size, light and easily carried features, less emphasis on word typing, omitting a
physical keyboard and changing to a more intuitive touch input. In the past, the main
LCD screen was 7 to 10 inches. Now it has gradually increased in its size development
trend, such as the new iPad which is expected to have a 12.9-inch screen and more
focus on entertainment needs. Therefore everything is moving toward a panel with a
wide viewing angle.
Since 2014 high end tablets not only have improved computational efficiency and
completeness of software function, in the same time there has been more focus on the
customer’s visual sensibility about high screen resolution. The demand of high end
tablets has increased significantly due to FHD and more high resolution products
continuing to be released.
For many computer users, a keyboard is still the main input device, and notebooks
coming with a physical keyboard still have a considerable market. Facing the rise of
tablets, personal computer manufacturers have also started to import new design
concepts in notebooks, such as transformer books that can switch between two
different modes of tablet and notebook at any time, are gradually becoming the
mainstream design of 10-inch to 13-inch notebooks. Ultra-thin, wide viewing angle,
high colour, and touch function are also becoming important factors. As for those
customers with high document requirements and lower mobile requirements, the
bigger screen goes with FHD resolution to provide better webpage browsing and
visual entertainment experience. 13-inch to 16-inch products are mainstream
applications. As for those who emphasize video and audio effects or use the product to
replace desktop products, they go with bigger, low energy consumption, and wide
color gamut panels to present better color expression.
About the size of the panels, due to the development of next generation production
lines and wide screens generally supported by operating systems, 16:9 products are
already becoming the mainstream of the market. In addition, to fit the trend of thin and
light, panels using thinner glass and thinner organization design are essential factors
for products.
(ii) LCD Monitor
LCD monitors mainly go with desktops; two mainstream markets are office use and
personal video and audio entertainment use. For office use LCD monitors, generally
sales are for computers hosted by brand manufacturers and product structure is
relatively simple and of moderate cost to fit the budget of enterprise and government
organizations. For personal video and audio entertainment product, due to more focus
74
on video and audio purposes, recently the proportion of the product equipped with
wide viewing angle technology has gradually increased. We expecting the proportion
is going to increase continually in 2015. Meanwhile due to customers increasing
demand for high quality products, we are expecting 4K2K high resolution products to
be released on the market, having a wide viewing angle and narrow frames will
become the mainstream of the high end market gradually.
In addition, there is increasing customer demands for touch operation. When the
software platforms of new versions of Windows gradually spread and become mature,
we anticipate the product proportion of our touch function is going to gradually
increase.
About size, due to an increase in the manufacturing efficiency and efficiency of
product design structure, the price of TFT-LCD products is dropping and accelerating
market demand for a transfer to the bigger size. For office use types, a gradual transfer
from 18.5-inch and 19-inch to 20-inch and 21.5-inch; the average size is bigger for
personal video and audio entertainment products, 23.6-inch and 27-inch units will
gradually increase their proportion soon.
Except for standard LCD monitors, the market will release All-In-One (AIO) which is
an integrated design of the desktop host and monitor. Because of advantages in
functionality saving space , the product is winning customers. As the Windows 8
operating system penetration rate increases, it accompanies the All-in-One product
with touch function adding greater entertainment function. It also shows a new
appearance for the market of LCD monitors.
(iii) LCD TV
Since 2005, Taiwan, Japan and Korea, started to mass produce generation six (G6).
The production of TFT-LCD panels above 32-inches increased significantly and LCD
TVs have taken up living rooms rapidly. In recent years, LCD TVs fast popularization
due to each manufacturer developing G7 and G8 capacity, goes with the improvement
of each phase of production technology. It not only has become customers’ first choice
when buying a new TV, but also has stimulated the traditional TV refresh cycle.
Meanwhile, when a product becomes popular, mass production of large scale and
technical improvements provide effective cost reduction of bigger size panels. Each
manufacturer introduces large sizes such as 40-inches to 65-inches successively and
they are accepted by a great number of customers, even for 75-inch and 85-inch super
size products, the market is warming up. Innolux is the pioneer of providing
differentiated large size models (especially 50-inch and 58-inch), dedicated to
effectively improving the technology of each product to significantly increase the
panel’s added value, gain customers’ brand recognition, and market segmentation, and
increase the market share of large sizes.
In 2011, with 3D film and 3D TV channel development, the company released a
highly competitive panel with a 3D display function as the pioneer of the panel
industry to accelerate 3D applications into the family. Meanwhile, mobile display
devices gradually move toward high resolution to satisfy customers' demand for high
definition TV. We released 4K2K ultra high resolution products in succession since the
second half of 2012 and became the pioneer manufacturer of the first of mass
production and the highest market share. The company keeps developing 4K2K, Low
75
Power-consumption & Wide Color Gamut, and over 130% sRGB color range,
including 85-inch, 75-inch, 65-inch, 58-inch and 50-inch panels. The 65-inch wide
color Gamut (over 130% sRGB color range) and 4K2K LCD TV panel were granted
the 2014 Taiwan Flat Panel product technical award. The Innolux 4K2K large size
series panel solves dynamic image roughness and increases vividness. The quality of
the TV is delicate and the color has higher fidelity, smoother dynamic image, and is
mentally in the scene. Moreover, with the standard of 4K high resolution transport
protocol agreement completed in the end of 2013, we are expecting the 4K2K product
trend will extend into 2015 and future development. Each manufacturer will release
4K2K photographic equipment and go with 4K2K film releases and programs . 4K2K
will become the necessary specifications of large TVs.
On the design of panel appearance, the company provides ultra-narrow frames (6mm
and 7.5mm) and 50-inch ultra-thin design (thickness <10mm), integrate paint design
on appearance to make client rapid input and mass production. End customers not only
enjoy the real 4K image, also provide the real high quality of excellent vision and
sensual experience. Innolux provide client and customer comprehensive and high
competitive TV panel by innovation continually, and continue to lead the market trend
and become lead firm of the industry.
(iv) Medium and small size panel
Before 2008, no matter technology or shipment, panel manufacturer of Japan always
the leader of medium and small size panel industry; after 2009, Taiwan manufacturer
shipment started to exceed Japan and Korea, became the leader of medium and small
size panel industry instead. As the competition is more and more intense, panel
manufacturer of medium and small size started to produce by higher generation factory.
From 2011, even some panel manufacturer started to mass produce mobile phone
panel by G6 factory. However, industry competition of medium and small panel not
only at price competition, but also at market demands of higher resolution and higher
definition panel. It drives medium and small panel manufacturer to be more
enhancement in technical part. Since 2013, not only wide viewing angle technology is
sharp competitive edge for manufacturers, each manufacturer release high resolution
product continually. By a-si realize high cost-effective in over 5-inch screen of FHD
resolution and by LTPS provide WQHD resolution in over 5.5-inch screen. In view of
the 202015, keep improving resolution in 4-inch to 6-inch screen and compete in
lighter, thinner, narrow frames and lower energy consumption products. Manufacturers
have R&D input in abnormality cutting wearable device and flexible panel for next
generation technology, hoping besides the price competition can developing some
more niche products to widen difference with competitors by technology and keeping
sustainable operation in the industry.
(2) Market competition situation
In competition of the industry, in order of countries input in TFT-LCD, countries are
South Korea, Taiwan, China and Japan. Korea has large-scale investment in two big
corporate groups Samsung and LG. Due to domestic support on their own brand, they lead
in production volume and production value recent years. Taiwan’s manufacturers based on
complete supply chain integration and high production efficiency, the market share is hot
pursuit subsequently after Korea manufacturer. The main manufacturers are Innolux and
AU Optronics, etc. Japan manufacturers’ market share decrease gradually due to
production cost and decreased in new factory investment plan, transfer to high end mobile
display and ultra-big TV market. When we look at China, due to huge domestic demand, it
76
attracts government’s support and factory’s input. Recently BOE and ChinaStar step into
generation eight production, but due to the production line’s limitation, they cannot provide
whole size product.
5.1.3 Research and Development
1.
Technical Level and Research Development
We keep helping clients to intensify product competitiveness, fit market demand, and be
friendly to the environment as our main objective of display technique development. About the
development, it mainly includes environment protection materials, electronic saving and low
power consumption, high pixel, high chroma, thin, narrow frame, high dynamic displays, touch,
wide viewing angle, and all-around system services integration. We already have obtained
remarkable achievements. These results of technical development are applying to TV, desktop
monitor, Notebook, Tablet, Cell Phone, Medical, Industrial Display. Moreover, the integrated
development on the touch components and panels of more advanced techniques and portable
and wearable product applications are the key points of our future product design and
development.
2.
Facts of research & development:
With incessant efforts, the Company has insistently invested significant human resources,
resources and funds in research & development to continually upgrade the quality of products,
technology & know-how of new manufacturing process and application for new products. The
Company would like to depict performance in research & development through three aspects
below:
(1) In the aspect of upgrade of product quality:
Including the technology & know-how for broad visual angle, high solution, low energy
consumption, thin thickness, high hue, dyamic image, high dynamic range, narrow frames,
new touch panel and the like.
(2) New material technical process:
Including IGZO, In-Cell Touch Technique, Copper Manufacture Procedure, COA(Color
Filter on Array), Photo-Alignment, Horizontal Electronic Field High Transparency and
High Contract Positive Magnetic Susceptibility, Reducing Mask and Automotive wide
temperature range display material technique.
(3) In the aspect of new product application:
The up-to-date technology & know-how developed by the Company have been put into
volume production one after another and applied onto a good number of products,
including notably general cell phones, cameras, MPD, electronic paper, tablets, notebooks,
desk monitors, AIO, television, medical treatment services, vehicular carriage, aerospace
and touch panel and the like, in the dimensions ranging from 1.36” to 85” TFT-LCD
products. In the days and years ahead, we shall continually invest in the research &
development oriented human resources and fund to develop more and more TFT-LCD
display and monitor products of added dimensions, application ranges, thinner, more
environmental protection friendly and high efficiency to live up to the future trends in
application and satisfy customers in varied ranges.
77
3.
The consolidated research & development costs invested in the latest year as of the Annual
Report date.
Unit: NT$ thousand
Item
R & D expense
Net Revenue
Percentage of
revenue (%)
4.
2014
12,177,083
428,661,898
As of 3/31/2015
3,970,262
100,157,867
2.80%
4.00%
Successful development technical or product
The company’s develop technical and products for each direction are listed below.
(1) TV:
A. The first company of the world develop 40-inch/50-inch/58-inch the best cutting
efficiency size in G5.5/G6/G7.5 generation factory, we creating market differentiation
and improve add-value of product.
B. Introduce 4Kx2K ultra high definition and high resolution TV display, the product line
is complete, product size from 40-inch to 85-inch, providing higher quality TV image
and better product competitiveness, lead 4K TV industry going to fast development and
trend.
C. Introduce new size 40-inch/75-inch/85-inch TV display, overall arrangement in big size
application, creating more differentiation product than competitors.
D. Develop high chroma technique, increasing to over 130% sRGB colour range and
without increase energy consumption, not only increase the performance of display, but
also make customers feeling more about the value-added of big size TV product.
E. Develop new MEMC improvement technique, apparent improving dynamic quality and
integrate IC, increase dynamic picture quality and integrated technique.
F. Develop and mass produce a series of over 50-inch thin TV model (<10mm), providing
artistic and fashion appearance model to clients.
G. Develop 0.5mm thin glass and apply to TV display, reduce glass usage and cost.
Whole series big size TV import and mass production successfully.
H. Whole series big size TV import and mass production successfully.
I. Develop Inno Module model, combine narrow frames and front and back appearance,
provide clients high competitive module and reduce assembled time and cost.
J. Cooperate with brand to develop big size (65-inch and 75-inch) Curve model, mass
production successfully and assist client to introduce the product to the market for
customers.
(2) Monitors:
A. Release whole series wide viewing angle VA desktop monitor panel and with high
brightness, high contrast, high saturation, not only increase product quality and value,
but also provide client the best choice of high end monitor LCD panel.
B. Develop several model of globally new Inno-touch monitor and AIO personal computer,
by integrate touch as multi-function use can reduce module thickness to become light,
increase touch functional can close to end customers’ need.
C. Release 28-inch and 32-inch 4K2K monitor panel, panel monitor can have higher
resolution visual enjoyment, not only increase product value, but also provide client the
best choice of high end monitor LCD panel.
D. Develop monitor panel of frameless and wide viewing angle and integrate InnoTouch,
not only provide thinner and better appearance design to clients, but also have touch
function and provide full service.
78
(3) Notebook:
A. Release whole series light-weight notebook panel, the thickness of whole series of
notebook (11.6-inch/12.5-inch/13.3-inch/14-inch/15.6-inch) is only 2.6mm, show light
feature and solve the heavy problem of notebook.
B. Interface technical of Notebook panel is totally from LVDS to eDP. It can connect to
high resolution trend, also can save space to help thinner design of the system and lower
the energy consumption.
C. Release whole series FHD AAS wide viewing angle notebook panel and goes with Low
Power-consumption & Wide Color Gamut to increase color range but not increase
energy consumption to increase visual performance.
D. Develop TOD technical on notebook panel, through touch integration, notebook not
only can be thinner but also can reduce produce process of the module and simplify the
complexity of new product.
(4) Small/Medium:
A. Develop oxide TFT technical, using the technique goes with wide viewing angle
technique, reduce power consumption and increase optical performance, further can
improve optical specification and realize high quality panel product.
B. Develop high resolution panel and smart phone panel, resolution can reach above
500ppi, at the same time have high quality, low energy consumption features to delicate
the image but not cost too much energy. The product successfully equipped with better
viewing quality and lasting for long time to use in portable product.
C. Develop display with Low Power-consumption & Wide Color Gamut, increasing color
gamut but not increase energy consumption in smart phone panel and tablet, can reach
130% sRGB color gamut and increase competitiveness of the product.
D. Develop LTPS AAS panel of frames narrow than 0.6mm and high resolution, reduce the
size of the panel module to fit the narrow frames demand from smart phone and tablet
user, increase the design freedom of portable device display appearance.
(5) Touch Panel:
The company already develops several touch technique solutions (including InnoTouch,
TOD, TID, Hybrid, Total Solution):
A.New type Inno-touch technique is integrated touch panel and induction glass technology.
The advantage is able to simplified production process and provides economic touch
panel option. The technology can goes with multiple size panels; meets the new
development trend of affordable electronic product toward to touch function.
B. Touch On Display (TOD): Through TOD technique can make portable device have light
performance effectively, also with well optical performance and increase portable
electronics competitiveness. Not only medium and small size smart phone and tablet
apply and mass production, but also apply to bigger size notebook products.
C. Touch In Display (TID) & Hybrid : Not only have TOD technical advantage, the
company develop TID Hybrid technical to make it even more lighter, and high touch
sensibility technique apply to portable product can improve the users’ experience about
portable electronic product.
D. Provide more completeness Touch Total Solution: Through highly vertical integration of
streamlined production, we may provide client complete and all-round touch integration
service. Not only shorten the process and time of production and delivery, but also help
client to enter the market, make better arrangement and configuration at capacity and
resource of panel and touch. Equip with integrated InnoTouch, TOD, TID Hybrid
product and process technical to serve customers.
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(6) Special Application
Release 21.3-inch to 30-inch (AAS; 5/6/10/14 MegaPixel) medical LCD display, with high
resolution, high brightness, high contrast, adopt 10 bits drive new technology and high
efficiency LED BL, to make the image more delicate and medical personnel can make
more precise judgment. Big size public display 75-inch/ 85-inch present natural high color
gamut and give consideration to both indoor and outdoor environment. Also first release
horizon LCD display (32:9) presents multiple sizes can fit for multiple environments.
5.1.4 Long- and Short-Term Business Development Plans
In the short-run, we shall devote ourselves profoundly toward televisions, notebooks, tablet
computers, cell phones, monitors oriented to vehicles, medical treatment services and industries.
Continually we shall help customers pep up competitive edge through our pround monitor
technology & know-how, live up to the market and environment-friendly demands. About the
development, it mainly includes environment protection materials, electronic saving and low power
consumption, high pixel, high chroma, thin, narrow frame, high dynamic displays, touch, wide
viewing angle, and all-around system services integration. We already have obtained remarkable
achievements. Meanwhile, we shall spare no effort to profoundly team up with customers in
strategic alliance to solidify our firm foundation in the panel supply chains and create the happy
win-win aspects through the teamwork.
Long-term development: Other than the efforts to do research & development for up-to-date
monitors, strengthen manufacturing process to optimize the productivity. For the emerging of new
model monitor know-how, we shall invest appropriate resources, cultivate autonomous development
capability, like the embedded touch know-how, super narrow frames, super thin design, super high
solution, curved plate design and niche oriented application products and the like. Through such
efforts, we hope to set up the optimal strategic deployment in the brand new monitor application
regions. Meanwhile, we shall further stress value chian integration and development of products
high added values, to make our products more competitive in both pricing and specifications to
provide customers with added solutions and services and to provide terminal end consumers with
added excitements in visual enjoyment.
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5.2
Market and Sales Overview
5.2.1 Market Analysis
1.
Main products selling area
Unit；NT$thousand；%
Area
Domestic sales
Americas
Europe
Foreign
Asia
sales
Other Area
Total amount of F/S
Total
Amount of Sales
91,333,989
11,727,851
31,048,822
248,515,267
46,035,969
337,327,909
428,661,898
%
21.31%
2.74%
7.24%
57.97%
10.74%
78.69%
100.00%
2.
Market Share
According to the statistic of HIS/DisplaySearch research report, until Q3 2014, the market of
the company’s big size panel shipment is 19.5%, which is the second-largest supplier of the world
LCD panel industry. Based on application product, global market share of LCD display panel is
23.1%, maintains world’s second ranking performance; global market share of LCD TV panel is
19.8%, world’s third ranking performance, but the market share grows 3.5% compared to 2013;
global market share of notebook (including tablet) is 18.4% which is the world’s third ranking, the
rank improved compared to 2013. Overall, under the tough economic environment and strong
market competition, the company still maintains nice performance in the market of big size product
application. The market share of medium and small panel is 10% until Q3 2014, which is the
second largest shipment of medium and small size panel manufacturer.
3.
The supply and demand situation and growth of the future market
Due to the outstanding product feature and the continuous improvement of cost and quality,
TFT-LCD already become the mainstream of flat display and the sales will keep growth as the
improvement of application level and penetration. According to the estimation of
IHS/DisplaySearch, the global shipment of big size (over 9-inch) TFT-LCD panel will be 534
million chips.
If analyzing market size of several main application level, about LCD TV part, as new size
development and new technical input and plus new capacity growth stable, expecting global
shipment of LCD TV will be 238 million in 2015 and even will be 242 million shipment in 2016.
About LCD monitor, the shipment forecast is 148 million and will slightly decline to 145 million,
but as the demand increased of big size and high resolution product, the penetration rate of high
value product will increase gradually. About mobile PC (including notebook and tablet), due to
tablet trend, shipment grow fast in 2013, notebook have slightly growth in 2014, but growth
momentum of tablet slowing down, the shipment slightly declined in 2014. However, overall
forecast of mobile PC market will growth again in 2015, will be reach to 438 million, even reach to
455 million in 2016.
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Unit: million
LCD TV
LCD
Laptop (including
tablet)
Data Source: DisplaySearch
According to the estimation from IHS/DisplaySearch, global shipment of medium and small
size panel will be 220 million in 2014, increased 13.8 % compared with 2013. The shipment will be
238 million in 2015 and annual growth rate is 8.4%. Cell phone shipment grows from 165 million
in 2011 to 182 million in 2014; it will grow to 197 million in 2015 and annual growth rate will
reach 8.5 %, according to the forecast. As middle-end smart phone rapid growth in emerging
countries market, it will keep driving the demand of cell phone’s panel; the overall cell phone panel
shipment is going to grow continually until 2020 and will be the main growth power of middle and
small size panel.
1,600
1,400
1,200
1,391
1,187
1,199
945
1,000
666
964
464 1.9%
200
0
5.1%
782
697
800
600
400
6.8%
6.3%
570
-0.5%
2011
2012
2013(E)
2014(F)
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
Smartphone
Functionphone
Mobile Phone YoY
2015(F)
Data Source: DisplaySearch
Amidst the unpredictable macroeconomy, competition amidst the industries, expansion and
competition by newly joining competitors amidst products and technology & know-how that have
been developed and changed in each and every passing day, the TFT-LCD products would be
subject to high level circulation uncertainty. In the face of the mounting cutthroat competition, we
shall launch overall upgrade of all substances to deal with all sorts of challenges.
We shall boost marketing by means of improved operating efficiency, refined management,
product development, customer services, technical research & development and such
efforts. In turn, we will be able to intensify gross profit in sales, cost control to further
intensify competitive edge.
Continued investment in research & development to suffice technical talents, improve
product design and application of materials. We shall proceed with research &
development of advanced and improved manufacturing process and new generation
monitor technology & know-how so as to create added lead in know-how of products and
production costs.
With wholehearted efforts, we shall deploy integrated product lines for new products. The
products manufactured by our Company cover televisions, computers, mobile devices,
vehicles- and medical treatment oriented products. We provide varied modes to sell panels,
whole machines, touch integration and the like. Through such efforts, we virtually bring
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down the potential risks of fluctuation with single products.
4.
We intensify integration of supply chains to stay in close teamwork with suppliers to
deepen deployment of strategic customers, strengthen responsiveness toward supply and
demand fluctuation and, meanwhile, boost approval-level from customers.
Niches in competition.
(1) Business model:
Since we launched the three-in-one merger, we have continually demonstrated the
integrated concerted performance (synergy). Through the business policies with
“leadership with know-how and quality, boosting of production efficiency and quality”, we
have enhanced the operating efficiency by leaps and bounds and gradually open the new
aspects amidst the cutthroat competition.
(2) Vertical and horizontal integration:
In an attempt to strengthen integration of our products, boost cost competitiveness,
demonstrate maximum possible benefit in supply chain management, other than production
of TFT-LCD panel modules, we dominate a significant ratio of design and manufacture of
parts & components, including LED panels, color filter, light guide plate, Backlight
Module, PCBA and such structure pieces which could be manufactured inside our home
factory or overseas subsidiaries. Thanks to such high leve vertical integration, we have
taken advantage in lowering costs, prompt response to assure top level quality.
(3) Portfolios of our products:
The principal products of the Company include notably the TFT-LCD panel modules
primarily including: Large size like LED TV, desktop monitor and laptop plate; mid-small
size like mobile phone, tablet PC, automotive display. Various products with advanced
wide viewing angle and high resolution manufacturing techology. We satisfied every level
of your needs.
(4) Our advantages in costs:
Through the hands-on experiences accumulated by TFT-LCD manufacturers at home and
abroad, we could conserve quite a few time which is normally indispensable to try & err. In
procurement of machinery & equipment, the hands-on experiences accumulated by the
suppliers in installation could help us conserve partially the costs. Further coupled with the
aforementioned advantages in the unique operation mode and vertical integration, we well
outperform horizontal trades in terms of costs required for production.
(5) Concerted performance (synergy) in marketing:
We are dominant of sound marketing channels to get connected with world class customers.
Toward those world-class giant customers, we are capable of rendering prompt design,
integrated products with global services through which our customers enjoy the
excitements of one-stop shopping.
In looking back over 2014, our production lines for all sorts of panels, large, medium and
small sized ones, were complete and comprehensive and were in an excellent position to
enable customers to enjoy the excitements of one-stop shopping. In extensive aspects
notably the productivity scale, product design capability, quality rate, supply, managerial
plans as well as financial stability, we have accomplished further upgrade.
Besides, the Company has continually without interruption teamed up with customers in
the product designs and supply chain management profoundly to continually boost
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customer approval-level and, in turn, expanded our shares in the panel markets. In 2014,
we saw continued shipment growth, apparently that our efforts in performance have
yielded fruit step-by-step. We anticipate that in the days and years ahead, we are in a
position to further optimize product, upgrade quality and assure further upgraded
approval-level from customers.
Customization Capability:
We can provide customized products through good vertical integration and cost advantage.
5.
Advantage and disadvantage of long term development and reaction strategy
(1) Advantage:
A. Keep developing new product applications
With rapid development of wireless communication and cloud technologies, TV, PC,
pad and cellphone are gradually integrated their contents. The development of “one
cloud with multiple screens” is the major strategy of all companies. Because the service
of cloud information is surrounding people’s life, the flat-panel monitor, as the
intermediary of information, has become more important. The more delicate the
information content is, the demand of size, resolution, visual angel, and light
specification design of consumers rise. It also raises the unit price of TFT-LCD products,
and brings new applications and demand increases. The main stream products of all
major TV industry brands is ”smart TV”, which is also the sign of the rapid involvement
of cloud applications in TV area. 4K 2K ultra HD TV, which were put into market in the
second half of 2012 and provided higher level of joy for watching TV, has grown very
fast and is expected to become the major spec of middle or high end product from 2015.
Regarding to the LCD monitors, because the market is more matured, the major product
requirement is energy saving and HD quality to encourage the customers to upgrade the
current product lines. Regarding to notebooks, the new market drives come from the
new operating system and calculating platform. The company had started to provide
pads products and had good development since pads had grown very fast from 2011.
This is good for the production of middle size panels. Regarding to the medium and
small size panels, the common use of smart phones and gradually matured touch panel
technologies allows smart phones to become general consumer products. The delivery
of production is growing rapidly while 2014 might deliver more than 1.2 billion and
2015 1.38 to be expected. Because the panel size of smart phone increases from the size
of functional phones, panel’s unit price rises while the requirements of wide visual angle,
high resolution, and color presentation upgrades. Thus, cellphone panels’ revenue rises
rapidly, too.
B. Stable customer base
Our major customers are global consumer electronics companies, which have important
stands in TV, PC and mobile communication industry globally. Moreover, because the
trends on integration of consumer electronics and personal computers are obvious, the
market will still be dominated by the international big companies, and develops with the
direction of “the big ones get bigger”. Therefore, in the company’s perspective, we not
only can grow our revenue rapidly, the market share of us is also expected to keep
increasing with our major customer basis.
Under the synthesized effects of the three factors: rise of production line completion,
84
stronger customer base, keep developing new customers in newly developed market on
the current customer basis, the company’s revenue is expected to grow stably and
rapidly, and the global market share will grows gradually as well.
C. Globalized strategy
Innolux has been recognized as the best LCD panel supplier in all aspects, and had been
setting up global strategy aggressively. Now we have production base of
post-production LCD panel module and monitor in Shenzhen，Ningbo, Foshan, Nanjing
in China, and we also have delivery hubs in major cities in Asia, Europe, and America,
so that we can achieve “deliver just in time” object and strengthen the long term
cooperative relationship with customers.
D. Vertical integration in depth
Innolux has been working in TFT-LCD industry for a long time, and we have the
professional knowledge and managing capability in LCD panel, module, mechanism,
and optical components’ R&D, production, and selling. We are more cost-effective and
have better capability to service the customers timely than unitary TFT-LCD factory.
(2) Disadvantage and Reaction Strategy
A. The balance of supply and demand is hard to keep due to the intense competition in this
industry.
LCD panel industry’s economy cycle is more obvious than other industry and the
balance of supply and demand is more difficult to maintain because the high capital
intensity and long establishment time. Other competitors in Taiwan, Japan and Korea
are planning to build up next generation panel factories and the rising production
capability in China since 2012 also brought competition to the industry. Innolux has
3.5th generation, 4th generation, 4.5th generation, 5th generation, 6th generation, 7.5th
generation and 8.5th generation production lines, which can produce all sizes of LCD
panels and touch panels. The production capability is the 3rd largest panel manufacturer.
We try to produce the best combination of products and adjust the production allocation
according to market supply-demand condition, so that we can optimize the use our
production capacity.
B. The complicated technology and patent portfolio
The design and production of TFT-LCD requires highly professional technology. All
companies that in this industry are aggressively making their portfolio in technology
and patent applications. To avoid the violation of patent rights in the production process,
Innolux has been developing our own patents and technology since the beginning of this
company. We recruited domestic and international talents to join the research team, and
evaluate the feasibility of getting the usage rights of some key technology from foreign
companies at the same time. Regarding to intellectual poverty, we not only aggressively
conduct R&D and the patent applications, we also keep strong legal support team to
protect our intellectual poverty.
C. The global economy influences demand and supply
The global economy has become less stable due to the sub-prime mortgage crisis and
the European debt crisis. Although it is recovering gradually, it’s hard to say that the
global economy had recovered to the positive growth completely. The demand can be
influenced dramatically once regional or global economy fluctuate, and moreover,
influence the demands of LCD monitor products. We provide products that are
85
competitive for its cost and specifications by constantly optimizing our products and
technology. We also help our supply chain partners to develop business to diminish the
operation disadvantages of fluctuation of external demands.
5.2.2 The Production Procedures of Main Products
1.
Important function of main products
(1) TFT-LCD
TFT-LCD products are display application for digital information delivery, its wide
application including information display equipment for business and industry, computer,
telecom related and consumer electronics display equipment, etc. As the development of
integrated digital age 3C market, the main area of TFT-LCD product are:
Information Technology, IT: such as Desktop monitor and Notebooks, etc.
LCD TV
Communications and Consumer Electronics: Mobile phone, digital camera, digital
video, digital photo frame, automotive display, portable DVD player, portable game
console, tablet and other high mobility and portable electronic products application.
Special application: medical display, Avionics display, automotive display and other
touch panel application.
(2) Touch Panel business
Small size (below 7 inch) products mainly apply to smart phone, multimedia player,
GPS and digital camera, etc.
Medium size (7 inch to 19 inch) products mainly apply to tablet, eBook, Ultrabook,
notebook, etc.
Large size (above 20 inch) products mainly apply to All-in-one computer (AIO),
Public Information Display, etc.
2.
Production process of main products
(1) Three Steps in the TFT-LCD Production Process:
In the Array or TFT Process mentioned in the preceding paragraph, injection and
washing for glass baseplates→gate metallic layer sputtered coating→gatemetallic
layer lithography→Semiconductor layer continued filming→Semiconductor
lithography→source/drain film-forming→source/ drain medal sputtered
coating→source/drain lithography→Protection film manufacturing
process→Protection film lithography→Transparent conducting layer sputtered coating
transparent conducting layer lithography→thin film transistor electrical analysis→thin
film transistor completion.
Cell or LCD Process: The Cell process fits the Array substrate to a color-filter
substrate; liquid crystal is then inserted between the two substrate layers.
Module Assembly or LCM Process: taking the panel from the Cell process and
bonding the assembling backlights, IC and frame and other components to make the
Open cell, module and system and other types based on clients’ demand.
(2) Touch Panel business
Sensor Process: Use Semiconductor Litho process to put sensor on the glass.
Lamination & FPC Bonding Process:
Touch panel modules and LCD/LCM assembling process (TP & LCD/LCM Direct
Bonding & Advanced Direct Bonding): A.TP & LCM: taking LCM as the baseplates
to be attached to the touch panel modules for overall combination. B.TP & LCD: 以
LCD(Open-Cell) as the baseplates to be attached to the touch panel modules for
overall combination before being assembled with Back Light modules(BLM).
86
5.2.3 Supply Status of Main Materials
Major Raw Materials
Driver IC
Glass
Polarizer
Source of Supply
Supplier U
Supplier P, Supplier Q, Supplier S
Supplier R, Supplier T, Supplier V
Supply Situation
Good
Good
Good
5.2.4 Major Suppliers and Clients
A. Major Clients Information for the Last Two Calendar Years
Unit：NT Thousand$
2013
Item
Company
Name
1
2
Customer A
Others
Net Total
Supplies
2014
Amount
Percent
－
422,730,500
－
100.00
422,730,500
100.00
Relation
with
Issuer
－
Company
Name
－
Others
Net Total
Supplies
Amount
Percent
－
428,661,898
－
100.00
428,661,898
100.00
Relation
with
Issuer
－
B. Major Suppliers Information for the Last Two Calendar Years
Unit：NT Thousand$
2013
2014
Item
Company
Name
Amount
Percent
1
Others
Net Sales
279,778,851
279,778,851
100.00
100.00
Relation
with
Issuer
-
87
Company
Name
Amount
Percent
Others
Net Sales
248,184,050
248,184,050
100.00
100.00
Relation
with
Issuer
-
5.2.5 Production over the Last Two Years
Unit: NT Thousand$
Year
2013
2014
Output
Major Products
(or by departments)
TFT-LCD
Total
Capacity
Quantity
Amount
Capacity
602,919
602,919
552,668 390,036,096 605,200
552,668 390,036,096 605,200
Quantity
Amount
574,940 371,700,000
574,940 371,700,000
5.2.6 Shipments and Sales over the Last Two Years
Unit：NT Thousand$
Year
2013
Shipments
& Sales
Local
Quantity
Major Products
(or by departments)
TFT-LCD
Others
Export
Amount
56,087 91,333,989
-
Total
5.3
2014
-
56,087 91,333,989
Quantity
Local
Amount
405,536
Quantity
Export
Amount
Quantity
Amount
337,327,909 54,028 71,710,073 510,097 351,019,347
-
-
405,536
-
216
-
864
337,327,909 54,028 71,710,289 510,097 351,020,211
Human Resources
Year
2013
Manager
2014
As of 4/30/2015
2,951
2,974
2,965
IDL
16,195
17,306
17,374
DL
74,694
79,952
69,488
93,840
91,232
89,827
Average Age
26.53
27.50
27.78
Average Years of Service
2.53
2.79
2.84
Ph. D.
0.09%
0.11%
0.10%
Masters
5.62%
6.28%
6.10%
Bachelor’s Degree
68.18%
73.14%
69.69%
Senior High School
Below Senior High
School
Total
18.15%
15.99%
16.84%
7.96%
4.48%
7.27%
100%
100%
100%
Number of
Employees
Total
Education
88
5.4
Environmental expenditures Information
Innolux has disclosed the reactions and the total lost (including compensations) and the
possible expenses (including the costs of reactions haven’t been taken, estimated amounts of
punishments and compensations. We also explain the reason if there is any cost we couldn’t
estimate.) Of environmental pollutions.
1. Jan 9, 2014, Taiwan T3 factory of Innolux Japan had been reported for a violation of
environmental protection incidents and the compensations was NTD 60,000. This reported
incident happened because the inventory we reported on the online reporting system didn’t
match the factory actual inventory.
Corrective action: Innolux has completed the improvement of out online digital system,
which will implement systematic error preventing and correcting
functions by audition remarks.
2. Dec 12, 2014, the Taiwan c3 factory of Innolux Japan had an environmental pollution
incident. This incident happened because we reported as “0” ton inventory of D-1504,
C-0202, and C-0110 on the system, which didn’t match the actual disposal inventory, and
violated the Waste Disposal Act’s rule.
Corrective actions:
(1) Create the checklist of materials of waste disposal plan and the waste.
(2) Conduct inspection and estimation operation for all waste (including liquid waste) in
factories in the end of every month, so that we will be able to report the temporary
inventory in the end of every month.
(3) Confirm the balance and contents of material use and the reported waste every month.
(4) Control the time limitation of disposal reporting of polluted business regularly. (need
to apply for expansion of temporary inventory if the disposal hasn’t been removed
within a year)
(5) We plan to complete the consensus and corrective actions in all factories before Jan 31,
2015 (able to track back to Jan 2014 system reporting) to avoid the compensations
from happening again with the same reason in other factory.
3. 5 Dec 2013, Innolux in Nang Jing had a fire in the dormitory. According to the
investigation, the reason of this fire was due to the left tinder ignites the surrounding
combustibles. The range of the fire covered 5 square meters and burned one closet. The
Nanjing City Jiangning District Gong An Xiao Fang Da Dui had issued ticket and
10,000rmb compensations in 2014/1/15 due to the violation of the rule of “Nana Jing City
Xiao Fang Act”.
Corrective Action: Conduct safety inspection at the public areas like dormitory and
restaurant, remove, and improve the hidden dangers.
5.5
Labor Relations
5.5.1 List any employee benefit plans, continuing education, training, retirement systems, and
the status of their implementation, and the status of labor-management agreements and
measures for preserving employees' rights and interests.
1. Employee welfare and the situation of implementation
(1) Besides the basic monthly salary, we also provide Luna Festival, dragon boat festival
and New Year bonus, and proper performance bonus according to the company
operation revenue.
(2) Our Employees have the labor insurance, citizen health insurance, and group insurance
from the very first day of employment.
(3) We integrate and continuously improve the system, process and plan of talents
89
development, and we earned the golden prize of TTQS’ evaluation in 2011.
(4) We promote the quality training and activities to maintain our competitiveness with
high quality, and we had earned several related awards too.
(5) Strengthening the concepts of sustainable management: we hire mentally or physically
ill employees insist in environmental protection, and being responsible to social
welfare.
(6) We provide internal and external trainings, such as professional studies, headquarter
training, oversea training to develop employees’ professional knowledge and skills.
(7) We provide internal and external trainings, such as professional studies, headquarter
training, oversea training to develop employees’ professional knowledge and skills.
(8)
With the concepts of energy, comfortable life, and happiness, we build the
employee’s center, which provide the leisure and exercise functions to release
employees’ mental and physical stress.
(9) We have employees’ restaurants in all factories, and provide meal substitutes
according to the company rules.
(10) We set up the employee welfare committee to be responsible to welfare planning and
execution. Including: club activities, art and culture season, company trip, exercise
season, family day, special discounts, and substitutes of festivals, wedding or other
special events, and emergencies.
(11) We provide health promotion and mental consulting plan to take care of employees’
mental and physical health.
2. Retirement structure and the situation of implement
(1) Retirement structure and the situation of implement.
(2) We hire actuary to evaluate our employees’ retirement preparation fund and issue the
evaluation report according to the ROC’s financial principles.
(3) We transfer 2%~15% monthly salary to retirement preparation every month.
(4) We will conduct the new retirement structure according to the laws from Jul 1, 2005.
3. Labor and management settlement
The rights and obligations of our labor and management follow the rules of our
company operation. The relations between labor and management are good without and
dispute settlements.
In order to maintain mutual communications and interactions, we have communicating
meetings such as management interviews and mobilization meetings, issuing INX digital
news, establishing employee communication mailbox to listen and solve employees’
opinions and thoughts.
4. Working environment and individual safety protection
(1) Safety and Health organization and operation
The company has an environmental safety office to be in charge of all safety and
health risks in company operation management, and to integrate the safety and health
departments in all factories. The environmental safety office reports to the factory
manager, related departments and the soviet in “factory fields’ safety and
environmental protection committee” every season. There are 208 worker
representatives of Taiwan factory fields in 2014, which is 45% of the committee; there
are 96 worker representatives of Mainland factory fields in 2014, which is 43% of the
committee. These worker representatives in behave of all employees to discuss the
safety and health issues such as legality, internal and external communications, safety
and health issues, objects and KPI, and the latest outer environmental trends.
Analysis and Statistics of Occupational Hazards
90
Innolux's objective in disaster management is to progressively reduce the
Disabling Frequency Rate (FR) and the Disabling Severity Rate (SR) to zero. Through
the incident management system the company analyzes the statistics and causes of
incidents including traffic accidents and near miss. With reports and surveys generated,
the system would announce improvements in hazard prevention, as well as accident
reviews and improvements. It also ensures parallel deployment across plants to
prevent re-occurrence of incidents. Over 2014 the Disabling Frequency Rate (FR)
increased by 16% compared with 2013, while the Disabling Severity Rate (SR)
increased by 43% compared to 2013.
Business Continuity Management
Innolux has been providing ESH management and training to vendors. A structure
is in place for hazard identification, risk assessment and emergency response for
high-risk operations. Monthly meetings are conducted with contractors for two-way
communication and coordination. In 2014, the incident rate for vendors was 0 per
1000 persons.
ESH Training
'Employees are the most valuable asset. Training is an investment that never
depreciates.' ESH training is the basis for the promotion and practical implementation
of our ESH management. We make long-term investments in human and material
resources according to the hazard profile of each plant.
We plan, design and deliver training to the staff regarding ESH knowledge and skills,
such as handling chemicals, dangerous machinery and equipment, injury prevention,
machinery safety, fire safety management, and plant safety management. We also
monitor and control the training quality and effectiveness. In 2014, 1,609 ESH training
sessions were held, for a total of 277,858 participants. On average, employees joined
over 3 training sessions per person per year.
(2) Safety Culture and Risk Management
Outstanding integrating working system
Regarding to environmental safety and health management, we develop several
digital working systems and integrate into ESH Information Portal (ESHIP).
Managing level can see the condition and efficiency of the operation of factories and
his/her departments’ environmental safety and health management immediately;
meanwhile, colleagues can learn and interact with other factories through the platform.
Self-audit on Injury Prevention and Risk Management
Early waring system
The system divided into 5 levels, base on plant equipment, facilities, inside &
outside trend, irresistible natural disasters and man-made disasters to pre-defense and
notify manager immediately.
Prevention of manmade disasters
Due to musculoskeletal disorders percentage increase this few years, prevention of
company as below:
A. Identification and analysis of the risk of job-specific processes of a systematic,
resource and continuous improvement mode execution.
B. Occupational Safety and Health Act will trigger repetitive operations, such as
pre-musculoskeletal diseases Anti concept implanted "hazard identification and risk
assessment norms" to implement career
91
In order to effectively prevent and control concepts, health management must be
through hazard awareness, assessment and control improvement.
(3) Recruitment and Staffing
Innolux’s goal is to employ qualified personnel to create the best possible
performance. Our company cares about diversity and equal opportunity. We do not
allow employment discrimination based on race, color, age, gender, sexual orientation,
ethnicity, disability, pregnancy, religion, political affiliation, union membership, and
marital status or otherwise. In our day-to-day operations, this means that we monitor
and manage our human resources consciously. We analyze and improve turnover
patterns. We build a labor force with a balanced structure, which was also integrated
into our recruiting policy.
To build up its vertically integrated operations, Innolux opened up 5,000
vacancies in 2014.
(4) Zero Distance Communication
Zero Distance Communication
Innolux emphasizes harmonious labor relations. To this end, we convene quarterly
meetings with the labor-capital committee and the Employee Welfare Committee.
High-level managers from the capital side and grassroots level representatives from
the labor side engage in two-way face-to-face communications, to exchange views in
an open atmosphere. We also have built a full range of communication channels,
which employees can use under their names or anonymously. The Employee
Care Hotline, the Employee Care Mailbox, and the opinion box help employees to find
quick solutions to their problems.
Workplace Free from Sexual Harassment
To protect employees from sexual harassment, Innolux adopted the 'Sexual
Harassment Prevention, Complaint and Management Procedures for Taiwan site' to
effectively prevent and deal with sexual harassment. Investigation of sexual
harassment is conducted in a non-public fashion to protect the privacy of the parties
involved. Everyday protection from sexual harassment is promoted through the
start-up screens of computers to build a friendly workplace and eliminate sexual
harassment. In 2014 13 sexual harassment cases were reported, handled, and solved.
EAPs Employee Assistance Programs
Employees are company's most important asset. Innolux understands how
difficulties may affect an individual’s work and life. Therefore, Innolux takes a
systematic and embedded approach to offer appropriate professional resources, such as
employee communications, psychological counseling, and healthcare, in an effort to
reduce the impact that problems may have on our employees' work and lives.
We hope to enable our employees to work with a fit body and a healthy mind and
improve productivity.
Integrated Employee Care Channels
Innolux takes employee feedback seriously. We offer various feedback channels to
employees, to effectively prevent and solve employee issues. From 2013 onward, we
put more focus on integrating our employee care channels across Taiwan and China.
Thus, we unified the representative code of Employee care hotline and the Employee
Care Mailbox at different sites. The same was advertised via internal announcements
and the start-up screens on computers. We expect this integrated approach will pay off
92
through more efficient handling of cases.
5.5.2 List any loss sustained as a result of labor disputes in the most recent fiscal year, and
during the current fiscal year up to the date of printing of the annual report, disclose an
estimate of losses incurred to date or likely to be incurred in the future, and indicate
mitigation measures being or to be taken. If the loss cannot be reasonably estimated,
make a statement to that effect. NT$2,530 Thousand.
93
5.6
Important Contracts
Agreement
Counterparty
Period
Major Contents
Lease of land for Chunan
Base of Hsinchu Science
Park in Miaoli County
Lease Agreement Science-based Industrial
of the Land
Park Administration
Feb 2001Dec 2020
of the Land
Park Administration
May 28,
2003 - Dec
31, 2022
Leasehold of land
of the Land
Park Administration
Feb 2004 Dec 2023
Lease of land for Chunan
Base of Hsinchu Science
Park in Miaoli County
(Plant No. II)
of the Land
Park Administration
of the Land
Park Administration
South Taiwan
Lease Agreement
Science-based Industrial
of the Land
Park Administration
Engineering
Project
Agreement
Chung Lin Construction
Co., Ltd.
Engineering
Project
Agreement
Hu Tzu Construction Co.,
Ltd.
Engineering
Project
Agreement
Cheng Teh Fireproof
Industrial Co., Ltd.
Lease Agreement Chan Mao Optical Co., Ltd.
Apr 6,
2004 – Dec
31, 2023
Dec 1,
2007 – Dec
31, 2026
Leasehold of land
T2 Leasehold of land
oriented for factory
Mar 9, 2015 Leasehold of land
Mar 8, 2035
2001.02Till
expiry of
warranty
period
2005.07 Till
expiry of
warranty
period
2005.09Till
expiry of
warranty
period
FAB I Project of Civil
Engineering Construction
CTBC Bank and the bank
syndicate
Jul 8, 2004 –
Jul 8, 2015
Financing
Contract
Mega Bank and the bank
syndicate
Feb 2005 –
Mar 2015
Bank of Taiwan and bank
Long Term Loan
groups
Mar 19, 2006
- Nov 15,
2016
Long Term Loan
groups
Feb 8, 2007 –
Aug 8, 2016
Financing
Contract
CTBC Bank and the bank
syndicate
Aug 2008 –
Aug 2016
Joint Credit
Mega Bank and Taiwan
Sept 25,
Cooperative Bank and other 2008 – Nov
94
Pursuant to the terms and
conditions set forth under
the Agreement
the Agreement
the Agreement
the Agreement
the Agreement
FAB II Newly constructed
project
the Agreement
New construction of Plant Pursuant to the terms and
No. II, award of the fire
prevention project contract the Agreement
Jul 4, 2013 – Leasehold of land for
Jul 3, 2016 construction purposes
Long Term Loan
Restrictions
the Agreement
the Agreement
the Agreement
Financing for fund for setup
(establishment) of next
generation (Generation V conditions set forth under
the Agreement
up) fund financing for
TFT-LCD.
FAB I Loan for machine
and equipment procurement
the Agreement
Financing Loan for next
generation (Above 7.5
generation) of TFT-LCD
the Agreement
procurement
Financing Loan for next
generation (6 generation) of conditions set forth under
TFT-LCD procurement
the Agreement
Loan for factory and
machine and equipment
procurement
the Agreement
Invest to build generation 6 Pursuant to the terms and
TFT LCD factory and the conditions set forth under
Agreement
Counterparty
20 bank
Period
20, 2016
Major Contents
fund for machine and
equipment and the related
attached equipment
procurement, NT$ 24
billion and US$ 200
million.
In an attempt to reimburse
Sept 9,
the syndicated loan credit
2009 – Sept
Long Term Loan
groups
loans due in 2009 and June
9, 2016
2010.
To be used to suffice the
Company’s general
Mega Bank and Taiwan
Nov 17,
mid-term working capital
Joint Credit
Cooperative Bank and other 2009 – Nov and to expand the existent
19 bank
14, 2016
productivity and equipment
& facilities, in the amount
of NT$48 billion.
Negotiate with syndicate to
Joint agreement
Apr 5,
extend the participating
of settlement
Bank Syndicate
2012 – Dec
loan and medium-short
contract
31, 2016
term loan amount
1. To be used by the Loanee
to reimburse, under the
syndicated accord, the
mid-term and long-term
Mar 12, 2015 syndicated loans, for all
Long Term Loan
fund required for the
- Mar 12,
groups
2018
outstanding balance of
principal as mentioned
above.
2. In the amount of
NT$68.5 billion
June 28,
IPS Relevant technology &
Cross-licensing Multinational Enterprise C. 2010 - Dec
know-how
31, 2019
Sept 30,
Cross-licensing Foreign Company B
2010 – Sept LCDRelevant patents
30, 2017
Display of the relevant
Jul 2, 2012 –
Cross-licensing Foreign Company D
cross-patent licensing
Jul 7, 2022
within the regions.
Cross-licensing
Foreign Company E
Jul 1, 2013 –
Jul 1, 2023
Patent
authorization
Foreign Company F
Jan 1, 2013 –
Dec 31, 2019
Patent
authorization
Patent
authorization
Patent
authorization
Jun 17,
Foreign Company A
2013 – Jun
17, 2016
Sept 5,
Foreign Company G
2013 – Sept
5, 2018
Oct 31, 2013
Multinational Enterprise H - Oct 31,
2017
95
Restrictions
the Agreement
the Agreement
the Agreement
the Agreement
the Agreement
the Agreement
the Agreement
the Agreement
LCD Relevant technology
& know-how
the Agreement
& know-how
the Agreement
3D Relevant technology &
know-how
the Agreement
& know-how
the Agreement
LCD related technical
the Agreement
VI. Financial Information
6.1.1
Five-Year Financial Summary
1. Condensed Balance Sheet-IFRS-Consolidate
Unit: NT Thousand
Year
Item
Five-Year Financial Summary(Note1)
2010 2011
2012
2013
2014
Financial
data of
ending date
in March
31, 2015
－
－
Current assets
173,139,399 171,701,969 189,380,812 145,539,799
－
－
Fixed assets
332,525,859 273,505,759 233,609,843 222,590,627
－
－
Intangible assets
22,909,059
21,214,994
20,219,137 19,968,114
－
－
Other assets
42,888,840
41,778,163
39,306,763 36,368,319
－
－
Total assets
571,463,157 508,200,885 482,516,555 424,466,859
－
Before distribution －
237,566,939 300,586,751 199,135,498 125,777,294
Current
liabilities
－
－
－
After distribution
237,566,939 301,944,190
Note 3
－
－
Non current liabilities
162,539,193
13,036,280
54,209,621 62,267,502
－
－
Before distribution
400,106,132 313,623,031 253,345,119 188,044,796
Total liabilities
－
－
－
After distribution
400,106,132 314,980,470
Note 3
Equity attributable to owners of the
169,823,860 193,043,229 227,690,063 234,969,894
parent
－
－
Capital stock
169,823,860 193,043,229 227,690,063 99,542,240
－
－
Capital surplus
119,677,980
96,058,741
99,584,369 99,602,249
－
(24,979,239)
7,421,697
26,632,674 35,283,281
Retained
earnings
－
－
－
After distribution
(24,979,239)
7,331,202
Note 3
－
－
Other equity interest
(4,004,589)
(1,531,497)
1,927,656
542,124
－
－
－
－
－
－
Treasury stock
－
－
Non controlling interest
1,533,165
1,534,625
1,481,373 1,452,169
Total
－
171,357,025 194,577,854 229,171,436 236,422,063
shareholders’
－
－
－
After distribution
171,357,025 193,220,415
Note 3
equity
Note 1: Financial data by IFRS less than 5 years, preparing the following report by ROC GAAP
Note 2: Numbers are audited.
Note 3: Pending on approval of shareholders at Annual General Shareholders’ Meeting
96
2. Condensed Statement of Income-IFRS-Consolidate
Item
Operating revenue
Gross profit (loss) from
operations
Unit: NT Thousand
Financial
Year
Five-Year Financial Summary (Note1)
data of
ending date
in March
2010 2011
2012
2013
2014
31, 2015
－
－
483,609,931 422,730,500 428,661,898 100,157,867
－
－
4,499,935
37,759,115
50,385,001 17,744,057
Net operating income (loss)
－
－
(19,749,654)
15,349,268
28,173,396 11,216,791
Non-operating income and
expenses
Profit (loss) before tax
－
－
(11,064,521)
(9,705,915)
(5,639,056) (1,156,562)
－
－
(30,814,175)
5,643,353
22,534,340 10,060,229
Profit (loss) from continuing
－
－
(30,167,283)
5,095,019
21,676,908 8,649,289
operations
Profit (loss) from discontinued
－
－
－
－
－
－
operations
－
－
Profit (loss)
(30,167,283)
5,095,019
21,676,908 8,649,289
－
－
Other comprehensive income, net
(1,975,663)
2,859,517
3,159,493 (1,445,244)
－
－
Comprehensive income
(32,142,946)
7,954,536
24,836,401 7,204,045
Profit (loss), attributable to owners
－
－
5,102,568
21,676,759 8,650,607
(29,899,236)
of parent
Profit (loss), attributable to
－
－
(7,549)
149
(1,318)
(268,047)
non-controlling interests
Comprehensive income, attributable
－
－
(31,688,130)
7,953,076
24,844,853 7,233,249
to owners of parent
Comprehensive income, attributable
－
－
(454,816)
1,460
(8,452)
(29,204)
to non-controlling interests
－
－
Earnings per share
(4.00)
0.57
2.31
0.87
97
3. Condensed Balance Sheet-IFRS-Alone
Unit: NT Thousand
Year
Item
2010
2011
2012
2013
2014
－
－
Current assets
147,154,273
138,274,531
162,875,147
－
－
Fixed assets
287,051,335
233,557,614
192,599,182
－
－
Intangible assets
22,796,701
21,114,443
20,127,184
－
－
Other assets
100,240,714
100,611,858
106,252,898
－
－
Total assets
557,243,023
493,558,446
481,854,411
－
－
Before distribution
238,165,426
287,413,773
205,189,126
Current
liabilities
－
－
After distribution
238,165,426
288,771,212
Note 3
－
－
Non current liabilities
149,253,737
13,101,444
48,975,222
－
－
Before distribution
387,419,163
300,515,217
254,164,348
Total liabilities
－
－
After distribution
387,419,163
301,872,656
Note 3
－
－
169,823,860
193,043,229
227,690,063
parent
－
－
Capital stock
79,129,708
91,094,288
99,545,364
－
－
Capital surplus
119,677,980
96,058,741
99,584,369
－
－
Before distribution
(24,979,239)
7,421,697
26,632,674
Retained
earnings
－
－
After distribution
(24,979,239)
7,331,202
Note 3
－
－
(4,004,589)
(1,531,497)
1,927,656
－
－
－
－
－
Treasury stock
－
－
－
－
－
Non controlling interest
Total
－
－
Before distribution
169,823,860
193,043,229
227,690,063
shareholders’
－
－
After distribution
169,823,860
191,685,790
Note 3
equity
98
4. Condensed Statement of Income-IFRS-Alone
Unit: NT Thousand
Year
Item
Operating revenue
Gross profit (loss) from operations
Non-operating income and expenses
Profit (loss) before tax
2010
2011
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
2012
471,524,374
(7,116,158)
(24,249,282)
(7,431,680)
(31,680,962)
(29,899,236)
－
(29,899,236)
(1,788,894)
(31,688,130)
2013
419,738,269
27,531,818
11,300,119
(6,864,968)
4,435,151
5,102,568
－
5,102,568
2,850,508
7,953,076
2014
426,005,033
36,395,248
20,439,440
1,238,394
21,677,834
21,676,759
－
21,676,759
3,168,094
24,844,853
Profit (loss) from continuing operations
Profit (loss) from discontinued operations
Profit (loss)
Other comprehensive income, net
Comprehensive income
Profit (loss), attributable to owners of
－
－
5,102,568
21,676,759
(29,899,236)
parent
Profit (loss), attributable to non-controlling
－
－
－
－
－
interests
Comprehensive income, attributable to
－
－
(31,688,130)
7,953,076
24,844,853
owners of parent
Comprehensive income, attributable to
－
－
－
－
－
non-controlling interests
－
－
Earnings per share
(4.00)
0.57
2.31
99
6.1.2
Five-Year Financial Summary
1. Condensed Balance Sheet-GAAP-Consolidate
Unit: NT Thousand
Year
Item
Current assets
Funds & Long-term investments
Fixed assets
Intangible assets
Other assets
Total assets
Before distribution
Current
liabilities
After distribution
Long-term liabilities
Other liabilities
Before distribution
Total liabilities
After distribution
Capital stock
Capital surplus
Before distribution
Retained
earnings
After distribution
Unrealized gain or loss on financial
instruments
Cumulative translation adjustments
Net loss unrecognized as pension
cost
Treasury stock
Minority interest
Total
Before distribution
shareholders’
After distribution
equity
Note: Numbers are audited.
Five-Year Financial Summary(Note)
2010
2011
2012
2013
2014
198,958,776
13,419,057
458,792,555
18,891,676
21,333,617
711,395,681
252,445,755
252,445,755
184,536,481
11,495,895
448,478,131
448,478,131
73,126,748
191,189,596
(5,215,061)
(5,215,061)
212,582,766
22,059,603
403,808,043
18,517,906
26,696,758
683,665,076
419,171,745
419,171,745
55,703,297
10,122,091
484,997,133
484,997,133
73,129,708
191,835,695
(69,654,839)
(69,654,839)
174,628,466
23,623,033
328,297,554
18,065,083
26,244,104
570,858,240
237,029,639
237,029,639
152,491,697
8,894,958
398,416,294
398,416,294
79,129,708
119,594,471
(26,984,855)
(26,984,855)
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
1,700,560
(2,107,490)
(985,693)
－
－
(2,031,508)
2,977,862
155,150
－
－
－
－
－
－
－
(15,589)
4,162,804
2,487,007
1,533,165
262,917,550 198,667,943 172,441,946
－
－
－
－
－
－
262,917,550 198,667,943 172,441,946
－
－
－
－
100
2. Condensed Statement of Income-GAAP-Consolidate
Unit: NT Thousand
Year
Item
2010
2011
2012
2013
2014
－
－
operations
21,621,735 (35,208,648)
4,737,345
－
－
(4,596,422) (62,700,308) (19,344,622)
－
－
6,999,454
－
－
(14,679,737) (15,341,165) (17,725,537)
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
Operating Revenue
Non-operating revenue and
gain
Non-operating expense and
loss
operations Before tax
operations
operations
Extraordinary gain or loss
Cumulative effect of accounting
principle changes
Net income
Earnings per share
493,084,954 510,081,200 483,609,931
5,863,594
8,311,203
(13,412,565) (69,730,270) (30,070,705)
(12,214,041) (64,760,598) (29,473,396)
－
－
－
－
－
－
－
－
－
(14,214,041) (64,760,598) (29,473,396)
(2.29)
(8.81)
(3.91)
101
3. Condensed Balance Sheet-GAAP-Alone
Unit: NT Thousand
Year
Item
Current assets
Funds & Long-term investments
Fixed assets
Intangible assets
Other assets
Total assets
Before distribution
Current
liabilities
After distribution
Long-term liabilities
Other liabilities
Before distribution
Total liabilities
After distribution
Capital stock
Capital surplus
Before distribution
Retained
earnings
After distribution
Unrealized gain or loss on financial
instruments
Cumulative translation adjustments
Net loss unrecognized as pension
cost
Treasury stock
Total
Before distribution
shareholders’
After distribution
equity
2010
2011
2012
2013
2014
172,390,026
67,862,519
396,860,728
17,647,004
17,176,888
671,937,165
221,257,372
221,257,372
179,284,091
12,640,956
413,182,419
413,182,419
73,126,748
191,189,596
(5,215,061)
(5,215,061)
155,428,602
82,495,850
342,612,740
18,515,631
22,596,907
621,649,730
380,305,366
380,305,366
33,946,997
11,216,431
425,468,794
425,468,794
73,129,708
191,835,695
(69,654,839)
(69,654,839)
148,614,892
82,455,767
284,338,966
18,064,885
23,121,395
556,595,905
237,628,126
237,628,126
139,310,440
8,748,558
385,687,124
385,687,124
79,129,708
119,594,471
(26,984,855)
(26,984,855)
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
1,700,560
(2,107,490)
(985,693)
－
－
(2,031,508)
2,977,862
155,150
－
－
－
－
－
－
－
(15,589)
258,754,746 196,180,936 170,908,781
－
－
－
－
258,754,746 196,180,936 170,908,781
－
－
－
－
102
4. Condensed Statement of Income-GAAP-Alone
Unit: NT Thousand
Year
Item
2010
Operating Revenue
operations
Non-operating revenue and
gain
Non-operating expense and
loss
operations Before tax
operations
operations
Extraordinary gain or loss
Cumulative effect of accounting
principle changes
Net income
Earnings per share
2011
2012
2013
2014
－
－
(6,872,735)
－
－
(10,492,493) (63,395,419) (23,838,237)
－
－
7,345,941
－
－
(14,112,329) (14,733,347) (14,445,196)
－
－
(14,895,300) (70,161,788) (30,937,492)
－
－
473,695,780 485,403,114 471,524,374
8,338,094 (43,979,512)
9,709,522
7,966,978
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
(14,835,437) (64,439,778) (29,205,349)
(2.29)
(8.81)
(3.91)
6.1.3 Auditors’ Opinions from 2010 to 2014
Year
2010
2011
2012
2013
2014
CPA Firm
CPA's Name
Hsiao Chun-Yuan & Hsu Yung-Chien
Hsiao Chun-Yuan & Wu Han-Chi
Wu Han-Chi & Sheng Chung-Hsu
Auditing Opinion
Unqualified-modified wording
6.1.4 If there was change/replacement of the CPA within the most recent 5 fiscal years,
explanation made by the company’
’s previous and current CPA over the causes for such
change/replacement shall be set forth.
Year
Former CPA's Name
Current CPA's Name
Reason
2010 Hsiao Chun-Yuan & Zeng Hui-Jin
Hsiao Chun-Yuan & Hsu Yung-Chien Unqualified-modified wording
2011
None
2012
None
2013 Hsiao Chun-Yuan & Hsu Yung-Chien Hsiao Chun-Yuan & Wu Han-Chi
2014 Hsiao Chun-Yuan & Wu Han-Chi
Wu Han-Chi & Sheng Chung-Hsu
103
6.2 Five-Year Financial Analysis
1. Financial Analysis-IFRS-Consolidate
Year (Note 1)
Financial analysis in the past five years
Ending date in
March
31,2015
2010
2011
2012
2013
2014
Item(Note 2)
Ratio of liabilities to
－
－
Financial
70.01
61.71
52.50
44.30
assets
structure
Ratio of long-term capital
(%)
－
－
100.41
75.91
121.31
134.19
to fixed assets
－
－
Current ratio
72.88
57.12
95.10
115.71
Solvency
－
－
Quick ratio
54.77
39.92
77.41
88.34
(%)
－
－
Times interest earned ratio
(3.09)
2.12
7.28
17.45
Accounts receivable
－
－
6.11
5.56
5.88
5.64
turnover (turns)
－
－
Average collection period
60
66
62
65
－
－
Inventory turnover (turns)
8.51
7.67
8.41
9.15
Operating Accounts payable
－
－
4.54
4.90
4.43
4.47
ability turnover (turns)
－
－
Average days in sales
43
48
43
40
Fixed assets turnover
－
－
1.31
1.40
1.69
1.76
(turns)
Total assets turnover
－
－
0.77
0.78
0.87
0.88
(turns)
－
－
Return on total assets (%)
1.72
4.98
2.02
(3.77)
Return on stockholders'
－
－
(16.18)
2.79
10.23
3.72
equity (%)
Profitability
－
－
Ratio to issued capital (%)
(38.94)
6.20
22.64
10.11
－
－
Profit ratio (%)
(6.18)
1.21
5.06
8.64
－
－
Earnings per share ($)
(4.00)
0.57
2.31
0.87
－
－
Cash flow ratio (%)
21.16
25.25
52.33
20.05
Cash flow adequacy ratio
－
－
64.93
84.75
129.39
226.84
Cash flow (%)
Cash reinvestment ratio
－
－
7.83
12.91
14.58
3.40
(%)
－
－
－
Operating leverage
4.77
3.02
2.24
Leverage
－
－
－
Financial leverage
1.49
1.15
1.06
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis
is not required.)
1. The ratio of long-term funds to real estate, plant buildings, current ratio and quick ratio increased over
2013, due primarily to the fact that in 2013, the Company did not live up to the commitment for capital
104
2.
3.
4.
5.
6.
7.
increase in cash in schedule under the “Agreement for Syndicated Loan & Reimbursement”. As a result,
on December 31, 2013, the balance of the syndicated loan was converted from long-term loan to
“long-term liabilities due within one year or within one business cycle”. The Company, nevertheless,
was aproved by the creditor financial institution that the capital increase through cash injection
previously scheduled as of December 31, 2013 be extended as of December 31, 2014.
Interest coverage folds: Due primarily to the facts that in 2014, the Company put forth maximum
possible efforts to control costs and upgrade the operating efficiency. As a result, the profits earned in
2014 significantly increased over 2013’s while the interest expenses significantly dropped.
Turnover rate of real estate, plant biuldings and equipment & facilities: In 2014, the net sales increased
over 2013’s. Meanwhile, service life of real estate, plant biuldings and equipment & facilities was due
in some cases. As a result, the net value in 2014 decreased from 2013’s.
Various ratios of profitability rose due primarily to the facts that in 2014, the profits earned by the
Company significantly increased over 2013’s.
Various ratios of cash flow rose due primarily to the facts that in 2014, the profits earned by the
Company significantly increased over 2013’s. As a result, the net cash inflow in operating activities
incrased.
Business operation leverage: In 2014, the Company put forth maximum possible efforts to control costs
and enhance operating efficiency. As a result, in 2014, the profits earned by the Company significantly
increased over 2013’s, leading to a drop of business operation leverage of 2014.
Financial leverage: Due primarily to the facts that in 2014, the Company put forth maximum possible
efforts to control cost and boost operating efficiency, the operating profit in 2014 significantly increased
over 2013’s. Besides, as the interest expenses significantly dropped, the financial leverage dropped in
2014.
Note 1: We adopted International Financial Reporting Standards ( IFRS). For period less than five(5) years, we worked
Table 4 below, adopted the Financial Reporting Standards of the Republic of China.
Note 3: Financial Ratio Formula
1. Financial Structure analysis
(1) Debt ratio= Total Liabilities / Total Assets
(2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities ) / Property,
plant and equipment, net
2. Liquidity analysis
(1) Current ratio = Current assets / Current liability
(2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability
(3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense
3. Operating performance analysis
(1) Average collection turnover(Including Accounts Receivable and Notes Receivable from operation) =
Sales / Average trade receivables
(2) Days to collect accounts receivable = 365 / Average collection turnover
(3) Average inventory turnover = Cost of goods sold / Average inventories
(4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) =
operating costs / Average trade payables
(5) Average days to sell inventory = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Sales / Average property, plant and equipment, net
(7) Total assets turnover = Sales / Average total assets
4. Return on investment analysis
(1) Rate of return on assets = [Profit + Interest expense X (1 - Tax rate)] / Average assets
(2) Rate of return on equity = Profit / Average total Equity
(3) Profit to sales = Profit / Sales
(4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock ) / Weighted
average outstanding shares
5. Cash flow
(1) Cash flow ratio = Net cash provided by operating activities / Current liability
(2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense +
Increase in inventories + Cash dividend)
(3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property,
plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital)
6. Leverage
(1) Operating Leverage= (Net sales – Variable cost) / Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expenses)
105
2. Financial Analysis-IFRS-Alone
Year (Note 1)
Item (Note 2)
Ratio of liabilities to assets
Financial
structure (%) Ratio of long-term capital to
fixed assets
Current ratio
Solvency (%) Quick ratio
Accounts receivable turnover
(turns)
Operating
Accounts payable turnover
ability
(turns)
Fixed assets turnover (turns)
Total assets turnover (turns)
Return on stockholders' equity
(%)
Profitability
Ratio to issued capital (%)
Profit ratio (%)
Cash flow ratio (%)
Cash flow Cash flow adequacy ratio (%)
Cash reinvestment ratio (%)
Operating leverage
Leverage
Financial leverage
2010
2011
－
－
69.52
60.89
52.75
－
－
111.16
88.26
143.65
－
－
－
－
－
－
61.79
46.82
(5.27)
48.11
34.07
2.03
79.38
65.50
8.23
－
－
6.16
5.66
6.03
－
－
－
－
59
9.99
64
9.62
61
10.78
－
－
3.13
3.11
3.39
－
－
－
－
－
－
－
－
37
1.49
0.80
(4.36)
38
1.61
0.80
1.65
34
2.00
0.87
4.95
－
－
(16.35)
2.81
10.30
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－
(40.04)
(6.34)
(4.00)
17.11
81.66
7.06
－
－
4.87
1.22
0.57
17.30
96.55
9.34
5.81
1.62
21.78
5.09
2.31
44.53
153.66
14.02
3.63
1.17
106
2012
2013
2014
is not required.)
1. The ratio of long-term funds to real estate, plant buildings, current ratio and quick ratio increased over
2013, due primarily to the fact that in 2013, the Company did not live up to the commitment for capital
increase in cash in schedule under the “Agreement for Syndicated Loan & Reimbursement”. As a result,
on December 31, 2013, the balance of the syndicated loan was converted from long-term loan to
“long-term liabilities due within one year or within one business cycle”. The Company, nevertheless,
was aproved by the creditor financial institution that the capital increase through cash injection
previously scheduled as of December 31, 2013 be extended as of December 31, 2014.
2. Interest coverage folds: Due primarily to the facts that in 2014, the Company put forth maximum
possible efforts to control costs and upgrade the operating efficiency. As a result, the profits earned in
2014 significantly increased over 2013’s while the interest expenses significantly dropped.
3. Turnover rate of real estate, plant buildings and equipment & facilities: Due primarily to the facts that in
2014, the net sales increased over 2013 and that the service life spans of rate of real estate, plant
buildings and equipment & facilities were due in 2014, the net values decreased from 2013.
4. Various ratios of profitability rose due primarily to the facts that in 2014, the profits earned by the
Company significantly increased over 2013’s.
5. Various ratios of cash flow rose due primarily to the facts that in 2014, the profits earned by the
Company significantly increased over 2013’s. As a result, the net cash inflow in operating activities
incrased.
6. Business operation leverage: In 2014, the Company put forth maximum possible efforts to control costs
and enhance operating efficiency. As a result, in 2014, the profits earned by the Company significantly
7. Financial leverage: In 2014, the Company put forth maximum possible efforts to control costs and
enhance operating efficiency. As a result, in 2014, the profits earned by the Company significantly
Note 1: We adopted International Financial Reporting Standards ( IFRS). For period less than five(5) years, we worked
Table 3 below, adopted the Financial Reporting Standards of the Republic of China.
5. Cash flow
107
6. Leverage
108
3. Financial Analysis-GAAP-Consolidate
Year (Note 1)
Item (Note 2)
2010
2011
2012
2013
2014
－
－
63.04
70.94
69.79
Financial
Ratio
of
long-term
capital
to
structure (%)
－
－
65.50
101.68
100.03
fixed assets
－
－
Current ratio
78.81
50.71
73.67
－
－
52.72
36.10
54.89
－
－
(1.87)
(10.85)
(2.91)
－
－
6.11
7.28
7.28
(turns)
－
－
50
60
50
－
－
7.87
8.50
7.87
Operating
－
－
4.76
4.46
4.76
ability
(turns)
－
－
46
43
46
－
－
1.18
1.32
1.18
－
－
0.73
0.77
0.73
－
－
(2.46)
(8.54)
(3.64)
－
－
(8.30)
(27.92)
(15.74)
(%)
－
－
(6.29)
(85.74)
(24.45)
Profitability Ratio to issued capital (%)
－
－
Ratio to Profit before tax
(18.34)
(95.35)
(38.00)
－
－
Profit ratio (%)
(3.01)
(12.63)
(6.04)
－
－
(2.29)
(8.81)
(3.91)
－
－
Cash flow ratio (%)
30.94
6.71
18.36
－
－
57.62
56.37
62.57
－
－
13.22
5.75
6.89
－
－
－
－
－
Operating leverage
Leverage
－
－
－
－
－
Financial leverage
is not required.):N.A.
Note 2: Calculation formula of financial ratio
109
5. Cash flow
6. Leverage
110
4. Financial Analysis-GAAP-Alone
Year (Note 1)
Item (Note 2)
2011
2012
2013
2014
2015
－
－
－
68.44
69.29
Financial
Ratio
of
long-term
capital
to
structure (%)
－
－
－
109.10
67.17
fixed assets
－
－
－
Current ratio
40.87
62.54
－
－
－
27.31
46.93
－
－
－
(14.02)
(4.93)
－
－
－
6.16
7.13
(turns)
－
－
－
51
59
－
－
－
8.81
9.99
Operating
－
－
－
3.75
3.13
ability
(turns)
－
－
－
41
37
－
－
－
1.31
1.50
－
－
－
0.75
0.80
－
－
－
(9.36)
(4.22)
－
－
－
(28.33)
(15.91)
(%)
－
－
－
(86.69)
(30.13)
Profitability Ratio to issued capital (%)
－
－
－
Ratio to Profit before tax
(95.94)
(39.10)
－
－
－
Profit ratio (%)
(13.28)
(6.19)
－
－
－
(8.81)
(3.91)
－
－
－
Cash flow ratio (%)
16.16
14.96
－
－
－
73.1
79.33
－
－
－
15.98
6.65
－
－
－
－
－
Operating leverage
Leverage
－
－
－
－
－
Financial leverage
is not required.):N.A.
Note 1: Financial data by IFRS less than 5 years, preparing the following table 3 by ROC GAAP
111
5. Cash flow
6. Leverage
112
6.3
Supervisors’ Report in the Most Recent Year
Innolux Corporation
Supervisors’ Audit Report
The Board of Directors has duly submitted the 2014 operating report, financial statements,
and table of profit distribution. The financial statements has been duly reviewed and approved by
CPA Mr. Hsiao Chun-Yuan and CPA Mr. Wu Han-Chi of PwC Taiwan with the issuance of
Independent Auditor’s Report.
I, as the supervisor of the Company, have completed the audit and review, and had found nothing
inconsistent with any of the above. Therefore, I issue this audit report for acknowledgment in
accordance with Article 219 of the Company Act. For your approval.
To
General Shareholders Meeting of the Company in 2015
Supervisor: Lin, Ren-Guang
Date: April 28, 2015
113
Innolux Corporation
To
Supervisor: Chen, Yi-Fang
114
Innolux Corporation
To
Supervisor:
Representative: Te-Tsai Huang
115
6.4
Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013,
and Independent Auditors’ Report
Please refer to page 137 of the annual report.
6.5
Financial Statements for the Years Ended December 31, 2014 and 2013, and
Independent Auditors’ Report
Please refer to page 235 of the annual report.
6.6
Disclosure of the Impact on Company’s Financial Status Due to Financial Difficulties:
Not applicable.
116
VII. Review of Financial Conditions, Operating Results, and Risk Management
7.1
Analysis of Financial Status
Unit: NT Thousand
Year
2013
2014
Difference
Amount
%
Item
Current Assets
171,701,969
189,380,812
17,678,843
10.30
Fixed Assets
273,505,759
233,609,843
(39,895,916)
(14.59)
Intangible assets
21,214,994
20,219,137
(995,857)
(4.69)
Other Assets
41,778,163
39,306,763
(2,471,400)
(5.92)
508,200,885
482,516,555
(25,684,330)
(5.32)
Total Assets
Current Liabilities (1)
300,586,751
199,135,498
(101,451,253)
(33.75)
Long-term Liabilities (1)
13,036,280
54,209,621
41,173,341
315.84
253,345,119
(60,277,912)
(19.22)
313,623,031
Total Liabilities
Capital stock
91,094,288
99,545,364
8,451,076
9.28
Capital surplus (2)
96,058,741
99,584,369
3,525,628
3.67
Retained Earnings (3)
7,421,697
26,632,674
19,210,977
258.85
Other equity
(1,531,497)
1,927,656
3,459,153
(225.87)
Non controlling equity
1,534,625
1,481,373
(53,252)
(3.47)
194,577,854
229,171,436
34,593,582
17.78
Total Stockholders' Equity
Analysis of changes in financial ratios:
1. Due primarily to the facts that as of December 31, 2013, the Company did not conform with the
commitment in capital increase through cash injection within the time schedule as set forth under
“Agreement for Reimbursement under Syndicated Accord”, the banks in the syndicated loan were entitled
to take such acts including (but not limited to) that all principal, interest, expense and other sums payable
under the Agreement having been disbursed but not yet reimbursed should become due on the very day
ahead of expiry. The long-term loans were converted into “Long-term liabilities due within one year or
one business cycle”.
2. Mainly attributed to massive increase in profit.
3. Due primarily to the facts that in the wake of the change in exchange rate, the margin of exchange in
conversion in financial statements in the operating institutions in the long-term investment was
recognized.
117
7.2
Analysis of Operating Results
Unit: NT Thousand
Year
2013
2014
Difference
Amount
%
Item
Operating Revenue
422,730,500
428,661,898
5,931,398
1.40
Operating Costs
384,971,385
378,276,897
(6,694,488)
(1.74)
Gross Profit (1)
37,759,115
50,385,001
12,625,886
33.44
Operating Expenses
22,409,847
22,211,605
(198,242)
(0.88)
Operating Income (2)
15,349,268
28,173,396
12,824,128
83.55
Non-operating Income and Expenses
(9,705,915)
(5,639,056)
4,066,859
(41.9)
Income Before Tax (2)
5,643,353
22,534,340
16,890,987
299.31
Tax Benefit (Expense) (3)
548,334
857,432
309,098
56.37
Other comprehensive income
2,859,517
3,159,493
299,976
10.49
Total comprehensive income (4)
7,954,536
24,836,401
16,881,865
212.23
Analysis of changes in financial ratios:
1. Innolux focus on cost control and decrease in depreciation lead to increase in margin.
2. Operating income and Net income (loss) before tax mainly attributed to increase in operating margin
3. Mainly due to increase in profit of 2014 compared to last year
4. Mainly due to increase in Operating margin and other comprehensive income
118
7.3
Analysis of Cash Flow
7.3.1 Cash Flow Analysis for the Current Year
Unit: NT Thousand
Year
Items
Net cash provided by
operating activities
Net cash used in investing
activities
Net cash used in financing
activities
2014
Analysis
Net cash provided mainly due to depreciation and
reasonable control for operating cycle.
Mainly due to additions to property, plant and
equipment.
Mainly due to issuance of common stock for cash
and bank loan repayment.
104,212,037
(13,183,151)
(64,946,530)
7.3.2 Cash Flow Analysis for the Coming Year
Remedy Actions for Estimated
Cash and cash Estimated Net cash Estimated Net
Estimated Surplus
decrease
in
cash
Cash Shortfall
equivalents at
provided by
(Shortage) of Cash
and cash
beginning of year operating activities
Investment
(1)+(2)+(3)
equivalent for
Financing Plan
(1)
for whole year (2)
Plan
whole year (3)
－
－
－
71 Billion
80.2 Billion
3 Billion
2015 Analysis of changes in cash flow
Operating Activities: Net Cash inflow due to expected the average selling price for panels will return to
the stable and lower production cost continually
Investing Activities: Net cash outflow due to overcome difficulties continually and capital expenditure for
new techniques
Financing Activities: Net cash outflow mainly due to bank loan repayment
Remedy Actions for Cash Shortfall: None
119
7.4
Major Capital Expenditure Items
Capital Expenditures in 2014 focus on high-precision, high aperture ratio, yield quality
improvement, car panel, module manufacturing automation and train cum Green
environmental protection, Total amount approximately 17.8 billion
7.5
Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans
and the Investment Plans for the Coming Year
In terms of outward investment, the Company focused on the up- and down-streams of
TFT-LCD industries to assure effective vertical itnegration as the final objectives. Given the
worsening fluctuation of panel industry and the mature development of the industrial chains,
the Company held a policy of being increasingly conservative. Other than the effortswe try to
refrain from investing toward the businesses irrelevant to the Company’s principal business,
the Company disposed non-core investment and investment insignificant in strategies.
In the consolidated financial report of the Company in 2014, the investment gain
recognized in equity method came to NT$65.814 million, thanks primarily to the upturn of the
overall economy where the business performance of the invested businesses turned better.
Some outward investments appeared at a loss. Overall, the performance with the Company’s
outward reinvestments have been well up to our expectation and have been continually
integrated with our business development.
120
7.6
Analysis of Risk Management
7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on
Corporate Finance, and Future Response Measures
1. Interest rate
The American economy rallied at a slow pace. The Directorate General of Budget,
Accounting and Statistics (DGBAS) of Executive Yuan anticipated the economic growth
rate (yoy) by 2015 would hit 3.5%, 0.07% outgrew the annual rate of 2014 at 3.43%.
Given the factors of economic growth and commodity prices, the Central Bank would
maintain an easy interest rate policy in 2015. The M2 currency growth targets were set at
2.5%~6.5%. To prevent an increase in the Company’s loan costs as a result of an
adjustment of currency policy and rise in interest rate in the market, the Company would
undertake interest swap transactions in due time over the current loans in floating interest
rates so as to evade the risks of the change in cash flow possibly incurred by fluctuation
of interest rate.
2. Foreign exchange rates
a. To prevent a potential disadvantage to the foreign currencies in input, ouput,
investment and financing activities to the Company’s assets, liabilities values,
operating results due to fluctuation in exchange rates, the Company, in due time,
would undertake forward foreign exchange to evade potential risks in fluctuation in
exchange rates.
b. The Company adopted Natural Hedge in principle to evade exchange rate risks by
taking the revenues from sales in foreign currencies to pay off required foreign
currencies. We, therefore, only undertook the hedge transaction aiming at the positions
of net assets or liabilities in foreign currencies.
c. In the Company, over 90% of the operating revenues came from U. S. Dollars and
other foreign currencies. For capital expenditures and manufacturing costs, the
primary demand for foreign currencies came from U. S. Dollars and Japanese yen.
Any unfavorable significant change in exchange rate would lead to a passive impact
upon the financial profit and/or loss. In calculation with the Company’s output and
marketing as well as cost structure in 2014, where the New Taiwan Dollars is
appreciated by 1% over U. S. Dollars, the Company’s gross profit would drop
0.4%~0.55%.
3. Inflation
As officially promulgated by the Directorate General of Budget, Accounting and
Statistics (DGBAS) of Executive Yuan, in 2014, the average consumer price index (CPI)
rose by 0.79% annually, not yet significantly affected by the tremendous oil price drop in
2014. The commodity prices might look stable in years ahead. The high-speed inflation
and deflation would interfere with the efficiency in the markets, discourage investment,
consumption, savings and such behaviors. To prevent potential impact on the negative
aspect from high speed inflation which would, in turn, dampen investment, consumption
and savings, the communications has tried by all means of lower various costs to enhance
competitive edge and would be closely watchful the change in the supply and demand in
the market, to flexbly adjust product portfolio to closely live up to actual demand in the
market.
7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to
High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and
Derivatives Transactions
1. The Company had not engaged in highly risky and high financial leverage investment.
121
Exactly as required by the Securities and Futures Bureau, Financial Supervisory
Commission, Executive Yuan and the laws and ordinances concerned, we have set up
wholesome financial and operating grounds in the managerial regulations and operating
procedures, including “Procedures to Engage in Transaction and Disposal of Derivatives”,
“Procedures for Loaning of Funds to Others” and “Operating Procedures of
Endorsements/Guarantees”.
2. In an attempt to control potential risks in finance, we hold a very wholesome and
conservative principle in derivative financial instruments to primarily evade the potential
risks of the exchange rates in the substantial positions incurred by input, output and
financing activities. In the days and years ahead, we shall stick to such same principle to
coordinate with the trends of exchange rates and interest rates as well as the Company’s
business operation, we shall adjust the financial risk management in real time in
accordance with laws and ordinances concerned, internal managerial rule and operating
procedures.
7.6.3 Future Research & Development Projects and Corresponding Budget
In terms of the technical development in the future, the Company will continually aim at the
development in the monitor application regions. Primarily, we would aim at broad vision
TFT LCD monitor technology & know-how to upgrade the contrast and dues in TFT LCD;
upgrade of the high penetrating TFT LCD know-how in the optical utilization rate; ultra
dimension TFT LCD monitoring technology & know-how; high solution, high brightness,
narrow frame TFT LCD moules; in high solution, high brightness, high temperature, low
energy consumption. TFT LCD bare-eye monitor know-how upgrade into stereo display
effect, rightness monitor technology & know-how, built-in touch panel technology &
know-how (TOD, TID, Hybrid) , attachment process technology & know-how. In 2014, the
Company woul invest research & development funds in amount equivalent the preceding
year’s. In the future, we shall continually invest in technical research & development and
boost competitive edge.
7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate
Finance and Sales
As of the Annual Report’s publication date, there has been no adversely impact on financial
or business due to any policy and law changed. All the Company’s teammates would be
closely watchful of potential changes in major policies and laws and ordinances concerned
at home and abroad and set up legal personnel to help such issues. Through such efforts, we
shall be able to take right countermeasures in real-time to minimize the potential impact
upon the Company’s financial standing which might be incurred by major policies at home
and abroad and change in laws.
7.6.5 Effects of and Response to Changes in Technology and in Industry Relating to
Corporate Finance and Sales
1. Technology Change
The TFT-LCD industry is challenged by the constantly upgraded know-how and new
products while the mainstream products are being replaced by new generation at a
quickening pace. Should we fail to deal with the impact incurred by the change in science
and technology, that would be an impact upon the business and financial standing on the
seamy sides. Since the Company first came into being, we have spared no effort to
accumulate the technical capability of TFT-LCD displays to deal with the impact incurred
by the change in science and technology. Other than investment in high level research &
development toward high display quality, high solution, broad vision angles, high open
rates, quick response, thin and light designs, narrow frames, ultra energy conservaton and
122
such technology & know-how, we have, as wll, tried to develop low temperature LTPS
and organic lighting display OLED and such technology & know-how to assure firm
competitive edge and effective growth in the Company’s business and financial standing.
2. Industry Change
TFT-LCD features high economic cycle and drastic fluctuation. Any sort of economic
trend drop might lead to a shock to the Company’s business operation on the seamy side.
Here at the Company, all our teammates would be closely watchful of fluctuation that
might hit the Company ito passive aspect and work out sound countermeasures
beforehand. In terms of financial operation, we adopt sound and stable financial operation
to deal with potential fluctuation in the businesses.
7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the
Company’s Response Measures
Faithful law compliance, focus on shareholders’ equity represent the very bounden duties to
the Company’s management. In case of a contingence, the Company’s ranking department
head would serve as the emergency convener to immediately set up the Crisis Task Force ti
defuse the crisis forthwith. As of the Annual Report’s publication date, there has been no
event that adversely impact in Innolux’s corporate image and impact on corporate risk
management.
7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition
Plans
At the moment, the Company has no plan to launch a merger with another enterprise.
Toward potential strategic investment or vertical integration, and the cost benefit and the
potential risk so arising, the Company’s management would conduct appropriate evaluation
and evasion as appropriate.
7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans
We all have those related technical groups to perform the professional feasibility assessment
for expansion and build out of new generation factory
7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and
Excessive Customer Concentration
There is no risk associated with excessive customer concentration, due to the plenty
production line and the main customers are international brand manufacturers. Innolux’s
usually have two or more suppliers for main material. Therefore there is no risk associated
with excessive concentration of purchasing. We will keep developing new products and new
customers in the future and seeking for the better quality and the lower cost of purchase
sources to reduce the risk of excessive customer concentration or excessive purchasing
concentration.
7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in
Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over
10%
As of the date of this Annual Report, there were no such risks for Innolux.
7.6.11 Effects of, Risks Relating to and Response to Changes in Control over the Company
As of the date of this Annual Report, there were no such risks for Innolux.
123
7.6.12 Litigation or Non-litigation Matters
1. The lawsuits, non-contentious cases, administrative litigation that are decided by the
court or still in proceeding in recent years until this report was issued.
(1) Former Chi Mei Optoelectronics Corporation, CMO Japan Co. Ltd. CMO UK Ltd.,
Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics U.S.A. Inc. were
inquired by the Department of Justice of U.S.A. in December 2006 regarding to their
being suspected of involving violating Anti-trust Laws. Some state governments in
the U.S.A, European Union, Brazil, and Korean governments also conducted
investigations. Some of the retailers and consumers in the U.S. and Canada had
brought individual or collective Civil Procedure lawsuits toward panel manufacturers.
Former Chi Mei Optoelectronics Corporation and Chi Mei Optoelectronics U.S.A.
Inc. were listed as defendant in some of the cases. The debriefing of major
investigations related to anti-trust laws are as following:
A. The company had reached agreement with the U.S.A. Department of Justice to
pay 220 million USD sentence with five years installment plan. Until the end of
February 2015, the company finished the payment 220 million USD.
From 2012 to presents, the company has reached settlement agreements with
individual plaintiffs in the U.S.A, and recognizes the related losses.
From 2011 November to presents, the company has reached settlement
agreements with 13 state governments, and the company had agreed to settle the
civil procedure lawsuits by paying the sentences according to civil codes.
B. The company received European Commission’s notice in December 2010 to
inquire the company paying 300 million Euro sentences to the appointed account
within 3 months from the date the notice was received. The company had
appealed to EU Court of Justice in February 2011, and deposit 300 million Euro to
the account appointed by European Commission in March 14th in the same year.
The principal and interest shall be return to the company according the final
judgment of this case. EU Court of Justice decided to accepted parts of the appeal
and decreased the sentence to 288 million Euro in February 2014. The company
decided to make appeal to parts of the judgment within legal time limit.
C. Except the final judgment remaining unpredictable, the company has recognized
the losses according to the facts and evaluation regarding to anti-trust
investigation related items revealed in previous paragraphs. The losses are listed
in“Provisions Liabilities-Current”,“other accrued expenses payable” and
“other financial non-current liabilities”.
(2) Eidos Display, LLC and Eidos III, LLC (below as Eidos) had brought a suit to
Eastern District Court of Texas in April 25, 2011, to accuse certain products of
Innolux and its US branch’s infringes its patent rights. The summary judgment，
which decided the invalidation of Eidos’ patent rights, of this case had been issued by
the administrative judge in December 2013 and the judge of this case had confirmed
the summary judgment in January 2014. Eidos had appealed to the United States
courts of appeals in February 2014. The United States courts of appeals made
decision to rejected and remanded to the district court in March 2015. The company
has a form to United States courts of appeals and raise defences actively. The final
judgment depends on the suit proceedings and can’t be certain; therefore, this case
doesn’t influence Innolux’s business and finance in short order.
2. Board members, monitors, CEO, responsible person in fact, shareholders and their
companies holding more than 10% shares that involved in lawsuits, non-contentious
cases, administrative litigation that were decided by the court or still in proceeding in
recent years until this report was issued and might cause major influence on Innolux
124
stockholder's equity and securities price: None.
7.6.13 Other Major Risks:None.
7.7 Other Important Matters: None.
125
VIII.
8.1
Special Disclosure
Summary of Affiliated Companies
QunKang
Technology
(Chengdu) Co.
Ltd.
QunKang
Technology
(Shenzhen) Co.
Ltd.
Qun Zhi
Optronics Corp.
(Nanjing)
Qun Yi
Investment
Company
Qun You
Optronics Corp.
(Nanjing)
Qun Zhi
Optronics Corp.
(Shanhai)
Yuan Chi
Investment
Company
Innolux Corp. Ltd
(Tree Valley
Park)
Innolux Corporation
Innolux Corp. Ltd
(Tree Valley
Park)
Qun You
Optronics Co.,
Ltd (Ningbo)
Qun Zhi
Optronics Co.,
Ltd (Ningbo)
Qun Zhi
Optronics Co.,
Ltd (Foshan)
Chyun Huei
Logistics
Company.
(Foshan)
Chyun Huei
Logistics
Company.
(Ningbo)
Qun Huei
Optronics Co.,
Ltd (Ningbo)
Kuen Bao
Photoelectric
Material Co., Ltd
(Nanjing)
126
Tai Kang
Technology Co.,
Ltd (Nanjing)
8.1.2 Innolux Subsidiaries
December 31, 2014
Company
Asiaward Investment
Ltd.
Best China Investments
Ltd.
Bright Information
Holding Ltd.
Date of
Incorporation
Address
Room 1701, 111 Leighton Road,
Causeway Bay, Hong Kong
Offshore Chambers, P.O.
Jan 3, 2007
Box,217, Apia, Samoa
Rm 1501 15/F, Millennium City
Nov 26, 2008 5, 418 Kwun Tong Road, Kwun
Tong, Kowloon,HK.
Jan 9, 2008
Chi Mei
Optoelectronics
Germany GmbH
Mar 02, 2006
Gold Union
Investments Limited
Oct 05, 2006
Golden Achiever
International Limited
Sept 30, 2005
InnoLux Corporation
Nov 22, 2004
Feb 28, 2002
Innolux Hong Kong
Holding Limited
Dec 14, 2005
Innolux Hong Kong
Limited
Feb 15, 2006
Hanns-Martin Schleyer Strasse
9b-9c,47877 Willich-Munchheide
Offshore Chambers, P.O. Box
217, Apia, Samoa
Palm Grove House, PO Box 438,
Road Town, Tortola, British
Virgin Islands
2525 Brockton Drive, Suite 300,
Austin, TX 78758
Box,217, Apia, Samoa.
5, 418 Kwun Tong Road, Kwun
Tong, Kowloon,HK.
5, 418 Kwun Tong Road, Kwun
Tong, Kowloon,HK.
Innolux
Jupiterstraat 106, 2132 HE
Optoelectronics Europe Nov 29, 2004
Hoofddorp,The Netherlands
B.V.
Innolux
Optoelectronics Hong
Kong Holding Ltd.
Innolux
Optoelectronics Japan
Co., Ltd.
Nov 16, 2001 5, 418 Kwun Tong Road, Kwun
Tong, Kowloon,HK.
8F, kowa kawasaki-nishiguchi
Bldg., 66-2 horikawa-cho,
Aug 20, 1991
Saiwai-ku, Kawasaki-City,
Kanagawa 212-0013, Japan
Innolux
Optoelectronics USA,
INC.
May 9, 2002
101 Metro Drive Suite 510,San
Jose,CA95110, U.S.A
Innolux Technology
Europe B.V.
Mar 8, 2006
Stationstraat 39G, 6411NK,
Heerlen, The Netherlands
Innolux Technology
Germany GmbH
Feb 17, 2006
Kaiserswerther Strasse
115,D-40880 Ratingen, Germany
Innolux Technology
Japan Co., Ltd.
Innolux Technology
USA Inc.
Keyway Investment
1-1-1, Ibukidaihigashimachi,
Nishi-ku, Kobe-city, 651-2242,
Japan
2300 North Barrington Road,
Apr 12, 2006 Suite 400, Hoffman Estates, IL
60169, USA
Mar 30, 2005 Portcullis TrustNet Chambers,
Mar 1, 2005
127
Capital Stock
Business Activities
Controlling
Company
Controlling
US$10,000,000
Company
HK$77,830,001
USD 4,910,000
Controlling
Company
Operating
electronics parts and
EUR 25,000 LCD display import
and export sale and
after service
Controlling
USD31,783,000
Company
USD 39,250
Controlling
Company
USD 200,000 Sales company
USD 246,768,185
Controlling
Company
HKD 1,158,844,000
Controlling
Company
HKD 35,000,000
Entrepot trade
company
Operating
EUR 18,000
LCD display import
and export sale
HKD 162,897,802
Controlling
Company
Operating TFT-LCD
development,
JPY 314,258,270
manufacture and
sales
Operating
US$6,000,000
computer display
sale
Controlling
Company of
EUR 37,581,000 Researching,
developing and
Testing
Testing &
EUR 100,000 Maintenance
Company
JPY 146,570,164 Distributor
USD 1,000 Distributor
USD 5,656,410 Controlling
Company
Date of
Incorporation
Management Limited
Lakers Trading Ltd.
Jun 4, 2004
Landmark International
Apr 24, 2003
Ltd.
Leadtek Global Group
Mar 30, 2005
Limited
Magic Sun Ltd.
Main Dynasty
Investment Ltd.
Mega Chance
Investments Ltd.
Nov 10, 2009
Dec 06, 2007
Jan 3, 2007
Nets Trading Ltd.
May 2, 2008
Dec 18, 2002
Stanford Developments
Aug 12, 1999
Ltd.
Sun Dynasty
Nov 6, 2009
Development Ltd.
Suns Holding Ltd.
Dec 18, 2006
Toppoly
Optoelectronics (B.V.I.)
Ltd.
Jul 17, 2001
Toppoly
Optoelectronics
(Cayman) Ltd.
Jul 17, 2001
Warriors Technology
Investments Ltd.
Jan 3, 2007
Address
P.O Box 1225, Apia, Samoa
Offshore Chambers, P.O.Box
217, Apia, Samoa
P.O. Box 3444,Road
Town,Tortola,BVI
217, Apia, Samoa
217, Apia, Samoa
CITCO Building, P.O. Box 662,
Road Town, Tortola , British
Virgin Islands.
89 Nexus Way, Camana Bay, P.
O. Box 31106, Georgetown
Grand Cayman KY1-1205,
Cayman Islands
Shanghai Innolux
Jan 9, 2006
No. 272-2, Ba Sheng Road, New
Customs, Wai Gao Qiao Free
Trade Zone, 200131 Pudong,
Shanghai, China
Yuan Chi investment
co., Ltd
Jul 6, 2005
No.8, Zhongxin Rd., Xinshi
Dist., Tainan City 74148, Taiwan
(R.O.C.)
Foshan Innolux
Xingye North Rd., Foshan
Science & Technology Industry
Apr 21, 2006
Garden, Foshan, Guangdong,
528325, China
Foshan Innolux
Logistics Ltd.
Jul 17, 2008
Chi Mei EL Corp.
VAP Optoelectromics
(NanJing) Corp.
Oct 4, 2004
North Factory, Xingye Rd.,
Nanhai Economic Zone, Foshan,
Guangdong, 528325, China
Area A-F03-01, No.1, Qiye Rd.,
Xinshi Dist., Tainan City, 74148,
Taiwan (R.O.C.)
No. 8, Jiu Zu Road, Jiangning
Economic and Technical
Mar 29, 2007
Development Zone, Nanjing,
China
128
Capital Stock
Business Activities
Company
Entrepot trade
USD 1
company
Controlling
USD 693,100,000
Company
Entrepot trade
USD 50,000,000
company
Controlling
US$38,000,000
Company
Controlling
HKD 139,623,801
Company
Controlling
USD 18,000,000
Company
General Investment
USD900,001
Industry
Controlling
USD 226,504,550
Company
Controlling
USD 164,000,000
Company
Controlling
HKD 295,969,001
Company
Controlling
US$18,177,052
Company
USD 144,447,000
Controlling
Company
USD 144,417,000
Controlling
Company
Investment
activities
Manufacturing &
selling LCD back
USD 21,000,000 end module related
technologies and
products.
US$18,177,052
NTD 2,100,000,000
Investment
activities
Manufacturing &
selling LCD back
technologies and
products.
USD 1,500,000 Storage services
Researching,
developing,
designing,
NTD 1,600,000,000 manufacturing
and selling OLED
related technologies
and products.
Manufacturing &
selling LCD back
technologies and
products.
Company
Kunpal Optoelectronics
Ltd.
Nanjing Innolux
Technology Ltd.
Date of
Incorporation
Address
No. 93, Fu Cheng West Road,
Jiangning Economic and
Jan 9, 2009
Technical Development Zone,
Nanjing, China
Oct 24, 2007
Nanjing, China
Nanjing Innolux
May 23, 2001
Nanjing, China
InnoJoy Investment
Corp.
No.8, Zhongxin Rd., Xinshi
Jun 26, 2007 Dist., Tainan City 74148, Taiwan
(R.O.C.)
Innocom Technology
(Chengdu) Co., LTD
98.11.07
No.168, HeZuo Rd., West Park of
ChengDu Hi-Tech Industrial
Development Zone
Innocom Technology
(Shenzhen) Co., LTD
1F, Zone 4, Foxconn Technology
Industrial Park E, Bao'an District,
Jun 24, 2004
Shenzhen City, Guangdong
Province, China
Ningbo Innolux
Technology Co., LTD
Jun 7, 2005
No.8, Cao E River Rd., Ningbo
Bonded Zone
Ningbo Innolux
Optoelectronics Co.,
LTD
No.16, YangZi River North Rd.,
Dec 14, 2004 Ningbo Export Processing Zone,
315800, China
Ningbo Innolux
Display LTD
Dec 05, 2006
No.8, Cao E River Rd., Ningbo
Bonded Zone
Ningbo Innolux
Logistics LTD
Dec 05, 2006
No.8, Alishan Road, Ningbo
Export Processing Zone, China
Capital Stock
Business Activities
USD 4,000,000
Thinner glass
process service
USD 2,100,000
Business of display
and related product.
Manufacturing &
selling LCD back
technologies and
products.
NTD1,674,053,920
Investment
activities
Manufacturing &
selling LCD back
technologies and
products.
Manufacturing &
selling LCD back
technologies and
products.
Manufacturing &
selling LCD back
technologies and
products.
Manufacturing &
selling LCD back
technologies and
products.
Manufacturing &
selling LCD back
technologies and
products.
USD 4,000,000 Storage services
8.1.3 Shareholders in Common of TSMC and Its Subsidiaries with Deemed Control and
Subordination: None.
8.1.4 Business Scope of INX and Its Subsidiaries:
The company and its subsidiary operating business include the development, manufacture,
after service and sale of TFT-LCD.
By the layout of globalization, combine the distribution of Taiwan and China production base;
provide downstream manufacturer or panel module manufacturer to have high flexibility
supply capacity.
There are a small number of affiliated companies are setting investment business as operating
scope, to strength vertical integration and strategy investment and coordinate the company’s
future operation.
129
8.1.5 Rosters of Directors, Supervisors, and Presidents of TSMC’s Subsidiaries:
As of 12/31/2014
Shareholding
Company
Title
Name
Chairman
Chairman
Chairman
Director
Director
Hsing-Chien Tuan
Hsing-Chien Tuan
Jyh Chau, Wang
Chao-Hsien Liu
Jun-Yi Yu
-
% (Investment
Holding)
-
Chairman
Chin-Yuan Chang
-
-
Chairman
Jyh Chau, Wang
-
-
Chairman
Chao-Hsien Liu
-
-
Chairman
Chairman
Chairman
Director
Director
Chairman
Director
Director
Chen-Hua Luo
Hsing-Chien Tuan
Jyh Chau, Wang
Chao-Hsien Liu
Jun-Yi Yu
Jyh Chau, Wang
Tzu-En Hung
Nai-Hsun Kuo
-
-
Chairman
Chin-Yuan Chang
-
-
Chairman
Director
Director
Chairman
Director
Director
Supervisor
Supervisor
Supervisor
Chairman
Director
Director
Chairman
-
-
-
-
-
-
-
-
Director
Chairman
Director
Director
Supervisor
Chairman
Director
Jyh Chau, Wang
Shu-Mei He
Jun-Yi Yu
Suzuki Mikio
Jyh Chau, Wang
Ching-Lung Ting
Kida Masukichi
Hui-Chuan Chien
Chin-Yuan Chang
Junichi Ishi
Suzuki Mikio
Sato Takahiro
Jyh Chau, Wang
van Riel, Lucien Franciscus
Henricus
Jyh Chau, Wang
van Riel, Lucien Franciscus
Henricus
Akkie Petrus Lambert Kersten
Taruda Kiyoshi
Jyh Chau, Wang
Hui-Chuan Chien
Chin-Yuan Chang
Jyh Chau, Wang
Brant White
-
-
-
-
Chairman
Jyh Chau, Wang
-
-
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Hsing-Chien Tuan
Jyh Chau, Wang
Jyh Chau, Wang
Hsing-Chien Tuan
Hsing-Chien Tuan
Hsing-Chien Tuan
-
-
Shares
Best China Investments Ltd.
Chi Mei Optoelectronics Germany
GmbH
Gold Union Investments Limited
Golden Achiever International
Limited
InnoLux Corporation
Innolux Hong Kong Holding
Limited
Innolux Hong Kong Limited
Innolux Optoelectronics Europe
B.V.
Innolux Optoelectronics Hong
Kong Holding Ltd.
Innolux Optoelectronics Japan
Co., Ltd.
Innolux Optoelectronics USA,
INC.
Innolux Technology Europe B.V.
Director
Chairman
Innolux Technology Germany
GmbH
Innolux Technology Japan Co.,
Ltd.
Keyway Investment Management
Limited
Lakers Trading Ltd.
Magic Sun Ltd.
Main Dynasty Investment Ltd.
Mega Chance Investments Ltd.
Director
130
Shareholding
Company
Title
Name
Chairman
Chairman
Chairman
Chairman
Chairman
Hsing-Chien Tuan
Hsing-Chien Tuan
Hsing-Chien Tuan
Hsing-Chien Tuan
Chih-Hung Hsiao
-
% (Investment
Holding)
-
Chairman
Jyh Chau, Wang
-
-
Chairman
Jyh Chau, Wang
-
-
Chairman
Chih-Hung Hsiao
-
-
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
Shares
Nets Trading Ltd.
Sun Dynasty Development Ltd.
Suns Holding Ltd.
Toppoly Optoelectronics (B.V.I.)
Ltd.
Toppoly Optoelectronics
(Cayman) Ltd.
Warriors Technology Investments
Ltd.
Chairman
Shanghai Innolux Optoelectronics
Director
Ltd
Director
Chairman
Yuan Chi investment co., Ltd
Director
Director
Chairman
Director
Foshan Innolux Optoelectronics
Ltd.
Director
Supervisor
Chairman
Director
Foshan Innolux Logistics Ltd.
Director
Supervisor
Chi Mei EL Corp.
Chairman
Director
Director
TPO Displays Hong Kong
Holding Ltd.
Representative - Nai-Jian Zheng
Holding Ltd.
Representative - Chin-Yuan
Chang
Holding Ltd.
Representative - Jun-Yi Yu
Innolux Corporation
Representative - Jyh-Chau Wang
Innolux Corporation
Representative – Chien-Lang Lo
Innolux Corporation
Representative - Chih-Hung
Hsiao
Representative - Chen-Hua Luo
Representative - Ching-Hui Lin
Chang
Keyway Investment
Management Ltd.
Representative - Chen-Hua Luo
Keyway Investment
Management Ltd.
Representative - Jung-Hsien
Chien
Keyway Investment
Management Ltd.
Representative - Kuei Wang
Keyway Investment
Management Ltd.
Chang
Innolux Corporation
Representative - Chih-Ming
Chen
Innolux Corporation
Innolux Corporation
131
155,500,000
97.19%
155,500,000
97.19%
155,500,000
97.19%
Shareholding
Company
Title
Name
Shares
Supervisor
Chairman
Director
VAP Optoelectromics (NanJing)
Corp.
Director
Supervisor
Chairman
Director
Kunpal Optoelectronics Ltd.
Director
Supervisor
Chairman
Director
Nanjing Innolux Technology Ltd.
Director
Supervisor
Chairman
Director
Nanjing Innolux Optoelectronics
Ltd.
Director
Supervisor
Chairman
Director
Representative - Ke-Yi Kao
Innolux Corporation
Chang
Ltd.
Ltd.
Chang
Ltd.
Representative - Nai-Hsun Kuo
Ltd.
Representative - Kun Ma
Chang
(Cayman) Ltd.
(Cayman) Ltd.
Chang
(Cayman) Ltd. RepresentativeChih-Chiang Lu
(Cayman) Ltd.
(Cayman) Ltd.
(Cayman) Ltd.
Chang
(Cayman) Ltd.
(Cayman) Ltd.
Innolux Corporation
Representative - Chih-Hung
Hsiao
Innolux Corporation
Representative - Jyh Chau, Wang
132
155,500,000
% (Investment
Holding)
97.19%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
167,405,392
100%
167,405,392
100%
Shareholding
Company
Title
Name
Shares
Director
Supervisor
Chairman
Innocom Technology (Chengdu)
Co., LTD
Director
Director
Chairman
Innocom Technology (Shenzhen) Director
Co., LTD
Director
Chairman
Director
Ningbo Innolux Technology Co.,
LTD
Director
Supervisor
Chairman
Director
Ningbo Innolux Optoelectronics
Co., LTD
Director
Supervisor
Chairman
Director
Ningbo Innolux Display LTD
Director
Supervisor
Ningbo Innolux Logistics LTD
Chairman
Innolux Corporation
Innolux Corporation
Chang
Sun Dynasty Development
Limited.
Limited.
Representative - Jui-Pin Lu
Limited.
Representative - Tzu-En Hung
Representative - Tun-Fu Huang
Chang
Representative - Kuo-Hsiung
Kuo
Representative- Cheng-Chung
Chiang
Chang
Kuo
Representative - Cheng-Chung
Chiang
Chang
Gold Union Investments Ltd.
Kuo
Chiang
Chang
Keyway Investment
Management Ltd.
133
% (Investment
Holding)
167,405,392
100%
167,405,392
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
-
100%
Shareholding
Company
Title
Director
Director
Supervisor
Name
Kuo
Keyway Investment
Management Ltd.
Keyway Investment
Management Ltd.
Chiang
Keyway Investment
Management Ltd.
Chang
134
Shares
% (Investment
Holding)
-
100%
-
100%
-
100%
8.1.6 Operational Highlights of INX Subsidiaries
Unit: NT$ thousands, 12/31/2014
Company
Capital
Stock
Assets
Liabilities Net Worth
Net
Revenue
317,546
255,806
255,806
316,500
255,806
255,806
Ltd.
Bright Information
155,402
106,137
408
105,729
Holding Ltd.
Chi Mei Optoelectronics
692
154,600
7,115
147,485
71,204
Germany GmbH
Gold Union Investments
962
28,840
1,903
26,937
61,223
Limited
Golden Achiever
189,900
424,492
165,723
258,769
902,759
International Limited
83,153 1,761,838
337,278
1,424,560
2,223,865
InnoLux Corporation
1,005,932
260,761
260,761
Innolux Hong Kong
1,242 (43,353)
(43,353)
Holding Limited
Innolux Hong Kong
6,330
126,290
214,508
(88,218)
Limited
Innolux Optoelectronics
7,810,213 16,818,434
16,818,434
Europe B.V.
179,025
239,763
239,763
Hong Kong Holding Ltd.
57,981,140 57,740,012
241,128 142,333,982
Japan Co., Ltd.
21,936,615 42,428,340
42,428,340
USA, Inc.
Innolux Technology
1,582,500 57,157,313 57,279,027
(121,714)
109,357
Europe B.V.
Innolux Technology
1,202,700 1,018,638
1,018,638
Germany GmbH
Innolux Technology Japan
569,665
421,267
421,267
Co., Ltd.
Innolux Technology USA
569,700
421,268
421,268
Inc.
Keyway Investment
28,485
30,441
30,441
Management Limited
7,168,869 15,261,116
15,261,116
Lakers Trading Ltd.
5,190,600 13,534,886
41 13,534,845
Ltd.
1,207,554 1,018,638
1,018,638
Limited
575,304 1,404,398
1,404,398
Magic Sun Ltd.
Main Dynasty Investment
4,571,748 6,181,533
6,181,533
Ltd.
Mega Chance Investments
4,570,798 6,181,164
6,181,164
Ltd.
1,445,741 2,510,337
100,158
2,410,179
699,473
Nets Trading Ltd.
3,847
92,017
28,866
63,151
32,996
664,623
780,296
2
780,294
Ltd.
142,800 10,456,844 12,552,790 (2,095,946) 57,330,046
Ltd.
38,782 1,696,926
56,806
1,640,120
361,091
Suns Holding Ltd.
32
623,602
297,285
326,317
1,364,389
(B.V.I.) Ltd.
135
Income
Basic
Net
(Loss)
Earnings
Income
from
(Loss) Per
(Loss)
Operation
Share
-
36,380
-
-
36,380
-
(525)
423
-
2,789
7,361
-
4,329
3,753
-
15,269
23,063
-
47,682
-
68,864
111,306
-
(573)
-
(1,722)
-
-
324,999
-
-
5,890
-
-
-
(1,598)
846,049
109,357
4,430,141
(96,260)
-
-
3,328
-
-
1,221
-
-
1,221
-
-
-
-
-
71,583
-
-
36,362
-
-
3,328
-
-
255,129
-
-
740,811
-
-
740,811
-
42,679
1,745
35,651
41
-
(207)
233,398
-
120,387
320,095
-
17,197 (128,257)
-
49,315
-
31,730
Company
(Cayman) Ltd.
Warriors Technology
Investments Ltd.
Shanghai Innolux
Yuan Chi investment co.,
Ltd
Foshan Innolux
Foshan Innolux Logistics
Ltd.
Chi Mei EL Corp.
VAP Optoelectromics
(NanJing) Corp.
Kunpal Optoelectronics
Ltd.
Nanjing Innolux
Technology Ltd.
Nanjing Innolux
Innocom Technology
(Chengdu) Co., LTD
Innocom Technology
(Shenzhen) Co., LTD
Ningbo Innolux
Technology Co., LTD
Ningbo Innolux
Optoelectronics Co., LTD
Ningbo Innolux Display
LTD
Ningbo Innolux Logistics
LTD
8.2
8.3
8.4
Capital
Stock
Assets
Liabilities Net Worth
4,728,084 2,367,447
575,304 1,404,397
2,100,000 1,233,647
47,475
81,577
150
Net
Revenue
Income
Basic
Net
Earnings
(Loss)
Income
from
(Loss) Per
(Loss)
Operation
Share
2,367,297
-
(256)
493,840
-
-
1,404,397
-
(48)
255,127
-
4,400
1,229,247
-
(289)
31,904
-
14,934
66,643
(584)
161
-
18,717,618 114,099,814 2,331,328 1,866,041
-
12,121,950 61,485,547 42,767,929
107,930
1,600,000
143,551
88,729
54,822
-
(11,387)
(5,702)
-
208,890
72,047
115,803
(43,756)
-
(324)
(574)
-
126,600
94,846
15,413
79,433
1,565
942
-
66,465
609,473
2,420
607,053
(1,620)
11,797
-
105,743
-
4,494,300 17,814,440 12,239,408
5,575,032 46,480,006
907,803
729,013
-
664,650 6,107,615 5,327,200
780,415 17,939,224
286,824
233,398
-
(299) (162,272)
-
1,674,054 1,670,913
830
1,670,083
-
1,202,700 1,020,309
1,515
1,018,794
-
5,190,600 15,514,116 1,977,216
13,536,900
2,624,944
949,500 4,578,221 4,317,436
260,785
4,114,500 16,627,556 13,408,962
9,811,500 50,735,291 30,130,493
126,600
174,276
5,939
3,328
-
334,552
36,362
-
4,745,511
52,128
34,860
-
3,218,594 33,635,480
528,642
491,039
-
92,087,411 2,029,637 2,070,696
-
20,604,798
168,337
45,021
-
4,475
5,729
-
Private Placement Securities in the Most Recent Years: None.
The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent
Years: None.
Special Notes: None.
IX. Materially might affect shareholders' equity or the price of the company's
securities, has occurred during the most recent fiscal year or during the
current fiscal year up to the date of printing of the annual report, such
situations shall be listed one by one: None
136
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Innolux Corporation:
We have audited the accompanying consolidated balance sheets of Innolux Corporation and its
subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of
comprehensive income, of changes in equity and of cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We did not audit the financial statements of certain consolidated subsidiaries and investments
accounted for under equity method for the year ended December 31, 2013. Those statements reflect
NT$5,130,451,000, constituting 1% of the consolidated total assets as of December 31, 2013, and total
operating revenues was NT$0 for the year then ended. Those financial statements and the information
disclosed in Note 13 were audited by other independent accountants whose reports thereon have been
furnished to us, and our opinion expressed herein is based solely on the audit reports of the other
independent accountants.
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of
Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the
Republic of China. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of other independent accountants provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of other independent accountants, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of
Innolux Corporation and subsidiaries as of December 31, 2014 and 2013, and their financial
performance and cash flows for the years then ended in conformity with the “Regulations Governing
the Preparations of Financial Statements by Securities Issuers” and the International Financial
Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC
Interpretations as endorsed by the Financial Supervisory Commission.
137
Innolux Corporation and its subsidiaries’ current liabilities have exceeded its current assets by
NT$9,754,686,000 as of December 31, 2014. As set forth in Note 12(4), management has designed a
turnaround plan to improve the Company’s operating efficiency.
We have also audited the separate financial statements of Innolux Corporation as of and for the years
ended December 31, 2014 and 2013, and have expressed an unqualified opinion on such financial
statements.
PricewaterhouseCoopers, Taiwan
February 10, 2015
------------------------------------------------------------------------------------------------------------------------------------------------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.
138
INNOLUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2014 AND 2013
(Expressed in thousands of New Taiwan dollars)
Assets
2013
2014
Notes
Current assets
Cash and cash equivalents
6(1)
$
70,989,741
$
44,137,818
Financial assets at fair value through profit 6(2)
or loss - current
Available-for-sale financial assets - current 6(3)
52,453
227,703
220,000
-
70,976,005
66,358,291
Accounts receivable, net
6(5)
Accounts receivable, net - related parties
7
6,112,400
2,049,985
Other receivables
7
2,849,589
4,255,683
Inventory
6(6)
33,787,842
50,524,156
1,441,603
1,194,871
2,284,870
2,544,567
666,309
408,895
189,380,812
171,701,969
605,155
712,603
5,137,117
3,952,530
2,364,225
4,919,134
233,609,843
273,505,759
693,677
706,850
Prepayments
Other financial assets - current
8
Other current assets
Total current assets
Non-current assets
or loss - non-current
Available-for-sale financial assets -
6(3)
non-current
Investments accounted for under equity
6(7)
method
Property, plant and equipment
6(8), 7 and 8
Investment property, net
6(9)
Intangible assets
6(10)
20,219,137
21,214,994
Deferred income tax assets
6(25)
17,778,516
18,123,869
Other financial assets - non-current
8
11,160,082
12,327,722
1,567,991
1,035,455
293,135,743
336,498,916
Other non-current assets
Total non-current assets
Total assets
$
(Continued)
139
482,516,555
$
508,200,885
CONSOLIDATED BALANCE SHEETS
Liabilities and Equity
2014
Notes
2013
Current liabilities
Short-term borrowings
6(11)
Financial liabilities at fair value through
6(2)
$
profit or loss - current
22,526,999
$
31,179,767
605,016
689,097
1,351
-
74,954,439
65,435,586
Derivative financial liabilities for hedging - 6(4)
current
Accounts payable
Accounts payable - related parties
7
5,252,946
8,756,243
Other payables
7
23,912,180
20,715,595
582,258
454,482
Current income tax liabilities
Provisions - current
6(15)
3,133,489
1,949,029
Long-term liabilities, current portion
6(12)
66,162,663
169,097,708
2,004,157
2,309,244
199,135,498
300,586,751
Other current liabilities
Total current liabilities
Non-current liabilities
-
21,918
Long-term borrowings
6(12)
42,293,423
-
Deferred income tax liabilities
6(25)
477,580
909,708
Other non-current liabilities
9
11,438,618
12,104,654
54,209,621
13,036,280
253,345,119
313,623,031
non-current
Total non-current liabilities
Total liabilities
Equity attributable to owners of the parent
Share capital - common stock
6(16)
99,545,364
91,094,288
Capital surplus
6(17)
99,584,369
96,058,741
Retained earnings
6(18)
Legal reserve
Special reserve
Unappropriated retained earnings
509,272
2,328,981
1,144,229
-
24,979,173
5,092,716
1,927,656 (
6(19)
1,531,497)
parent
Non-controlling interest
Total equity
Significant contingent liabilities and
227,690,063
193,043,229
1,481,373
1,534,625
229,171,436
194,577,854
9
unrecognized contract commitments
Significant events after the balance sheet
6(12)(16) and 11
date
Total liabilities and equity
$
482,516,555
$
The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountants dated February 10, 2015.
140
508,200,885
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Items
Sales revenue
Operating costs
Net operating margin
Operating expenses
Selling expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Operating profit
Other income
Other gains and losses
Finance costs
Share of profit/(loss) of associates and
joint ventures accounted for under equity
method
Total non-operating income and
expenses
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income (net)
Financial statements translation
differences of foreign operations
Unrealized gain on valuation of
available-for-sale financial assets
Cash flow hedges
Actuarial loss on defined benefit plan
Share of other comprehensive income of
associates and joint ventures accounted for
under equity method
Income tax relating to the components of
other comprehensive income
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Total
Other comprehensive income attributable
to:
Owners of the parent
Total
Notes
7
$
6(6)(23)(24) and 7 (
Earnings per share (in dollars)
Basic earnings per share
Diluted earnings per share
6(26)
2014
2013
428,661,898 $
378,276,897) (
50,385,001
422,730,500
384,971,385)
37,759,115
3,224,079) (
6,810,443) (
12,177,083) (
22,211,605) (
28,173,396
2,974,223)
7,169,974)
12,265,650)
22,409,847)
15,349,268
2,734,952
5,130,475) (
3,309,347) (
2,627,868
7,166,774)
5,103,230)
65,814 (
63,779)
6(23)(24)
(
(
(
(
6(20)
6(21)
6(22)
(
(
(
6(25)
(
$
$
5,639,056) (
22,534,340
857,432) (
21,676,908 $
3,078,767
$
9,705,915)
5,643,353
548,334)
5,095,019
2,712,774
6(3)
6(4)
6(13)
284,946
278,458)
55,790) (
(
(
16,772
79,477
11,870)
81,659
36,122
48,369
26,242
6(25)
$
$
3,159,493
24,836,401
$
21,676,759 $
149 (
21,676,908 $
5,102,568
7,549)
5,095,019
24,844,853 $
8,452)
24,836,401 $
7,953,076
1,460
7,954,536
$
$
(
$
$
$
2.31
2.28
$
$
$
$
141
2,859,517
7,954,536
0.57
0.57
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)
Notes
2013
Balance at January 1, 2013
Capital surplus offset against
accumulated deficit
Global depositary receipt issued
for cash
Issuance of restricted stock to
employees
Cancellation of restricted stock to
employees
Compensation related to
share-based payment
Changes in net equity of
long-term equity investments
Profit for the year
Other comprehensive income for
the year
Balance at December 31, 2013
2014
Capital issued for cash
Appropriations of 2013 earnings:
Legal reserve
Special reserve
Cash dividends
Cash paid from capital surplus
accumulated deficit
Cancellation of restricted
stock to employee
Changes in restricted stock to
employees
share-based payment
Changes in net equity of
long-term equity investments
Changes in non-controlling
interests
Profit for the year
Other comprehensive income for
the year
Common stock
Capital surplus
Legal
reserve
$ 79,129,708
$ 119,677,980
$ 2,328,981
-
$
Non-controlling
interest
Total
-
$ 169,823,860
$
Total
1,533,165
$ 171,357,025
-
-
-
-
-
-
-
11,250,000
3,269,051
-
-
-
-
-
-
-
14,519,051
-
14,519,051
725,260
187,212
-
-
-
-
-
- ( 754,166)
158,306
-
158,306
10,680
-
-
-
-
-
-
-
-
-
-
-
189,976
-
-
-
-
-
-
366,898
556,874
-
556,874
-
32,062
-
-
-
5,102,568
-
-
-
-
32,062
5,102,568
$ 91,094,288
$ 96,058,741
$ 2,328,981
$ 91,094,288
8,500,000
$ 96,058,741
2,125,000
$ 2,328,981
-
10,680 )
-
6(18)
6(18)
(
(
1,266,944 )
2,328,981
509,272
-
$
1,144,229
-
(
9,852 )
2,740,631
65,168
$ 5,092,716
($
78,074 ) ($ 1,544,345 )
$ 5,092,716
(
(
(
509,272 )
1,144,229 )
90,495 )
-
($
78,074 ) ($ 1,544,345 )
-
54,561
$ 478,190 ( $387,268)
2,850,508
$ 193,043,229
$ 478,190 ( $387,268)
-
$ 193,043,229
10,625,000
-
-
-
-
(
(
$
$
90,495)
1,266,944)
32,062
5,095,019
9,009
1,534,625
2,859,517
$ 194,577,854
1,534,625
-
$ 194,577,854
10,625,000
-
(
(
90,495 )
1,266,944 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,174
-
-
-
-
-
- (
3,223
-
3,223
-
289,523
-
-
-
-
-
-
288,704
578,227
-
578,227
-
-
-
-
-
-
-
-
-
21,676,759
-
-
-
-
509,272
$ 1,144,229
(
( 2,328,981 )
$
7,549)
(
48,924
48,924 )
-
6(19)
$ 423,629
Employee
unearned
compensatio
n
27,308,220
(
6(14)
($ 27,308,220 ) ($ 2,818,705 ) ($ 1,609,513 )
Changes in
gain (loss)
on cash
flow hedge
-
6(14)
6(16)
6(18)
-
Unrealized
gain (loss) on
available-forsale financial
assets
-
6(14)
(
$
27,308,220 )
6(16)
6(19)
Equity attributable to owners of the parent
Retained Earnings
Financial
statements
translation
differences of
Unappropriated
foreign
earnings
operations
Special reserve
47,030 )
-
-
$ 99,545,364
$ 99,584,369
$
(
46,306 )
$ 24,979,173
3,161,022
$ 3,082,948
284,498 ( 231,120)
($ 1,259,847 )
$ 247,070 ( $142,515)
142
43,951)
(
47,030)
-
21,676,759
(
3,168,094
$ 227,690,063
(
$
(
47,030 )
44,800) (
149
44,800 )
21,676,908
8,601)
1,481,373
3,159,493
$ 229,171,436
CONSOLIDATED STATEMENTS OF CASH FLOWS
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated profit before tax for the year
Adjustments to reconcile net income to net cash provided by
Income and expenses having no effect on cash flows
Depreciation and amortization
Compensation related to share-based payment
Provision for doubtful accounts
Share of profit (loss) of associates and joint ventures
accounted for under equity method
Gain from disposal of investments
Loss on disposal of property, plant and equipment
Impairment loss
Interest expense
Interest income
Dividend income
Unrealized foreign exchange loss (gain)
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets /liabilities at fair value through profit
or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Net changes in liabilities relating to operating activities
Derivative financial liabilities for hedging
Accounts payable
Other payables
Cash generated from operations
Cash paid for income tax
Net cash provided by operating activities
2014
$
(Continued)
143
22,534,340
$
60,899,556
578,227
820
6(23)
6(24)
6(5)
6(21)
6(21)
6(21)
6(22)
6(20)
2013
(
(
(
(
(
(
(
(
(
(
(
(
(
(
65,814 )
794,041 )
179,758
351,066
3,586,581
328,633 )
39,958 )
1,417,004
5,643,353
77,851,438
556,874
453
(
(
(
(
198,617
4,618,534 )
4,062,415 )
1,047,816 )
16,736,314
246,732 )
257,414 )
(
299,025 )
9,518,853
3,503,297 )
4,070,494
1,184,460
290,486 )
721,826 )
104,980,099
768,062 )
104,212,037
(
(
(
(
(
(
(
63,779
1,977,799 )
138,658
921,828
5,051,960
293,741 )
58,897 )
310,450 )
1,275,676 )
8,336,807
6,500,243
734,595
8,456,587 )
226,676 )
123,046 )
399,357 )
16,066,134 )
4,958,074 )
749,050
814,253
513,119
3,133,498
76,863,471
974,312 )
75,889,159
CONSOLIDATED STATEMENTS OF CASH FLOWS
Notes
2014
2013
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of financial assets carried at cost non-current
Proceeds from disposal of non-current assets held for sale
Acquisition of investment accounted for under equity
method
Proceeds from disposal of investment accounted for under
equity method
Proceeds from capital reduction of investments accounted
for under equity method
Decrease in other financial assets
Acquisition of property, plant and equipment
6(27)
Proceeds from disposal of property, plant and equipment
6(27)
Acquisition of intangible assets
(Increase) decrease in other non-current assets
Interest received
Dividends received
Net cash used in investing activities
($
(
240,167 ) ($
802,524
916,909 )
3,963,684
-
192,758
279,312
73,500 )
-
1,685,201
(
(
(
(
136,185
59,451
464,337
20,526,552 ) (
4,253,209
18,140 ) (
22,070 )
368,335
64,221
13,183,151 ) (
941,407
18,370,343 )
1,174,898
157,781 )
29,586
364,391
201,765
12,161,047 )
8,881,219 )
61,671,395 )
10,625,000
90,495 )
1,266,944 )
7,754 )
44,800 )
3,608,923 )
64,946,530 )
769,567
26,851,923
44,137,818
70,989,741
14,499,547 )
699,430 )
51,589,030 )
2,000,000 )
980,000 )
14,519,051
181,315
8,260 )
5,586,134 )
60,662,035 )
173,764
3,239,841
40,897,977
44,137,818
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings
Decrease in short-term notes and bills payable
Payment of long-term borrowings
Payment of bonds payable
Decrease in accrued lease payments
Stock issued for cash
Cash dividends paid
Proceeds from issuance of restricted stock to employees
Repurchase from issuance of restricted stock to employees
Changes in non-controlling interests
Interest paid
Net cash used in financing activities
Effect of changes in foreign currency exchange
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(
(
6(16)
6(18)
(
(
6(14)
(
(
(
(
$
(
(
(
(
(
(
(
(
$
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts expressed in thousands of New Taiwan dollars)
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”) are engaged in the research, development, design,
manufacture and sales of TFT-LCD panels, modules and monitors of LCD, color filter, and low
temperature poly-silicon TFT-LCD.
2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL
STATEMENTS AND PROCEDURES FOR AUTHORIZATION
These consolidated financial statements were authorized for issuance by the Board of Directors on
February 10, 2015.
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”)
None.
(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by
the Group
According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued on April 3, 2014,
commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai
Securities Market or Emerging Stock Market shall adopt the 2013 version of IFRS (not including
IFRS 9, ‘Financial instruments’) as endorsed by the FSC and the "Regulations Governing the
Preparation of Financial Reports by Securities Issuers" effective January 1, 2015 (collectively
referred herein as the “2013 version of IFRSs”) in preparing the consolidated financial statements.
The related new standards, interpretations and amendments are listed below:
New Standards, Interpretations and Amendments
Limited exemption from comparative IFRS 7
disclosures for first-time adopters (amendment to IFRS 1)
145
Effective Date by
International Accounting
Standards Board
July 1, 2010
Severe hyperinflation and removal of fixed dates
for first-time adopters (amendment to IFRS 1)
Government loans (amendment to IFRS 1)
Disclosures－Transfers of financial assets
(amendment to IFRS 7)
Disclosures－Offsetting financial assets and financial
liabilities (amendment to IFRS 7)
IFRS 10, ‘Consolidated financial statements’
IFRS 11, ‘Joint arrangements’
IFRS 12, ‘Disclosure of interests in other entities’
IFRS 13, ‘Fair value measurement’
Presentation of items of other comprehensive income
(amendment to IAS 1)
Deferred tax: recovery of underlying assets
IAS 19 (revised), ‘Employee benefits’
IAS 27 (revised), ‘Separate financial statements’
Investments in associates and joint ventures
Offsetting financial assets and financial liabilities
IFRIC 20, ‘Stripping costs in the production phase
of a surface mine’
Improvements to IFRSs 2010
Improvements to IFRSs 2009－2011
Effective Date by
Standards Board
July 1, 2011
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
(Investment entities: January 1, 2014)
January 1, 2013
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
January 1, 2011
January 1, 2013
Based on the Group’s assessment, the adoption of the 2013 version of IFRS has no significant
impact on the consolidated financial statements of the Group, except the following:
A.IAS 19, ‘Employee benefits’
Under the revised standard, net interest expense or income, calculated by applying the discount
rate to the net defined benefit asset or liability, replace the finance charge and expected return on
plan assets. Additional disclosures are also required.
B.IAS 1, ‘Presentation of financial statements’
The amendment requires entities to separate items presented in other comprehensive income
(OCI) classified by nature into two groups on the basis of whether they may be reclassified to
profit or loss subsequently when specific conditions are met. If the items are presented before tax
then the tax related to each of the two groups of OCI items (those that might be reclassified and
those that will not be reclassified) must be shown separately. Accordingly, the Group will adjust
its presentation of the statement of comprehensive income.
146
C.IFRS 12, ‘Disclosure of interests in other entities’
The standard integrates the disclosure requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The Group will disclose additional information
about its interests in consolidated entities and unconsolidated entities accordingly.
D.IFRS 13, ‘Fair value measurement’
The standard defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
The standard sets out a framework for measuring fair value using the assumptions that market
participants would use when pricing the asset or liability; for non-financial assets, fair value is
determined based on the highest and best use of the asset. The standard requires disclosures about
fair value measurements. Based on the Group’s assessment, the adoption of the standard has no
significant impact on its consolidated financial statements and the Group will disclose additional
information about fair value measurements accordingly.
Based on the Group’s assessment, the adoption of the 2013 version of IFRSs has no significant
impact on the consolidated financial statements of the Group.
(3) IFRSs issued by IASB but not yet endorsed by the FSC
New standards, interpretations and amendments issued by IASB but not yet included in the 2013
version of IFRS as endorsed by the FSC:
IFRS 9, ‘Financial instruments’
Sale or contribution of assets between an investor and its associate
or joint venture (amendments to IFRS 10 and IAS 28)
Investment entities: applying the consolidation exception
(amendments to IFRS 10, IFRS 12 and IAS 28)
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRS 14, ‘Regulatory deferral accounts’
IFRS 15, ‘Revenue from contracts with customers’
Disclosure initiative (amendments to IAS 1)
Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions
(amendments to IAS 19)
Equity method in separate financial statements
Recoverable amount disclosures for non-financial assets
147
Effective Date by
Standards Board
January 1, 2018
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2017
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
Effective Date by
Standards Board
Novation of derivatives and continuation of hedge accounting
January 1, 2014
IFRIC 21, ‘Levies’
January 1, 2014
Improvements to IFRSs 2010-2012
July 1, 2014
July 1, 2014
January 1, 2016
The Group is assessing the impact of the new standards and interpretations above and the impact
will be disclosed when the assessment is complete.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the periods presented, unless
otherwise stated.
(4) Compliance statement
These consolidated financial statements are the consolidated financial statements prepared by the
Group in accordance with the “Rules Governing the Preparation of Financial Statements by
Securities Issuers” and the International Financial Reporting Standards, International Accounting
Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively
referred herein as the “IFRSs”).
(5) Basis of preparation
A.Except for the following items, these consolidated financial statements have been prepared under
the historical cost convention:
(a)Financial assets and financial liabilities (including derivative instruments) at fair value through
profit or loss.
(b)Available-for-sale financial assets measured at fair value.
(c)Defined benefit liabilities recognized based on the net amount of pension fund assets less
present value of defined benefit obligations.
B.The preparation of financial statements in conformity with International Financial Reporting
Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as
endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process
of applying the Group’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 5.
(6) Basis of consolidation
A.Basis for preparation of consolidated financial statements
(a)All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are
148
all entities over which the Group has the power to govern the financial and operating policies.
In general, control is presumed to exist when the parent owns, directly or indirectly through
subsidiaries, more than half of the voting power of an entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
(b)Inter-company transactions, balances and unrealised gains or losses on transactions between
companies within the Group are eliminated. Accounting policies of subsidiaries have been
adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c)Profit or loss and each component of other comprehensive income are attributed to the owners
of the parent and to the non-controlling interests. Total comprehensive income is attributed to
the owners of the parent and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
(d)Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing
control of the subsidiary (transactions with non-controlling interests) are accounted for as
equity transactions, i.e. transactions with owners in their capacity as owners. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of
the consideration paid or received is recognized directly in equity.
(e)When the Group loses control of a subsidiary, the Group remeasures any investment retained
in the former subsidiary at its fair value. Any difference between fair value and carrying
amount is recognized in profit or loss. All amounts previously recognized in other
comprehensive income in relation to the subsidiary are reclassified to profit or loss on the
same basis as would be required if the related assets or liabilities were disposed of. That is,
when the Group loses control of a subsidiary, all gains or losses previously recognized in other
comprehensive income in relation to the subsidiary should be reclassified from equity to profit
or loss, if such gains or losses would be reclassified to profit or loss when the related assets or
liabilities are disposed of.
B. Subsidiaries included in the consolidated financial statements:
Name of Investor
Name of Subsidiary
Innolux Corporation Bright Information
Holding Ltd.
Ltd.
Golden Achiever
International Ltd.
Keyway Investment
Management Limited
Ltd.
Ownership (%)
December 31,
Main Business
Activities
2014
2013
Description
Investment holdings
100
57
(a)
Investment holdings
100
100
-
Investment holdings
100
100
-
Investment holdings
Investment holdings
100
100
100
100
-
Investment holdings
100
100
-
149
Name of Investor
Innolux Corporation
Bright Information
Holding Ltd.
Gold Union
Investments Ltd.
Golden Achiever
International Ltd.
Keyway Investment
Management Limited
Landmark
International Ltd.
Main Business
Name of Subsidiary
Activities
Toppoly Optoelectronics Investment holdings
(B.V.I.) Ltd.
Innolux Hong Kong
Investment holdings
Holding Ltd.
(Former TPO Hong Kong
Holding Ltd.)
Order swapping
Limited
company
Yuan Chi Investment
Investment company
Co., Ltd.
InnoJoy Investment
Investment company
Corporation
Chi Mei Optoelectronics Distribution company
(Singapore) Pte Ltd.
Innolux Optoelectronics Investment and
Europe B.V.
distribution
(Former Chi Mei
company
Optoelectronics Europe
B.V.)
Innolux Optoelectronics Investment and
distribution company
Japan Co., Ltd.
(Former Chi Mei
Co., Ltd.)
Chi Mei El Corporation Production and
distribution company
Kunpal Optoelectronics Processing company
Ltd.
Ningbo Innolux Display Processing company
Ltd.
VAP Optoelectronics
Processing company
(Nanjing) Corp.
Investment holdings
Suns Holding Ltd.
Investment holdings
Lakers Trading Ltd.
Order swapping
company
Innolux Corporation
Distribution company
Ningbo Innolux Logistics Warehousing company
Ltd.
Foshan Innolux Logistics Warehousing company
Ltd.
Ningbo Innolux
Processing company
Ningbo Innolux
Processing company
Technology Ltd.
150
Ownership (%)
December 31,
2014
2013
100
100
Description
-
100
100
-
100
100
-
100
100
-
100
100
-
-
100
(c)
100
100
-
100
100
-
97
97
-
100
100
-
100
100
-
100
100
-
100
100
100
100
100
100
-
100
100
100
100
-
100
100
-
100
100
-
100
100
-
Name of Investor
Landmark
International Ltd.
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Innolux Hong Kong
Holding Ltd.
Foshan Innolux
Processing company
(Former Nanhai Chi Mei
Electronics Ltd.)
Nanhai Chi Mei
Processing company
Toppoly Optoelectronics Investment holdings
(Cayman) Ltd.
Hong Kong Holding Ltd.
(Former TPO Displays
Hong Kong Holding
Ltd.)
Innolux Hong Kong Ltd.
Hong Kong Ltd.)
Innolux Technology
Europe B.V.
Europe B.V.)
Innolux Technology
Japan Co., Ltd.
Japan K.K.)
Innolux Technology USA
Inc.
USA Inc.)
Innolux
Optoelectronics Europe Germany GmbH
B.V.
Innolux
Optoelectronics Japan USA, Inc.
Co., Ltd.
Rockets Holding Ltd. Best China Investments
Ltd.
Mega Chance
Investments Ltd.
Magic Sun Ltd.
Ltd.
Sonics Trading Ltd.
Suns Holding Ltd.
Main Business
Activities
Name of Subsidiary
Nets Trading Ltd.
Warriors Technology
Investments Ltd.
Ownership (%)
December 31,
2014
2013
Description
100
100
(b)
-
100
(b)
100
100
-
Investment holdings
100
100
-
Order swapping
company
100
100
-
Investment and R&D
company
100
100
-
100
100
-
100
100
-
After sales service
company
100
100
-
100
100
-
Investment holdings
100
100
-
Investment holdings
100
100
-
Investment holdings
Investment holdings
100
100
100
100
-
Order swapping
company
Investment company
Investment company
-
100
(c)
100
100
100
100
-
151
Name of Investor
Toppoly
Optoelectronics
(Cayman) Ltd.
Innolux
Kong Holding Ltd.
Innolux Technology
Europe B.V.
Main Business
Activities
Name of Subsidiary
Nanjing Innolux
Technology Ltd.
(Shinepal) Ltd.
Nanjing Innolux
Shanghai Innolux
Innolux Technology
Germany GmbH
Germany GmbH)
Best China Investments Asiaward Investment
Ltd.
Ltd.
Mega Chance
Main Dynasty Investment
Investments Ltd.
Ltd.
Magic Sun Ltd.
Sun Dynasty
Development Ltd.
Stanford Developments Innocom Technology
Ltd.
(Shenzhen) Ltd.
Asiaward Investment Innocom Technology
Ltd.
(Xiamen) Ltd.
Sun Dynasty
Innocom Technology
Development Ltd.
(Chengdu) Co., Ltd.
Ownership (%)
December 31,
2014
2013
Description
100
100
-
Processing company
100
100
-
Processing company
100
100
-
Testing and
maintenance company
100
100
-
Investment holdings
100
100
-
Investment holdings
100
100
-
Investment holdings
100
100
-
Processing company
100
100
-
Processing company
-
100
(c)
Processing company
100
100
-
(a)In July, 2014, the Company obtained the remaining 43% interest of its subsidiary, Bright
Information Holding Ltd., and the transaction was accounted as equity transaction.
(b)In June, 2013, the Board of Directors of the Company adopted a resolution for the merger of
two wholly-owned subsidiaries, Foshan Innolux Optoelectronics Ltd. and Nanhai Chi Mei
Optoelectronics Ltd., with Foshan Innolux Optoelectronics Ltd. as the surviving company.
Effective date of this merger was January 1, 2014, and it was accounted for as a
reorganization.
(c)Chi Mei Optoelectronics (Singapore) Pte Ltd., Sonics Trading Ltd., and Innocom Technology
(Xiamen) Ltd. ceased operations and were all liquidated in the first quarter of 2014.
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.
(7) Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional
152
currency”). The consolidated financial statements are presented in NTD, which is the Company’s
functional and the Group’s presentation currency.
A.Foreign currency transactions and balances
(a)Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions are
recognized in profit or loss in the period in which they arise, except when deferred in other
comprehensive income as qualifying cash flow hedges.
(b)Monetary assets and liabilities denominated in foreign currencies at the period end are
re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences
arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c)Non-monetary assets and liabilities denominated in foreign currencies held at fair value
through profit or loss are re-translated at the exchange rates prevailing at the balance sheet
date; their translation differences are recognized in profit or loss. Non-monetary assets and
liabilities denominated in foreign currencies held at fair value through other comprehensive
income are re-translated at the exchange rates prevailing at the balance sheet date; their
translation differences are recognized in other comprehensive income. However,
non-monetary assets and liabilities denominated in foreign currencies that are not measured at
fair value are translated using the historical exchange rates at the dates of the initial
transactions.
(d)All foreign exchange gains and losses are presented in the statement of comprehensive income
under “other gains and losses”.
B.Translation of foreign operations
(a)The operating results and financial position of all the group entities and associates that have a
functional currency different from the presentation currency are translated into the
presentation currency as follows:
i.Assets and liabilities for each balance sheet presented are translated at the exchange rate
prevailing at the dates of that balance sheet;
ii.Income and expenses for each statement of comprehensive income are translated at average
exchange rates of that period;
iii.All resulting exchange differences are recognized in other comprehensive income.
(b)When a foreign operation partially disposed of or sold is an associate, exchange differences
that were recorded in other comprehensive income are proportionately reclassified to profit or
loss as part of the gain or loss on sale. In addition, if the Group retains partial interest in the
former foreign associate after losing significant influence over the former foreign associate,
such transactions should be accounted for as disposal of all interest in these foreign operations.
(c)When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange
differences that were recorded in other comprehensive income are proportionately transferred
153
to the non-controlling interest in this foreign operation. In addition, if the Group retains partial
interest in the former foreign subsidiary after losing control of the former foreign subsidiary,
such transactions should be accounted for as disposal of all interest in the foreign operation.
(8) Classification of current and non-current items
A.Assets that meet one of the following criteria are classified as current assets; otherwise they are
classified as non-current assets:
(a)Assets arising from operating activities that are expected to be realized, or are intended to be
sold or consumed within the normal operating cycle;
(b)Assets held mainly for trading purposes;
(c)Assets that are expected to be realized within twelve months from the balance sheet date;
(d)Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to
be exchanged or used to pay off liabilities more than twelve months after the balance sheet
date.
B.Liabilities that meet one of the following criteria are classified as current liabilities; otherwise
they are classified as non-current liabilities:
(a)Liabilities that are expected to be paid off within the normal operating cycle;
(b)Liabilities arising mainly from trading activities;
(c)Liabilities that are to be paid off within twelve months from the balance sheet date;
(d)Liabilities for which the repayment date cannot be extended unconditionally to more than
twelve months after the balance sheet date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
(9) Cash equivalents
Cash equivalents refer to short-term highly liquid investments that are readily convertible to known
amount of cash and subject to an insignificant risk of changes in value. Time deposits and bonds
sold under repurchase agreements that meet the above criteria and held for the purpose of meeting
short-term cash commitment in operations are classified as cash equivalents.
(10) Financial assets at fair value through profit or loss
A.Financial assets at fair value through profit or loss are financial assets held for trading or
designated as at fair value through profit or loss on initial recognition. Financial assets are
classified in this category of held for trading if acquired principally for the purpose of sale in the
short-term. Derivatives are also categorized as financial assets held for trading unless they are
designated as hedges. Financial assets that meet one of the following criteria are designated as at
fair value through profit or loss on initial recognition:
(a)Hybrid (combined) contracts; or
(b)They eliminate or significantly reduce a measurement or recognition inconsistency; or
(c)They are managed and their performance is evaluated on a fair value basis, in accordance with
154
a documented risk management or investment strategy.
B.On a regular way purchase or sale basis, financial assets at fair value through profit or loss are
recognized and derecognized using trade date accounting.
C.Financial assets at fair value through profit or loss are initially recognized at fair value. Related
transaction costs are expensed in profit or loss. These financial assets are subsequently
remeasured and stated at fair value, and any changes in the fair value of these financial assets are
recognized in profit or loss.
(11) Available-for-sale financial assets
A.Available-for-sale financial assets are non-derivatives that are designated in this category. On a
regular way purchase or sale basis, available-for-sale financial assets are recognized and
derecognized using trade date accounting.
B.Available-for-sale financial assets are initially recognized at fair value plus transaction costs.
These financial assets are subsequently remeasured and stated at fair value, and any changes in
the fair value of these financial assets are recognized in other comprehensive income.
(12) Loans and receivables
Accounts receivable are loans and receivables originated by the entity. They are created by the
entity by selling goods or providing services to customers in the ordinary course of business.
Accounts receivable are initially recognized at fair value and subsequently measured at amortized
cost using the effective interest method, less provision for impairment. However, short-term
accounts receivable which are non-interest bearing are subsequently measured at initial invoice
amount as the effect of discounting is insignificant.
(13) Impairment of financial assets
A.The Group assesses at each balance sheet date whether there is objective evidence that an
individual financial asset or a group of financial assets is impaired as a result of one or more
events that occurred after the initial recognition of the asset and that loss event has an impact on
the estimated future cash flows of an individual financial asset or group of financial assets that
can be reliably estimated.
B.The objective evidence that the Group uses to determine whether there is an impairment loss is
as follows:
(a)Significant financial difficulty of the issuer or debtor;
(b)A breach of contract, such as a default or delinquency in interest or principal payments;
(c)Information about significant changes with an adverse effect that have taken place in the
technology, market, economic or legal environment in which the issuer operates, and
indicates that the cost of the investment in the equity instrument may not be recovered; or
(d)A significant or prolonged decline in the fair value of an investment in an equity instrument
below its cost.
C.When the Group assesses that there has been objective evidence of impairment and an
155
impairment loss has occurred, accounting for impairment is made as follows according to the
category of financial assets:
(a)Financial assets measured at amortized cost
The amount of the impairment loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the financial
asset’s original effective interest rate, and is recognized in profit or loss. If, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment loss was recognized, the previously
recognized impairment loss is reversed through profit or loss to the extent that the carrying
amount of the asset does not exceed its amortized cost that would have been at the date of
reversal had the impairment loss not been recognized previously. Impairment loss is
recognized and reversed by adjusting the carrying amount of the asset through the use of an
impairment allowance account.
(b)Available-for-sale financial assets
The amount of the impairment loss is measured as the difference between the asset’s
acquisition cost (less any principal repayment and amortisation) and current fair value, less
any impairment loss on that financial asset previously recognized in profit or loss, and is
reclassified from “other comprehensive income” to “profit or loss”. If, in a subsequent period,
the fair value of an investment in a debt instrument increases, and the increase can be related
objectively to an event occurring after the impairment loss was recognized, then such
impairment loss is reversed through profit or loss. Impairment loss of an investment in an
equity instrument recognized in profit or loss shall not be reversed through profit or loss.
Impairment loss is recognized and reversed by adjusting the carrying amount of the asset
through the use of an impairment allowance account.
(14) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the
weighted-average cost method. The cost of finished goods and work in process comprises raw
materials, direct labor, other direct costs and related production overheads (allocated based on
normal operating capacity). It excludes borrowing costs. The item by item approach is used in
applying the lower of cost and net realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated cost of completion and applicable
variable selling expenses.
(15) Investments accounted for under the equity method / associates
A.Associates are all entities over which the Group has significant influence but not control. In
general, it is presumed that the investor has significant influence, if an investor holds, directly or
indirectly 20 per cent or more of the voting power of the investee. Investments in associates are
accounted for using the equity method and are initially recognized at cost.
B.The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or
156
loss, and its share of post-acquisition movements in other comprehensive income is recognized
in other comprehensive income. When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, the Group does not recognize further losses, unless it has
incurred legal or constructive obligations or made payments on behalf of the associate.
C.When changes in an associate’s equity are not recognized in profit or loss or other
comprehensive income of the associate and such changes do not affect the Group’s ownership
percentage of the associate, the Group recognizes all the change in equity in “capital surplus” in
proportion to its ownership.
D.Unrealized gains on transactions between the Group and its associates are eliminated to the
extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been adjusted where necessary to ensure consistency with the policies adopted
by the Group.
E.In the case that an associate issues new shares and the Group does not subscribe or acquire new
shares proportionately, which results in a change in the Group’s ownership percentage of the
associate but maintains significant influence on the associate, then “capital surplus” and
“investments accounted for under the equity method” shall be adjusted for the increase or
decrease of its share of equity interest. If the above condition causes a decrease in the Group’s
ownership percentage of the associate, in addition to the above adjustment, the amounts
previously recognized in other comprehensive income in relation to the associate are reclassified
to profit or loss proportionately on the same basis as would be required if the relevant assets or
liabilities were disposed of.
F.Upon loss of significant influence over an associate, the Group remeasures any investment
retained in the former associate at its fair value. Any difference between fair value and carrying
amount is recognized in profit or loss.
G.When the Group disposes its investment in an associate and loses significant influence over this
associate, the amounts previously recognized in other comprehensive income in relation to the
associate are reclassified to profit or loss, on the same basis as would be required if the relevant
assets or liabilities were disposed of.
H.When the Group disposes its investment in an associate and loses significant influence over this
associate, the amounts previously recognized as capital surplus in relation to the associate are
reclassified to profit or loss. If it retains significant influence over this associate, then the
amounts previously recognized as capital surplus in relation to the associate are reclassified to
profit or loss proportionately.
(16) Property, plant and equipment
A.Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the
construction period are capitalized.
B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,
157
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. The carrying amount of
the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss
when incurred.
C.Land is not depreciated. Other property, plant and equipment apply cost model and are
depreciated using the straight-line method to allocate their cost over their estimated useful lives.
If each component of property, plant and equipment is significant, it is depreciated separately.
D.The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful
lives differ from previous estimates or the patterns of consumption of the assets’ future
economic benefits embodied in the assets have changed significantly, any change is accounted
for as a change in estimate under IAS 8, “Accounting Policies, Changes in Accounting
Estimates and Errors”, from the date of the change. The estimated useful lives of property, plant
and equipment are as follows:
Buildings
3~50 years
Machinery and equipment
2~9 years
Others
2~6 years
(17) Investment property
An investment property is stated initially at its cost and measured subsequently using the cost
model. Except for land, investment property is depreciated on a straight-line basis over its
estimated useful life of 25~50 years.
(18) Intangible assets
A.Goodwill arises in a business combination accounted for by applying the acquisition method.
B.Intangible assets, mainly patents, royalties and other intangible assets, are amortized on a
straight-line basis over their estimated useful lives of 2～10 years.
(19) Impairment of non-financial assets
A.The Group assesses at each balance sheet date the recoverable amounts of those assets where
there is an indication that they are impaired. An impairment loss is recognized for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the
circumstances or reasons for recognizing impairment loss for an asset in prior years no longer
exist, the impairment loss shall be reversed to the extent of the loss previously recognized in
profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount
greater than its amortized cost where no impairment loss was recognized.
B.The recoverable amounts of goodwill, intangible assets with an indefinite useful life and
intangible assets that have not yet been available for use shall be evaluated periodically. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall
158
not be reversed in the following years.
C.For impairment testing purpose, goodwill is allocated to cash generating units. This allocation is
based on operating segments. Goodwill is allocated to a cash generating unit or a group of cash
generating units that expects to benefit from business combination that will produce goodwill.
(20) Financial liabilities at fair value through profit or loss
A.Financial liabilities at fair value through profit or loss are financial liabilities held for trading.
Financial liabilities are classified in this category of held for trading if acquired principally for
the purpose of repurchasing in the short-term. Derivatives are also categorized as financial
liabilities held for trading unless they are designated as hedges.
B.Financial liabilities at fair value through profit or loss are initially recognized at fair value.
Related transaction costs are expensed in profit or loss. These financial liabilities are
subsequently remeasured and stated at fair value, and any changes in the fair value of these
financial liabilities are recognized in profit or loss.
(21) Derivative financial instruments and hedging activities
A.Derivatives are initially recognized at fair value on the date a derivative contract is entered into
and are subsequently remeasured at their fair value. Any changes in the fair value are recognized
in profit or loss.
B.The Group designates certain derivatives as either:
(a)Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value
hedge).
(b)Hedges of a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction (cash flow hedge).
C.The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.
D.The full fair value of a hedging derivative is classified as a non-current asset or liability when
the remaining maturity of the hedged item is more than 12 months, and as a current asset or
liability when the remaining maturity of the hedged item is less than 12 months. Trading
derivatives are classified as current assets or liabilities.
E.Fair value hedge
(a)Changes in the fair value of derivatives that are designated and qualified as fair value hedges
are recorded in profit or loss, together with any changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk. The Group only applies fair value hedge
accounting for hedging foreign currency on long-term borrowings. The gain or loss relating
to the effective portion of currency swaps hedging long-term borrowings denominated in
159
foreign currency is recognized in the statement of comprehensive income within “finance
costs”. The gain or loss relating to the ineffective portion is recognized in the statement of
comprehensive income within “other gains and losses”. Changes in the fair value of the
hedge long-term borrowings denominated in foreign currency attributable to interest rate risk
are recognized in the statement of comprehensive income within “finance costs”.
(b)If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying
amount of a hedged item for which the effective interest method is used is amortized to profit
or loss over the period to maturity.
F.Cash flow hedge
(a)The effective portion of changes in the fair value of derivatives that are designated and
qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss
relating to the ineffective portion is recognized immediately in the statement of
comprehensive income within “other gains and losses”.
(b)Amounts accumulated in other comprehensive income are reclassified into profit or loss in
the periods when the hedged item affects profit or loss. The gain or loss relating to the
effective portion of interest rate swaps hedging variable rate borrowings is recognized in the
statement of comprehensive income within “finance costs”.
(c)When a hedging instrument expires, or is sold, cancelled or executed, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other
comprehensive income at that time remains in other comprehensive income. When a forecast
transaction occurs or is no longer expected to occur, the cumulative gain or loss that was
reported in other comprehensive income is transferred to profit or loss in the periods when
the hedged forecast cash flow affects profit or loss.
(22) Employee benefits
A.Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected
to be paid and should be recognized as expenses in that period when the employees render
service.
B.Pensions
(a)Defined contribution plans
For defined contribution plans, the contributions are recognized as pension expenses on an
accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund
or a reduction in the future payments.
(b)Defined benefit plans
i.The liability recognized in the balance sheet in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the balance sheet date less the fair
value of plan assets, together with adjustments for unrecognized past service costs. The
defined benefit obligation is calculated annually by independent actuaries using the
160
projected unit credit method. The rate used to discount is determined by using interest rates
of government bond (at the balance sheet date).
ii.Actuarial gains and losses arising on defined benefit plans are recognized in other
comprehensive income in the period in which they arise.
iii.Past service costs are recognized immediately in profit or loss if vested immediately; if
not, the past service costs are amortized on a straight-line basis over the vesting period.
C.Employees’ bonus and directors’ and supervisors’ remuneration
Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and
liabilities, provided that such recognition is required under legal or constructive obligation and
those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus
and directors’ and supervisors’ remuneration are different from the actual distributed amounts as
resolved by the stockholders at their stockholders’ meeting subsequently, the differences should
be recognized based on the accounting for changes in estimates. The Group calculates the
number of shares of employees’ stock bonus based on the fair value per share at the previous
day of the stockholders’ meeting held in the year following the financial reporting year, and
after taking into account the effects of ex-rights and ex-dividends.
(23) Employee share-based payment
A.For the equity-settled share-based payment arrangements, the employee services received are
measured at the fair value of the equity instruments granted at the grant date, and are recognized
as compensation cost over the vesting period, with a corresponding adjustment to equity. The
fair value of the equity instruments granted shall reflect the impact of market vesting conditions
and non-market vesting conditions. Compensation cost is subject to adjustment based on the
service conditions that are expected to be satisfied and the estimates of the number of equity
instruments that are expected to vest under the non-market vesting conditions at each balance
sheet date. Ultimately, the amount of compensation cost recognized is based on the number of
equity instruments that eventually vest.
B.Restricted stocks to employees:
(a)Restricted stocks issued to employees are measured at the fair value of the equity instruments
granted at the grant date, and are recognized as compensation cost over the vesting period.
(b)For restricted stocks where employees have to pay to acquire those stocks, if employees
resign during the vesting period, they must return the stocks to the Group and the Group must
refund their payments on the stocks. The Group recognizes the payments from the employees
who are expected to resign during the vesting period as liabilities at the grant date, and
recognizes the payments from the employees who are expected to be eventually vested with
the stocks in “capital surplus – others”.
C.The grant date for the shares reserved for employee preemption in cash capital increase is the
date on which the Company informs employees of the grant and both the Company and
employees agree to the number of shares granted and the price for subscription.
161
(24) Income tax
A.The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or
loss, except to the extent that it relates to items recognized in other comprehensive income or
items recognized directly in equity, in which cases the tax is recognized in other comprehensive
income or equity.
B.The current income tax expense is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the Company and its
subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in accordance with applicable tax regulations. It
establishes provisions where appropriate based on the amounts expected to be paid to the tax
authorities. An additional 10% tax is levied on the unappropriated retained earnings and is
recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C.Deferred income tax is recognized, using the balance sheet liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in
the consolidated balance sheet. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realized or the deferred income tax liability
is settled.
D.Deferred income tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized. At each
balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E.A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from
acquisitions of equipment or technology, research and development expenditures and equity
investments to the extent that it is possible that future taxable profit will be available against
which the unused tax credits can be utilized.
(25) Revenue recognition
The Group manufactures and sells TFT-LCD panels. Revenue is measured at the fair value of the
consideration received or receivable taking into account value-added tax, returns, rebates and
discounts for the sale of goods to external customers in the ordinary course of the Group’s
activities.
(26) Business combinations
A.The Group uses the acquisition method to account for business combinations. The Group
chooses to measure the non-controlling interest in the acquiree at the non-controlling interest’s
proportionate share of the acquirer’s identifiable net assets on an acquisition-by-acquisition
basis.
B.If the total of the fair values of the consideration of acquisition and any non-controlling interest
in the acquiree as well as the acquisition-date fair value of any previous equity interest in the
acquiree is higher than the fair value of the Group’s share of the identifiable net assets acquired,
162
the difference is recorded as goodwill; if less than the fair value of the Group’s share of the
identifiable net assets acquired, the difference is recognized directly in profit or loss.
(27) Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments.
5. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION
UNCERTAINTY
The preparation of these consolidated financial statements requires management to make critical
judgments in applying the Group’s accounting policies and make critical assumptions and estimates
concerning future events. Assumptions and estimates may differ from the actual results and are
continually evaluated and adjusted based on historical experience and other factors. The information is
addressed below:
(28) Critical judgments in applying the Group’s accounting policies
Financial assets－impairment of equity investments
The Group follows the guidance of IAS 39 to determine whether a financial asset-equity investment
is impaired. This determination requires significant judgment. In making this judgment, the Group
evaluates, among other factors, the duration and extent to which the fair value of an equity
investment is less than its cost and the financial health of and short-term business outlook for the
investee, including factors such as industry and sector performance, changes in technology and
operational and financing cash flow.
If the decline of the fair value of an individual equity investment below cost was considered
significant or prolonged, the accumulated fair value adjustments recognized in other comprehensive
income on the impaired “available-for-sale financial assets” is transferred to profit or loss.
(29) Critical accounting estimates and assumptions
The Group makes estimates and assumptions based on the expectation of future events that are
believed to be reasonable under the circumstances at the end of the reporting period. The resulting
accounting estimates might be different from the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are addressed below:
A.Impairment assessment of goodwill
The impairment assessment of goodwill relies on the Group’s subjective judgment, including
identifying cash-generating units, allocating assets and liabilities as well as goodwill to related
cash-generating units, and determining the recoverable amounts of related cash-generating units.
Please refer to Note 6(10) for the information on goodwill impairment.
B.Reliability of deferred income tax assets
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the deductible temporary differences can be utilized.
163
Assessment of the reliability of deferred income tax assets involves critical accounting judgments
and estimates of the management, including the assumptions of expected future sales, revenue
growth rate, profit rate, tax holiday, available tax credits, and tax planning, etc. Any change in
global economic environment, industrial environment, and laws and regulations might cause
material adjustments to deferred income tax assets.
C.Evaluation of inventories
As inventories are stated at the lower of cost and net realizable value, the Group must determine
the net realizable value of inventories on balance sheet date using judgments and estimates. Due
to the rapid technology innovation, the Group evaluates the amounts of normal inventory
consumption, obsolete inventories or inventories without market selling value on balance sheet
date, and writes down the cost of inventories to the net realizable value.
D.Financial assets - fair value measurement of unlisted stocks without active market
The fair value of unlisted stocks held by the Group that are not traded in an active market is
determined considering those companies’ recent fund raising activities and technical development
status, fair value assessment of other companies of the same type, market conditions and other
economic indicators existing on balance sheet date. Any changes in these judgments and
estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note
12(3) for the financial instruments fair value information.
6. DETAILS OF SIGNIFICANT ACCOUNTS
(30) Cash and cash equivalents
December 31, 2014
Cash on hand and revolving funds
Checking accounts and demand deposits
Time deposits
December 31, 2013
$
2,572
45,954,667
20,806,255
66,763,494
4,226,247
$
2,809
32,827,254
11,028,129
43,858,192
279,626
$
70,989,741
$
44,137,818
Cash equivalents - Repurchase Bonds
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. The
Group’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash
and cash equivalents.
B.The above time deposits and bonds with repurchase agreement expire in 3 months and risks of
changes in their values are remote.
164
(31) Financial assets and liabilities at fair value through profit or loss
Assets
December 31, 2014
Current items
Financial assets held for trading
Forward foreign exchange contracts
Non-current items:
Stock-Advanced Optoelectronic Technology Inc.
Valuation adjustment
$
52,453
$
227,703
$
77,019
528,136
605,155
$
78,337
634,266
712,603
$
Liabilities
December 31, 2013
$
December 31, 2014
Current items
Financial liabilities held for trading
$
December 31, 2013
605,016
$
689,097
A.The Group recognized net loss of $976,857 and $1,060,390 on financial assets held for trading
for the years ended December 31, 2014 and 2013, respectively.
B.The non-hedging derivative financial assets and liabilities transaction information are as follows:
December 31, 2014
December 31, 2013
Contract Amount
Contract Amount
Derivative financial
(Notional Principal)
assets and liabilities
(in thousands)
Contract Period
(in thousands)
Contract Period
Current items
425,000
2014/10~2015/3 USD (sell)
$ 467,000
2013/10~2014/3
48,580,180
2014/10~2015/3 JPY (buy)
47,065,250
2013/10~2014/3
EUR (sell)
38,000
2014/10~2015/2 EUR (sell)
188,000
2013/10~2014/3
exchange contracts USD (buy)
47,574
2014/10~2015/2 USD (buy)
256,665
2013/10~2014/3
TWD (sell) 26,762,745
2013/12~2014/3
904,000
2013/12~2014/3
Forward foreign
USD (sell)
exchange contracts JPY (buy)
Forward foreign
$
USD (buy)
The Group entered into forward foreign exchange contracts to hedge exchange rate risk of import
and export proceeds and foreign currency. However, these forward foreign exchange contracts are
not accounted for under hedge accounting.
165
Items
December 31, 2014
Current items
Bond investments
Non-current items
Listed stocks and bond investments
Emerging and unlisted stocks
December 31, 2013
$
220,000
$
-
$
3,582,677
1,554,440
5,137,117
$
1,896,076
2,056,454
3,952,530
$
$
A.The Group recognized gain in other comprehensive income for the fair value change for the years
ended December 31, 2014 and 2013 in the amount of $536,429 and $1,875,599, respectively.
B.As approved by the Board of Directors in June 2013, the Group sold the shares and depositary
receipts of Himax Technologies, Inc. and recognized gain on disposal of investments of
$1,880,884 (shown as “other gains and losses”).
C.The counterparties of the Group’s debt instrument investments have good credit quality, all with
credit rating of twA+ above. The maximum exposure to credit risk at balance sheet date is the
carrying amount of available-for-sale financial asstes - debt instruments.
(33) Hedging derivative financial liabilities
Items
December 31, 2014
Current item
Interest rate swap - cash flow hedges
Non-current item
December 31, 2013
$
1,351
$
-
$
-
$
21,918
Cash flow hedges
Designated as Hedging Instruments
Derivative
Period of Gain
Fair Value
Instruments
Hedged Items
Designated
as Hedges
Interest rate swap
December 31,
2014
($
December 31,
2013
1,351) ($
21,918)
Period of
(Loss) Expected
Anticipated
Cash Flow
to be Recognised
in Profit or Loss
2008~2015
2008~2015
(a)The Company was exposed to significant risk of future cash flow changes on principal
payments associated with the Company’s floating interest rate bearing borrowings, both
current and long-term portion. Therefore, the Company entered into interest rate swap
contracts for exchanging floating interest rate for fixed interest rate (TWD90/180CP
(Page51328) to hedge such exposures.
(b)Information about gain or loss arising from cash flow hedges recognized in profit or loss and
other comprehensive income:
166
Years ended December 31,
2014
2013
Items
Amount of gain or loss adjusted in other
comprehensive income
Amount of gain or loss transferred from other
comprehensive income to profit or loss
$
1,224
$
3,210
227,234 (
82,687)
(c)The gain/(loss) relating to the ineffective portion of cash flow hedges recognized in profit or
loss amounted to $289 for the year ended December 31, 2013.
(34) Accounts and notes receivable
Notes receivable
Accounts receivable
Less: allowance for sales returns and discounts
allowance for bad debts
December 31, 2014
$
21,447
71,922,008
71,943,455
(
827,583)
(
139,867)
$
70,976,005
December 31, 2013
$
24,516
68,063,587
68,088,103
(
1,590,591)
(
139,221)
$
66,358,291
A.The Group’s accounts receivable that were neither past due nor impaired meet the credit ranking
rule based on the counterparties’ industrial characteristics scale of business and profitability.
B.The aging analysis of accounts receivable and notes receivable that were past due but not
impaired is as follows:
December 31, 2014
$
611,670
64,488
73,023
$
749,181
Up to 60 days
61 to 180 days
Over 180 days
December 31, 2013
$
3,259,953
594,665
157,567
$
4,012,185
C.Movement analysis of accounts receivable and notes receivable that were impaired is as follows:
(a)As of December 31, 2014 and 2013, the Group’s accounts receivable that were impaired were
$139,867 and $139,221, respectively.
(b)Movement on allowance for bad debts for impairment loss based on individual provision is as
follows:
2014
$
At January 1
Allowance for bad debts - provision
Allowance for bad debts - reclassified
Allowance for bad debts - write - offs
Net exchange difference
At December 31
(
$
167
139,221 $
820
211)
37 (
139,867 $
2013
117,322
453
21,447
1)
139,221
D.The maximum exposure to credit risk was the carrying amount of each class of accounts
receivable.
(35) Inventories
December 31, 2014
$
3,851,583
17,996,857
11,939,402
$
33,787,842
Raw materials and supplies
Work in process
Finished goods
December 31, 2013
$
3,970,268
29,182,602
17,371,286
$
50,524,156
Expenses and losses incurred on inventories for the years ended December 31, 2014 and 2013 are as
follows:
$
Cost of inventories sold
Reversal of allowance for scrap, obsolescence
and price decline
Disposal loss and others
(
$
2014
2013
378,358,466 $
384,541,919
473,142) (
391,573
378,276,897 $
1,397,747)
1,827,213
384,971,385
The Group had disposed its expired and slow-moving inventories. Thus, the risk of reduction in the
inventory’s market price had been decreased and the net realizable value of inventories had been
recovered.
(36) Investments accounted for under the equity method
Ampower Holding Ltd.
GIO Optoelectronics Corporation
TOA Optronics Corporation
Chi Mei Materials Technology
Contrel Technology Co., Ltd.
Others
December 31, 2014
December 31, 2013
$
$
$
1,477,199
450,726
364,907
71,393
2,364,225
A.The financial information of the Group’s associates is summarized below:
Assets
Liabilities
Revenue
December 31, 2014
December 31, 2013
$
5,190,457
24,441,179
$
1,417,506
7,330,642
$
1,526,449
476,176
410,671
1,883,267
473,259
149,312
4,919,134
$
Profit/(Loss)
2,211,238 ($
21,222,917
581,093)
2,223,356
B.The fair value of the Group’s associates which have quoted market price is as follows:
168
Stock price per share (in dollars)
December 31, 2013
$
36.45
16.95
C.During 2014, the Company sold its interests in Chi Mei Materials Technology and Contrel
Technology Co., Ltd. Since the Company lost control, the investment was reclassified as
“available-for-sale financial assets - non-current”.
D.The Group recognized impairment loss on associates for the year ended December 31, 2013 in
the amount of $245,253.
2014
At January 1
Cost:
Land
$ 3,852,792
Buildings
184,139,364
Machinery and equipment 433,442,047
29,178,672
Others
650,612,875
Accumulated depreciation
and impairment:
Buildings
( 68,425,305)
Machinery and equipment ( 291,198,835)
( 20,748,143)
Others
( 380,372,283)
Unfinished construction
and equipment under
acceptance
3,265,167
$ 273,505,759
Additions
$
8,652
393,335
210,165
612,152
Disposals
$
- $
(
341,088)
1,545,170
( 19,161,213)
17,904,638
( 4,149,307)
4,789,534
( 23,651,608)
24,239,342
( 15,250,980)
( 40,505,195)
( 3,617,759)
( 59,373,934)
19,220,115 (
169
Transfer, net
exchange
differences
and others
327,125
18,063,267
4,042,819
22,433,211
At December 31
$
3,852,792
185,352,098
432,578,807
30,029,064
651,812,761
(
(
(
(
154,535)
11,624,229)
1,800,945)
13,579,709)
( 83,503,695)
( 325,264,992)
( 22,124,028)
( 430,892,715)
814,963) (
8,980,522)
12,689,797
$ 233,609,843
2013
At January 1
Cost:
Land
$ 3,852,792
Buildings
179,137,767
26,297,094
Others
614,685,966
and impairment:
Buildings
( 51,417,547)
( 18,162,188)
Others
( 307,882,628)
and equipment under
acceptance
25,722,521
$ 332,525,859
Additions
$
(
(
(
(
Transfer, net
exchange
differences
and others
Disposals
96,030
808,409
305,186
1,209,625
At December 31
$
- $
(
326,605)
5,232,172
(
9,815,779)
37,051,104
(
3,255,595)
5,831,987
( 13,397,979)
48,115,263
16,270,281)
55,655,014)
3,611,175)
75,536,470)
300,169
6,605,916
2,832,151
9,738,236
16,893,203
$
3,852,792
184,139,364
433,442,047
29,178,672
650,612,875
(
(
(
(
1,037,646)
3,846,844)
1,806,931)
6,691,421)
( 68,425,305)
( 291,198,835)
( 20,748,143)
( 380,372,283)
- (
39,350,557)
3,265,167
$ 273,505,759
a.The Group evaluated the recoverable amount for assets with impairment indicators; the
impairment loss for the years ended December 31, 2014 and 2013 was $351,066 and $676,575,
respectively, shown under “other gains and losses”.
b.Information about the property, plant and equipment that were pledged to others as collateral is
provided in Note 8.
2013
2014
At
At
At
Additions
December 31
January 1
$
$ 188,247
$ 188,247
January 1
At
Additions
December 31
$
$ 188,247
Cost:
Land
$ 188,247
568,440
Buildings
$ 756,687
$
-
568,440
568,440
-
$ 756,687
$ 756,687
$
-
568,440
-
$ 756,687
and impairment:
Buildings
(
49,837) (
13,173) (
$ 706,850
63,010) (
$ 693,677
36,664) (
$ 720,023
13,173) (
49,837)
$ 706,850
The fair value of the investment property held by the Group as at December 31, 2014 and 2013 was
$1,110,523 and $721,774, respectively. The amounts mentioned above represent valuation results of
comparative method based on market trading information.
A.Intangible assets are goodwill, payments for TFT-LCD related technology, and royalty.
170
2014
At January 1
Cost:
Patents and royalty
Goodwill
Others
Accumulated amortisation
and impairment:
Patents and royalty
Others
$
(
(
(
8,807,308
17,096,628
3,497,213
29,401,149
Additions
$
Disposals
Transfer, net
exchange
differences
and others
At December 31
- ($ 673,622) $
3,349
18,140 (
8,911)
486,719
18,140 ( 682,533)
490,068
5,215,970) ( 1,193,337)
2,970,185) ( 319,112)
8,186,155) ( 1,512,449)
$ 21,214,994
673,622
7,012
680,634
$
- (
10,283 (
10,283 (
8,137,035
17,096,628
3,993,161
29,226,824
5,735,685)
3,272,002)
9,007,687)
$ 20,219,137
2013
At January 1
Cost:
Patents and royalty
Goodwill
Others
and impairment:
Patents and royalty
Others
$
(
(
(
8,805,803
17,096,628
3,437,199
29,339,630
Additions
$
Disposals
Transfer, net
exchange
differences
and others
1,700 ($
195) $
156,081 ( 144,553)
157,781 ( 144,748)
3,709,759) ( 1,507,211)
2,720,812) ( 333,127)
6,430,571) ( 1,840,338)
$ 22,909,059
195
142,720 (
142,915 (
At December 31
48,486
48,486
$
8,807,308
17,096,628
3,497,213
29,401,149
805 (
58,966) (
58,161) (
5,215,970)
2,970,185)
8,186,155)
$ 21,214,994
B.Details of amortisation on intangible assets are as follows:
2014
2013
$
Operating costs
Operating expenses
$
960,230
552,219
1,512,449
$
$
1,068,073
772,265
1,840,338
C.The Company performed impairment analysis for recoverable amount of the goodwill at each
reporting date and used the value in use as the basis for calculation of the recoverable amount.
The value in use was calculated based on the estimated present value of future cash flows for
five years, which was discounted at the discount rate of 4.89% and 4.22% for the years ended
December 31, 2014 and 2013, respectively, to reflect the specific risks of the related cash
generating units. The future cash flows were estimated based on the future revenue, gross profit,
and other operating costs each year. Based on the evaluation above, the Company did not
recognize impairment loss on goodwill for the years ended December 31, 2014 and 2013.
171
(40) Short-term borrowings
Type of borrowings
Bank loans
Credit loans
Range of interest rates
December 31, 2014 December 31, 2013
$
22,526,999
1.2046%~3.9235%
$
31,179,767
1.7461%～3.8919%
Collateral
None
(41) Long-term borrowings
Type of loans
Syndicated bank loans
Guaranteed commercial papers
Credit loans
Period
2005/03~2016/11
2012/11~2015/07
2009/09~2014/06
Less:
Administrative expenses
charged by syndicated
banks
Current portion
$
108,368,190
129,148
108,497,338
$
152,654,461
258,354
16,372,450
169,285,265
(
41,252) (
187,557)
(
66,162,663) (
169,097,708)
$
42,293,423 $
1.2474%~2.4737%
0.995%~2.795%
A.Please refer to Note 8 for the information on assets pledged as collateral for long-term
borrowings.
B.The syndicated loan agreements specified that the Company shall meet covenants on current
ratio, liability ratio, interest coverage, and tangible net equity, which were based on the
Company’s annual consolidated financial statements audited by independent auditors. The
Company’s financial ratios on the consolidated financial statements for the year ended
December 31, 2014 and 2013 are in accordance with the covenants on the syndicated loan
agreement.
C.In December 2011, the Company applied for the assistance of Ministry of Economic Affairs to
negotiate the debt with the syndicated banks, in accordance with the “Procedures for the
Assistance of Ministry of Economic Affairs in the Negotiation of Enterprise and Financial
Institution relating to the Debt Issue”. On April 5, 2012, the Company signed an “Agreed-upon
Repayment Agreement” with all financial institution creditors based on the framework of the
resolutions during the creditors and debtors negotiation meeting. The major terms of the
agreement were as follows:
(a)Medium and long-term syndicated loans
The medium and long-term syndicated loans due between 2012 to 2014 will be extended for
2-3 years. Principal is repayable every year based on a certain percentage; interest is charged
at the original interest rate or at the original interest rate plus premium rate.
(b)Short and medium-term non-syndicated loans
172
The outstanding balances or the original amounts of each loan are renewed based on the
original terms and all extended to December 31, 2013. Before maturity, the Company may
apply for the extension of such loans for another year for each application, with a maximum
of two applications with each bank. Interest is charged at the original interest rate plus
premium rate and extension fee is charged at a certain percentage.
(c)Credit lines of derivative financial instruments
At least two-thirds of the original credit lines of derivative financial instruments are renewed
based on the original terms and all extended to December 31, 2013. Before maturity, the
Company may apply for the extension of such credit lines for another one year for each
application, with a maximum of two applications with each bank. Extension fee is charged at
a certain percentage.
(d)Other matters
a) All financial institution creditors agreed to waive the 2011 and 2012 covenants, the interest
penalty, and default penalty arising from the violation of covenants.
b) All financial institution creditors agreed to waive the agreement that the Company shall
early repay whole or part of the loans as prescribed by the original agreements before the
extension agreements were approved by all financial institution creditors.
(e)The Company’s significant commitments
The Company is committed to increase capital in certain amounts of cash within 3 years
starting from 2012, to focus on its main business activities, and not to make investments out
of its main business lines, except for equipment improvements or equipment additions for its
main business. Further, the Company shall not apply for bankruptcy or reorganisation during
the period of negotiation for the extension of the due date on the Company’s debt.
D.Because the Company failed to meet the requirements specified in the “syndicated repayment
agreement” signed for the cash capital increase for the year ended December 31, 2013, the
syndicated banks may take measures, in accordance with the agreement, including, but not
limited to the outstanding principal, interest, expenses and other payables be due immediately.
Therefore, the Company reclassified syndicated loans and other long-term borrowings as of
December 31, 2013 amounting to $169,097,708 (including administrative expenses charged by
syndicated banks) to “long-term liabilities - current portion”. However, the deadline was
extended to the end of 2014 through the concession of financial institution creditors on January
27, 2014.
E.Though the Company failed to meet the requirement specified in the “syndicated repayment
deadline was extended to the end of 2015 through the concession of financial institution
creditors.
F.In order to repay the unpaid balance of the medium and long-term syndicated loans from the
above “Agreed-upon Repayment Agreement”, on February 10, 2015, the Board of Directors has
173
approved the proposal of syndicated credit line of NT$68.5 billion with financial institutions.
(42) Pensions
A.Defined benefit pension plan
(a)The Company has established a defined benefit pension plan in accordance with the Labor
Standards Law, covering all regular employees’ service years prior to the enforecment of the
Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to
continue to be subject to the pension mechanism under the Law. Under the defined benefit
pension plan, employees are entitled to two base points for every year of service for the first
15 years and one base point for each additional year thereafter, up to a maximum of 45 base
points. The pension payment to employees was computed based on years of service and
average salaries or wages of the last six months prior to approved retirement. The Company
contributed monthly an amount equal to 2% of the employees’ monthly salaries and wages to
the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the
independent retirement fund committee.
(b)The amounts recognised in the balance sheet were determined as follows:
December 31, 2014
Present value of funded obligations
Fair value of plan assets
Net liability in the balance sheet (shown as
“Other non-current liabilities”)
$
(
$
December 31, 2013
1,605,920 $
1,488,938) (
116,982
$
1,504,354
1,454,627)
49,727
(c)Changes in present value of funded obligations were as follows:
2014
At January 1
Current service cost
Interest expense
Actuarial gain and loss
At December 31
$
$
1,504,354
10,470
30,087
61,009
1,605,920
2013
$
$
1,464,983
9,148
21,975
8,248
1,504,354
(d)Changes in fair value of plan assets were as follows:
2014
At January 1
Expected return on plan assets
Employer contributions
At December 31
$
$
174
1,454,627 $
29,092
5,219 (
1,488,938 $
2013
1,398,638
20,980
3,622)
38,631
1,454,627
(e)Expenses recognised in statements of comprehensive income were as follows:
2014
2013
$
Interest cost
Current pension costs
(
$
10,470 $
30,087
29,092) (
11,465 $
9,148
21,975
20,980)
10,143
Details of cost and expenses recognised in statements of comprehensive income were as
follows:
2014
2013
$
Cost of sales
Selling expenses
$
7,991
184
848
2,442
11,465
$
$
6,593
329
1,058
2,163
10,143
(f)Amounts recognised under other comprehensive income were as follows:
$
$
Recognition for current period
Accumulated amount
2014
2013
55,790 $
11,870
12,453
68,243 $
(g)The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined
benefit pension plan in accordance with the Fund’s annual investment and utilisation plan
and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor
Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in
domestic or foreign financial institutions, investment in domestic or foreign listed,
over-the-counter, or private placement equity securities, investment in domestic or foreign
real estate securitization products, etc.). With regard to the utilisation of the Fund, its
minimum earnings in the annual distributions on the final financial statements shall be no less
than the earnings attainable from the amounts accrued from two-year time deposits with the
interest rates offered by local banks. The composition of fair value of plan assets as of
December 31, 2014 and 2013 is given in the Annual Labor Retirement Fund Utilisation
Report published by the government. Expected return on plan assets was a projection of
overall return for the obligations period, which was estimated based on historical returns and
by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund
Supervisory Committee and taking into account the effect that the Fund’s minimum earnings
in the annual distributions on the final financial statements shall be no less than the earnings
175
attainable from the amounts accrued from two-year time deposits with the interest rates
offered by local banks.
For the years ended December 31, 2014 and 2013, the actual return on plan assets was
$34,311 and $17,358, respectively.
(h)The principal actuarial assumptions used were as follows:
2014
2013
2.25%
2.00%
3.00%
3.00%
2.25%
2.00%
Discount rate
Future salary increases
Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience
Morality Table.
(i)Historical information of experience adjustments was as follows:
2014
2013
Present value of defined benefit obligation
Deficit in the plan
Experience adjustments on plan liabilities
Experience adjustments on plan assets
$
(
$
$
$
1,605,920
1,488,938)
116,982
60,201
5,219
$
(
$
$
($
1,504,354
1,454,627)
49,727
320,046
3,622)
(j)The Group suspended its contributions to the pension reserve as agreed by the Science Park
Administration in June 2013.
B.Defined contribution pension plan
(a)Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined
contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”),
covering all regular employees with R.O.C. nationality. Under the New Plan, the Company
and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’
monthly salaries and wages to the employees’ individual pension accounts at the Bureau of
Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of
employment.
(b)The subsidiaries in Mainland China have defined contribution plans. Monthly contributions
to an independent fund administered by the government in accordance with the pension
regulations in the People’s Republic of China (PRC) are based on certain percentages of
employees’ monthly salaries and wages. Other than the monthly contributions, the Group has
no further obligations.
(c)The pension costs under the defined contribution pension plans of the Group for the years
ended December 31, 2014 and 2013 were $1,999,252 and $1,758,981, respectively.
176
(43) Share-based payment
A.As of December 31, 2014, the Company’s share-based payment transactions were set forth
below (excluding employee stock options assumed because of the merger stated in Note B):
Type of arrangement
Employee stock options
Reservation for new share
subscription by employees
Restricted stocks to employeesshares subscribed with
consideration
-shares subscribed with consideration
-shares without consideration
Reservation for new share subscription
by employees
Grant date
2007.12.20
2010.05.13
2011.05.19
2013.01.17
Quantity granted Contract period
(in thousand units)
(in years)
Vesting conditions
Note (b),(c)
25,000
6
Note (a)
20,000
5
Note
(a)
50,000
5
36,122
- Vested immediately
2013.01.30
2013.01.30
2013.03.29
2013.03.29
2013.12.12
2013.12.12
2014.07.09
31,151
31,151
844
844
4,628
4,628
85,000
Note (d),(e)
3
Note
(d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
(a)The employees may exercise the stock options by stage based on 30%, 30% and 40% of total
options granted on completion of the specified year(s) of service (one to four years) from the
grant date.
(b)The employees may exercise the stock options by stage based on 40%, 30% and 30% of total
options granted on completion of the specified year(s) of service (three to five years) from
the grant date.
(c)The employee stock options had already expired.
(d)The employees may exercise the stock options by stage based on 20%, 40% and 40% of total
options granted on completion of the specified year(s) of service (one to three years) from the
grant date.
(e)The restricted stocks issued by the Company cannot be transferred. Voting right and dividend
right are restricted on these stocks before vested.
177
(f)The fair value of stock options granted from 2010 to first quarter of 2014 is measured using
the Black-Scholes option-pricing model. Relevant information is as follows:
Type of
arrangement
Reservation for new
share subscription
by employees
Restricted stocks to
employees
- shares subscribed
with consideration
- shares issued with
no consideration
- shares subscribed
with consideration
no consideration
- shares subscribed
with consideration
no consideration
Reservation for new
share subscription
by employees
Employee stock
options
Employee stock
options
Exercise Expected Expected Expected Free Fair value
Price
price
volatility duration dividend interest per unit
Grant date (in dollars) (in dollars) (%)
(month) yield (%) rate (%) (in dollars)
2014.07.09
14.90
12.50
36.01
0.84
0.42
2.42
2013.12.12
10.65
-
-
-
-
-
10.65
2013.12.12
10.65
5.00
-
-
-
-
5.65
2013.03.29
18.40
-
-
-
-
-
18.40
2013.03.29
18.40
5.00
-
-
-
-
13.40
2013.01.30
15.35
-
-
-
-
-
15.35
2013.01.30
15.35
5.00
-
-
-
-
10.35
2013.01.17
14.15
12.98
48.20
0.36
-
0.65
1.17
2011.05.19
26.70
26.70
35.67
48.60
-
1.00
2010.05.13
39.85
39.85
51.57
48.60
-
0.80
7.31
~8.32
15.12
~16.98
B.Employee stock options acquired because of merger
(a)Details:
Type of arrangement
Quantity granted
(in thousand units)
Grant date
2009.09.30
2007.07.02
2007.12.27
24,819
21
2
(Note i)
(Note i)
Contract period Vesting conditions
Note ii, iv
5 years
years
Note
iii, iv
6
Note iii, iv
6 years
i. Each unit of stock options can subscribe for 1,000 shares of common stock.
ii. The employees may exercise the stock options by stage based on 50% and 50% of total
options granted on completion of the specified years of service (two to three years) from
the grant date.
iii. The employees may exercise the stock options by stage based on 25%, 25%, 25% and
25% of total options granted on completion of the specified years of service (two to five
years) from the grant date.
178
iv. The employee stock options had already expired.
v. The units of employee stock options above were adjusted by share conversion rate.
(b)The fair value of employee stock options was estimated using the Hull & White (2002)
Enhanced FASB 123 of the aforementioned binomial model. The information was as follows:
Type of
arrangement
Employee stock
options
Employee stock
options
Employee stock
options
Exercise Expected Expected Expected Free
Fair value
Price
price
volatility duration dividend interest
per unit
2009.09.30
51.60
39.20
45.10
36.78
0.61
0.82 3.57~4.14
2007.07.02
51.60
67.53
45.10
24.78
0.61
0.82
4.23~4.41
2007.12.27
51.60
80.63
45.10
48.54
0.61
0.82
3.65~3.82
C.The details of the employee stock option plan for the years ended December 31, 2014 and 2013
were as follows:
Year ended December 31, 2014
Stock Options
Outstanding options at the
beginning of the year
Options exercised
Options expired
end of the year
Weighted
Weighted
average
average
Range of
remaining
Quantity
exercise
exercise
vesting
(in thousand
price
price
period
units)
(in dollars) (in dollars)
94,819
$ 28.71
( 24,819)
32.10
70,000
25.63
$
$ 32.59
22.85
Exercisable options at the
end of the year
50,000
26.75
179
Weighted
average
stock price of
stock options
at exercise
date (in dollars)
0.38 years
1.39 yeas
12.68
Stock Options
Options exercised
Options expired
end of the year
Weighted
average
Range of
Quantity
exercise
exercise
(in thousand
price
price
units)
119,842
$ 41.79
( 25,023)
57.05
94,819
28.71
$
$ 34.46
1.38 years
23.82
2.39 years
0.75 years
33.93
end of the year
Weighted
Weighted
average
average
stock price of
remaining stock options
vesting
at exercise
period
date (in dollars)
14.98
31.13
51,819
D.For the years ended December 31, 2014 and 2013, the expenses incurred from share-based
payment arrangements were $578,227 and $556,874, respectively.
(44) Provisions-current
At January 1, 2014
Addition
Used during the year
At December 31, 2014
$
(
$
Warranty
Litigation and others
140,809 $
1,808,220 $
2,723,491
2,451,275
2,117,279) (
1,873,027) (
747,021
$
2,386,468
$
Total
1,949,029
5,174,766
3,990,306)
3,133,489
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 provision 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).
(45) Share capital
A.As of December 31, 2014, the Company’s authorized and outstanding capital were
$120,000,000 (including $500,000 reserved for employee stock options) and $99,545,364,
respectively, with a par value of $10 (in dollars) per share. All proceeds from shares issued have
been collected. Movements in the number of the Company’s ordinary shares outstanding are as
follows:
180
2014
2013
Number of ordinary
Number of ordinary
shares (in thousands)
At January 1
9,109,429
7,912,971
Employee stock options exercised
850,000
1,125,000
Issuance of restricted shares to employees
72,526
4,893) (
1,068)
Cancellation of restricted stock to employees (
9,954,536
9,109,429
At December 31
B.The Company’s Board of Directors resolved to increase capital through cash on December 17,
2013 by issuing common shares of no more than 2 billion shares, in exchange for cash
domestically or by using cash from capital increase to issue common shares in exchange for the
issuance of foreign depository receipts. On June 19, 2014, the shareholders approved the capital
increase. On June 20, 2014, the Board of Directors approved the domestic capital increase of
10,625,000 shares. The issue price was determined to be $12.5 in July 2014, and the capital
increase was effective on August 12, 2014.
C. The Board of Directors of the Company resolved to increase capital for cash by issuing global
depositary receipts (the “GDR”). The amount of $9,360,000 is tentatively scheduled for release,
(approximately equivalent to US$312,625 thousand). As the Company has received bank’s
approval for extending capital increase, based on shareholders’ interest, the issuance of the GDR
was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on
January 30, 2015.
D.As authorized by the shareholders during their meeting in June 2012, the Board of Directors of
the Company resolved to increase capital for cash by issuing the GDR on July 18, 2012, and had
been completed in January 2013. The Company issued 1,125,000 thousand shares of common
stock for cash, including 112,500 thousand shares regarded as employee stock options, and
101,250,000 units of GDRs which represent 1,012,500 thousand shares of common stock, with a
unit of GDR representing 10 shares of common stock at the Luxembourg Stock Exchange. Per
unit was issued at a premium of US$4.481, which was equivalent to $12.98 per share and raised
a total of $14,519,051, net of issuance cost. As of December 31, 2014, there were 69 thousand
units outstanding, representing 692 thousand shares of common stocks.
E.As authorized by the shareholders at the shareholders’ meeting in June, 2012, the Board of
Directors of the Company adopted a resolution on January 30, 2013, March 29, 2013 and
November 12, 2013 to issue restricted shares to employees, consisting of 36,263 thousand
shares without consideration and 36,263 thousand shares with consideration (the price for
subscription is $5 per share). The effective dates of the issuance were on January 30, 2013,
March 29, 2013 and December 12, 2013. Until the vesting conditions are met by employees,
those shares are restricted to transfer voting rights, dividend and other rights. As of December
31, 2014, the Company bought back 4,893 shares of unvested restricted stocks to employees,
181
and decreased capital in accordance with related regulation.
F.The stockholders at the stockholders’ meeting on January 6, 2010 approved the merger of the
Company with another company by issuing new shares, with the Company as the surviving
company. The Company issued 4,046,382 thousand new shares according to the merger contract.
The new shares included the common stock issued by the acquired companies in May and
December 2006 through private placement. The issuance of 570,929 thousand shares was
determined based on the exchange ratio in the merger contract. The rights and obligations of the
private common shares were the same as other issued common shares, except for the transfer
restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public
listing will be allowed within three years since the day of issuance and only if the Company
completes the application to publicly issue the shares. The aforementioned private common
shares have not been publicly issued as of December 31, 2014.
G.In accordance with the Board of Directors’ resolution in August 2007, the Company decided to
issue 300 million shares of common stock for cash, including 149,967,500 units of GDRs which
represent 299,935 thousand shares of common stock with a unit of GDR representing 2 shares
of common stock. Per unit was issued at premium of US$9.02 (in dollars). In accordance with
the Board of Directors’ resolution in March 2013, the Company terminated the above mentioned
GDR, and the effective date of termination was in May 2013. The depository trust company
completed the cancellation and distributed proceeds in November 2013.
(46) Capital surplus
Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par
value on issuance of common stocks and donations can be used to cover accumulated deficit or to
issue new stocks or cash to shareholders in proportion to their share ownership, provided that the
Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires
that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the
paid-in capital each year. Accumulated deficit shall first be covered by retained earnings before the
capital reserve can be used to cover the accumulated deficit.
182
2014
Share of profit
(loss) of
associates
accounted for
under equity Employee
Share premium
method
stock option
Restricted
stock to
employees
Total
$ 94,106,611
$ 56,303
$ 1,697,935
$ 197,892
$ 96,058,741
2,125,000
-
-
-
2,125,000
Cash paid from Capital surplus
(
accumulated deficit
employees
Vested restricted stock to employees
employees
Compensation related to share-based
payment
1,266,944)
-
-
- (
1,266,944)
2,328,981
-
-
-
2,328,981
65,665
-
- (
48,924
65,665)
48,924
-
-
-
-
47,174
47,174
205,700
-
83,823
-
289,523
407,899
- (
407,899)
-
-
At January 1
Expiration of employee stock options
Changes in net equity of long-term
equity investments
At December 31
- (
$ 97,972,912
47,030)
$
9,273
$ 1,373,859
- (
$ 228,325
47,030)
$ 99,584,369
2013
Share of profit
(loss) of
associates
accounted for
Share premium
method
stock option
Restricted
stock to
employees
Total
At January 1
$ 118,065,992 $ 24,241 $1,587,747 $
- $119,677,980
( 27,308,220)
- ( 27,308,220)
accumulated deficit
Global depositary receipt issued for
3,269,051
3,269,051
cash
187,212
187,212
employees
10,680
10,680
employees
42,263
147,713
189,976
payment
37,525
- (
37,525)
32,062
32,062
equity investments
$ 94,106,611 $ 56,303 $1,697,935 $ 197,892 $ 96,058,741
At December 31
(47) Retained earnings
A.In accordance with the Company’s Articles of Incorporation, net income must be distributed in
the following order:
183
(a)To pay all tax accruals and payables arising from the current year and to cover prior years’
losses, if any;
(b)As legal reserve equal to 10% of net income after tax and distribution pursuant to clause (a);
(c)As any special reserve;
(d)To pay dividends on preferred shares;
(e)To pay bonuses to employees not less than 5% of net income after tax and distribution
pursuant to clauses (a) to (d); and
(f)The remaining amount, if any, shall be distributed pursuant to the proposal of the Board of
Directors in accordance with the Company’s dividend policy and the resolution approved at
the stockholders’ meeting, of which 0.1% should be paid as remuneration to directors and
supervisors and the remaining amount as dividends to stockholders.
Dividends distributed in respect of any fiscal year in the form of shares shall not exceed
two-thirds of total dividends to stockholders.
B.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in
proportion to their share ownership, the legal reserve shall not be used for any other purpose.
The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their
share ownership is permitted, provided that the balance of the reserve exceeds 25% of the
Company’s paid-in capital.
C.The Board of Directors proposed to cover accumulated deficit for the year ended December 31,
2012 and the proposal was approved by the stockholders in June 2013. It was resolved not to
distribute dividends or accrue employees’ bonus and directors’ and supervisors’ remuneration.
As approved by the stockholders in June 2013, the Company covered accumulated deficit
amounting to $27,308,220 by using additional paid-in capital in excess of par value of common
stock.
In June 2014, the shareholders approved and resolved the deficit compensation
amendment for 2012 which is to compensate deficit with legal reserve of $2,328,981 and
$24,979,239 by using additional paid-in capital in excess of par value of common stock.
D.The details of the appropriation of 2013 net income which was approved at the stockholders’
meeting in June 2014 are as follows:
$
Legal reserve
Special reserve
Cash dividends
$
Amount
509,272
1,144,229
90,495
1,743,996
Dividends per
share (in dollars)
$
0.01
Furthermore, the Company’s stockholders have resolved to distribute $0.14 cash per share with
capital surplus amounting to $1,266,944. The Company distributed a total of $0.15 cash dividend
per share.
184
E.Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $172,217 and
considering the period’s net profit after tax, legal reserve amongst other factors and the
Company’s Articles of Incorporation. As resolved by the stockholders in June 2014, employees’
bonus and directors’ and supervisors’ remuneration were $343,922 and $90, respectively,
resulting to a difference of $167,791 from the amounts in 2013 financial statements. The
difference was caused by different accrual ratio which has been processed as accounting
estimates after being approved at the stockholders’ meeting and recorded as expense in 2014. For
the year ended December 31, 2014, employees’ bonus was accrued at $1,436,187.
Information about the appropriation of employees’ bonus and directors’ and supervisors’
remuneration by the Company as proposed by the Board of Directors will be posted in the
“Market Observation Post System” at the website of the Taiwan Stock Exchange.
(48) Other equity items
2014
Available-
At January 1
Fair value losses of cash flow hedges
Reclassified as current income of cash
flow hedges
Revaluation of available-for-sale
investments - gross
Revaluation transfer of
available-for-sale investment - gross
Currency translation differences
Issuance of restricted stocks to
employees
payment
Share of other comprehensive
income (loss) of associates
Effect of income tax
At December 31
Employee
Currency
for-sale
Hedging
unearned
translation
investments
reserve
compensation
($
Total
78,074) ($1,544,345) $ 478,190 ($ 387,268) ($1,531,497)
-
-
(
1,224)
- (
1,224)
-
-
( 277,234)
- (
277,234)
-
536,429
-
-
536,429
251,483)
-
-
- ( 251,483)
3,087,368
- (
3,087,368
-
-
- (
-
-
-
288,704
288,704
47,338
-
81,659
38,885
73,654
- (
8,005
8,453)
43,951) (
43,951)
$3,082,948 ($1,259,847) $ 247,070 ($ 142,515) $1,927,656
185
2013
Availablefor-sale
investments
Currency
translation
At January 1
($2,818,705)
flow hedges
investments - gross
2,703,765
employees
payment
Share of other comprehensive
36,866
income (loss) of associates
($ 78,074)
At December 31
Hedging
reserve
Employee
unearned
compensation
($1,609,513) $ 423,629 $
- ( 3,210)
Total
- ($4,004,589)
- (
3,210)
-
82,687
-
82,687
1,875,599
-
-
1,875,599
( 1,858,827)
-
-
- ( 1,858,827)
2,703,765
(
-
- (
754,166) (
754,166)
-
-
366,898
366,898
-
36,122
24,224
744)
49,140 ( 24,916)
($1,544,345) $ 478,190 ($ 387,268) ($1,531,497)
(49) Other income
$
Rental revenue
Interest income
Dividend income
Other income
$
2014
2013
634,368 $
823,063
328,633
39,958
1,731,993
2,734,952
$
293,741
58,897
1,452,167
2,627,868
(50) Other gains and losses
2014
2013
Net loss on financial assets and liabilities at fair
value through profit or loss
Net currency exchange gain
Gain on disposal of investments
Loss on disposal of property, plant and equipment
Impairment loss
Litigation loss and others
186
($
(
(
(
($
976,857)
1,242,754
794,041
179,758)
351,066)
5,659,589)
5,130,475)
($
(
(
(
($
1,060,390)
2,488,707
1,977,799
138,658)
921,828)
9,512,404)
7,166,774)
(51) Finance costs
2014
2013
Interest expense:
Bank borrowings
Bonds
Others
(Gain) loss on fair value change of financial
instruments:
(Gain) loss on cash flow hedges, reclassified
from equity
Fair value hedges
Financing charges incurred on accounts
receivable factoring
$
(
3,579,026
7,555
$
277,234)
- (
$
3,309,347
5,026,870
5,662
19,428
82,687
31,642)
$
225
5,103,230
(52) Expenses by nature
$
Employee benefit expense
Depreciation
Amortization
$
2014
2013
46,106,336 $
38,023,935
59,387,107
75,549,643
1,512,449
2,301,795
107,005,892 $
115,875,373
(53) Employee benefit expense
2014
2013
$
Salaries and other-term employee benefits
Share-based payments
Termination benefits
$
187
43,517,392
578,227
2,010,717
46,106,336
$
$
35,697,937
556,874
1,769,124
38,023,935
(54) Income tax
A.Income tax expense
(a)Components of income tax expense:
2014
2013
Current tax:
Current tax on profit for the period
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of temporary
differences
Income tax expense
$
(
$
791,019
104,819
895,838
$
(
38,406)
857,432 $
1,082,714
76,992)
1,005,722
457,388
548,334
(b)The income tax (charge)/credit relating to components of other comprehensive income is as
follows:
2014
2013
Fair value gains/losses on available-for-sale
financial assets
Cash flow hedges
Actuarial gains/losses on defined benefit
obligations
$
(
8,453 ($
47,338)
49,140)
24,916
(
($
9,484) (
48,369) ($
2,018)
26,242)
B.Reconciliation between income tax expense and accounting profit
2014
2013
Tax calculated based on profit before tax and
statutory tax rate
$
4,535,027 $
1,868,960
Effects from items disallowed by tax regulation
(
533,680)
152,713
Under (over) provision of prior year's income tax
104,819 (
76,992)
Additional 10% tax on undistributed earnings
334,872
Effect from Alternative Minimum Tax
74,672
118,725
Change in assessment of realization of deferred tax
(
3,658,278) (
1,515,072)
assets
$
857,432 $
548,334
Tax expense
188
C.Amounts of deferred tax assets or liabilities as a result of temporary differences, loss
carryforward and investment tax credits were as follows:
Recognised
in other
Recognised in comprehensive
profit or loss
income
January 1
Temporary differences:
-Deferred tax assets:
Sales returns and discount
provisions
Accrued royalties and
warranty provisions
Unrealised gain (loss) on
financial instruments
Depreciation expense
Unrealised exchange loss
Net operating loss
carryforward
Others
-Deferred tax liabilities:
Unrealised exchange gain
Unrealised gain on cash
flow hedges
Amortisation charges on
goodwill
Others
Total
$
288,013 ($
364,411
448,380
97,965
-
51,357)
(
97,943)
36,493)
(
260,035 (
57,171)
200,697
8,453)
-
708,777)
116,965
346,384) $
9,484
1,031
$
(
726,842)
(
33,566)
($
909,708) $
$ 17,214,161 $
189
-
(
16,702,351 (
222,749
$ 18,123,869 ($
($
121,640) $
51,357
$
-
$
332,155
1,278
384,790
38,406
December 31
47,338 (
$
$
166,373
327,918
699,962
40,794
200,697
15,993,574
349,198
$ 17,778,516
$
50,605)
- (
394,687)
- (
32,288)
47,338 ($
477,580)
48,369 $ 17,300,936
January 1
provisions
warranty provisions
Unrealised gain (loss) on
Depreciation expense
Prior year’s expense
carryforward
Net operating loss
carryforward
Others
$
98,369
Total
December 31
$
$
169,057
($
(
189,644
$
-
195,354
288,013
-
364,411
482,738 (
5,256 (
83,498)
3,006)
49,140
-
448,380
2,250
243,826 (
145,861)
-
97,965
16,500,416
319,435 (
201,935
100,954)
2,018
16,702,351
220,499
51,158
$ 18,123,869
$ 17,819,097
flow hedges
goodwill
Others
Recognised
in other
profit or loss
income
$
253,614
$
455,343) $
403,986
$
73,027)
(
533,081)
(
27,115)
($ 1,088,566)
$ 16,730,531
- (
(
(
$
$
193,761)
6,451)
203,774 ($
457,388 $
- ($
24,916) (
24,916)
26,242
(
(
51,357)
97,943)
726,842)
33,566)
($
909,708)
$ 17,214,161
D.Details of investment tax credits and unrecognised deferred tax assets are as follows:
December 31, 2013
Qualifying items
Unused tax credits
$
409,544
190
Unrecognised
deferred tax assets
$
409,544
Final year tax
credits are due
2014
E.Expiration dates of unused net operating loss carryfoward and amounts of unrecognised deferred
tax assets were as follows:
December 31, 2014
Year incurred
2010
2011
2012
Amount filed /
assessed
Assessed
Assessed
Filed
Unrecognised
deferred
tax assets
Unused amount
$
$
14,641,521
63,808,943
43,505,968
121,956,432
$
$
3,414,183
14,879,288
10,055,723
28,349,194
Usable
until year
2015~2020
2021
2022
December 31, 2013
Year incurred
2009
2010
2011
2012
Amount filed /
assessed
Assessed
Assessed
Filed
Filed
Unused amount
$
44,982,156
22,184,259
63,324,406
43,601,064
Unrecognised
deferred
tax assets
$
37,405,250
9,273,300
17,700,435
12,053,847
$
$
174,091,885
Usable
until year
2014
2015~2020
2021
2022
76,432,832
F.The amounts of deductible temporary differences that are not recognised as deferred tax assets
were as follows:
December 31, 2014
$
31,105,662
Deductible temporary differences
December 31, 2013
$
81,415,741
G.The Company has not recognised taxable temporary differences associated with investment in
subsidiaries as deferred tax liabilities. As of December 31, 2014 and 2013, the amounts of
temporary differences unrecognised as deferred tax liabilities were $20,486,590 and
$12,677,405, respectively.
H.Certain revenue from the design, research, development, manufacture and sale of the thin film
transistor - liquid crystal displays (TFT-LCD) and LCDs is exempt from income tax from 2008
to 2015.
I.The Company’s income tax returns through 2011 have been assessed and approved by the Tax
Authority.
J.Unappropriated retained earnings recorded by the Company pertain to retained earnings after
1998.
191
K.The details of imputation system are as follows:
(a)Balance of tax credit account
December 31, 2014
$
738,931
December 31, 2013
$
1,082,780
(b)Estimated creditable tax rate
2014 (Estimate)
2.96%
2013 (Actual)
20.48%
(55) Earnings per share
2014
2013
Profit attributable to ordinary shareholders of the
parent
Weighted average number of ordinary shares
outstanding (shares in thousands)
Basic earnings per share (in dollar)
parent
Assumed conversion of all dilutive potential
ordinary shares:
-Employees’ bonus
-Restricted stocks
$
21,676,759
$
5,102,568
$
9,377,302
2.31
$
8,967,080
0.57
$
21,676,759
$
5,102,568
$
Diluted earnings per share (in dollar)
9,377,302
8,967,080
106,514
41,875
9,525,691
2.28
15,173
27,609
9,009,862
0.57
$
As employee stock options had anti-dilutive effect for the years ended December 31, 2014 and
2013, they were not included in the calculation of diluted earnings per share.
(56) Non-cash transaction
A.Investing activities with partial cash payments:
Purchase of property, plant and equipment
Add: opening balance of payable on equipment
Less: ending balance of payable on equipment
Cash paid during the year
192
$
(
$
2014
2013
19,832,267 $
3,383,261
2,688,976) (
20,526,552 $
18,102,828
3,650,776
3,383,261)
18,370,343
B.Investing activities with partial cash receipts:
$
Disposal of property, plant and equipment
Add: opening balance of receivable on
equipment
Less: ending balance of receivable on
equipment
Cash received during the year
2014
2013
1,839,001 $
3,390,107
2,414,208
$
-
- (
4,253,209 $
2,414,208)
975,899
7. RELATED PARTY TRANSACTIONS
(57) Significant related party transactions
A.Operating revenue
2014
2013
Sales of goods:
Others
Associates
$
$
14,450,540
33,263
14,483,803
$
$
5,814,715
13,940
5,828,655
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
2014
Purchases of goods:
Others
Associates
$
$
13,019,919
11,275,187
24,295,106
2013
$
$
7,813,860
17,054,293
24,868,153
The payment term was 30~120 days to related parties after delivery, and 30~180 days to
non-related parties after delivery or on a monthly-closing basis. The purchase prices and the
payment terms to related parties above were not materially different from those of purchases from
third parties.
193
C.Consigned processing
(a)Consigned processing
2014
2013
Processing costs:
Others
Associates
$
$
124,425
124,425
$
$
163,027
8,412
171,439
(b)Balance of consigned processing at the end of year (shown as “Other payables”)
December 31, 2014
December 31, 2013
Payables to related parties:
$
Others
2,505,250
$
2,576,372
The Group subcontracted the processing of products of associates in Mainland China. The
processing fees were mainly charged based on cost plus method.
D.Accounts receivable
December 31, 2014
Receivables from related parties:
Others
Associates
$
$
6,084,501
27,899
6,112,400
December 31, 2013
$
$
2,047,883
2,102
2,049,985
The receivables from related parties arise mainly from sales transactions. The receivables are due
30~120 days after the date of sale. The receivables are unsecured in nature and bear no interest.
There are no provisions held against receivables from related parties.
E.Accounts payable
December 31, 2014
Others
Associates
$
$
5,225,129
27,817
5,252,946
December 31, 2013
$
$
4,522,389
4,233,854
8,756,243
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.
194
F.Property transactions
Purchase of property
(a)Acquisition of property, plant and equipment:
$
Associates
Others
$
2014
2013
639,044 $
1,277,032
21,407
67,197
660,451 $
1,344,229
(b)Period-end balances arising from purchases of property (shown as “Other payables”):
December 31, 2014
$
229
748
$
977
Associates
Others
December 31, 2013
$
32,374
10,887
$
43,261
Sale of property
(a)Proceeds from sale of property and gain (loss) on disposal:
2014
Others
Disposal
proceeds
$
46,157
2013
Gain (loss) on
disposal
$
2,807
Disposal
proceeds
$
91,960
Gain (loss) on
disposal
$
12,418
(b)Period-end balances arising from sale of property (shown as “Other receivables”):
December 31, 2014
December 31, 2013
$
46,382 $
82,280
Others
(58) Key management compensation
Salaries and other short-term employee benefits
Post-employment benefits
$
$
195
2014
2013
73,982 $
46,386
18,638
27,582
216
334
92,836
$
74,302
8. PLEDGED ASSETS
The Group’s assets pledged as collateral are as
follows:
Pledged asset
Other financial assetscurrent
Time deposits
Book value
$
253
$
5,603 Tariff guarantee, letter of credit and
short-term borrowings
- Land lease
2,538,964 Syndicated bank loans
211,132,039 Long-term loans and performance
guarantee for lease payable
2,284,617
163,632,314
Time deposits
Demand deposits
Property, plant and
equipment
Other financial assetsnon-current
Refundable deposits
Purpose
11,079,360
12,327,000 Guarantee to European
Commission for litigation
Time deposits
$
80,722
177,077,266
$
722
226,004,328
Guarantee for contract
9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT
COMMITMENTS
(59) Contingencies－Significant Litigations
A.Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd.,
Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei
Optoelectronics USA Inc. were investigated under the Anti-Trust competition by the United
States (the “U.S.”) Department of Justice. Moreover, authorities of some U.S state governments,
the European Union’s, Brazil’s and Korea’s governments are starting to investigate this case. In
addition, certain downstream customers and consumers in the TFT-LCD industry of the U.S. and
Canada are now bringing up class-actions or individual civil lawsuits against the TFT-LCD
companies; in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as
defendants. Details for investigations on significant cases related to the Anti-Trust Act are as
follows:
(a)Regarding the above lawsuits, the Company had reached an agreement with the United States
Department of Justice in December 2009, agreeing to pay penalties of US$220 million in
installment over five years. As of December 31, 2014, the unpaid penalties amounted to
US$35 million.
The Company had reached settlement agreements with the plaintiffs on individual civil
lawsuits in the U.S. since 2012 and recognized related losses.
196
The Company reached an out-of-court settlement with twelve State Governments, agreeing to
pay the plaintiffs as civil statutory damages since November 2011.
(b)In December 2010, the Company received a notice from the European Commission,
requesting the Company to pay a penalty of EUR 300 million to the account as specified by
the European Commission within three months upon receipt of the notice. The Company
appealed this case with the Court of Justice of the European Union in February 2011 and
deposited EUR 300 million to the above account on March 14, 2011. The principal and interest
accrued in this account will be refunded to the Company depending on the final outcome of
this case. The Court of Justice of the European Union has rendered that partial of the
Company’s appeal was reasonable and lowered the penalty from EUR 300 million to EUR 288
million. The Company has decided to appeal against partial judgement within the prescribed
time.
(c)Except for the Anti-Trust litigations the ultimate outcome of which cannot be reliably
estimated, the Company has recognised actual or estimated losses or liabilities in “other
payables” and “other non-current liabilities”.
B.Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and its
subsidiaries in the US with the United States District Court for the District of East Texas on April
25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary
judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding
judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in
February 2014 and the Company remained positive on its defense. The United States Court of
Appeals for the Federal Circuit has held a hearing in November 2014 but has not ruled any
judgment. The Company is currently assessing the status of the litigation.
The Company does
not expect that the lawsuit would have a material adverse effect on the Company’s financial
position or results of operations in the short-term.
(60) Commitments
A.Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:
December 31, 2014
December 31, 2013
$
15,338,375 $
13,229,191
B.Operating lease commitments
The Group leases plant, land and warehouses under non-cancellable operating lease agreements.
The majority of lease agreements are renewable at the end of the lease period at market rate. The
future aggregate minimum lease payments under non-cancellable operating leases are as follows:
December 31, 2014
Not later than one year
Later than one year but not later than five years
Later than five years
$
$
197
571,800
2,152,538
1,541,309
4,265,647
December 31, 2013
$
$
572,237
2,132,349
1,961,865
4,666,451
C.Outstanding letters of credit
The outstanding letters of credit for the purchase of property, plant and equipment are as
follows:
December 31, 2014
$
693,635
Outstanding letters of credit
December 31, 2013
$
390,027
10. SIGNIFICANT DISASTER LOSS
None.
11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
(1) Details of cancellation of issuance of global depository receipts (the “GDR”) as approved by the
Financial Supervisory Commission (FSC) on January 30, 2015 are provided in Note 6(16) C.
(2) Details of the proposal of syndicated credit line contract with financial institution creditors that
was approved by the Board of Directors on February 10, 2015 are provided in Note 6(12) F.
12. OTHERS
(1) Capital risk management
The Group’s objectives are to maintain an optimal capital structure, and constructively reduce the
debt ratio and the cost of capital in order to maximize shareholders' equity.
(2) Financial instruments
A.Fair value information of financial instruments
Except those listed in the table below, the carrying amounts of the Group’s financial instruments
not measured at fair value (including cash and cash equivalents, accounts receivable, other
receivables, other financial assets-current, short-term loans, short-term notes payable, accounts
payable and other payables) are approximate to their fair values. The fair value information of
financial instruments measured at fair value is provided in Note 12(3).
December 31, 2014
Book value
Fair value
Financial assets:
Other financial assets
- non-current
Financial liabilities:
Long-term
borrowings (including
current portion)
December 31, 2013
Book value
Fair value
$ 11,160,082
$ 11,103,454
$ 12,327,722
$ 12,265,170
$ 108,456,086
$ 108,456,086
$ 169,097,708
$ 169,097,708
B.Financial risk management policies
(a)The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s
overall risk management programme focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on the Group’s financial position and financial
performance. The Group uses derivative financial instruments to hedge certain risk
198
exposures (see Notes 6(2), (4)).
(b)Risk management is carried out by each treasury department (of all group companies) under
policies approved by the board of directors. Group treasury identifies, evaluates and hedges
financial risks in close cooperation with the Group’s operating units. The Board provides
principles for overall risk management, as well as policies covering specific areas and
matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments, and investment by excess
liquidity.
C.Significant financial risks and degrees of financial risks
(a)Market risk
Foreign exchange risk
a) The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the USD and RMB. Foreign
exchange risk arises from future commercial transactions, recognized assets and liabilities
and net investments in foreign operations.
b) Management has set up a policy to require group companies to manage their foreign
exchange risk against their functional currency. The group companies are required to
hedge their entire foreign exchange risk exposure via their treasury departments. To
manage their foreign exchange risk arising from future commercial transactions and
recognized assets and liabilities, entities in the Group use forward foreign exchange
contracts. Foreign exchange risk arises when future commercial transactions or
recognized assets or liabilities are denominated in a currency that is not the entity’s
functional currency.
c) The 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 $304,219 or a decrease of $439,379
for the years ended December 31, 2014 and 2013, respectively. The information on assets
and liabilities denominated in foreign currencies whose values would be materially
affected by the exchange rate fluctuations is as follows:
199
December 31, 2014
December 31, 2013
Foreign
Foreign
Currency
Currency
Exchange
Book Value
(NTD)
Amount
(In Thousands)
rate
(Note)
Book Value
(NTD)
Amount
Exchange
(In Thousands)
Rate
Financial assets
Monetary items
$ 7,672,372
31.65
$242,830,574
$ 4,077,314
29.81
$121,544,730
6,197,615
0.26
1,611,380
761,223
0.28
213,142
363,657
38.47
13,989,885
405,043
41.09
16,643,217
$ 2,217,538
31.65
$ 70,185,078
$ 2,108,219
29.81
$ 62,846,008
322,534
4.08
1,315,939
266,670
3.84
1,024,013
5,383,824
0.26
1,399,794
4,813,897
0.28
1,347,891
3,834
38.47
147,494
3,651
41.09
150,020
USD
$ 6,531,987
31.65
$206,737,389
$ 5,531,327
29.81
$164,888,858
JPY
38,466,012
0.26
10,001,163
36,451,156
0.28
10,206,324
292,992
38.47
11,271,402
176,291
41.09
7,243,797
USD
JPY
EUR
Non-monetary
items
USD
HKD
JPY
EUR
Financial liabilities
Monetary items
EUR
Note: Exchange rate represents the amount of NT dollars for which one foreign currency could
be exchanged.
Price risk
a) The Group is exposed to equity securities price risk because of investments held by the
Group that are classified on the consolidated balance sheet either as available-for-sale or
at fair value through profit or loss. To manage its price risk arising from investments in
equity securities, the Group diversifies its portfolio in accordance with the policy set by
the Group.
b) The Group’s investments in equity securities comprise domestic listed and unlisted stocks.
The prices of equity securities would change due to the change of the future value of
investee companies. If the prices of these equity securities had increased/decreased by
20% with all other variables held constant, post-tax profit for the years ended December
31, 2014 and 2013 would have increased/decreased by $121,031 and $142,521,
respectively, as a result of gains/losses on equity securities classified as at fair value
through profit or loss; other components of equity would have increased/decreased by
$1,027,423 and $746,506, respectively, as a result of gains/losses on equity securities
classified as available-for-sale.
200
Interest rate risk
a) The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at
variable rates expose the Group to cash flow interest rate risk which is partially offset by
cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose
the Group to fair value interest rate risk. During the years ended December 31, 2014 and
2013, the Group’s borrowings at variable rate were denominated in the NTD, USD and
RMB.
b) The Group analyzes its interest rate exposure on a dynamic basis. Various scenarios are
simulated taking into consideration refinancing, renewal of existing positions, alternative
financing and hedging. Based on these scenarios, the Group calculates the impact on
profit and loss of a defined interest rate shift. For each simulation, the same interest rate
shift is used for all currencies. The scenarios are run only for liabilities that represent the
major interest-bearing positions.
c) Based on the simulations performed, the impact on post-tax profit of a 0.1% shift would be
a maximum increase of $271,243 or decrease of $423,213 for the years ended December
31, 2014 and 2013, respectively. The simulation is done on a quarterly basis to verify that
the maximum loss potential is within the limit given by the management.
d) Based on the various scenarios, the Group manages its cash flow interest rate risk by using
floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of
converting borrowings from floating rates to fixed rates. Generally, the Group raises
long-term borrowings at floating rates and swaps them into fixed rates that are lower than
those available if the Group borrowed at fixed rates directly. The Group agrees with other
parties to exchange interest rate, at specified intervals. The difference between fixed
contract rates and floating-rate interest amounts calculated by reference to the agreed
notional amounts.
(b)Credit risk
a) Credit risk refers to the risk of financial loss to the Group arising from default by the
clients or counterparties of financial instruments on the contract obligations. According to
the Group’s credit policy, each local entity in the Group is responsible for managing and
analyzing the credit risk for each of their new clients before standard payment and
delivery terms and conditions are offered. Customer credit quality is assessed via internal
risk control, considering customer financial position, past experience and other factors.
Individual risk limits are set by the board of directors based on internal or external ratings.
The utilization of credit limits is regularly monitored. Credit risk arises from cash and
cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to wholesale and retail customers, including
outstanding receivables. Because the Company's counterparties and executor are banks
201
with good credit standing and financial institutions and Government with investment
grade or above, there is no significant default. Therefore, there is no significant credit risk.
b) No credit limits were exceeded during the reporting periods. Management does not expect
any significant losses from non-performance by these counterparties.
c) The individual analysis of financial assets that had been impaired is provided in Note 6.
(c)Liquidity risk
a) Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it
has sufficient cash to meet operational needs while maintaining sufficient headroom on its
undrawn committed borrowing facilities (Note 6(12)) at all times so that the Group does
not breach borrowing limits or covenants (where applicable) on any of its borrowing
facilities. Such forecasting takes into consideration the Group’s debt financing plans,
covenant compliance, compliance with internal balance sheet ratio targets and, external
regulatory or legal requirements.
b) Surplus cash held by the operating entities over and above balance required for working
capital management are transferred to the Group treasury. Group treasury invests surplus
cash in interest bearing saving accounts, time deposits, money market deposits and
marketable securities. The Group chooses instruments that are with appropriate maturities
or sufficient liquidity to provide sufficient headroom as determined by the
abovementioned forecasts. These are expected to readily generate cash inflows for
managing liquidity risk.
c) 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.
202
Non-derivative financial liabilities:
December 31, 2014
Short-term
borrowings
Accounts payable
Other payables
Long-term
borrowings
(including current
portion)
Other financial
liabilities
December 31, 2013
Short-term
borrowings
Accounts payable
Other payables
Long-term
borrowings
(including current
portion)
Other financial
liabilities
Less than
1 year
$22,526,999
Between 1
and 3 years
$
-
Between 3
and 5 years
$
-
Over 5
years
$
-
Total
$22,526,999
80,207,385
23,912,180
-
-
-
80,207,385
23,912,180
66,192,903
42,304,435
-
-
108,497,338
36,821
10,938,112
663
6,344
10,981,940
Less than
1 year
$31,179,767
Between 1
and 3 years
$
-
Between 3
and 5 years
$
-
Over 5
years
$
-
Total
$31,179,767
74,191,829
20,715,595
-
-
-
74,191,829
20,715,595
169,097,708
-
-
-
169,097,708
114,516
8,220,937
29,493
25,582
8,390,528
Derivative financial liabilities:
December 31, 2014
Forward exchange contracts
Interest rate swap contracts
December 31, 2013
Between 1
and 3 years
Less than 1 year
$
605,016
1,351
$
689,097
-
-
$
Between 1
and 3 years
Less than 1 year
$
Total
$
21,918
605,016
1,351
Total
$
689,097
21,918
(3) Fair value estimation
A.The table below analyses financial instruments measured at fair value, by valuation method. The
different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
203
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data.
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at December 31, 2014 and 2013:
December 31, 2014
Financial assets:
Financial assets at fair value
through profit or loss
Equity securities
Available-for-sale financial
assets
Equity securities
Debt securities
Level 1
$
Level 2
605,155
-
3,296,020
220,000
$ 4,121,175
Financial liabilities at fair value
Forward exchange contracts $
Cross currency swap
contracts
Derivative financial liabilities
for hedging
$
-
$
Level 3
Total
52,453
$
-
$
52,453
1,841,097
$ 1,841,097
5,137,117
220,000
$ 6,014,725
$
605,016
$
$
-
$
605,155
52,453
605,016
-
-
-
-
-
1,351
606,367
-
1,351
606,367
204
$
$
$
December 31, 2013
Financial assets:
Equity securities
assets
Equity securities
Debt securities
Level 1
$
Level 2
712,603
-
2,028,601
220,000
$ 2,961,204
for hedging
$
-
-
$
Level 3
Total
227,703
$
-
$
712,603
227,703
$
227,703
1,703,929
$ 1,703,929
3,732,530
220,000
$ 4,892,836
$
689,097
$
-
$
689,097
$
21,918
711,015
$
-
$
21,918
711,015
B.The fair value of financial instruments traded in active markets is based on quoted market prices
at the balance sheet date. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly occurring market transactions
on an arm’s length basis. The quoted market price used for financial assets held by the Group is
the closing price. These instruments are included in level 1. Instruments included in level 1
comprise primarily equity instruments and debt instruments classified as financial
assets/financial liabilities at fair value through profit or loss or available-for-sale financial
assets.
C.The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in level 2.
D.If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
E.Specific valuation techniques used to value financial instruments include:
(a)Quoted market prices or dealer quotes for similar instruments.
(b)The fair value of interest rate swaps is calculated as the present value of the estimated future
cash flows based on observable yield curves.
(c)The fair value of forward foreign exchange contracts is determined using forward exchange
205
rates at the balance sheet date, with the resulting value discounted back to present value.
(d)Other techniques, such as discounted cash flow analysis, are used to determine fair value for
the remaining financial instruments.
F.All of the resulting fair value estimates are included in level 2 except for certain forward foreign
exchange contracts where forward exchange rates are not observable directly in the market.
G.The following table presents the changes in level 3 instruments as at December 31, 2014 and
2013:
At January 1
$
Acquired in the period
Gains and losses recognized in profit or loss
Gains and losses recognized in other comprehensive income
Disposed in the period
(
Transfers out from level 3
$
At December 31
Equity securities
2014
2013
1,703,929
$
610,017
162,730
10,701
420,922
196,382
1,350,330
232,645) (
126,563)
- (
550,777)
1,841,097
$ 1,703,929
(4) Turnaround plan
The Group’s current liabilities exceeded its current assets by $9,754,686 as of December 31, 2014.
The Group’s management adopted the following measures to improve its operations and financial
position:
A.Negotiation with the creditor banks as to the debt issue
On April 5, 2012, the Company signed an “Agreed-upon Repayment Agreement” with creditor
banks. Under the agreement, creditor banks agreed to extend the due dates for the repayment of
the Company’s short, medium and long-term loans and to renew the Company’s credit lines to
safeguard creditors’ rights and ensure the Company’s continuing operations. More information
is described in Note 6(12)C.
In order to repay the unpaid balance of the medium and long-term syndicated loans from the
approved the proposal of syndicated credit line of NTD$68.5 billion with financial institutions.
B.Capital increase by cash
According to the “Agreed-upon Repayment Agreement” (the Agreement) stated in Note 6(12)C,
the Company shall increase its capital in certain amount of cash within three years starting from
2012. From 2012 to 2014, the Company has completed some cash capital increase required by
the Agreement. For more information, please refer to Notes 6(16)B and D.
As the Company has received bank’s approval for extending capital increase, based on
shareholders’ interest, the issuance of the GDR was cancelled in accordance with the Financial
Supervisory Commission (FSC)’s approval. Details are provided in Note 6(16) C.
C.Improvements in operations
206
The Company continuously adjusts its product lines according to the market demands to
increase operating revenue and gross profit. The Company also tries to strictly control various
expenses and expenditures to effectively enhance operational performance to create cash
inflows from operating activities.
D.Capital expenditure control program
Future capital expenditures will focus on the upgrading technology, improving efficiency and
expanding production capacity. Capital expenditure budgets and amounts will be controlled
strictly to maximize the benefits of capital expenditures.
207
13. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU
(1) Related information of significant transactions
A.Loans granted during the year ended December 31, 2014:
No.
1
Creditor
Borrower
Innolux
Chi Mei
Optoelectronics Optoelectronics
Europe B.V.
Germany GmbH
General
ledger
account
Other
receivables
Maximum
outstanding
balance during
the year
Is a
ended
related December 31,
party
2014
Related $ 30,776
parties
Actual
amount
drawn
down
Balance at
December
31, 2014
$
30,776
$
Interest
rate
-
-
-
2
Ningbo Innolux Ningbo Innolux Other
Optoelectronics Technology Ltd. receivables
Ltd.
Related
parties
822,900
-
-
2
Ningbo Innolux Ningbo Innolux Other
Optoelectronics Technology Ltd. receivables
Ltd.
Related
parties
3,339,075
3,165,000
2
Ningbo Innolux Ningbo Innolux
Optoelectronics Display Ltd.
Ltd.
Other
receivables
Related
parties
949,500
2
Ningbo Innolux Ningbo Innolux
Optoelectronics Display Ltd.
Ltd.
Other
receivables
Related
parties
3
Innocom
Foshan Innolux
Technology
Optoelectronics
(Shenzhen) Co., Ltd.
Ltd.
Other
receivables
4
Innolux
Technology
USA Inc.
5
Innolux
Technology
Europe B.V.
6
Kunpal
Bright
Information
Optoelectronics
Holding Limited Ltd.
Nature
of loan
Short-term
financing
Amount
of
transactions
with the
borrower
$
-
Reason Allowance
for shortfor
Limit on loans
term
doubtful Collateral
granted to
financing accounts Item Value
a single party
Operating $
$- $ 227,690,063
support
Ceiling on
total loans
granted
$ 227,690,063
Note
A
Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
3,165,000
2.7641% Short-term
~2.7807% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
949,500
949,500
2.7626% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
949,500
949,500
949,500
2.6506% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
3,620,680
3,620,680
3,563,266
5.400% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Innolux Displays Receivables
Hong Kong Ltd. from related
parties
Related
parties
189,900
189,900
189,900
0.16% Short-term
~0.56% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Innolux Displays Receivables
Hong Kong Ltd. from related
parties
Related
parties
1,491,707
1,491,707
1,461,161
0.007% Short-term
~0.269% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
63,300
-
-
- Short-term
financing
-
Operating
support
-
-
-
105,729
105,729
B
Other
receivables
208
No.
Creditor
7
Innolux
Technology
Germany GmbH
Innolux Hong
Kong Ltd.
8
9
Innolux
Technology
Japan Co., Ltd.
Borrower
General
ledger
account
Innolux Hong
Kong Ltd.
Receivables
from related
parties
Shanghai Innolux Receivables
Optoelectronics from related
Ltd.
parties
Leadtek Global Other
Group Limited receivables
Maximum
outstanding
balance during
the year
Is a
ended
party
2014
Related $
parties
24,927
Actual
amount
drawn
down
Balance at
December
31, 2014
$
-
$
Interest
rate
Nature
of loan
-
- Short-term
financing
Amount
of
transactions
with the
borrower
$
Reason Allowance
for shortfor
term
doubtful Collateral
-
Operating
support
$
Limit on loans
granted to
a single party
Ceiling on
total loans
granted
Note
-
-
$-
$ 227,690,063
$227,690,063
A
Related
parties
499,941
-
-
- Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
1,375,920
1,375,920
1,375,920
1.475% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
C
Innolux
10 Innolux
Optoelectronics Corporation
Japan Co., Ltd.
Other
receivables
Related
parties
396,900
396,900
396,900
1.380% Business
association
2,256,506
-
-
-
-
569,824
569,824
11 Foshan Innolux Nanhai Chi Mei
Ltd.
Ltd.
Other
receivables
Related
parties
2,532,000
-
-
- Business
association
-
-
-
-
-
227,690,063
227,690,063
A,D
Note A: The Company – Innolux Corporation
1.For loans obtained for short-term financing, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the company.
2.The financial limit on loans granted shall not exceed 40% of the company’s net equity. If it is for short-term capital needs, the limit shall not exceed 30% of the company’s net equity.
3.The policy for loans granted to direct or indirect wholly-owned overseas subsidiaries is as follows: for short-term capital needs, financial limit shall not be below the 40% requirement, but should not exceed 100% of
the company’s net equity.
Note B: The subsidiary - Bright Information Holding Limited
2.The financial limit on loans granted shall not exceed 30% of the company’s net equity.
3.For the short-term capital needs of direct or indirect wholly-owned subsidiaries, the above two limitations are not required. However, the financial limit on loans granted shall not exceed 100% of the company’s net
equity.
209
Note C: Innolux Optoelectronics Japan Co., Ltd.
1.For the company’s short-term capital needs, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the parent
company.
2.The financial limit on loans granted shall not exceed 30% of the company’s net equity, based on the most recent audited financial statements of the parent company; with intercompany transaction, the company’s
financial limit on loans granted shall not exceed 40% of the company’s equity.
3.The amount of loans provided by the company and intercompany shall not exceed 40% of the company’s equity.
Note D: Foshan Innolux Optoelectronics Ltd. entered into a merger agreement with Nanhai Chi Mei Optoelectronics Ltd. on January 1, 2014 and Foshan Innolux Optoelectronics Ltd. is the surviving company
B.Endorsements and guarantees provided during the year ended December 31, 2014:
Guaranteed party
Endorsement
/guarantee
Number provider
0
Innolux
Corporation
Name
Leadtek
Global
Group
Limited
Nature of
relationship
An indirect
whollyowned
subsidiary
Limit on
endorsement/
guarantee
amount provided
to each
counterparty
Maximum
balance for
the year
Ending balance
Actual amount
drawn down
$113,845,032
$16,901,100
$16,901,100
$10,140,660
Ratio of
accumulated
Amount of
endorsement/
endorsement/ guarantee to net
Maximum
guarantee equity per latest
endorsement/
collateralized
financial
guarantee amounts
by properties
statements
allowable
$
-
7.42%
$113,845,032
Provision of
endorsement/
guarantees
by parent
company to
subsidiary
Y
Provision of
Provision of
endorsements
endorsement/
/guarantees to
guarantees
by subsidiary the party in
Mainland
to parent
company
China
N
N
Note
A,B
Note A: Limits on endorsement/guarantee amount provided to each counterparty did not exceed 0.5% of the Company’s net equity based on the most recent audited financial statements of the Company. Maximum
endorsement/guarantee amounts allowable should not exceed 1% of the Company’s net equity based on the most recent audited financial statements of the Company. For subsidiaries with over 90% of shares directly
or indirectly owned by the Company, the endorsement / guarantee amount provided by the Company shall not exceed 10% of the Company’s net equity. The limitation is not required for direct or indirect
wholly-owned subsidiaries of the Company.
Note B: Accumulated endorsement/guarantee amount provided by the Company shall not exceed 50% of the Company’s net equity.
C.Holding of marketable securities at the end of the year (not including subsidiaries, associates and joint ventures):
210
Securities held by
Kind and name of marketable securities
Relationship
with the Company
December 31, 2014
General ledger account
Number of shares
Book value
Percentage
Fair value
Common stock
Innolux Corporation
AvanStrate Inc.
None
assets - non-current
900,000
Innolux Corporation
TPV Technology Ltd.
None
Innolux Corporation
Chi Lin Optoelectronics Co., Ltd.
None
Innolux Corporation
Epistar Corp.
Innolux Corporation
Corporation
$
80,302
1
$
80,302
150,500,000
1,031,587
6
1,031,587
48,283,725
483,194
19
483,194
None
89,072
5,603
-
5,603
None
45,068,305
1,500,775
9
1,500,775
None
-
220,000
-
220,000
Bond
Innolux Corporation
Unsecured subordinated bonds of Cathay
Financial Holdings
Common stock
Yuan Chi Investment Co., Ltd.
Trillion Science, Inc.
None
1,439,180
2,252
2
2,252
China Electric Mfg. Corp.
None
13,000,000
140,400
3
140,400
Tera Xtal Technology Corporation
None
4,900,000
56,693
3
56,693
InnoJoy Investment Corporation
Advanced Optoelectronic Technology, Inc.
None
Financial asset at fair value
11,165,222
605,155
8
605,155
J TOUCH Corporation
None
1,080,749
19,507
1
19,507
Fitipower Integrated Technology Inc.
None
10,000,000
343,350
8
343,350
G-TECH Optoelectronics Corporation
None
6,311,734
184,934
2
184,934
211
Note
Securities held by
Relationship
with the Company
December 31, 2014
Number of shares
Entire Technology Co., Ltd.
None
7,506,326
Ltd.
OED Holding Ltd.
None
Ltd.
General Interface Solution (GIS) Holding
Limited
None
Ltd.
Perfect Optronics Limited
Nets Trading Ltd.
PilotTech Global Fund
Book value
Fair value
177,900
5
16,000,000
3,553
6
3,553
40,500,000
900,242
14
900,242
None
22,000,000
178,621
2
178,621
None
90
28,204
-
28,204
212
$
Percentage
$
177,900
Note
D.Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital:
Marketable
Financial
securities
statement
Nature of
Company name type and name
account Counterparty relationship
Innolux
Toppoly
Investments
A
B
Corporation
Optoelectronics accounted
(B.V.I.) Ltd.
for under
the equity
method
Beginning balance
Acquisition
Disposal
Shares/units
Amount
Shares/units
Amount
126,847,000
$ 3,064,699
17,600,000
$ 531,608
Shares/units
-
Amount
$
Ending balance
Carrying
value
-
$
Shares/units
Amount
-
Gain (loss)
on disposal
$
-
144,447,000
$ 3,596,307
Note
Toppoly
Toppoly
Investments
Optoelectronics Optoelectronics accounted
(B.V.I.) Ltd.
(Cayman) Ltd. for under
the equity
method
A
C
126,817,000
3,040,776
17,600,000
531,608
-
-
-
-
144,417,000
3,572,384
Toppoly
Nanjing Innolux Investments
(Cayman) Ltd. Ltd.
for under
the equity
method
A
C
-
2,935,314
-
531,608
-
-
-
-
-
3,466,922
871,885)
436,572
45,068,305
1,500,775
D
-
-
D
22,000,000
25,745
E
Innolux
Corporation
Chi Mei
Materials
Technology
Corporation
Available- Open market
for-sale
financial
assets - non
current
None
80,184,305
2,372,660
-
- ( 35,116,000)
1,308,457 (
Innolux
Corporation
Contrel
Technology Co., for-sale
Ltd.
financial
assets - non
current
None
17,009,330
464,322
-
- ( 17,009,330)
314,798 (
464,322) (
149,524)
Warriors
Technology
Investments
Ltd.
Perfect
Optronics
Limited
None
-
-
66,000,000
77,236 ( 44,000,000)
317,743 (
51,491)
266,252
for-sale
financial
assets - non
current
Note A: Cash capital increase implemented by an investee.
Note B: A subsidiary of the Company.
213
Note C: An indirect wholly-owned subsidiary.
Note D: The beginning carrying balance included profits and losses from investments and cash dividends.
Note E: Ending book value excludes gain (loss) on valuation of financial assets.
E.Acquisition of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.
F.Disposal of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.
G.Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more:
214
Difference with general
transactions (Note A)
Transactions
Notes and accounts receivable
(payable)
Percentage
Company
Counterparty
Relationship with the
Company
Purchases/
of purchases/
sales
Amount
$
Percentage
sales
Terms
5,497,697
1
60 days
Innolux
Corporation
Shenzhen Fu Tai Hong
Precision Industry Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Sales
Innolux
Corporation
Hon Hai Precision Industry
Co., Ltd.
Same major stockholder
Sales
3,977,339
Innolux
Corporation
Honfujin Precision Electronics An indirect wholly-owned
(Chongqing) Co., Ltd.
Sales
Innolux
Corporation
Innolux
Corporation
Lakers Trading Ltd.
subsidiary
Innolux Optoelectronics Japan A subsidiary of the Company
Co., Ltd.
Innolux
Corporation
Unit price
Terms
Similar with
general sales
No significant
difference
1
45-60 days Similar with
general sales
3,558,807
1
Sales
2,687,589
1
Sales
1,757,646
-
subsidiary
Sales
1,231,983
-
60 days
Similar with
general sales
Innolux
Corporation
Foshan Innolux Optoelectronics An indirect wholly-owned
Ltd.
subsidiary
Sales
850,573
-
90 days
Innolux
Corporation
Inc.
subsidiary
Sales
714,609
-
Innolux
Corporation
subsidiary
Sales
635,548
-
Innolux
Corporation
Hongfujin Precision Industry
(Wuhan) Co., Ltd.
Sales
391,448
-
Innolux
Corporation
FuTaiJing Precision Electronics An indirect wholly-owned
(Yantai) Co., Ltd.
Sales
341,756
-
60 days
Innolux
Corporation
Futaijing Precision Electronics An indirect wholly-owned
(Beijing) Co., Ltd.
Sales
191,636
-
60 days
215
of balance
Balance
$
1,543,053
2
No significant
difference
1,875,465
3
general sales
No significant
difference
1,282,691
2
general sales
45 days
Single purchases
target, no basis
for comparsion
No significant
difference
No significant
difference
-
-
186,694
-
No significant
difference
173,861
-
Similar with
general sales
No significant
difference
1,649
-
45 days
Similar with
general sales
No significant
difference
133,856
-
60 days
Similar with
general sales
No significant
difference
-
-
general sales
No significant
difference
93,428
-
Similar with
general sales
No significant
difference
7,469
-
Similar with
general sales
No significant
difference
179,404
-
Note
Transactions
(payable)
Percentage
Company
Counterparty
Company
Purchases/
of purchases/
sales
Amount
Terms
133,220
-
60 days
Similar with
general sales
No significant
difference
101,020
-
45 days
Similar with
general sales
Innolux
Corporation
Ambit Microsystem (Shanghai) An indirect wholly-owned
Co., Ltd.
Sales
Innolux
Corporation
HongFuJin Precision
Electronics (HengYang) Co.,
Ltd.
Sales
Innolux
Corporation
Chi Mei Materials Technology An investee company
Corporation
accounted for under the
equity method
Purchases
4,407,106
1
Innolux
Corporation
Co., Ltd.
Purchases
1,820,509
Innolux
Corporation
Chi Lin Optoelectronics Co.,
Ltd.
The company is a corporate
director of Chi Lin
Optoelectronics Co., Ltd.
Purchases
Innolux
Corporation
Co., Ltd.
Innolux
Corporation
Innolux
Corporation
Innolux
Corporation
Ningbo Innolux
Optoelectronics
Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Nanjing Innolux
Optoelectronics
Ltd.
Leadtek Global Group Limited A subsidiary of the Company
Lakers Trading Ltd.
subsidiary
subsidiary
$
Percentage
sales
Unit price
Terms
Balance
$
of balance
2,036
-
No significant
difference
-
-
90 days after Single purchases
acceptance target, no basis
for comparsion
No significant
difference
-
-
-
60~90 days Single purchases
after
target, no basis
acceptance for comparsion
No significant
difference
(
726,789)
1
898,860
-
for comparsion
No significant
difference
(
609,775)
1
Purchases
296,646
-
No significant (
difference
16,826)
-
Processing
expense
Processing
expense
Processing
expense
Processing
revenue
78,866,584
20
for comparsion
60-90 days
Cost plus
53,598,757
14
60-90 days
Cost plus
35,408,180
9
60-90 days
Cost plus
41,971,830
91
90 days
( 42,634,612)
36
( 32,726,649)
28
(
8,444,162)
7
Similar with
general sales
No significant
difference
No significant
difference
No significant
difference
No significant
difference
19,784,634
92
Lakers Trading Ltd.
subsidiary
Processing
revenue
36,601,008
48
60 days
Similar with
general sales
No significant
difference
22,267,762
94
subsidiary
Processing
revenue
34,677,066
97
90 days
Similar with
general sales
No significant
difference
7,884,481
97
216
Note
Transactions
(payable)
Percentage
Company
Ningbo Innolux
Technology Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Shanghai Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Display Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Innolux
Technology
Japan Co., Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Shanghai Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Counterparty
Company
Purchases/
of purchases/
Percentage
sales
Amount
sales
Terms
Unit price
Terms
Processing
revenue
Processing
revenue
$ 19,610,772
92
90 days
16,648,612
17
90 days
Similar with
general sales
Similar with
general sales
No significant
difference
No significant
difference
Balance
$
of balance
6,966,625
-
90
-
Lakers Trading Ltd.
subsidiary
Processing
revenue
12,863,897
95
60 days
Similar with
general sales
No significant
difference
3,069,946
95
Lakers Trading Ltd.
subsidiary
subsidiary
Processing
revenue
Processing
revenue
3,116,868
98
90 days
100
47
60 days
No significant
difference
No significant
difference
986,622
1,226,867
Similar with
general sales
Similar with
general sales
2,158,754
58
subsidiary
Service
revenue
306,702
85
60 days
Similar with
general sales
No significant
difference
45,553
94
Ningbo Innolux Technology
Ltd.
subsidiary
Sales
2,079,743
2
90 days
Similar with
general sales
No significant
difference
965,551
3
Nanjing Innolux
subsidiary
Sales
723,106
4
60 days
Similar with
general sales
No significant
difference
142,914
3
Ningbo Chi Mei Materials
Subsidiary of an investee
company accounted for under
the equity method
subsidiary of Chi Lin
Purchases
3,169,506
4
Similar with
general sales
No significant
difference
-
-
Purchases
2,921,686
3
Similar with
general sales
No significant
difference
(
1,188,883)
6
Purchases
1,903,333
2
90 days after
goods are
shipped
60 days after
goods are
shipped
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
(
388,841)
1
Lakers Trading Ltd.
Ningbo Lin Moug Optronics
Co., Ltd.
Co., Ltd.
217
Note
Transactions
(payable)
Percentage
Company
Ningbo Innolux
Optoelectronics
Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Counterparty
Company
Purchases/
of purchases/
sales
Amount
$
Percentage
sales
Terms
Unit price
Terms
1,860,997
2
60 days after
goods are
shipped
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
Similar with
general sales
No significant
difference
90 days after
goods are
shipped
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
Similar with
general sales
Co., Ltd.
Purchases
the equity method
Purchases
1,546,583
1
Ningbo Innolux Hon Hai Precision Industry
Technology Ltd. Co., Ltd.
Purchases
1,022,838
3
Ningbo Innolux Ningbo Chi Mei Materials
Technology Ltd. Technology Co., Ltd.
the equity method
Purchases
779,482
2
Balance
($
of balance
688,812)
3
-
-
300,694)
3
No significant
difference
-
-
-
-
(
Foshan Innolux
Optoelectronics
Ltd.
Corporation
equity method
Purchases
701,095
1
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
Ningbo Innolux
Optoelectronics
Ltd.
Purchases
539,927
1
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
(
173,670)
1
An investee company
equity method
the equity method
Purchases
412,044
-
Similar with
general sales
No significant (
difference
26,952)
-
Purchases
364,731
1
Similar with
general sales
No significant
difference
200,785)
2
Purchases
179,536
4
Similar with
general sales
No significant
difference
-
-
Purchases
155,767
3
90 days after
goods are
shipped
120 days after
goods are
shipped
90 days after
goods are
shipped
90 days after
goods are
shipped
Similar with
general sales
No significant (
difference
63,614)
6
Foshan Innolux GIO Optoelectronics Corp.
Optoelectronics
Ltd.
Ningbo Innolux Ningbo Lin Moug Optronics
Ningbo Innolux
Display Ltd.
Ningbo Innolux
Display Ltd.
Co., Ltd.
218
(
Note
Transactions
(payable)
Percentage
Company
Counterparty
Company
Foshan Innolux
Optoelectronics
Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Ampower Technology Co., Ltd. The company is a corporate
director of Ampower
Jizhun Precision Industry
(Huizhou) Co., Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Purchases/
of purchases/
sales
Percentage
sales
Terms
Unit price
130,295
-
Similar with
general sales
No significant ($
difference
3,401)
-
Processing
expense
167,217
9
90 days after
goods are
shipped
30 days
Similar with
general sales
No significant (
difference
21,059)
3
Processing
expense
114,341
6
30 days
Similar with
general sales
No significant (
difference
23,662)
4
Purchases
Amount
$
Note A: Accounts for the cost of goods sold ratio.
219
Terms
Balance
of balance
Note
H.Receivables from related parties exceeding $100 million or 20% of the Company’s paid-in capital:
Balance of
Company
Counterparty
Overdue receivables
Relationship with
receivable from
Turnover
the Company
related parties
rate
Innolux Corporation
An indirect wholly-owned subsidiary of Hon Hai $
Innolux Corporation
Co., Ltd.
Allowance for
Action adopted for
Amount
Subsequent
overdue accounts
-
-
doubtful accounts
collection
$
provided
1,543,053
7.12 $
661,954
$
-
1,875,465
3.85
110,139
Subsequent
collection
78,424
-
1,282,691
3.28
209,867
Subsequent
collection
378,539
-
489,164
-
71,285
Subsequent
collection
106,435
-
-
-
8,405
-
Innolux Corporation
Honfujin Precision Electronics An indirect wholly-owned subsidiary of Hon Hai
Innolux Corporation
Kang Zhun Electronical
Technology (Kunshan) Co.,
Ltd.
Innolux Corporation
Co., Ltd.
186,694
11.39
-
Innolux Corporation
Futaijing Precision Electronics An indirect wholly-owned subsidiary of Hon Hai
(Beijing) Co., Ltd.
179,404
2.14
1,802
Innolux Corporation
An indirect wholly-owned subsidiary
173,861
9.93
-
-
-
-
Innolux Corporation
Inc.
133,856
5.93
-
-
96,199
-
Foshan Innolux
Lakers Trading Ltd.
22,267,762
2.34
17,331,083
Subsequent
collection
3,896,237
-
Ningbo Innolux
19,784,634
2.29
4,667,893
Subsequent
collection
3,165,386
-
Nanjing Innolux
7,884,481
3.73
-
-
2,943,828
-
Ningbo Innolux
Technology Ltd.
6,966,625
3.10
928,046
Subsequent
collection
2,025,388
-
Shanghai Innolux
Lakers Trading Ltd.
3,069,946
5.48
579,608
Subsequent
collection
579,608
-
Innocom Technology
Lakers Trading Ltd.
2,158,754
0.77
1,622,044
Subsequent
collection
-
-
An indirect wholly-owned subsidiary of Hon Hai
220
Subsequent
collection
Balance of
Company
Counterparty
Overdue receivables
Relationship with
receivable from
Turnover
the Company
related parties
rate
Ningbo Innolux Display Lakers Trading Ltd.
Ltd.
Ningbo Innolux
Ltd.
Shanghai Innolux
Nanjing Innolux
Innocom Technology
$
Amount
986,622
6.45 $
965,551
2.87
54,787
142,914
5.36
-
111,123
-
111,123
I. Derivative financial instruments undertaken during the year ended December 31, 2014: Please refer to Notes 6(2) and 6(4).
J. Significant inter-company transactions during the year ended December 31, 2014:
221
-
Allowance for
Action adopted for
Subsequent
doubtful accounts
overdue accounts
collection
provided
Subsequent
collection
$
89,598
$
-
681,627
-
-
-
-
Subsequent
collection
-
-
Information from transactions (Note C)
Number
Name of counterparty
Relationship
(Note A)
Name of transaction parties
General ledger
Transaction
account
0
Innolux Corporation
1
Sales
0
Innolux Corporation
1
Processing expense
0
Innolux Corporation
1
Accrued expense
0
Innolux Corporation
Innolux Optoelectronics Japan Co.,Ltd.
1
Sales
Amount
$
(
terms (Note B)
Percentage of totoal
combined revenue or
total assets
635,548
-
-
35,408,180
-
8
8,444,162)
-
2
1,757,646
-
-
0
Innolux Corporation
1
Accounts receivable
186,694
-
-
0
Innolux Corporation
1
Purchases
296,646
-
-
0
Innolux Corporation
1
Sales
714,609
-
-
0
Innolux Corporation
1
Accounts receivable
133,856
-
-
0
Innolux Corporation
1
Sales
1,231,983
-
-
0
Innolux Corporation
1
Accounts receivable
0
Innolux Corporation
Lakers Trading Ltd.
1
Sales
0
Innolux Corporation
Lakers Trading Ltd.
1
Processing expense
0
Innolux Corporation
Lakers Trading Ltd.
1
Accrued expense
0
Innolux Corporation
1
Processing expense
0
Innolux Corporation
1
Accrued expense
(
(
173,861
-
-
2,687,589
-
1
12
53,598,757
-
32,726,649)
-
8
78,866,584
-
18
42,634,612)
-
10
-
0
Innolux Corporation
1
Sales
850,573
-
1
3
Service revenue
306,702
-
-
2
Lakers Trading Ltd.
3
Processing revenue
12,863,897
-
3
2
Lakers Trading Ltd.
3
Accounts receivable
3,069,946
-
1
2
3
Sales
723,106
-
-
2
3
Accounts receivable
3
Lakers Trading Ltd.
3
Processing revenue
3
Lakers Trading Ltd.
3
3
3
4
3
4
3
142,914
-
-
36,601,008
-
8
Accounts receivable
22,267,762
-
5
Processing revenue
16,648,612
-
4
Processing revenue
34,677,066
-
8
Accounts receivable
7,884,481
-
2
5
Innocom Technology (Shenzhen) Co., Ltd.
Lakers Trading Ltd.
3
Processing revenue
1,226,867
-
-
5
Lakers Trading Ltd.
3
Accounts receivable
2,158,754
-
1
6
Ningbo Innolux Optoelectronics Ltd.
3
Processing revenue
41,971,830
-
9
222
Number
Relationship
(Note A)
terms (Note B)
combined revenue or
total assets
19,784,634
-
5
2,079,743
-
-
965,551
-
-
General ledger
Transaction
account
Amount
6
3
Accounts receivable
6
Ningbo Innolux Technology Ltd.
3
Sales
6
3
Accounts receivable
7
3
Processing revenue
19,610,772
-
4
7
3
Accounts receivable
6,966,625
-
2
3,116,868
-
1
986,622
-
-
8
Ningbo Innolux Display Ltd.
Lakers Trading Ltd.
3
Processing revenue
8
Lakers Trading Ltd.
3
Accounts receivable
$
Note A: Relationship with the transaction company:
1. The parent company to the subsidiary.
3. The subsidiary to the subsidiary.
Note B: Except for no comparable transactions from related parties, sales prices were similar to non-related parties transactions and the collection period was 30~120 days; the purchases from related parties were at market
prices and payment term was 30~120 days upon receipt of goods.
Note C: Amount disclosure standard: purchases, sales and receivables from related parties in excess of $100 million or 20% of capital.
223
(2) Information on investees
The information on the name, the location…etc of the investee companies is shown below (not including investees in Mainland China):
Original cost
Held by the Company at December 31, 2014
Net income
(loss) of the
investee
company
Investment
income (loss)
recognized by
the Company
Number of shares
Percentage
of ownership
(%)
74,924
4,910,000
100
348,999
779,152
31,783,000
100
Investment holdings
9,083
9,083
39,250
Samoa
Investment holdings
7,858,300
8,000,912
246,768,185
100
16,796,396
324,999
311,917
Keyway Investment
Management Limited
Samoa
Investment holdings
197,554
197,554
5,656,410
100
277,422
5,890
5,890
Innolux
Corporation
Landmark
International Ltd.
Samoa
Investment holdings
32,925,315
32,925,315
693,100,000
100
41,425,623
4,430,141
4,356,784
Innolux
Corporation
Toppoly
Optoelectronics
(B.V.I.) Ltd.
BVI
Investment holdings
3,596,307
3,064,699
144,447,000
100
5,945,861
740,811
740,811
Innolux
Corporation
Innolux Hong Kong
Holding Ltd.
Hong Kong Investment holdings
2,107,291
2,107,291
1,158,844,000
100
2,393,227
493,840
518,932
Innolux
Corporation
Limited
BVI
Order swap company
-
-
50,000,000
Innolux
Corporation
Yuan Chi Investment
Co., Ltd.
Taiwan
Investment company
1,217,235
1,217,235
Innolux
Corporation
InnoJoy Investment
Corporation
Taiwan
Investment company
1,078,166
Innolux
Corporation
Innolux
Optoelectronics
Europe B.V.
121,941
Name of
company
Investee company
Location
Main operating activities
Innolux
Corporation
Bright Information
Holding Ltd.
Innolux
Corporation
Gold Union
Investments Ltd.
Samoa
Investment holdings
Innolux
Corporation
Golden Achiever
International Ltd.
BVI
Innolux
Corporation
Innolux
Corporation
Netherlands Importing, exporting, buying,
selling and logistics services of
electronic equipment and TFTLCD monitors
December 31,
2014
December 31,
2013
$
$
119,724
100 (
Book value
$
185,214
116,227
21,849) (
$
423
111,306
573)
$
114
111,306
6,829
100 (
358,432) (
96,260) (
96,260)
-
100
918,468
31,904
31,904
1,078,166
167,405,392
100
1,670,083 (
162,272) (
162,272)
121,941
180
100
152,269
7,361
7,361
224
Original cost
Name of
company
Investee company
Location
Innolux
Corporation
Innolux
Co., Ltd.
Japan
Innolux
Corporation
Ampower Holding
Ltd.
Innolux
Corporation
Innolux
Corporation
December 31,
2014
December 31,
2013
Number of shares
Percentage
of ownership
(%)
Researching, manufacturing and $ 1,335,486
selling of the film transistor
liquid crystal display
$ 1,335,486
80
100
47
Net income
(loss) of the
investee
company
Book value
$ 1,572,495
68,864
$
68,864
Cayman
Investment holdings
1,717,714
1,717,714
14,062,500
Jetronics International
Corp.
Samoa
Investment holdings
86,149
145,600
726,941
FI Medical Device
Manufacturing Co.,
Ltd.
iZ3D, Inc.
Taiwan
Photographic and optical
instruments manufacturing
73,500
-
7,350,000
49
73,164
686
336
-
-
4,333
35
-
-
-
Innolux
Corporation
Chi Mei Lighting
Technology
Corporation
Taiwan
Manufacturing of electronic
equipment and lighting
equipment
819,312
819,312
78,195,856
33
-
-
-
Innolux
Corporation
Chi Mei El
Corporation
Taiwan
Developing, designing,
manufacturing and selling of
organic light emitting diodes
361,382
361,382
155,500,000
97
24,799 (
5,702) (
5,541)
Innolux
Corporation
GIO Optoelectronics
Corp.
Taiwan
components of back light
module on TFT-LCD
800,892
800,892
63,521,501
24
449,994 (
112,745) (
26,811)
Innolux Holding
Ltd.
Samoa
Investment holdings
7,296,530
7,426,240
226,504,550
100
15,261,115
71,583
71,583
Innolux Holding
Ltd.
Suns Holding Ltd.
Samoa
Investment holdings
555,422
568,324
18,177,052
100
1,404,398
255,129
255,129
Innolux Holding
Ltd.
Lakers Trading Ltd.
Samoa
Order swap company
-
-
1
100
241,128
-
-
Innolux Holding
Ltd.
Innolux Corporation
USA
Distributor company
6,348
6,348
2,000
Innolux
Corporation
USA
Research and development and
sale of 3D flat monitor
225
32 (
100 (
1,477,199 (
$
Investment
income (loss)
recognized by
the Company
1,771) (
88,218) (
276,629) (
90,897)
85,293)
41,869
1,722) (
1,722)
Original cost
Name of
company
Investee company
Location
Cayman
Net income
(loss) of the
investee
company
Investment
income (loss)
recognized by
the Company
December 31,
2014
December 31,
2013
Number of shares
Percentage
of ownership
(%)
Investment holdings
$ 3,572,384
$ 3,040,776
144,417,000
100
$ 6,181,164
100
780,296
233,398
233,398
100 (
2,095,946)
320,095
320,095
35,651
35,651
Book value
$
740,811
$
740,811
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Toppoly
Optoelectronics
(Cayman) Ltd.
Innolux Hong
Kong Holding
Ltd.
Innolux
Kong Holding Ltd.
-
-
162,897,802
Innolux Hong
Kong Holding
Ltd.
Innolux Hong Kong
Ltd.
Hong Kong Order swap company
-
-
35,000,000
Innolux Hong
Kong Holding
Ltd.
Innolux Technology
Europe B.V.
Netherlands Holding company and R&D
testing company
3,073,072
3,073,072
375,810
100
2,410,215
Innolux Hong
Kong Holding
Ltd.
Innolux Technology
Japan Co., Ltd.
Japan
Distributor company
1,815,603
1,815,603
201
100
1,647,930 (
Innolux Hong
Kong Holding
Ltd.
Innolux Technology
USA Inc.
USA
Distributor company
263,685
263,685
1,000
100
326,317
31,730
31,730
Innolux
Optoelectronics
Europe B.V.
Chi Mei
Optoelectronics
Germany GmbH
Innolux
Optoelectronics
Japan Co., Ltd.
Innolux
Optoelectronics USA,
Inc.
Rockets Holding
Ltd.
Best China
Investments Ltd.
Samoa
Rockets Holding
Ltd.
Mega Chance
Investments Ltd.
Rockets Holding
Ltd.
Rockets Holding
Ltd.
128,257) (
128,257)
Germany
Importing, exporting, buying,
10,324
10,324
250
100
26,937
3,753
3,753
USA
Selling of electronic equipment
and computer monitors
2,400
2,400
1,000
100
258,769
23,063
23,063
Investment holdings
314,740
314,740
10,000,001
100
255,806
36,380
36,380
Samoa
Investment holdings
573,940
573,940
18,000,000
100
421,268
1,221
1,221
Magic Sun Ltd.
Samoa
Investment holdings
1,146,370
1,146,370
38,000,001
100
1,018,638
3,328
3,328
Stanford
Developments Ltd.
Samoa
Investment holdings
5,391,125
5,391,125
164,000,000
100
13,534,845
36,362
36,362
226
Original cost
Name of
company
Rockets Holding
Ltd.
Investee company
Nets Trading Ltd.
Suns Holding Ltd. Warriors Technology
Investments Ltd.
Location
Samoa
Investment company
Samoa
Investment company
Germany
Testing and maintenance
company
Net income
(loss) of the
investee
company
Investment
income (loss)
recognized by
the Company
Number of shares
Percentage
of ownership
(%)
-
900,001
100
555,422
568,324
18,177,052
100
1,404,397
255,127
255,127
33,735
33,735
100,000
100
63,152
41
41
December 31,
2014
December 31,
2013
$
$
27,477
Book value
$
30,441
$
-
$
-
Innolux
Technology
Europe B.V.
Innolux Technology
Germany GmbH
Best China
Investments Ltd.
Asiaward Investment
Ltd.
314,740
314,740
77,830,001
100
255,806
36,380
36,380
Mega Chance
Investments Ltd.
Main Dynasty
Investment Ltd.
573,940
573,940
139,623,801
100
421,267
1,221
1,221
Magic Sun Ltd.
Sun Dynasty
Development Ltd.
1,146,370
1,146,370
295,969,001
100
1,018,638
3,328
3,328
Yuan Chi
Investment Co.,
Ltd.
Chi Mei Lighting
Technology
Corporation
Taiwan
Trading business,
manufacturing of electronic
equipment
263,812
263,812
19,673,402
8
-
-
-
Yuan Chi
Investment Co.,
Ltd.
GIO Optoelectronics
Corp.
Taiwan
components of back light
module on TFT-LCD
6,881
6,881
467,519
-
732 (
112,745) (
Yuan Chi
Investment Co.,
Ltd.
Chi Mei Logistics
Corp.
Taiwan
Warehousing services
-
124,485
-
-
-
5,843
2,863
Yuan Chi
Investment Co.,
Ltd.
TOA Optronics
Corporation
Taiwan
Selling electronic materials,
trading business, manufacturing
of electronic equipments and
lighting equipments
423,606
423,606
58,007,000
40
105,740) (
45,764)
227
364,907 (
203)
(3) Information on investments in Mainland China
A.Basic information:
Profit
Transactions during
Balance of
Jan. 1, 2014~Dec. 31, 2014
(in thousands of USD)
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
-
$ 4,016,756
1,202,700
Main activities of
investee
Capital
(Note A)
Method of
Investment
(Note D)
Balance of
amount remitted
from Taiwan on
January 1, 2014
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
$ 5,190,600
1
$ 4,016,756
Innocom
Technology
(Chengdu) Co.,
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
1,202,700
1
1,202,700
-
-
OED Company
Manufacturing and
selling of electronic
paper
256,112
1
63,300
-
-
Ningbo Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
9,811,500
2
1,396,613
-
Ningbo Innolux
Technology Ltd.
Manufacturing and
selling of LCD
backend module and
related components
4,114,500
2
4,114,500
-
Foshan Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
12,121,950
2
12,121,950
Ningbo Innolux
Display Ltd.
Manufacturing and
selling of LCD
backend module and
related components
949,500
3
949,500
Name of investee
in Mainland China
-
(1,163,508)
recognized
Net income of
63,300 (
$
Ownership
Profit
during
Book value
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
36,362
$ 13,534,833
$ 1,173,844
3,328
1,018,638
-
-
12,989
-
36,362
100
3,328
100
140,976)
5
233,105
2,070,696
100
2,070,696
20,601,650
5,463,896
-
4,114,500
491,039
100
491,039
3,218,102
-
-
-
12,121,950
1,866,041
100
1,866,041
18,607,398
-
-
-
949,500
34,860
100
34,860
260,746
-
228
Profit
Name of investee
in Mainland China
Main activities of
investee
Capital
(Note A)
Balance of
Balance of
amount remitted
from Taiwan on
January 1, 2014
Jan. 1, 2014~Dec. 31, 2014
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
$
$
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
$
$
71,744
47,951
-
VAP
Optoelectronics
(Nanjing) Corp.
Manufacturing and
selling of LCD
backend module and
related components
208,890
6
9,495
-
-
Nanjing Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
4,494,300
4
3,937,260
557,040
-
4,494,300
729,013
100
729,013
5,574,181
-
Ningbo Innolux
Logistics Ltd.
126,600
8
126,600
-
-
126,600
5,729
100
5,729
168,311
-
664,650
7
-
-
-
-
233,398
100
233,398
780,296
-
47,475
8
47,475
-
-
47,475
161
100
161
66,633
-
633,000
9
316,500
-
-
8,949)
47
4,206)
594,508
-
Amlink
(Shanghai) Ltd.
Manufacturing and
selling of power
supply, modem,
ADSL, and other IT
equipments
229
119,695
9,495 (
316,500 (
$
Book value
5
Foshan Innolux
Logistics Ltd.
66,465
Profit
during
126,600
Shanghai Innolux Manufacturing and
Optoelectronics
selling of LCD
Ltd.
backend module and
related components
-
Ownership
Glass thinning
processing service
Kunpal
Optoelectronics
Ltd.
-
Net income of
4
Purchases and sales
of monitor-related
components company
66,465
recognized
66,465
Nanjing Innolux
Technology Ltd.
$
Method of
Investment
(Note D)
Transactions during
11,797
100
942
100
574)
100
(
(
11,797
606,961
-
942
79,430
-
574) (
43,749)
-
Profit
Name of investee
in Mainland China
Main activities of
investee
Kunshan GuannJye Electronics
Co., Ltd.
Manufacturing of
transformers
Interface
Optoelectronics
(Shenzhen) Co.,
Ltd.
Development of new
type of flat panel
display, monitor and
peripherals,
production and
management, and
offer of after-sales
service
Capital
(Note A)
$
Method of
Investment
(Note D)
265,860
10
2,095,230
1
Transactions during
Balance of
Balance of
amount remitted
from Taiwan on
January 1, 2014
Jan. 1, 2014~Dec. 31, 2014
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
$
$
85,139
427,275
-
-
-
-
85,139
recognized
Net income of
$
427,275
Ownership
Profit
during
Book value
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
$
$
-
32
-
14
-
-
-
900,242
-
-
B. Information on investments in Mainland China (Note C):
Accumulated amount wired out from Taiwan
to Mainland China as of the end of the year
Company
Innolux Corporation
$
29,846,173
Investment amount approved by FIC of MOEA
Ceiling of investment amount of the Company
$
$
44,838,617
-
C. Significant transactions with investees in Mainland China directly or indirectly through the third areas:
The significant transactions between the Company and the investee companies for the year ended December 31, 2014 were eliminated in these financial statements and shown in Notes 13(1) A、G、H、J.
Note A: The relevant figures were listed in NT$. Where foreign currencies were involved, the figures were converted to NT$ using exchange rate.
Note B: Profit or loss recognised for the year ended December 31, 2014 was audited by independent accountants.
Note C: Pursuant to the Jing-Shen-Zi Letter No. 10100485600 of the Ministry of Economic Affairs, R.O.C., dated June 29, 2012, as the Company has obtained the certificate of conforming to the business scope of
headquarters, issued by the Industrial Development Bureau, MOEA, the investment ceiling regulation for Taiwan-based companies investing in Mainland China is not applicable to the Company.
Note D: The investment methods are as follows:
1.Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.
230
2.Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.
3.Through investing in Gold Union Investments Ltd. in the third area, which then invested in the investee in Mainland China.
4.Through investing in Toppoly Optoelectronics (B.V.I) Ltd. in the third area, which then invested in the investee in Mainland China.
5.Through investing in Bright Information Holding Ltd. in the third area, which then invested in the investee in Mainland China.
6.Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.
7.Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China.
8.Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.
9.Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.
10.Through investing in Jetronics International Corporation in the third area, which then invested in the investee in Mainland China.
231
14. SEGMENT INFORMATION
(5) General information
The Group is primarily engaged in the research, development, manufacture and sales 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 Company met the criteria for combining the segment information of big-size and
small-medium-size TFT LCD departments, the Company disclosed only one reportable operating
segment for all TFT LCD products. The Company’s operating segment information was prepared
in accordance with the Company’s accounting policies. The chief operating decision-maker
allocates 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.
(6) Information about segment profit or loss, assets and liabilities
The segment information provided to the chief operating decision-maker for the reportable
segment is as follows:
Segment revenue
Segment income
Depreciation and amortisation
Capital expenditure-property, plant and equipment
Segment assets
$
$
$
$
$
2014
2013
TFT LCD
TFT LCD
428,661,898 $
422,729,420
22,523,244 $
5,645,922
60,883,074 $
77,845,557
20,526,552 $
18,370,343
480,984,747 $
507,927,783
(7) Reconciliation for segment income
A reconciliation of reported segment income and income from continuing operations before tax is
provided as follows:
A.Reconciliation of segment revenue with operating revenue:
$
Segment revenue
Other revenue
Operating revenue
$
232
2014
2013
428,661,898 $
422,729,420
1,080
428,661,898 $
422,730,500
B.Reconciliation of segment income with income from continuing operations before income tax:
$
Segment income
Others
Income before income tax
$
2014
2013
22,523,244 $
5,645,922
2,569)
11,096 (
22,534,340 $
5,643,353
C.Reconciliation of segment assets with total assets:
December 31, 2014
$
480,984,747
1,531,808
$
482,516,555
Segment assets
Others
December 31, 2013
$
507,927,783
273,102
$
508,200,885
D.Other significant reconciliation:
$
Others
$
Capital expenditure - property, plant and
equipment
Others
$
$
2014
2013
60,883,074 $
77,845,557
16,482
5,881
60,899,556 $
77,851,438
20,526,552
20,526,552
$
$
18,370,343
18,370,343
(8) Information on product
Revenue from external customers is mainly from TFT-LCD product. Details of revenue are as
follows:
$
Sales of TFT LCD products
Other revenues
$
233
2014
2013
428,661,898 $
422,729,420
1,080
428,661,898 $
422,730,500
(9) Geographical information
Geographical information for the years ended December 31, 2014 and 2013 is as follows:
Taiwan
Hong Kong
China
Europe
USA
Others
2014
Revenue
Non-current assets
$ 91,333,989 $ 214,158,469
124,681,779
103,061,439
41,762,276
31,048,822
28,601
11,727,851
513
66,808,018
140,789
$ 428,661,898 $ 256,090,648
2013
Revenue
Non-current assets
$ 71,710,289 $ 255,437,219
147,983,751
74,639,122
40,949,233
28,876,735
30,474
30,837,604
1,862
68,682,999
44,270
$ 422,730,500 $ 296,463,058
(10) Major customer information
None of the individual sales to the Group’s customers exceeds 10% of the sales in the consolidated
statement of comprehensive income for the years ended December 31, 2014 and 2013.
234
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Innolux Corporation
We have audited the accompanying parent company only balance sheets of Innolux Corporation as of
December 31, 2014 and 2013, and the related parent company only statements of comprehensive
income, of changes in equity and of cash flows for the years then ended. These parent company only
financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these parent company only financial statements based on our audits. We did not
audit the financial statements of certain investments accounted for under equity method for the year
ended December 31, 2013. The long-term equity investments amounted to NT$2,618,196,000 as of
December 31, 2013, and the comprehensive income (including share of profit (loss) of subsidiaries,
associates and joint ventures accounted for using equity method and share of other comprehensive
income of subsidiaries, associates and joint ventures accounted for using equity method) was
NT$451,716,000 for the year then ended. Those financial statements and the information disclosed in
Note 13 were audited by other independent accountants whose reports thereon have been furnished to
us, and our opinion expressed herein is based solely on the audit reports of the other independent
accountants.
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of
Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the
Republic of China. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits and the reports of other independent accountants provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other independent accountants, the parent
company only financial statements referred to above present fairly, in all material respects, the
235
financial position of Innolux Corporation as of December 31, 2014 and 2013, and their financial
performance and cash flows for the years then ended in conformity with the “Regulations Governing
the Preparations of Financial Statements by Securities Issuers”.
Innolux Corporation’s current liabilities have exceeded its current assets by NT$42,313,979,000 as of
December 31, 2014. As set forth in Note 12(4), management has designed a turnaround plan to
improve the Company’s operating efficiency.
PricewaterhouseCoopers, Taiwan
February 10, 2015
------------------------------------------------------------------------------------------------------------------------------------------------The accompanying financial statements are not intended to present the financial position and results of operations and cash
flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of
China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements
may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the
accompanying financial statements and report of independent accountants are not intended for use by those who are not
informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their
applications in practice.
236
INNOLUX CORPORATION
PARENT COMPANY ONLY BALANCE SHEETS
Assets
Notes
2014
2013
Current assets
Cash and cash equivalents
6(1)
$
55,543,195
$
27,604,892
or loss - current
Available-for-sale financial assets - current 6(3)
Accounts receivable, net
6(5)
Accounts receivable, net - related parties
7
Other receivables
Other receivables - related parties
7
Inventory
6(6)
Prepayments
Other financial assets - current
8
Total current assets
52,453
227,703
220,000
-
68,858,149
63,763,265
6,067,658
2,409,842
699,592
609,036
691,024
787,951
27,938,165
39,510,209
542,334
849,108
2,250,035
2,485,841
12,542
26,684
162,875,147
138,274,531
3,101,461
1,824,122
73,096,389
67,860,212
192,599,182
233,557,614
693,677
706,850
Non-current assets
Available-for-sale financial assets -
6(3)
non-current
Investments accounted for under equity
6(7)
method
6(8), 7 and 8
Investment property, net
6(9)
Intangible assets
6(10)
20,127,184
21,114,443
Deferred income tax assets
6(25)
17,575,426
17,835,399
Other financial assets - non-current
8
11,160,082
12,327,722
625,863
57,553
318,979,264
355,283,915
Other non-current assets
Total non-current assets
Total assets
$
(Continued)
237
481,854,411
$
493,558,446
INNOLUX CORPORATION
PARENT COMPANY ONLY BALANCE SHEETS
Liabilities and Equity
Notes
2014
2013
Current liabilities
Short-term borrowings
6(11)
Financial liabilities at fair value through
6(2)
$
profit or loss - current
1,300,000
$
1,943,565
605,016
689,097
1,351
-
33,731,780
29,023,925
current
Accounts payable
7
85,171,012
81,977,746
Other payables
7 and 9
18,688,940
15,090,951
6(15)
3,133,489
1,949,029
Long-term liabilities, current portion
6(12)
61,092,333
155,569,218
1,465,205
1,170,242
205,189,126
287,413,773
-
21,918
Total current liabilities
Non-current liabilities
non-current
6(12)
37,223,093
-
Deferred income tax liabilities
6(25)
477,579
909,708
6(13) and 9
11,274,550
12,169,818
48,975,222
13,101,444
254,164,348
300,515,217
Total non-current liabilities
Total liabilities
Equity
Share capital - common stock
6(16)
99,545,364
91,094,288
Capital surplus
6(14)(17)
99,584,369
96,058,741
Retained earnings
6(18)
509,272
2,328,981
1,144,229
-
24,979,173
5,092,716
Legal reserve
Special reserve
Unappropriated retained earnings
1,927,656 (
6(19)
1,531,497)
227,690,063
Total equity
Significant contingent liabilities and
193,043,229
9
unrecognized contract commitments
Significant events after the balance sheet
6(12)(16) and 11
date
Total liabilities and equity
$
481,854,411
$
The accompanying notes are an integral part of these financial statements.
238
493,558,446
INNOLUX CORPORATION
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of New Taiwan dollars, except for earnings per share amount)
Items
Notes
7
$
6(6)(23)(24) and
7
(
Sales revenue
Operating costs
Net operating margin
Operating expenses
Selling expenses
Total operating expenses
Operating profit
Other income
Other gains and losses
Finance costs
Share of profit of subsidiaries and
associates accounted for under equity
method
Total non-operating income and
expenses
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Financial statements translation
differences of foreign operations
Unrealized gain (loss) on valuation of
available-for-sale financial assets
Cash flow hedges
Actuarial loss on defined benefit plan
Share of other comprehensive income
of associates and joint ventures
accounted for under equity method
Income tax relating to the components
of other comprehensive income
Other comprehensive income for the
year, net of tax
Total comprehensive income for the
year
Earnings per share (in dollars)
2014
426,005,033
$
2013
419,738,269
389,609,785) (
36,395,248
392,206,451)
27,531,818
1,092,207) (
3,451,341) (
11,412,260) (
15,955,808) (
20,439,440
1,105,609)
3,997,111)
11,128,979)
16,231,699)
11,300,119
1,379,919
3,418,822) (
2,721,239) (
1,222,075
8,950,438)
4,369,834)
5,998,536
5,233,229
6(23)(24)
(
(
(
(
6(20)
6(21)
6(22)
6(25)
(
(
(
$
$
1,238,394 (
21,677,834
1,075)
21,676,759 $
3,087,368
$
6,864,968)
4,435,151
667,417
5,102,568
2,703,765
6(3)
6(4)
6(13)
(
(
103,510 (
278,458)
55,790) (
223,008)
79,477
11,870)
263,095
275,902
48,369
26,242
6(25)
$
3,168,094
$
2,850,508
$
24,844,853
$
7,953,076
$
$
2.31
2.28
$
$
0.57
0.57
6(26)
239
INNOLUX CORPORATION
PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY
Retained Earnings
Notes
2013
accumulated deficit
cash
employees
employees
share-based payment
equity investments
Profit for the year
year
2014
Appropriations of 2013 earnings:
Legal reserve
Special reserve
Cash dividends
accumulated deficit
employees
employees
share-based payment
equity investments
Profit for the year
year
Common stock
$
Capital surplus
79,129,708
-
6(16)
6(14)
(
6(14)
6(19)
$
$
6(16)
6(18)
(
6(14)
$
$
-
($ 27,308,220 )
($ 2,818,705 )
($ 1,609,513 )
$
423,629
Employee
unearned
compensation
$
-
Total
$169,823,860
-
-
27,308,220
-
-
-
-
-
3,269,051
-
-
-
-
-
-
-
14,519,051
725,260
187,212
-
-
-
-
-
-
10,680
-
-
-
-
-
-
-
-
-
189,976
-
-
-
-
-
-
366,898
556,874
-
32,062
-
-
-
5,102,568
-
-
-
-
32,062
5,102,568
96,058,741
$ 2,328,981
96,058,741
2,125,000
$ 2,328,981
-
10,680 )
91,094,288
91,094,288
8,500,000
$
$
(
1,266,944 )
2,328,981
48,924 )
$
$
509,272
(
-
(
9,852 )
$ 5,092,716
-
$ 5,092,716
-
1,144,229
-
2,328,981 )
(
(
(
509,272 )
1,144,229 )
90,495 )
-
($
($
2,740,631
78,074 )
65,168
($ 1,544,345 )
78,074 )
-
($ 1,544,345 )
-
$
$
54,561
478,190
478,190
-
(
($
($
754,166 )
2,850,508
$193,043,229
387,268 )
-
$193,043,229
10,625,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,174
-
-
-
-
-
-
-
289,523
-
-
-
-
-
-
288,704
-
-
21,676,759
-
-
-
-
99,545,364
$
47,030 )
99,584,369
$
509,272
$
1,144,229
(
46,306 )
$ 24,979,173
3,161,022
$ 3,082,948
Employees' bonus and directors' and supervisors' remuneration accrued at $172,217 and $4,004 had been deducted from the statement of comprehensive income for the year ended December 31, 2013.
240
(
(
90,495 )
1,266,944 )
-
-
(
158,306
387,268 )
48,924
6(19)
$ 2,328,981
Special reserve
Changes in
gain (loss) on
cash flow
hedge
27,308,220 )
(
119,677,980
Unappropriated
earnings
Unrealized gain
(loss) on
available-forsale financial
assets
11,250,000
-
6(18)
6(18)
$
Legal reserve
Financial
statements
translation
differences of
foreign
operations
284,498
($ 1,259,847 )
(
$
231,120 )
247,070
(
($
43,951 )
142,515 )
3,223
578,227
(
47,030 )
21,676,759
3,168,094
$227,690,063
INNOLUX CORPORATION
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
Notes
2014
2013
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax for the year
Adjustments to reconcile net income to net cash provided by
Income and expenses having no effect on cash flows
Compensation related to share-based payment
Share of profit of subsidiaries and associates accounted
Gain from disposal of investments
Impairment loss
(Gain) loss on disposal of property, plant and equipment
Interest income
Dividend income
Interest expense
Unrealized foreign exchange loss (gain)
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets /liabilities at fair value through profit
or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Net changes in liabilities relating to operating activities
Derivative financial liabilities for hedging
Accounts payable
Other payables
Cash generated from operations
Cash paid for income tax
Net cash provided by operating activities
$
(Continued)
241
$
56,134,539
578,227
6(23)
6(14)
6(21)
6(21)
6(21)
6(20)
6(20)
6(22)
6(21)
21,677,834
(
(
(
(
(
(
(
(
(
(
(
4,435,151
71,068,428
556,874
5,998,536 )
452,613 )
22,568 )
126,493 )
7,567 )
2,998,473
1,188,553
(
(
91,169
5,094,884 )
3,657,816 )
89,561 )
11,572,044
306,774
14,142
(
299,025 )
4,707,855
3,193,266
4,125,260
1,184,460
309,564
951,067 )
91,382,030
1,075 )
91,380,955
(
(
(
(
(
(
(
(
(
(
(
5,233,229 )
18,366 )
204,721
6,065
112,782 )
43,822 )
4,318,564
468,215 )
706,193 )
5,437,335
10,145,135
194,789
4,133,091 )
580,008 )
9,872 )
290,235 )
22,695,791 )
7,322,352 )
8,943,611 )
814,253
248,257 )
3,361,094
49,736,585
49,736,585
INNOLUX CORPORATION
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
Notes
2014
2013
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in other receivables - related parties
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of financial assets carried at cost non-current
Acquisition of investment accounted for under equity
method
Proceeds from disposal of investment accounted for under
equity method
Proceeds from capital reduction of investments accounted
Acquisition of property, plant and equipment
6(27)
Decrease in other financial assets
Proceeds from disposal of property, plant and equipment
Increase in other non-current assets
Interest received
Dividends received
Net cash used in investing activities
$
(
96,927
$
135,456 ) (
167,288
-
(
192,758
753,906 ) (
1,381,019 )
1,550,113
(
(
(
547,891
292,854 )
201,107
3,557
736,214
14,629,033 ) (
440,446
12,761
568,172 ) (
125,498
1,444,112
11,513,208 ) (
3,278,146
16,072,136 )
877,470
111,287
13,819 )
113,894
5,859,537
6,574,181 )
643,565 )
57,625,650 )
10,625,000
90,495 )
1,266,944 )
7,754 )
2,920,036 )
51,929,444 )
27,938,303
27,604,892
55,543,195
1,943,565
699,430 )
49,210,951 )
2,000,000 )
980,000 )
14,519,051
181,315
8,260 )
4,239,118 )
40,493,828 )
2,668,576
24,936,316
27,604,892
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings
Decrease in short-term notes and bills payable
Payment of long-term borrowings
Payment of bonds payable
Decrease in accrued lease payments
Stock issued for cash
Cash dividends paid
Proceeds from issuance of restricted stock to employees
Repurchase from issuance of restricted stock to employees
Interest paid
Net cash used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(
(
6(16)
(
(
6(14)
(
(
(
$
242
(
(
(
(
(
(
(
$
INNOLUX CORPORATION
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS
(Expressed in thousands of New Taiwan dollars, except as otherwise indicated )
1. HISTORY AND ORGANIZATION
(1)Innolux Corporation (the “Company”) was organized on January 14, 2003 under the Act for
Establishment and Administration of Science Parks in Republic of China (R.O.C.). The Company
was listed on the Taiwan Stock Exchange Corporation (the “TSEC”) in October 2006. The Company
merged with TPO Displays Corporation and Chi Mei Optoelectronics Corporation on March 18,
2010, with the Company as the surviving entity.
(2)The Company is engaged in the research, development, design, manufacture and sales of TFT-LCD
panels, modules and monitors of LCD, color filter, and low temperature poly-silicon TFT-LCD.
2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY
FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION
These parent company only financial statements were authorized for issuance by the Board of Directors
on February 10, 2015.
3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
(61) Effect of the adoption of new issuances of or amendments to International Financial Reporting
Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)
None.
(62) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by
the Company
According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued on April 3, 2014,
commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai
Securities Market or Emerging Stock Market shall adopt the 2013 version of IFRS (not including
IFRS 9, ‘Financial instruments’) as endorsed by the FSC and the "Regulations Governing the
Preparation of Financial Reports by Securities Issuers" effective January 1, 2015 (collectively
referred herein as the “2013 version of IFRSs”) in preparing the parent company only financial
statements. The related new standards, interpretations and amendments are listed below:
Limited exemption from comparative IFRS 7
disclosures for first-time adopters (amendment to IFRS 1)
Severe hyperinflation and removal of fixed dates
for first-time adopters (amendment to IFRS 1)
243
Effective Date by
Standards Board
July 1, 2010
July 1, 2011
Effective Date by
Standards Board
Government loans (amendment to IFRS 1)
Disclosures－Transfers of financial assets
(amendment to IFRS 7)
Disclosures－Offsetting financial assets and financial
liabilities (amendment to IFRS 7)
IFRS 10, ‘Consolidated financial statements’
IFRS 11, ‘Joint arrangements’
IFRS 12, ‘Disclosure of interests in other entities’
IFRS 13, ‘Fair value measurement’
Presentation of items of other comprehensive income
Deferred tax: recovery of underlying assets
IAS 19 (revised), ‘Employee benefits’
IAS 27 (revised), ‘Separate financial statements’
Investments in associates and joint ventures
Offsetting financial assets and financial liabilities
IFRIC 20, ‘Stripping costs in the production phase
of a surface mine’
Improvements to IFRSs 2010
Improvements to IFRSs 2009－2011
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
(Investment entities: January 1, 2014)
January 1, 2013
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
January 1, 2011
January 1, 2013
Based on the Company’s assessment, the adoption of the 2013 version of IFRS has no significant
impact on the parent company only financial statements of the Company, except the following:
A. IAS 19, ‘Employee benefits’
Under the revised standard, net interest expense or income, calculated by applying the discount
rate to the net defined benefit asset or liability, replace the finance charge and expected return on
plan assets. Additional disclosures are also required.
B. IAS 1, ‘Presentation of financial statements’
The amendment requires entities to separate items presented in other comprehensive income
(OCI) classified by nature into two groups on the basis of whether they may be reclassified to
profit or loss subsequently when specific conditions are met. If the items are presented before tax
then the tax related to each of the two groups of OCI items (those that might be reclassified and
those that will not be reclassified) must be shown separately. Accordingly, the Company will
adjust its presentation of the statement of comprehensive income.
244
C. IFRS 12, ‘Disclosure of interests in other entities’
The standard integrates the disclosure requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The Company will disclose additional
information about its interests in consolidated entities and unconsolidated entities accordingly.
D. IFRS 13, ‘Fair value measurement’
The standard defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
The standard sets out a framework for measuring fair value using the assumptions that market
participants would use when pricing the asset or liability; for non-financial assets, fair value is
determined based on the highest and best use of the asset. The standard requires disclosures
about fair value measurements. Based on the Company’s assessment, the adoption of the
standard has no significant impact on its parent company only financial statements and the
Company will disclose additional information about fair value measurements accordingly.
Based on the Company’s assessment, the adoption of the 2013 version of IFRSs has no significant
impact on the parent company only financial statements of the Company.
(63) IFRSs issued by IASB but not yet endorsed by the FSC
New standards, interpretations and amendments issued by IASB but not yet included in the 2013
version of IFRS as endorsed by the FSC:
IFRS 9, ‘Financial instruments’
Sale or contribution of assets between an investor and its associate
or joint venture (amendments to IFRS 10 and IAS 28)
Investment entities: applying the consolidation exception
(amendments to IFRS 10, IFRS 12 and IAS 28)
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRS 14, ‘Regulatory deferral accounts’
IFRS 15, ‘Revenue from contracts with customers’
Disclosure initiative (amendments to IAS 1)
Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions
Equity method in separate financial statements
Recoverable amount disclosures for non-financial assets
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Effective Date by
Standards Board
January 1, 2018
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2017
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
Effective Date by
Standards Board
Novation of derivatives and continuation of hedge accounting
January 1, 2014
IFRIC 21, ‘Levies’
January 1, 2014
July 1, 2014
July 1, 2014
January 1, 2016
The Company is assessing the impact of the new standards and interpretations above and the impact
will be disclosed when the assessment is complete.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these parent company only financial
statements are set out below. These policies have been consistently applied to all the periods presented,
unless otherwise stated.
(64) Compliance statement
These parent company only financial statements are prepared by the Company in accordance with
the “Rules Governing the Preparation of Financial Statements by Securities Issuers.
(65) Basis of preparation
A.Except for the following items, these parent company only financial statements have been
prepared under the historical cost convention:
(a)Financial assets and financial liabilities (including derivative instruments) at fair value
through profit or loss.
(b)Available-for-sale financial assets measured at fair value.
(c)Defined benefit liabilities recognized based on the net amount of pension fund assets less
present value of defined benefit obligations.
B.The preparation of financial statements in conformity with International Financial Reporting
Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as
endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process
of applying the Company’s accounting policies. The areas involving a higher degree of judgment
or complexity, or areas where assumptions and estimates are significant to the parent company
only financial statements are disclosed in Note 5.
(66) Foreign currency translation
Items included in the financial statements are measured using the currency of the primary economic
environment in which the entity operates (the “functional currency”). The parent company only
financial statements are presented in NTD, which is the Company’s functional and presentation
currency.
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A.Foreign currency transactions and balances
(a)Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions are
recognized in profit or loss in the period in which they arise, except when deferred in other
comprehensive income as qualifying cash flow hedges.
(b)Monetary assets and liabilities denominated in foreign currencies at the period end are
re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences
arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c)Non-monetary assets and liabilities denominated in foreign currencies held at fair value
through profit or loss are re-translated at the exchange rates prevailing at the balance sheet
date; their translation differences are recognized in profit or loss. Non-monetary assets and
liabilities denominated in foreign currencies held at fair value through other comprehensive
income are re-translated at the exchange rates prevailing at the balance sheet date; their
translation differences are recognized in other comprehensive income. However,
non-monetary assets and liabilities denominated in foreign currencies that are not measured at
fair value are translated using the historical exchange rates at the dates of the initial
transactions.
(d)All foreign exchange gains and losses are presented in the statement of comprehensive income
under “other gains and losses”.
B.Translation of foreign operations
(a)The operating results and financial position of all the group entities and associates that have a
functional currency different from the presentation currency are translated into the
presentation currency as follows:
i.Assets and liabilities for each balance sheet presented are translated at the exchange rate
prevailing at the dates of that balance sheet;
ii.Income and expenses for each statement of comprehensive income are translated at average
exchange rates of that period;
iii.All resulting exchange differences are recognized in other comprehensive income.
(b)When a foreign operation partially disposed of or sold is an associate, exchange differences
that were recorded in other comprehensive income are proportionately reclassified to profit or
loss as part of the gain or loss on sale. In addition, if the Company retains partial interest in the
former foreign associate after losing significant influence over the former foreign associate,
such transactions should be accounted for as disposal of all interest in these foreign
operations.
(c)When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange
differences that were recorded in other comprehensive income are proportionately transferred
to the non-controlling interest in this foreign operation. In addition, if the Company retains
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partial interest in the former foreign subsidiary after losing control of the former foreign
subsidiary, such transactions should be accounted for as disposal of all interest in the foreign
operation.
(67) Classification of current and non-current items
A.Assets that meet one of the following criteria are classified as current assets; otherwise they are
classified as non-current assets:
(a)Assets arising from operating activities that are expected to be realized, or are intended to be
sold or consumed within the normal operating cycle;
(b)Assets held mainly for trading purposes;
(c)Assets that are expected to be realized within twelve months from the balance sheet date;
(d)Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to
be exchanged or used to pay off liabilities more than twelve months after the balance sheet
date.
B.Liabilities that meet one of the following criteria are classified as current liabilities; otherwise
they are classified as non-current liabilities:
(a)Liabilities that are expected to be paid off within the normal operating cycle;
(b)Liabilities arising mainly from trading activities;
(c)Liabilities that are to be paid off within twelve months from the balance sheet date;
(d)Liabilities for which the repayment date cannot be extended unconditionally to more than
twelve months after the balance sheet date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
(68) Cash equivalents
Cash equivalents refer to short-term highly liquid investments that are readily convertible to known
amount of cash and subject to an insignificant risk of changes in value. Time deposits and bonds
sold under repurchase agreements that meet the above criteria and held for the purpose of meeting
short-term cash commitment in operations are classified as cash equivalents.
(69) Financial assets at fair value through profit or loss
A.Financial assets at fair value through profit or loss are financial assets held for trading or
designated as at fair value through profit or loss on initial recognition. Financial assets are
classified in this category of held for trading if acquired principally for the purpose of sale in the
short-term. Derivatives are also categorized as financial assets held for trading unless they are
designated as hedges. Financial assets that meet one of the following criteria are designated as at
fair value through profit or loss on initial recognition:
(a)Hybrid (combined) contracts; or
(b)They eliminate or significantly reduce a measurement or recognition inconsistency; or
(c)They are managed and their performance is evaluated on a fair value basis, in accordance with
a documented risk management or investment strategy.
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B.On a regular way purchase or sale basis, financial assets at fair value through profit or loss are
recognized and derecognized using trade date accounting.
C.Financial assets at fair value through profit or loss are initially recognized at fair value. Related
transaction costs are expensed in profit or loss. These financial assets are subsequently
remeasured and stated at fair value, and any changes in the fair value of these financial assets are
A.Available-for-sale financial assets are non-derivatives that are designated in this category. On a
regular way purchase or sale basis, available-for-sale financial assets are recognized and
derecognized using trade date accounting.
B.Available-for-sale financial assets are initially recognized at fair value plus transaction costs.
These financial assets are subsequently remeasured and stated at fair value, and any changes in
the fair value of these financial assets are recognized in other comprehensive income.
(71) Loans and receivables
Accounts receivable are loans and receivables originated by the entity. They are created by the
entity by selling goods or providing services to customers in the ordinary course of business.
Accounts receivable are initially recognized at fair value and subsequently measured at amortized
cost using the effective interest method, less provision for impairment. However, short-term
accounts receivable which are non-interest bearing are subsequently measured at initial invoice
amount as the effect of discounting is insignificant.
(72) Impairment of financial assets
A.The Company assesses at each balance sheet date whether there is objective evidence that an
individual financial asset or a group of financial assets is impaired as a result of one or more
events that occurred after the initial recognition of the asset and that loss event has an impact on
the estimated future cash flows of an individual financial asset or group of financial assets that
can be reliably estimated.
B.The objective evidence that the Company uses to determine whether there is an impairment loss
is as follows:
(a)Significant financial difficulty of the issuer or debtor;
(b)A breach of contract, such as a default or delinquency in interest or principal payments;
(c)Information about significant changes with an adverse effect that have taken place in the
technology, market, economic or legal environment in which the issuer operates, and indicates
that the cost of the investment in the equity instrument may not be recovered; or
(d)A significant or prolonged decline in the fair value of an investment in an equity instrument
below its cost.
C.When the Company assesses that there has been objective evidence of impairment and an
impairment loss has occurred, accounting for impairment is made as follows according to the
category of financial assets:
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(a)Financial assets measured at amortized cost
The amount of the impairment loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the financial asset’s
original effective interest rate, and is recognized in profit or loss. If, in a subsequent period,
the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment loss was recognized, the previously recognized
impairment loss is reversed through profit or loss to the extent that the carrying amount of the
asset does not exceed its amortized cost that would have been at the date of reversal had the
impairment loss not been recognized previously. Impairment loss is recognized and reversed
by adjusting the carrying amount of the asset through the use of an impairment allowance
account.
(b)Available-for-sale financial assets
The amount of the impairment loss is measured as the difference between the asset’s
acquisition cost (less any principal repayment and amortisation) and current fair value, less
any impairment loss on that financial asset previously recognized in profit or loss, and is
reclassified from “other comprehensive income” to “profit or loss”. If, in a subsequent period,
the fair value of an investment in a debt instrument increases, and the increase can be related
objectively to an event occurring after the impairment loss was recognized, then such
impairment loss is reversed through profit or loss. Impairment loss of an investment in an
equity instrument recognized in profit or loss shall not be reversed through profit or loss.
Impairment loss is recognized and reversed by adjusting the carrying amount of the asset
through the use of an impairment allowance account.
(73) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the
weighted-average cost method. The cost of finished goods and work in process comprises raw
materials, direct labor, other direct costs and related production overheads (allocated based on
normal operating capacity). It excludes borrowing costs. The item by item approach is used in
applying the lower of cost and net realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated cost of completion and applicable
variable selling expenses.
(74) Investments accounted for under the equity method / subsidiaries / associates
A.Subsidiaries are all entities over which the Company has the power to govern the financial and
operating policies. In general, control is presumed when the parent owns, directly or indirectly,
more than half of the voting power of an entity. The Company evaluates investments in
subsidiaries accounted using equity method in these parent company only financial statements.
B.Inter-company transactions, balances and unrealised gains or losses on transactions between
companies within the Company are eliminated. Accounting policies of subsidiaries have been
adjusted where necessary to ensure consistency with the policies adopted by the Company.
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C.The Company's share of its subsidiaries' post-acquisition profits or losses is recognised in profit
or loss, and its share of post-acquisition movements in other comprehensive income is
recognised in other comprehensive income.
When the Company’s share of losses in a
subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise
losses proportionate to its ownership.
D.If changes in the Company’s shares in subsidiaries do not result in loss in control (transactions
with non-controlling interest), transactions shall be considered as equity transactions, which are
transactions between owners. Difference of adjustment of non-controlling interest and fair value
of consideration paid or received is recognised in equity.
E.When the Company loses its control in a subsidiary, the Company revalues the remaining
investment in the prior subsidiary at fair value, and recognises the difference between fair value
and book value in the profit or loss for the period. The Company should reclassify all amounts
previously recognised as other comprehensive income and amounts relating to the prior
subsidiary to profit or loss.
F.Associates are all entities over which the Company has significant influence but not control. In
general, it is presumed that the investor has significant influence, if an investor holds, directly or
indirectly 20 per cent or more of the voting power of the investee. Investments in associates are
accounted for using the equity method and are initially recognized at cost.
G.The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit
or loss, and its share of post-acquisition movements in other comprehensive income is
recognized in other comprehensive income.
When the Company’s share of losses in an
associate equals or exceeds its interest in the associate, the Company does not recognize further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of the
associate.
H.When changes in an associate’s equity are not recognized in profit or loss or other
comprehensive income of the associate and such changes do not affect the Company’s
ownership percentage of the associate, the Company recognizes all the change in equity in
“capital surplus” in proportion to its ownership.
I.Unrealized gains on transactions between the Company and its associates are eliminated to the
extent of the Company’s interest in the associates. Unrealized losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. Accounting policies
of associates have been adjusted where necessary to ensure consistency with the policies adopted
by the Company.
J.In the case that an associate issues new shares and the Company does not subscribe or acquire
new shares proportionately, which results in a change in the Company’s ownership percentage of
the associate but maintains significant influence on the associate, then “capital surplus” and
“investments accounted for under the equity method” shall be adjusted for the increase or
decrease of its share of equity interest. If the above condition causes a decrease in the
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Company’s ownership percentage of the associate, in addition to the above adjustment, the
amounts previously recognized in other comprehensive income in relation to the associate are
reclassified to profit or loss proportionately on the same basis as would be required if the
relevant assets or liabilities were disposed of.
K.When the Company loses its control in an associate, the Company revalues the remaining
investment in the prior associate at fair value, and recognises the difference between fair value
and book value in the profit or loss for the period.
L.When the Company disposes its investment in an associate and loses significant influence over
the associate, the amounts previously recognised in other comprehensive income in relation to
the associate, are reclassified to profit or loss, on the same basis as would be required if the
relevant assets or liabilities were disposed of.
M.When the Company disposes its investment in an associate and loses significant influence over
the associate, capital surplus in relation to the associate is transferred to profit or loss; if it
retains significant influence over the associate, the amounts are transferred in accordance with
the disposal ratio to profit or loss.
N.Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities
Issuers,” profit (loss) of the current period and other comprehensive income in the parent
company only financial statements shall equal to the amount attributable to owners of the parent
in the financial statements prepared with basis for consolidation. Owners’ equity in the parent
company only financial statements shall equal to equity attributable to owners of the parent in
the financial statements prepared with basis for consolidation.
A.Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the
construction period are capitalized.
B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost of the item can be measured reliably. The carrying
amount of the replaced part is derecognized. All other repairs and maintenance are charged to
profit or loss when incurred.
C.Land is not depreciated. Other property, plant and equipment apply cost model and are
depreciated using the straight-line method to allocate their cost over their estimated useful lives.
If each component of property, plant and equipment is significant, it is depreciated separately.
D.The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful
lives differ from previous estimates or the patterns of consumption of the assets’ future
economic benefits embodied in the assets have changed significantly, any change is accounted
for as a change in estimate under IAS 8, “Accounting Policies, Changes in Accounting
Estimates and Errors”, from the date of the change. The estimated useful lives of property, plant
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and equipment are as follows:
Buildings
3~50 years
2~9 years
Others
2~6 years
An investment property is stated initially at its cost and measured subsequently using the cost
model. Except for land, investment property is depreciated on a straight-line basis over its
estimated useful life of 25~50 years.
A.Goodwill arises in a business combination accounted for by applying the acquisition method.
B.Intangible assets, mainly patents, royalties and other intangible assets, are amortized on a
straight-line basis over their estimated useful lives of 2～10 years.
(78) Impairment of non-financial assets
A.The Company assesses at each balance sheet date the recoverable amounts of those assets where
there is an indication that they are impaired. An impairment loss is recognized for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the
circumstances or reasons for recognizing impairment loss for an asset in prior years no longer
exist, the impairment loss shall be reversed to the extent of the loss previously recognized in
profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount
greater than its amortized cost where no impairment loss was recognized.
B.The recoverable amounts of goodwill, intangible assets with an indefinite useful life and
intangible assets that have not yet been available for use shall be evaluated periodically. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall
not be reversed in the following years.
C.For impairment testing purpose, goodwill is allocated to cash generating units. This allocation is
based on operating segments. Goodwill is allocated to a cash generating unit or a group of cash
generating units that expects to benefit from business combination that will produce goodwill.
(79) Financial liabilities at fair value through profit or loss
A.Financial liabilities at fair value through profit or loss are financial liabilities held for trading.
Financial liabilities are classified in this category of held for trading if acquired principally for
the purpose of repurchasing in the short-term. Derivatives are also categorized as financial
liabilities held for trading unless they are designated as hedges.
B.Financial liabilities at fair value through profit or loss are initially recognized at fair value.
Related transaction costs are expensed in profit or loss. These financial liabilities are
subsequently remeasured and stated at fair value, and any changes in the fair value of these
financial liabilities are recognized in profit or loss.
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(80) Derivative financial instruments and hedging activities
A.Derivatives are initially recognized at fair value on the date a derivative contract is entered into
and are subsequently remeasured at their fair value. Any changes in the fair value are
B.The Company designates certain derivatives as either:
(a)Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value
hedge).
(b)Hedges of a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction (cash flow hedge).
C.The Company documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions. The Company also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.
D.The full fair value of a hedging derivative is classified as a non-current asset or liability when
the remaining maturity of the hedged item is more than 12 months, and as a current asset or
liability when the remaining maturity of the hedged item is less than 12 months. Trading
derivatives are classified as current assets or liabilities.
E.Fair value hedge
(a)Changes in the fair value of derivatives that are designated and qualified as fair value hedges
are recorded in profit or loss, together with any changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk. The Company only applies fair value
hedge accounting for hedging foreign currency on long-term borrowings. The gain or loss
relating to the effective portion of currency swaps hedging long-term borrowings
denominated in foreign currency is recognized in the statement of comprehensive income
within “finance costs”. The gain or loss relating to the ineffective portion is recognized in the
statement of comprehensive income within “other gains and losses”. Changes in the fair
value of the hedge long-term borrowings denominated in foreign currency attributable to
interest rate risk are recognized in the statement of comprehensive income within “finance
costs”.
(b)If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying
amount of a hedged item for which the effective interest method is used is amortized to profit
or loss over the period to maturity.
F.Cash flow hedge
(a)The effective portion of changes in the fair value of derivatives that are designated and
qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss
relating to the ineffective portion is recognized immediately in the statement of
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comprehensive income within “other gains and losses”.
(b)Amounts accumulated in other comprehensive income are reclassified into profit or loss in
the periods when the hedged item affects profit or loss. The gain or loss relating to the
effective portion of interest rate swaps hedging variable rate borrowings is recognized in the
statement of comprehensive income within “finance costs”.
(c)When a hedging instrument expires, or is sold, cancelled or executed, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other
comprehensive income at that time remains in other comprehensive income. When a forecast
transaction occurs or is no longer expected to occur, the cumulative gain or loss that was
reported in other comprehensive income is transferred to profit or loss in the periods when
the hedged forecast cash flow affects profit or loss.
(81) Employee benefits
A.Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected
to be paid and should be recognized as expenses in that period when the employees render
service.
B.Pensions
(a)Defined contribution plans
For defined contribution plans, the contributions are recognized as pension expenses on an
accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund
or a reduction in the future payments.
(b)Defined benefit plans
i.The liability recognized in the balance sheet in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the balance sheet date less the fair
value of plan assets, together with adjustments for unrecognized past service costs. The
defined benefit obligation is calculated annually by independent actuaries using the
projected unit credit method. The rate used to discount is determined by using interest rates
of government bond (at the balance sheet date).
ii.Actuarial gains and losses arising on defined benefit plans are recognized in other
comprehensive income in the period in which they arise.
iii.Past service costs are recognized immediately in profit or loss if vested immediately; if
not, the past service costs are amortized on a straight-line basis over the vesting period.
C.Employees’ bonus and directors’ and supervisors’ remuneration
Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and
liabilities, provided that such recognition is required under legal or constructive obligation and
those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus
and directors’ and supervisors’ remuneration are different from the actual distributed amounts as
resolved by the stockholders at their stockholders’ meeting subsequently, the differences should
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be recognized based on the accounting for changes in estimates. The Company calculates the
number of shares of employees’ stock bonus based on the fair value per share at the previous
day of the stockholders’ meeting held in the year following the financial reporting year, and after
taking into account the effects of ex-rights and ex-dividends.
(82) Employee share-based payment
A.For the equity-settled share-based payment arrangements, the employee services received are
measured at the fair value of the equity instruments granted at the grant date, and are recognized
as compensation cost over the vesting period, with a corresponding adjustment to equity. The
fair value of the equity instruments granted shall reflect the impact of market vesting conditions
and non-market vesting conditions. Compensation cost is subject to adjustment based on the
service conditions that are expected to be satisfied and the estimates of the number of equity
instruments that are expected to vest under the non-market vesting conditions at each balance
sheet date. Ultimately, the amount of compensation cost recognized is based on the number of
equity instruments that eventually vest.
B.Restricted stocks to employees:
(a)Restricted stocks issued to employees are measured at the fair value of the equity instruments
granted at the grant date, and are recognized as compensation cost over the vesting period.
(b)For restricted stocks where employees have to pay to acquire those stocks, if employees
resign during the vesting period, they must return the stocks to the Company and the
Company must refund their payments on the stocks. The Company recognizes the payments
from the employees who are expected to resign during the vesting period as liabilities at the
grant date, and recognizes the payments from the employees who are expected to be
eventually vested with the stocks in “capital surplus – others”.
C.The grant date for the shares reserved for employee preemption in cash capital increase is the
date on which the Company informs employees of the grant and both the Company and
employees agree to the number of shares granted and the price for subscription.
(83) Income tax
A.The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or
loss, except to the extent that it relates to items recognized in other comprehensive income or
items recognized directly in equity, in which cases the tax is recognized in other comprehensive
income or equity.
B.The current income tax expense is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the Company and its
subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in accordance with applicable tax regulations. It
establishes provisions where appropriate based on the amounts expected to be paid to the tax
authorities. An additional 10% tax is levied on the unappropriated retained earnings and is
recorded as income tax expense in the year the stockholders resolve to retain the earnings.
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C.Deferred income tax is recognized, using the balance sheet liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in
the parent company only balance sheet. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realized or the deferred income tax
liability is settled.
D.Deferred income tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized. At each
balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E.A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from
acquisitions of equipment or technology, research and development expenditures and equity
investments to the extent that it is possible that future taxable profit will be available against
which the unused tax credits can be utilized.
(84) Revenue recognition
The Company manufactures and sells TFT-LCD panels. Revenue is measured at the fair value of
the consideration received or receivable taking into account value-added tax, returns, rebates and
discounts for the sale of goods to external customers in the ordinary course of the Company’s
activities.
(85) Business combinations
A.The Company uses the acquisition method to account for business combinations. The Company
chooses to measure the non-controlling interest in the acquiree at the non-controlling interest’s
proportionate share of the acquirer’s identifiable net assets on an acquisition-by-acquisition
basis.
B.If the total of the fair values of the consideration of acquisition and any non-controlling interest
in the acquiree as well as the acquisition-date fair value of any previous equity interest in the
acquiree is higher than the fair value of the Company’s share of the identifiable net assets
acquired, the difference is recorded as goodwill; if less than the fair value of the Company’s
share of the identifiable net assets acquired, the difference is recognized directly in profit or
loss.
(86) Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments.
5. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION
UNCERTAINTY
The preparation of these parent company only financial statements requires management to make
critical judgments in applying the Company’s accounting policies and make critical assumptions and
estimates concerning future events. Assumptions and estimates may differ from the actual results and
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are continually evaluated and adjusted based on historical experience and other factors. The
information is addressed below:
(87) Critical judgments in applying the Company’s accounting policies
Financial assets－impairment of equity investments
The Company follows the guidance of IAS 39 to determine whether a financial asset-equity
investment is impaired. This determination requires significant judgment. In making this judgment,
the Company evaluates, among other factors, the duration and extent to which the fair value of an
equity investment is less than its cost and the financial health of and short-term business outlook for
the investee, including factors such as industry and sector performance, changes in technology and
operational and financing cash flow.
If the decline of the fair value of an individual equity investment below cost was considered
significant or prolonged, the accumulated fair value adjustments recognized in other comprehensive
income on the impaired “available-for-sale financial assets” is transferred to profit or loss.
(88) Critical accounting estimates and assumptions
The Company makes estimates and assumptions based on the expectation of future events that are
believed to be reasonable under the circumstances at the end of the reporting period. The resulting
accounting estimates might be different from the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are addressed below:
A.Impairment assessment of goodwill
The impairment assessment of goodwill relies on the Company’s subjective judgment, including
identifying cash-generating units, allocating assets and liabilities as well as goodwill to related
cash-generating units, and determining the recoverable amounts of related cash-generating units.
Please refer to Note 6(10) for the information on goodwill impairment.
B.Reliability of deferred income tax assets
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the deductible temporary differences can be utilized.
Assessment of the reliability of deferred income tax assets involves critical accounting judgments
and estimates of the management, including the assumptions of expected future sales, revenue
growth rate, profit rate, tax holiday, available tax credits, and tax planning, etc. Any change in
global economic environment, industrial environment, and laws and regulations might cause
material adjustments to deferred income tax assets.
C.Evaluation of inventories
As inventories are stated at the lower of cost and net realizable value, the Company must
determine the net realizable value of inventories on balance sheet date using judgments and
estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal
inventory consumption, obsolete inventories or inventories without market selling value on
balance sheet date, and writes down the cost of inventories to the net realizable value.
258
D.Financial assets - fair value measurement of unlisted stocks without active market
The fair value of unlisted stocks held by the Company that are not traded in an active market is
determined considering those companies’ recent fund raising activities and technical development
status, fair value assessment of other companies of the same type, market conditions and other
economic indicators existing on balance sheet date. Any changes in these judgments and
estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note
12(3) for the financial instruments fair value information.
6. DETAILS OF SIGNIFICANT ACCOUNTS
(89) Cash and cash equivalents
December 31, 2014
Cash on hand and revolving funds
Checking accounts and demand deposits
Time deposits
December 31, 2013
$
255
40,578,940
11,394,000
51,973,195
3,570,000
$
581
25,816,011
1,788,300
27,604,892
-
$
55,543,195
$
27,604,892
Cash equivalents - Repurchase Bonds
A.The Company associates with a variety of financial institutions all with high credit quality to
disperse credit risk, so it expects that the probability of counterparty default is remote. The
Company’s maximum exposure to credit risk at balance sheet date is the carrying amount of all
cash and cash equivalents.
B.The above time deposits and bonds with repurchase agreement expire in 3 months and risks of
changes in their values are remote.
(90) Financial assets and liabilities at fair value through profit or loss
Assets
December 31, 2014
Current items
$
Liabilities
52,453
December 31, 2014
Current items
Financial liabilities held for trading
$
605,016
December 31, 2013
$
227,703
December 31, 2013
$
689,097
A.The Company recognized net loss of $883,120 and $1,587,910 on financial assets held for
trading for the years ended December 31, 2014 and 2013, respectively.
259
B.The non-hedging derivative financial assets and liabilities transaction information are as follows:
December 31, 2013
December 31, 2014
Contract Amount
Contract Amount
Derivative financial
assets and liabilities
(in thousands)
Contract Period
(in thousands)
Contract Period
Current items
425,000 2014/10~2015/3 USD (sell)
$ 467,000
2013/10~2014/3
48,580,180 2014/10~2015/3 JPY (buy)
47,065,250
2013/10~2014/3
EUR (sell)
38,000 2014/10~2015/2 EUR (sell)
188,000
2013/10~2014/3
exchange contracts USD (buy)
47,574 2014/10~2015/2 USD (buy)
256,665
2013/10~2014/3
TWD (sell) 26,762,745
2013/12~2014/3
904,000
2013/12~2014/3
Forward foreign
USD (sell)
exchange contracts JPY (buy)
Forward foreign
$
USD (buy)
The Company entered into forward foreign exchange contracts to hedge exchange rate risk of
import and export proceeds and foreign currency. However, these forward foreign exchange
contracts are not accounted for under hedge accounting.
Items
December 31, 2014
Current items
Bond investments
Non-current items
Listed stocks and bond investments
Emerging and unlisted stocks
December 31, 2013
$
220,000
$
-
$
2,537,965
563,496
3,101,461
$
1,150,866
673,256
1,824,122
$
$
A.The Company recognized gain in other comprehensive income for the fair value change for the
years ended December 31, 2014 and 2013 in the amount of $138,700 and $211,410, respectively.
B.The counterparties of the Company’s debt instrument investments have good credit quality, all
with credit rating of twA+ above. The maximum exposure to credit risk at balance sheet date is
the carrying amount of available-for-sale financial asstes - debt instruments.
(92) Hedging derivative financial liabilities
Items
December 31, 2014
Current item
Non-current item
260
December 31, 2013
$
1,351
$
-
$
-
$
21,918
Cash flow hedges
Designated as Hedging Instruments
Derivative
Period of Gain
Fair Value
Instruments
Hedged Items
Designated
as Hedges
Interest rate swap
December 31,
2014
($
December 31,
2013
1,351) ($
21,918)
Period of
(Loss) Expected
Anticipated
Cash Flow
to be Recognised
in Profit or Loss
2008~2015
2008~2015
(a)The Company was exposed to significant risk of future cash flow changes on principal payments
associated with the Company’s floating interest rate bearing borrowings, both current and
long-term portion. Therefore, the Company entered into interest rate swap contracts for
exchanging floating interest rate for fixed interest rate (TWD90/180CP (Page51328) to hedge
such exposures.
(b)Information about gain or loss arising from cash flow hedges recognized in profit or loss and
other comprehensive income:
Items
Amount of gain or loss adjusted in other
comprehensive income
Amount of gain or loss transferred from other
comprehensive income to profit or loss
2014
2013
$
1,224
$
277,234 (
3,210
82,687)
(c)The gain/(loss) relating to the ineffective portion of cash flow hedges recognized in profit or loss
amounted to $289 for the year ended December 31, 2013.
(93) Accounts and notes receivable
Notes receivable
Accounts receivable
Less: allowance for sales returns and discounts
December 31, 2014
$
21,447
69,802,557
69,824,004
(
827,583)
(
138,272)
$
68,858,149
December 31, 2013
$
21,447
65,425,580
65,447,027
(
1,545,279)
(
138,483)
$
63,763,265
A.The Company’s accounts receivable that were neither past due nor impaired meet the credit
ranking rule based on the counterparties’ industrial characteristics scale of business and
profitability.
261
B.The aging analysis of accounts receivable and notes receivable that were past due but not
impaired is as follows:
December 31, 2014
$
534,490
64,153
4,309
$
602,952
Up to 60 days
61 to 180 days
Over 180 days
December 31, 2013
$
3,048,292
561,008
65,816
$
3,675,116
The above ageing analysis was based on past due date.
C.Movement analysis of accounts receivable and notes receivable that were impaired is as follows:
(a)As of December 31, 2014 and 2013, the Company’s accounts receivable that were impaired
were $138,272 and $138,483, respectively.
(b)Movement on allowance for bad debts for impairment loss based on individual provision is as
follows:
2014
$
At January 1
Allowance for bad debts - reclassified
Allowance for bad debts - write-offs
At December 31
(
$
2013
138,483 $
211)
138,272 $
117,036
21,447
138,483
D.The maximum exposure to credit risk was the carrying amount of each class of accounts
receivable.
(94) Inventories
December 31, 2014
$
1,780,875
16,122,356
10,034,934
$
27,938,165
Raw materials and supplies
Work in process
Finished goods
December 31, 2013
$
1,985,689
26,186,168
11,338,352
$
39,510,209
Expenses and losses incurred on inventories for the years ended December 31, 2014 and 2013 are as
follows:
$
(
Cost of inventories sold
Reversal of allowance for scrap, obsolescence
and price decline
Disposal loss and others
$
2014
2013
389,619,753 $
393,083,704
383,000) (
1,423,000)
373,032
389,609,785
$
545,747
392,206,451
The Company had disposed its expired and slow-moving inventories. Thus, the risk of reduction in
the inventory’s market price had been decreased and the net realizable value of inventories had been
262
recovered.
(95) Investments accounted for under the equity method
December 31, 2014
$
Toppoly Optoelectronics (B.V.I.) Ltd.
Innolux Hong Kong Holding Ltd.
Innolux Optoelectronics Japan Co., Ltd.
GIO Optoelectronics Corporation
Others
$
41,425,623
16,796,396
5,945,861
2,393,227
1,670,083
1,572,495
1,477,199
918,468
449,994
447,043
73,096,389
December 31, 2013
$
36,005,637
15,866,385
4,347,392
2,164,447
1,721,618
1,574,455
1,526,449
1,015,867
475,253
1,883,267
473,259
806,183
$
67,860,212
1. The Company’s subsidiaries
The Company has invested in the Mainland subsidiary through Landmark International Ltd.,
Innolux Holding Ltd., Toppoly Optoelectronics (B.V.I.) Ltd. and Innolux Hong Kong Holding
Ltd. The subsidiary is engaged in the research and development, assembly processing and
after-sale services of LCD modules and LCD monitors. Information on investees in Mainland
China is provided in Note 13.
2. The Company’s associates
A.The financial information of the Company’s associates is summarized below:
Assets
Liabilities
Revenue
Profit/(Loss)
$ 3,908,085 $ 1,297,031 $ 1,798,602 ($
475,353)
December 31, 2014
22,729,921
7,107,607
20,087,705
2,302,711
December 31, 2013
B.The fair value of the Company’s associates which have quoted market price is as follows:
Stock price per share (in dollars)
December 31, 2013
$
36.45
16.95
C.During 2014, the Company sold its interests in Chi Mei Materials Technology and Contrel
Technology Co., Ltd. Since the Company lost control, the investment was reclassified as
“available-for-sale financial assets - non-current”.
D.The Company recognized impairment loss on associates for the year ended December 31,
2013 in the amount of $204,721.
263
2014
At January 1
Cost:
Land
$ 3,852,792
156,365,038
Buildings
20,655,250
Others
557,025,225
and impairment:
( 59,116,947)
Buildings
( 15,428,084)
Others
( 326,608,753)
and equipment under
acceptance
3,141,142
$ 233,557,614
Additions
$
51,347
2,223
53,570
Transfer, net
exchange
differences
and others
Disposals
At December 31
$
$
- $
(
303,647)
797,338
( 14,314,548)
13,181,365
( 2,591,901)
4,518,734
( 17,210,096)
18,497,437
( 13,954,331)
( 37,915,245)
( 2,767,296)
( 54,636,872)
3,852,792
156,858,729
375,070,309
22,584,306
558,366,136
302,794
14,309,885 (
2,588,567 (
17,201,246 (
1,528
8,533,930)
1,983,547)
10,515,949)
( 72,766,956)
( 284,203,012)
( 17,590,360)
( 374,560,328)
130) (
8,474,675)
8,793,374
$ 192,599,182
14,127,037 (
2013
At January 1
Cost:
Land
$ 3,852,792
Buildings
153,864,439
17,895,333
Others
522,835,332
and impairment:
Buildings
( 44,259,742)
( 12,598,062)
Others
( 257,729,405)
and equipment under
acceptance
21,945,408
$ 287,051,335
Additions
$
(
(
(
(
330
215
545
14,939,334)
51,214,999)
3,023,762)
69,178,095)
15,812,656
Transfer, net
exchange
differences
and others
Disposals
$
(
(
(
(
- $
78,689)
2,579,288
2,556,036)
31,485,083
1,692,005)
4,451,707
4,326,730)
38,516,078
At December 31
$
3,852,792
156,365,038
376,152,145
20,655,250
557,025,225
58,594
2,138,976 (
1,689,971 (
3,887,541 (
23,535
2,116,098)
1,496,231)
3,588,794)
( 59,116,947)
( 252,063,722)
( 15,428,084)
( 326,608,753)
- (
34,616,922)
3,141,142
$ 233,557,614
Information about the property, plant and equipment that were pledged to others as collateral is
provided in Note 8.
264
2013
2014
At
At
At
Additions
December 31
January 1
$
$ 188,247
$ 188,247
January 1
At
Additions
December 31
$
$ 188,247
Cost:
$ 188,247
Land
-
568,440
Buildings
$ 756,687
$
-
568,440
568,440
-
$ 756,687
$ 756,687
-
$
-
568,440
-
$ 756,687
and impairment:
Buildings
(
49,837) (
13,173) (
$ 706,850
63,010) (
$ 693,677
36,664) (
13,173) (
$ 720,023
49,837)
$ 706,850
The fair value of the investment property held by the Company as at December 31, 2014 and 2013
was $1,110,523 and $721,774, respectively. The amounts mentioned above represent valuation
results of comparative method based on market trading information.
A.Intangible assets are goodwill, payments for TFT-LCD related technology and royalty.
2014
At January 1
Cost:
Patents and royalty
Goodwill
Others
and impairment:
Patents and royalty
Others
$
(
(
(
8,807,308
17,096,628
3,267,074
29,171,010
Additions
$
Disposals
At December 31
- ($ 673,622) $
3,349
- (
79,340)
498,811
- ( 752,962)
502,160
5,215,968) ( 1,193,337)
2,840,599) ( 291,157)
8,056,567) ( 1,484,494)
$ 21,114,443
265
Transfer, net
exchange
differences
and others
673,622
79,340 (
752,962 (
- (
4,925) (
4,925) (
$
8,137,035
17,096,628
3,686,545
28,920,208
5,735,683)
3,057,341)
8,793,024)
$ 20,127,184
2013
At January 1
Cost:
Patents and royalty
Goodwill
Others
and impairment:
Patents and royalty
Others
$
(
(
(
Additions
8,805,608
17,096,628
3,150,228
29,052,464
$
Disposals
- $
- (
- (
3,709,759) ( 1,506,209)
2,546,004) ( 370,951)
6,255,763) ( 1,877,160)
$ 22,796,701
Transfer, net
exchange
differences
and others
At December 31
- $
1,700
14,561)
131,407
14,561)
133,107
$
14,561
14,561
5,215,968)
2,840,599)
8,056,567)
$ 21,114,443
- (
61,795 (
61,795 (
8,807,308
17,096,628
3,267,074
29,171,010
B.Details of amortisation on intangible assets are as follows:
2014
2013
$
Operating costs
Operating expenses
$
954,350
530,144
1,484,494
$
$
961,945
915,215
1,877,160
C.The Company performed impairment analysis for recoverable amount of the goodwill at each
reporting date and used the value in use as the basis for calculation of the recoverable amount.
The value in use was calculated based on the estimated present value of future cash flows for
five years, which was discounted at the discount rate of 4.89% and 4.22% for the years ended
December 31, 2014 and 2013, respectively, to reflect the specific risks of the related cash
generating units. The future cash flows were estimated based on the future revenue, gross profit,
and other operating costs each year. Based on the evaluation above, the Company did not
recognize impairment loss on goodwill for the years ended December 31, 2014 and 2013.
(99) Short-term borrowings
Type of borrowings
Bank loans
Credit loans
$
266
1,300,000
2.5%
$
1,943,565
2.858%～4.050%
Collateral
None
(100) Long-term borrowings
Type of loans
Syndicated bank loans
Guaranteed commercial papers
Credit loans
Period
2005/03~2016/11
2012/11~2015/07
2009/09~2014/06
$
$
Less:
Administrative expenses
charged by syndicated
banks
Current portion
(
98,227,530
129,148
98,356,678
$
$
41,252) (
139,125,971
258,354
16,372,450
155,756,775
187,557)
(
61,092,333) (
155,569,218)
$
37,223,093 $
1.3115%~2.795%
1.2474%~2.4737%
A.Please refer to Note 8 for the information on assets pledged as collateral for long-term
borrowings.
B.The syndicated loan agreements specified that the Company shall meet covenants on current
ratio, liability ratio, interest coverage, and tangible net equity, which were based on the
Company’s annual parent company only financial statements audited by independent auditors.
The Company’s financial ratios on the parent company only financial statements for the years
ended December 31, 2014 and 2013 are in accordance with the covenants on the syndicated
loan agreement.
C.In December 2011, the Company applied for the assistance of Ministry of Economic Affairs to
negotiate the debt with the syndicated banks, in accordance with the “Procedures for the
Assistance of Ministry of Economic Affairs in the Negotiation of Enterprise and Financial
Institution relating to the Debt Issue”. On April 5, 2012, the Company signed an “Agreed-upon
Repayment Agreement” with all financial institution creditors based on the framework of the
resolutions during the creditors and debtors negotiation meeting. The major terms of the
agreement were as follows:
(a)Medium and long-term syndicated loans
The medium and long-term syndicated loans due between 2012 to 2014 will be extended for
2-3 years. Principal is repayable every year based on a certain percentage; interest is charged
at the original interest rate or at the original interest rate plus premium rate.
(b)Short and medium-term non-syndicated loans
The outstanding balances or the original amounts of each loan are renewed based on the
original terms and all extended to December 31, 2013. Before maturity, the Company may
apply for the extension of such loans for another year for each application, with a maximum
of two applications with each bank. Interest is charged at the original interest rate plus
premium rate and extension fee is charged at a certain percentage.
267
(c)Credit lines of derivative financial instruments
At least two-thirds of the original credit lines of derivative financial instruments are renewed
based on the original terms and all extended to December 31, 2013. Before maturity, the
Company may apply for the extension of such credit lines for another one year for each
application, with a maximum of two applications with each bank. Extension fee is charged at
a certain percentage.
(d)Other matters
a)All financial institution creditors agreed to waive the 2011 and 2012 covenants, the interest
penalty, and default penalty arising from the violation of covenants.
b)All financial institution creditors agreed to waive the agreement that the Company shall
early repay whole or part of the loans as prescribed by the original agreements before the
extension agreements were approved by all financial institution creditors.
(e)The Company’s significant commitments
The Company is committed to increase capital in certain amounts of cash within 3 years
starting from 2012, to focus on its main business activities, and not to make investments out
of its main business lines, except for equipment improvements or equipment additions for its
main business. Further, the Company shall not apply for bankruptcy or reorganisation during
the period of negotiation for the extension of the due date on the Company’s debt.
D.Because the Company failed to meet the requirements specified in the “syndicated repayment
syndicated banks may take measures, in accordance with the agreement, including, but not
limited to the outstanding principal, interest expenses, and other payables be due immediately.
Therefore, the Company reclassified syndicated loans and other long-term borrowings as of
December 31, 2013 amounting to $155,569,218 (including administrative expenses charged by
syndicated banks) to “long-term liabilities - current portion”. However, the deadline was
extended to the end of 2014 through the concession of financial institution creditors on January
27, 2014.
E.Though the Company failed to meet the requirement specified in the “syndicated repayment
deadline was extended to the end of 2015 through the concession of financial institution
creditors.
F. In order to repay the unpaid balance of the medium and long-term syndicated loans from the
approved the proposal for the company to apply for a syndicated credit line of NT$68.5 billion
with financial institutions.
268
(101) Pensions
A.Defined benefit pension plan
(a)The Company has established a defined benefit pension plan in accordance with the Labor
Standards Law, covering all regular employees’ service years prior to the enforecment of the
Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to
continue to be subject to the pension mechanism under the Law. Under the defined benefit
pension plan, employees are entitled to two base points for every year of service for the first
15 years and one base point for each additional year thereafter, up to a maximum of 45 base
points. The pension payment to employees was computed based on years of service and
average salaries or wages of the last six months prior to approved retirement. The Company
contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to
the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the
independent retirement fund committee.
(b)The amounts recognised in the balance sheet were determined as follows:
December 31, 2014
Net liability in the balance sheet (shown as
“Other non-current liabilities”)
$
(
$
December 31, 2013
1,605,920 $
1,488,938) (
116,982
$
1,504,354
1,454,627)
49,727
(c)Changes in present value of funded obligations were as follows:
2014
At January 1
Interest expense
At December 31
$
$
1,504,354
10,470
30,087
61,009
1,605,920
2013
$
$
1,464,983
9,148
21,975
8,248
1,504,354
(d)Changes in fair value of plan assets were as follows:
2014
At January 1
Employer contributions
At December 31
$
$
269
1,454,627 $
29,092
5,219 (
1,488,938 $
2013
1,398,638
20,980
3,622)
38,631
1,454,627
(e)Expenses recognised in statements of comprehensive income were as follows:
2014
2013
$
Interest cost
Current pension costs
(
$
10,470 $
30,087
29,092) (
11,465 $
9,148
21,975
20,980)
10,143
Details of cost and expenses recognised in statements of comprehensive income were as
follows:
2014
2013
$
Cost of sales
Selling expenses
$
7,991
184
848
2,442
11,465
$
$
6,593
329
1,058
2,163
10,143
(f)Amounts recognised under other comprehensive income were as follows:
$
$
Recognition for current period
Accumulated amount
2014
2013
55,790 $
11,870
12,453
68,243 $
(g)The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined
benefit pension plan in accordance with the Fund’s annual investment and utilisation plan
and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor
Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in
domestic or foreign financial institutions, investment in domestic or foreign listed,
over-the-counter, or private placement equity securities, investment in domestic or foreign
real estate securitization products, etc.). With regard to the utilisation of the Fund, its
minimum earnings in the annual distributions on the final financial statements shall be no
less than the earnings attainable from the amounts accrued from two-year time deposits with
the interest rates offered by local banks. The composition of fair value of plan assets as of
December 31, 2014 and 2013 is given in the Annual Labor Retirement Fund Utilisation
Report published by the government. Expected return on plan assets was a projection of
overall return for the obligations period, which was estimated based on historical returns and
by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund
Supervisory Committee and taking into account the effect that the Fund’s minimum earnings
in the annual distributions on the final financial statements shall be no less than the earnings
270
attainable from the amounts accrued from two-year time deposits with the interest rates
offered by local banks.
For the years ended December 31, 2014 and 2013, the actual return on plan assets was $34,311
and $17,358, respectively.
(h)The principal actuarial assumptions used were as follows:
2014
2013
2.25%
2.00%
3.00%
3.00%
2.25%
2.00%
Discount rate
Future salary increases
Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience
Morality Table.
(i)Historical information of experience adjustments was as follows:
2014
2013
Present value of defined benefit obligation
Deficit in the plan
Experience adjustments on plan liabilities
Experience adjustments on plan assets
$
(
$
$
$
1,605,920
1,488,938)
116,982
60,201
5,219
$
(
$
$
($
1,504,354
1,454,627)
49,727
320,046
3,622)
(j)The Company suspended its contributions to the pension reserve as agreed by the Science
Park Administration in June 2013.
B.Defined contribution pension plan
(a)Effective July 1, 2005, the Company has established a defined contribution pension plan (the
“New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with
R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based
on 6% of the employees’ monthly salaries and wages to the employees’ individual pension
accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump
sum upon termination of employment.
(b)The pension costs under the defined contribution pension plans of the Company for the years
ended December 31, 2014 and 2013 were $939,629 and $842,000, respectively.
271
(102) Share-based payment
A.As of December 31, 2014, the Company’s share-based payment transactions are set forth below
(excluding employee stock options assumed because of the merger stated in Note B):
Type of arrangement
Reservation for new share
subscription by employees
Restricted stocks to employeesshares subscribed with
consideration
Reservation for new share subscription
by employees
Grant date
2007.12.20
2010.05.13
2011.05.19
2013.01.17
Quantity granted Contract period
(in thousand units)
(in years)
Vesting conditions
Note (b),(c)
25,000
6
Note (a)
20,000
5
Note (a)
50,000
5
36,122
2013.01.30
2013.01.30
2013.03.29
2013.03.29
2013.12.12
2013.12.12
2014.07.09
31,151
31,151
844
844
4,628
4,628
85,000
Note (d),(e)
3
Note
(d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
Note (d),(e)
3
(a)The employees may exercise the stock options by stage based on 30%, 30% and 40% of total
options granted on completion of the specified year(s) of service (one to four years) from the
grant date.
(b)The employees may exercise the stock options by stage based on 40%, 30% and 30% of
total options granted on completion of the specified year(s) of service (three to five years)
from the grant date.
(c)The employee stock options had already expired.
(d)The employees may exercise the stock options by stage based on 20%, 40% and 40% of
total options granted on completion of the specified year(s) of service (one to three years)
(e)The restricted stocks issued by the Company cannot be transferred. Voting right and dividend
right are restricted on these stocks before vested.
272
(f)The fair value of stock options granted from 2010 to first quarter of 2014 is measured using
the Black-Scholes option-pricing model. Relevant information is as follows:
Type of
arrangement
Reservation for new
share subscription
by employees
Restricted stocks to
employees
- shares subscribed
with consideration
no consideration
- shares subscribed
with consideration
no consideration
- shares subscribed
with consideration
no consideration
Reservation for new
share subscription
by employees
Employee stock
options
Employee stock
options
Risk
Exercise Expected Expected Expected free Fair value
Price
price
volatility duration dividend interest per unit
2014.07.09 $ 14.90
$ 12.50
36.01
0.84
0.42
$ 2.42
2013.12.12
10.65
-
-
-
-
-
10.65
2013.12.12
10.65
5.00
-
-
-
-
5.65
2013.03.29
18.40
-
-
-
-
-
18.40
2013.03.29
18.40
5.00
-
-
-
-
13.40
2013.01.30
15.35
-
-
-
-
-
15.35
2013.01.30
15.35
5.00
-
-
-
-
10.35
2013.01.17
14.15
12.98
48.20
0.36
-
0.65
1.17
2011.05.19
26.70
26.70
35.67
48.60
-
1.00
2010.05.13
39.85
39.85
51.57
48.60
-
0.80
7.31
~8.32
15.12
~16.98
B.Employee stock options acquired because of merger
(a)Details:
Type of arrangement
Quantity granted
(in thousand units)
Grant date
2009.09.30
2007.07.02
2007.12.27
24,819
21
2
(Note i)
(Note i)
Contract period Vesting conditions
Note ii, iv
5 years
Note iii, iv
6 years
Note iii, iv
6 years
i.Each unit of stock options can subscribe for 1,000 shares of common stock.
ii.The employees may exercise the stock options by stage based on 50% and 50% of total
options granted on completion of the specified years of service (two to three years) from
the grant date.
iii.The employees may exercise the stock options by stage based on 25%, 25%, 25% and 25%
of total options granted on completion of the specified years of service (two to five years)
273
iv.The employee stock options had already expired.
v.The units of employee stock options above were adjusted by share conversion rate.
(b)The fair value of employee stock options was estimated using the Hull & White (2002)
Enhanced FASB 123 of the aforementioned binomial model. The information was as
follows:
Exercise Expected Expected Expected
Type of
Price
price
volatility duration dividend
arrangement
(month) yield (%)
$ 39.20
45.10
36.78
0.61
Employee stock 2009.09.30 $ 51.60
options
51.60
67.53
45.10
24.78
0.61
Employee stock 2007.07.02
options
51.60
80.63
45.10
48.54
0.61
Employee stock 2007.12.27
options
Risk
free
Fair value
interest
per unit
rate (%) (in dollars)
0.82
$3.57~4.14
0.82
4.23~4.41
0.82
3.65~3.82
C.The details of the employee stock option plan for the years ended December 31, 2014 and 2013
were as follows:
Stock Options
Options exercised
Options expired
end of the year
Weighted
Weighted
average
average
Range of
remaining
Quantity
exercise
exercise
vesting
(in thousand
price
price
period
units)
94,819
$ 28.71
( 24,819)
32.10
70,000
25.63
$
$ 32.59
22.85
end of the year
50,000
26.75
274
Weighted
average
stock price of
stock options
at exercise
date (in dollars)
0.38 years
1.39 yeas
12.68
Stock Options
Options exercised
Options expired
end of the year
Weighted
average
Range of
Quantity
exercise
exercise
(in thousand
price
price
units)
119,842
$ 41.79
( 25,023)
57.05
94,819
28.71
$
$ 34.46
1.38 years
23.82
2.39 years
0.75 years
33.93
end of the year
Weighted
Weighted
average
average
stock price of
remaining stock options
vesting
at exercise
period
date (in dollars)
14.98
31.13
51,819
D.For the years ended December 31, 2014 and 2013, the expenses incurred from share-based
payment arrangements were $578,227 and $556,874, respectively.
(103) Provisions-current
At January 1, 2014
Addition
Used during the year
At December 31, 2014
$
(
$
Warranty
Litigation and others
140,809 $
1,808,220 $
2,723,491
2,451,275
2,117,279) (
1,873,027) (
747,021
$
2,386,468
$
Total
1,949,029
5,174,766
3,990,306)
3,133,489
A.Warranty
The Company provides warranty on TFT-LCD panel products sold. Provision for warranty is
estimated based on historical warranty data of TFT-LCD panel products.
B.Litigation and others
Litigation and other provision for the Company are related to patents of TFT-LCD panel
products and anti-trust litigations. For information on estimation of provisions, please refer to
Note 9(1).
275
(104) Share capital
A.As of December 31, 2014, the Company’s authorized and outstanding capital were
$120,000,000 (including $500,000 reserved for employee stock options) and $99,545,364,
respectively, with a par value of $10 (in dollars) per share. All proceeds from shares issued have
been collected. Movements in the number of the Company’s ordinary shares outstanding are as
follows:
2014
2013
Number of ordinary
Number of ordinary
At January 1
9,109,429
7,912,971
Employee stock options exercised
850,000
1,125,000
Issuance of restricted shares to employees
72,526
4,893) (
1,068)
Cancellation of restricted stock to employees (
9,954,536
9,109,429
At December 31
B.The Company’s Board of Directors resolved to increase capital through cash on December 17,
2013 by issuing common shares of no more than 2 billion shares, in exchange for cash
domestically or by using cash from capital increase to issue common shares in exchange for the
issuance of foreign depository receipts. On June 19, 2014, the shareholders approved the capital
increase. On June 20, 2014, the Board of Directors approved the domestic capital increase of
10,625,000 shares. The issue price was determined to be $12.5 in July 2014, and the capital
increase was effective on August 12, 2014.
C.The Board of Directors of the Company resolved to increase capital for cash by issuing global
depositary receipts (the “GDR”). The amount of $9,360,000 is tentatively scheduled for release,
(approximately equivalent to US$312,625 thousand). As the Company has received bank’s
approval for extending capital increase, based on shareholders’ interest, the issuance of the GDR
was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on
January 30, 2015.
D.As authorized by the shareholders during their meeting in June 2012, the Board of Directors of
the Company resolved to increase capital for cash by issuing the GDR on July 18, 2012, and
had been completed in January 2013. The Company issued 1,125,000 thousand shares of
common stock for cash, including 112,500 thousand shares regarded as employee stock options,
and 101,250,000 units of GDRs which represent 1,012,500 thousand shares of common stock,
with a unit of GDR representing 10 shares of common stock at the Luxembourg Stock
Exchange. Per unit was issued at a premium of US$4.481, which was equivalent to $12.98 per
share and raised a total of $14,519,051, net of issuance cost. As of December 31, 2014, there
were 69 thousand units outstanding, representing 692 thousand shares of common stocks.
E.As authorized by the shareholders at the shareholders’ meeting in June, 2012, the Board of
276
Directors of the Company adopted a resolution on January 30, 2013, March 29, 2013 and
November 12, 2013 to issue restricted shares to employees, consisting of 36,263 thousand
shares without consideration and 36,263 thousand shares with consideration (the price for
subscription is $5 per share). The effective dates of the issuance were on January 30, 2013,
March 29, 2013 and December 12, 2013. Until the vesting conditions are met by employees,
those shares are restricted to transfer voting rights, dividend and other rights. As of December
31, 2014, the Company bought back 4,893 shares of unvested restricted stocks to employees,
and decreased capital in accordance with related regulation.
F.The stockholders at the stockholders’ meeting on January 6, 2010 approved the merger of the
Company with another company by issuing new shares, with the Company as the surviving
company. The Company issued 4,046,382 thousand new shares according to the merger contract.
The new shares included the common stock issued by the acquired companies in May and
December 2006 through private placement. The issuance of 570,929 thousand shares was
determined based on the exchange ratio in the merger contract. The rights and obligations of the
private common shares were the same as other issued common shares, except for the transfer
restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public
listing will be allowed within three years since the day of issuance and only if the Company
completes the application to publicly issue the shares. The aforementioned private common
shares have not been publicly issued as of December 31, 2014.
G.In accordance with the Board of Directors’ resolution in August 2007, the Company decided to
issue 300 million shares of common stock for cash, including 149,967,500 units of GDRs which
represent 299,935 thousand shares of common stock with a unit of GDR representing 2 shares
of common stock. Per unit was issued at premium of US$9.02 (in dollars). In accordance with
the Board of Directors’ resolution in March 2013, the Company terminated the abovementioned
GDR, and the effective date of termination was in May 2013. The depository trust company
completed the cancellation and distributed proceeds in November 2013.
(105) Capital surplus
Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par
value on issuance of common stocks and donations can be used to cover accumulated deficit or to
issue new stocks or cash to shareholders in proportion to their share ownership, provided that the
Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires
that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the
paid-in capital each year. Accumulated deficit shall first be covered by retained earnings before the
capital reserve can be used to cover the accumulated deficit.
277
2014
Share of profit
(loss) of
associates
accounted for
Share premium
method
stock option
Restricted
stock to
employees
Total
$ 94,106,611
$ 56,303
$ 1,697,935
$ 197,892
$ 96,058,741
2,125,000
-
-
-
2,125,000
(
accumulated deficit
employees
Vested restricted stock to employees
employees
payment
1,266,944)
-
-
- (
1,266,944)
2,328,981
-
-
-
2,328,981
65,665
-
- (
48,924
65,665)
48,924
-
-
-
-
47,174
47,174
205,700
-
83,823
-
289,523
407,899
- (
407,899)
-
-
At January 1
equity investments
At December 31
- (
$ 97,972,912
47,030)
$
9,273
$ 1,373,859
- (
$ 228,325
47,030)
$ 99,584,369
2013
Share of profit
(loss) of
associates
accounted for
Share premium
method
stock option
Restricted
stock to
employees
Total
At January 1
$ 118,065,992 $ 24,241 $1,587,747 $
- $119,677,980
( 27,308,220)
- ( 27,308,220)
accumulated deficit
3,269,051
3,269,051
cash
187,212
187,212
employees
10,680
10,680
employees
42,263
147,713
189,976
payment
37,525
- (
37,525)
32,062
32,062
equity investments
$ 94,106,611 $ 56,303 $1,697,935 $ 197,892 $ 96,058,741
At December 31
278
(106) Retained earnings
A.In accordance with the Company’s Articles of Incorporation, net income must be distributed in
the following order:
(a)To pay all tax accruals and payables arising from the current year and to cover prior years’
losses, if any;
(b)As legal reserve equal to 10% of net income after tax and distribution pursuant to clause (a);
(c)As any special reserve;
(d)To pay dividends on preferred shares;
(e)To pay bonuses to employees not less than 5% of net income after tax and distribution
pursuant to clauses (a) to (d); and
(f)The remaining amount, if any, shall be distributed pursuant to the proposal of the Board of
Directors in accordance with the Company’s dividend policy and the resolution approved at
the stockholders’ meeting, of which 0.1% should be paid as remuneration to directors and
supervisors and the remaining amount as dividends to stockholders.
Dividends distributed in respect of any fiscal year in the form of shares shall not exceed
two-thirds of total dividends to stockholders.
B.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in
proportion to their share ownership, the legal reserve shall not be used for any other purpose.
The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their
share ownership is permitted, provided that the balance of the reserve exceeds 25% of the
Company’s paid-in capital.
C.The Board of Directors proposed to cover accumulated deficit for the year ended December 31,
2012 and the proposal was approved by the stockholders in June 2013. It was resolved not to
distribute dividends or accrue employees’ bonus and directors’ and supervisors’ remuneration.
As approved by the stockholders in June 2013, the Company covered accumulated deficit
amounting to $27,308,220 by using additional paid-in capital in excess of par value of common
stock.
In June 2014, the shareholders approved and resolved the deficit compensation
amendment for 2012 which is to compensate deficit with legal reserve of $2,328,981 and
$24,979,239 by using additional paid-in capital in excess of par value of common stock.
D.The details of the appropriation of 2013 net income which was approved at the stockholders’
meeting in June 2014 are as follows:
279
$
Legal reserve
Special reserve
Cash dividends
$
Amount
509,272
1,144,229
90,495
1,743,996
Dividends per
share (in dollars)
$
0.01
Furthermore, the Company’s stockholders have resolved to distribute $0.14 cash per share with
capital surplus amounting to $1,266,944. The Company distributed a total of $0.15 cash dividend
per share.
E.Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $172,217 and
considering the period’s net profit after tax, legal reserve amongst other factors and the
Company’s Articles of Incorporation. As resolved by the stockholders in June 2014, employees’
bonus and directors’ and supervisors’ remuneration were $343,922 and $90, respectively,
resulting to a difference of $167,791 from the amounts in 2013 financial statements. The
difference was caused by different accrual ratio which has been processed as accounting
estimates after being approved at the stockholders’ meeting and recorded as expense in 2014.
For the year ended December 31, 2014, employees’ bonus was accrued at $1,436,187.
Information about the appropriation of employees’ bonus and directors’ and supervisors’
remuneration by the Company as proposed by the Board of Directors will be posted in the
“Market Observation Post System” at the website of the Taiwan Stock Exchange.
280
(107) Other equity items
2014
Available-
At January 1
flow hedges
investments - gross
employees
payment
Share of subsidiaries and other
comprehensive income (loss) of
associates
At December 31
Employee
Currency
for-sale
Hedging
unearned
translation
investments
reserve
compensation
($
Total
78,074) ($1,544,345) $ 478,190 ($ 387,268) ($1,531,497)
-
-
(
1,224)
- (
1,224)
-
-
( 277,234)
- (
277,234)
-
138,700
-
-
138,700
-
- (
-
- (
35,190)
35,190)
3,087,368
-
-
-
-
- (
-
-
-
288,704
288,704
47,338
-
263,095
38,885
73,654
- (
189,441
8,453)
43,951) (
3,087,368
43,951)
$3,082,948 ($1,259,847) $ 247,070 ($ 142,515) $1,927,656
2013
Availablefor-sale
investments
Currency
translation
At January 1
($2,818,705)
flow hedges
investments - gross
2,703,765
employees
payment
Share of subsidiaries and other
comprehensive income (loss) of
36,866
associates
($ 78,074)
At December 31
281
Hedging
reserve
Employee
unearned
compensation
($1,609,513) $ 423,629 $
- ( 3,210)
-
82,687
Total
- ($4,004,589)
- (
3,210)
-
82,687
(
211,410)
-
- (
211,410)
(
11,598)
-
-
- (
11,598)
2,703,765
-
- (
754,166) (
754,166)
-
-
366,898
366,898
-
275,902
24,224
239,036
49,140
( 24,916)
($1,544,345) $ 478,190 ($ 387,268) ($1,531,497)
(108) Other income
2014
2013
$
Rental revenue
Interest income
Dividend income
Other income
$
139,286
126,493
7,567
1,106,573
1,379,919
$
$
129,511
112,782
43,822
935,960
1,222,075
(109) Other gains and losses
2014
2013
Net loss on financial assets and liabilities at fair
value through profit or loss
Net currency exchange gain
Gain on disposal of investments
($
1,143,155
452,613
Gain (loss) on disposal of property, plant and
equipment
Impairment loss
Litigation loss and others
883,120) ($
1,587,910)
2,252,870
18,366
22,568 (
(
($
6,065)
- (
4,154,038) (
3,418,822) ($
204,721)
9,422,978)
8,950,438)
(110) Finance costs
2014
2013
Interest expense:
Bank borrowings
Bonds
Others
(Gain) loss on fair value change of financial
instruments:
(Gain) loss on cash flow hedges, reclassified
from equity
Fair value hedges
Financing charges incurred on accounts
receivable factoring
$
(
$
277,234)
- (
2,721,239
4,292,335
5,662
20,567
82,687
31,642)
$
282
2,984,966
13,507
225
$
4,369,834
(111) Expenses by nature
$
Employee benefit expense
Depreciation
Amortization
$
2014
2013
26,411,358 $
20,699,447
54,650,045
69,191,268
1,877,160
1,484,494
82,545,897 $
91,767,875
(112) Employee benefit expense
2014
$
Salaries and other-term employee benefits
Termination benefits
$
283
24,882,037
578,227
951,094
26,411,358
2013
$
$
19,290,430
556,874
852,143
20,699,447
(113) Income tax
A.Income tax expense
(a)Components of income tax expense:
2014
2013
Current tax:
Current tax on profit for the period
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of temporary
differences
Income tax expense (benefit)
$
(
$
123,787
1,075
124,862
$
123,787) (
1,075 ($
2,985
2,985
670,402)
667,417)
(b)The income tax (charge)/credit relating to components of other comprehensive income is as
follows:
2014
2013
Fair value gains/losses on available-for-sale
financial assets
Cash flow hedges
Actuarial gains/losses on defined benefit
obligations
$
(
8,453 ($
47,338)
49,140)
24,916
(
($
9,484) (
48,369) ($
2,018)
26,242)
B.Reconciliation between income tax expense and accounting profit
2014
2013
Tax calculated based on profit before tax and
statutory tax rate
$
3,685,232 $
753,976
Effects from items disallowed by tax regulation
(
575,514)
166,080
Under provision of prior year's income tax
1,075
2,985
Additional 10% tax on undistributed earnings
334,872
Effect from Alternative Minimum Tax
74,672
118,725
Change in assessment of realization of deferred tax
(
3,519,262) (
1,709,183)
assets
$
Tax expense
284
1,075 ($
667,417)
C.Amounts of deferred tax assets or liabilities as a result of temporary differences, loss
carryforward and investment tax credits were as follows:
January 1
provisions
warranty provisions
Unrealised exchange loss
Unrealised loss on
Net operating loss
carryforward
Others
flow hedges
goodwill
Others
Total
$
Recognised
in other
profit or loss
income
288,013 ($
121,640) $
-
364,411
-
36,493)
200,697
-
(
449,511
258,904
16,520,833 (
212,631
$ 17,835,399 ($
($
51,357)
(
97,943)
$
(
726,842)
(
33,566)
($
909,708) $
$ 16,925,691 $
285
(
672,645)
110,173
261,004) $
51,357
$
332,155
1,279
384,791
123,787
December 31
$
327,918
200,697
8,453)
9,484
1,031
-
699,962
15,848,188
332,288
$ 17,575,426
$
47,338 (
$
$
166,373
50,605)
- (
394,687)
- (
32,287)
47,338 ($
477,579)
48,369 $ 17,097,847
January 1
provisions
warranty provisions
Unrealised loss on
Net operating loss
carryforward
Others
flow hedges
goodwill
Others
Total
$
98,369
Recognised
in other
profit or loss
income
December 31
$
$
169,057
483,870 (
16,285,600
322,918 (
$ 17,359,814 $
($
(
455,343) $
189,644
-
195,354
83,499)
235,233
112,305)
424,427 $
403,986
73,027)
(
533,081) (
(
69,316)
($ 1,130,767) $
$ 16,229,047 $
$
-
364,411
49,140
449,511
2,018
51,158
16,520,833
212,631
$ 17,835,399
$
- (
193,761)
35,750
245,975 ($
670,402 $
288,013
- ($
24,916) (
24,916)
26,242
51,357)
97,943)
(
726,842)
(
33,566)
($
909,708)
$ 16,925,691
D.Details of investment tax credits and unrecognised deferred tax assets are as follows:
December 31, 2013
Qualifying items
Unused tax credits
$
409,544
286
Unrecognised
deferred tax assets
$
409,544
Final year tax
credits are due
2014
E.Expiration dates of unused net operating loss carryfoward and amounts of unrecognised deferred
tax assets were as follows:
December 31, 2014
Year incurred
2010
2011
2012
Amount filed /
assessed
Assessed
Assessed
Filed
Unrecognised
deferred
tax assets
Unused amount
$
$
14,641,521
63,808,943
43,123,373
121,573,837
$
$
3,414,183
14,879,288
10,055,723
28,349,194
Usable
until year
2015~2020
2021
2022
December 31, 2013
Year incurred
2009
2010
2011
2012
Amount filed /
assessed
Assessed
Assessed
Filed
Filed
Unused amount
$
44,934,812
22,184,259
63,324,400
43,123,373
Unrecognised
deferred
tax assets
$
37,357,906
9,273,300
17,700,435
12,053,847
$
$
173,566,844
Usable
until year
2014
2015~2020
2021
2022
76,385,488
F.The amounts of deductible temporary differences that are not recognised as deferred tax assets
were as follows:
December 31, 2014
$
31,105,662
Deductible temporary differences
December 31, 2013
$
81,368,397
G.The Company has not recognised taxable temporary differences associated with investment in
subsidiaries as deferred tax liabilities. As of December 31, 2014 and 2013, the amounts of
temporary differences unrecognised as deferred tax liabilities were $20,486,590 and
$12,677,405, respectively.
H.Certain revenue from the design, research, development, manufacture and sale of the thin film
transistor - liquid crystal displays (TFT-LCD) and LCDs is exempt from income tax from 2008
to 2015.
I.The Company’s income tax returns through 2011 have been assessed and approved by the Tax
Authority.
J.Unappropriated retained earnings recorded by the Company pertain to retained earnings after
1998.
287
K.The details of imputation system are as follows:
(a)Balance of tax credit account
December 31, 2014
$
738,931
December 31, 2013
$
1,082,780
(b)Estimated creditable tax rate
2014 (Estimate)
2.96%
2013 (Actual)
20.48%
(114) Earnings per share
2014
2013
parent
Basic earnings per share (in dollar)
parent
Assumed conversion of all dilutive potential
ordinary shares:
-Employees’ bonus
-Restricted stocks
$
21,676,759
$
5,102,568
$
9,377,302
2.31
$
8,967,080
0.57
$
21,676,759
$
5,102,568
$
Diluted earnings per share (in dollar)
9,377,302
8,967,080
106,514
41,875
9,525,691
2.28
15,173
27,609
9,009,862
0.57
$
As employee stock options had anti-dilutive effect for the years ended December 31, 2014 and
2013, they were not included in the calculation of diluted earnings per share.
(115) Non-cash transaction
Investing activities with partial cash payments:
Purchase of property, plant and equipment
Add: opening balance of payable on equipment
Less: ending balance of payable on equipment
Cash paid during the year
288
$
(
$
2014
2013
14,180,607 $
3,180,964
2,732,538) (
14,629,033 $
15,813,201
3,439,899
3,180,964)
16,072,136
7. RELATED PARTY TRANSACTIONS
(116) Significant related party transactions
A.Operating revenue
2014
2013
Sales of goods:
Others
Subsidiaries
Associates
$
$
14,374,629
7,967,864
27,050
22,369,543
$
$
5,617,759
6,111,580
11,729,339
The collection period was 30~120 days upon delivery or on a monthly-closing basis to related
parties, and 30~90 days to non-related parties. The sales prices and the trading terms to related
parties above were not significantly different from those of sales to third parties.
B.Purchases of goods
2014
2013
Purchases of goods:
Associates
Others
Subsidiaries
$
$
4,431,198
2,767,390
420,519
7,619,107
$
$
5,287,598
1,772,885
1,712,587
8,773,070
The payment term was 30~120 days to related parties after delivery, and 30~180 days to
non-related parties after delivery or on a monthly-closing basis. The purchase prices and the
payment terms to related parties above were not materially different from those of purchases from
third parties.
C.Consigned processing
(a)Consigned processing
2014
Processing costs:
Subsidiaries
Associates
Others
$
$
289
167,873,521
15,192
167,888,713
2013
$
$
148,212,172
8,412
148,220,584
(b)Balance of consigned processing at the end of year (shown as “Other payables”)
December 31, 2014
December 31, 2013
$
Subsidiaries
2,677,593
$
283,023
The Company subcontracted the processing of products of associates in Mainland China. The
processing fees were mainly charged based on cost plus method.
D.Accounts receivable
December 31, 2014
Receivables from related parties:
Others
Subsidiaries
Associates
$
(
(
$
Less: transfer to other receivables
5,821,222
774,814
27,899
6,623,935
556,217)
60)
6,067,658
December 31, 2013
$
(
(
$
1,833,860
1,095,893
2,929,753
519,851)
60)
2,409,842
(a) The receivables from related parties arise mainly from sales transactions. The receivables are
due 30~120 days after the date of sale. The receivables are unsecured in nature and bear no
interest. There are no provisions held against receivables from related parties.
(b) The above receivables from related parties that exceed normal granting periods were
transferred to ‘other receivables – related parties’.
E.Other receivables
Transfer from accounts receivable
Other receivables
December 31, 2014
$
556,217
134,807
$
691,024
December 31, 2013
$
519,851
268,100
$
787,951
December 31, 2014
December 31, 2013
$
$
F.Accounts payable
Subsidiaries
Others
Associates
$
83,822,951
1,347,900
161
85,171,012
$
80,095,077
442,802
1,439,867
81,977,746
The payables to related parties arise mainly from purchase transactions and are due 30~120 days
after the date of purchase. The payables bear no interest.
290
G.Other payables-short-term financing
2014
Subsidiaries
Maximum
outstanding
balance
$ 396,900
Actual amount
drawn down Interest rate
$ 396,900
1.38%
Interest
expenses
$
5,952
Accrued
expenses
$
-
2013
Subsidiaries
Maximum
outstanding
balance
$ 425,850
Actual amount
drawn down Interest rate
$ 425,850
1.40%
Interest
expenses
$
6,533
Accrued
expenses
$
-
H.Property transactions
Purchase of property
(a)Acquisition of property, plant and equipment:
$
Subsidiaries
Associates
Others
$
2013
2014
597,848 $
865,847
510,051
1,095,965
2,398
1,110,297 $
1,961,812
(b)Period-end balances arising from purchases of property (shown as “Other payables”):
December 31, 2014
$
586,682
748
$
587,430
Associates
Subsidiaries
Others
December 31, 2013
$
227,734
218,466
2,034
$
448,234
I. Endorsements and guarantees
As of December 31, 2014 and 2013, the balances of endorsement/guarantee provided by the
Company for bank borrowings are as follows. Details are provided in Note 13(1)B.
December 31, 2014
December 31, 2013
$
16,901,100 $
15,915,870
Subsidiaries
291
(117) Key management compensation
$
Salaries and other short-term employee benefits
Post-employment benefits
2014
2013
73,982 $
46,386
18,638
27,582
216
334
$
92,836
$
74,302
8. PLEDGED ASSETS
The Company’s assets pledged as collateral are as follows:
Book value
Pledged asset
Purpose
Other financial assetscurrent
Demand deposits
Property, plant and
equipment
Other financial assetsnon-current
Refundable deposits
$
2,250,035
163,632,314
$
2,485,841 Syndicated bank loans
211,132,039 Long-term loans and performance
guarantee for lease payable
11,079,360
12,327,000 Guarantee to European
Commission for litigation
Time deposits
$
80,722
177,042,431
$
722
225,945,602
Guarantee for contract
9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT
COMMITMENTS
(118) Contingencies－Significant Litigations
A.Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd.,
Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei
Optoelectronics USA Inc. were investigated under the Anti-Trust competition by the United
States (the “U.S.”) Department of Justice. Moreover, authorities of some U.S state governments,
the European Union’s, Brazil’s and Korea’s governments are starting to investigate this case. In
addition, certain downstream customers and consumers in the TFT-LCD industry of the U.S. and
Canada are now bringing up class-actions or individual civil lawsuits against the TFT-LCD
companies; in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as
defendants. Details for investigations on significant cases related to the Anti-Trust Act are as
follows:
(a)Regarding the above lawsuits, the Company had reached an agreement with the United States
Department of Justice in December 2009, agreeing to pay penalties of US$220 million in
installment over five years. As of December 31, 2014, the unpaid penalties amounted to
US$35 million.
292
The Company had reached settlement agreements with the plaintiffs on individual civil
lawsuits in the U.S. since 2012 and recognized related losses.
The Company reached an out-of-court settlement with twelve State Governments, agreeing to
pay the plaintiffs as civil statutory damages since November 2011.
(b)In December 2010, the Company received a notice from the European Commission,
requesting the Company to pay a penalty of EUR 300 million to the account as specified by
the European Commission within three months upon receipt of the notice. The Company
appealed this case with the Court of Justice of the European Union in February 2011 and
deposited EUR 300 million to the above account on March 14, 2011. The principal and interest
accrued in this account will be refunded to the Company depending on the final outcome of
this case. The Court of Justice of the European Union has rendered that partial of the
Company’s appeal was reasonable and lowered the penalty from EUR 300 million to EUR 288
million. The Company has decided to appeal against partial judgement within the prescribed
time.
(c)Except for the Anti-Trust litigations the ultimate outcome of which cannot be reliably
estimated, the Company has recognised actual or estimated losses or liabilities in “other
payables” and “other non-current liabilities”.
B.Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and its
subsidiaries in the US with the United States District Court for the District of East Texas on April
25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary
judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding
judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in
February 2014 and the Company remained positive on its defense. The United States Court of
Appeals for the Federal Circuit has held a hearing in November 2014 but has not ruled any
judgment. The Company is currently assessing the status of the litigation.
The Company does
not expect that the lawsuit would have a material adverse effect on the Company’s financial
position or results of operations in the short-term.
(119) Commitments
A.Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:
December 31, 2013
December 31, 2014
$
19,350,952 $
13,229,191
293
B.Operating lease commitments
The Company leases plant, land and warehouses under non-cancellable operating lease
agreements. The majority of lease agreements are renewable at the end of the lease period at
market rate. The future aggregate minimum lease payments under non-cancellable operating
leases are as follows:
December 31, 2014
Not later than one year
Later than one year but not later than five years
Later than five years
$
$
500,648
1,943,776
1,490,584
3,935,008
December 31, 2013
$
$
500,648
1,982,908
1,952,100
4,435,656
C.Outstanding letters of credit
The outstanding letters of credit for the purchase of property, plant and equipment are as follows:
December 31, 2014
December 31, 2013
$
693,635 $
390,027
Outstanding letters of credit
10. SIGNIFICANT DISASTER LOSS
None.
11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
(1) Details of cancellation of issuance of global depository receipts (the “GDR”) as approved by the
Financial Supervisory Commission (FSC) on January 30, 2015 are provided in Note 6(16) C.
(2) Details of the proposal of syndicated credit line contract with financial institution creditors that
was approved by the Board of Directors on February 10, 2015 are provided in Note 6(12) F.
12. OTHERS
(11) Capital risk management
The Company’s objectives are to maintain an optimal capital structure, and constructively reduce
the debt ratio and the cost of capital in order to maximize shareholders' equity.
(12) Financial instruments
A.Fair value information of financial instruments
Except those listed in the table below, the carrying amounts of the Company’s financial
instruments not measured at fair value (including cash and cash equivalents, accounts receivable,
other receivables, other financial assets-current, short-term loans, short-term notes payable,
accounts payable and other payables) are approximate to their fair values. The fair value
information of financial instruments measured at fair value is provided in Note 12(3).
294
December 31, 2014
Book value
Fair value
Financial assets:
Other financial assets
- non-current
Long-term
borrowings (including
current portion)
December 31, 2013
Book value
Fair value
$ 11,160,082
$ 11,103,454
$ 12,327,722
$ 12,265,170
$ 98,315,426
$ 98,315,426
$ 155,569,218
$ 155,569,218
B.Financial risk management policies
(a)The Company’s activities expose it to a variety of financial risks: market risk (including
foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The
Company’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the Company’s financial position
and financial performance. The Company uses derivative financial instruments to hedge
certain risk exposures (see Notes 6(2), (4)).
(b)Risk management is carried out by the treasury department under policies approved by the
board of directors. Company treasury identifies, evaluates and hedges financial risks in close
cooperation with the Company’s operating units. The Board provides principles for overall
risk management, as well as policies covering specific areas and matters, such as foreign
exchange risk, interest rate risk, credit risk, use of derivative financial instruments and
non-derivative financial instruments, and investment by excess liquidity.
C.Significant financial risks and degrees of financial risks
(a)Market risk
Foreign exchange risk
d) The Company operates internationally and is exposed to foreign exchange risk arising
from various currency exposures, primarily with respect to the USD and RMB. Foreign
exchange risk arises from future commercial transactions, recognized assets and liabilities
and net investments in foreign operations.
e) Management has set up a policy to require group companies to manage their foreign
exchange risk against their functional currency. The group companies are required to
hedge their entire foreign exchange risk exposure via their treasury departments. To
manage their foreign exchange risk arising from future commercial transactions and
recognized assets and liabilities, entities in the Company use forward foreign exchange
contracts. Foreign exchange risk arises when future commercial transactions or recognized
assets or liabilities are denominated in a currency that is not the entity’s functional
currency.
295
f) The Company’s businesses involve some non-functional currency operations (the
Company’s functional currency: NTD). Based on the simulations performed, the impact
on post-tax profit of a 1% exchange rate fluctuation would be a decrease of $13,765 or
$324,198 for the years ended December 31, 2014 and 2013, respectively. The information
on assets and liabilities denominated in foreign currencies whose values would be
materially affected by the exchange rate fluctuations is as follows:
December 31, 2014
Foreign
Currency
Exchange
Amount
Rate
(In Thousands) (Note)
Financial asstes
Monetary items
USD
$ 3,689,844
JPY
2,740,487
EUR
363,356
Non-monetary
items
USD
$ 2,217,538
HKD
278,754
JPY
5,383,824
EUR
3,834
Financial liabilities
Monetary items
USD
$ 3,568,162
JPY
32,732,829
EUR
292,958
Book Value
(NTD)
December 31, 2013
Foreign
Currency
Exchange
Amount
Rate
(In Thousands) (Note)
Book Value
(NTD)
31.65
0.26
38.47
$116,783,563
725,133
13,978,305
$ 2,580,180
761,223
405,043
29.81
0.28
41.09
$ 76,915,166
213,142
16,643,217
31.65
4.08
0.26
38.47
$ 70,185,078
1,137,316
1,424,560
147,494
$ 2,108,219
266,670
4,813,897
3,651
29.81
3.84
0.28
41.09
$ 62,846,008
1,024,013
1,347,891
150,020
31.65
0.26
38.47
$112,932,327
8,661,107
11,270,094
$ 3,647,810
36,451,156
176,291
29.81
0.28
41.09
$108,741,216
10,206,324
7,243,797
Note: Exchange rate represents the amount of NT dollars for which one foreign currency
could be exchanged.
Price risk
c) The Company is exposed to equity securities price risk because of investments held by the
Company that are classified on the parent company only balance sheet either as
available-for-sale or at fair value through profit or loss. To manage its price risk arising
from investments in equity securities, the Company diversifies its portfolio in accordance
with the policy set by the Company.
d) The Company’s investments in equity securities comprise domestic listed and unlisted
stocks. The prices of equity securities would change due to the change of the future value
of investee companies. If the prices of these equity securities had increased/decreased by
20% with all other variables held constant, other components of equity for the years ended
December 31, 2014 and 2013 would have increased/decreased by $620,292 and $320,825,
respectively, as a result of gains/losses on equity securities classified as available-for-sale.
296
Interest rate risk
e) The Company’s interest rate risk arises from long-term borrowings. Borrowings issued at
variable rates expose the Company to cash flow interest rate risk which is partially offset
by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates
expose the Company to fair value interest rate risk. During the years ended December 31,
2014 and 2013, the Company’s borrowings at variable rate were denominated in the NTD,
USD and RMB.
f) The Company analyzes its interest rate exposure on a dynamic basis. Various scenarios are
simulated taking into consideration refinancing, renewal of existing positions, alternative
financing and hedging. Based on these scenarios, the Company calculates the impact on
profit and loss of a defined interest rate shift. For each simulation, the same interest rate
shift is used for all currencies. The scenarios are run only for liabilities that represent the
major interest-bearing positions.
g) Based on the simulations performed, the impact on post-tax profit of a 25% shift would be
a maximum increase of $245,892 or decrease of $389,392 for the years ended December
31, 2014 and 2013, respectively. The simulation is done on a quarterly basis to verify that
the maximum loss potential is within the limit given by the management.
h) Based on the various scenarios, the Company manages its cash flow interest rate risk by
using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic
effect of converting borrowings from floating rates to fixed rates. Generally, the Company
raises long-term borrowings at floating rates and swaps them into fixed rates that are
lower than those available if the Company borrowed at fixed rates directly. The Company
agrees with other parties to exchange interest rate, at specified intervals. The difference
between fixed contract rates and floating-rate interest amounts calculated by reference to
the agreed notional amounts.
(b)Credit risk
d) Credit risk refers to the risk of financial loss to the Company arising from default by the
clients or counterparties of financial instruments on the contract obligations. According to
the Company’s credit policy, each local entity in the Company is responsible for
managing and analyzing the credit risk for each of their new clients before standard
payment and delivery terms and conditions are offered. Customer credit quality is
assessed via internal risk control, considering customer financial position, past experience
and other factors. Individual risk limits are set by the board of directors based on internal
or external ratings. The utilization of credit limits is regularly monitored. Credit risk arises
from cash and cash equivalents, derivative financial instruments and deposits with banks
and financial institutions, as well as credit exposures to wholesale and retail customers,
including outstanding receivables. Because the Company's counterparties and executor
297
are banks with good credit standing and financial institutions and government with
investment grade or above, there is no significant default. Therefore, there is no
significant credit risk.
e) No credit limits were exceeded during the reporting periods. Management does not expect
any significant losses from non-performance by these counterparties.
f) The individual analysis of financial assets that had been impaired is provided in Note 6.
(c)Liquidity risk
d) Company treasury monitors rolling forecasts of the Company’s liquidity requirements to
ensure it has sufficient cash to meet operational needs while maintaining sufficient
headroom on its undrawn committed borrowing facilities (Note 6(12)) at all times so that
the Company does not breach borrowing limits or covenants (where applicable) on any of
its borrowing facilities. Such forecasting takes into consideration the Company’s debt
financing plans, covenant compliance, compliance with internal balance sheet ratio targets
and external regulatory or legal requirements.
e) Surplus cash held by the operating entities over and above balance required for working
capital management are transferred to the Company treasury. Company treasury invests
surplus cash in interest bearing savings accounts, time deposits, money market deposits
and marketable securities. The Company chooses instruments that are with appropriate
maturities or sufficient liquidity to provide sufficient headroom as determined by the
abovementioned forecasts. These are expected to readily generate cash inflows for
managing liquidity risk.
f) The table below analyses the Company’s non-derivative financial liabilities and net-settled
or gross-settled derivative financial liabilities into relevant maturity groupings based on
the remaining period at the balance sheet date to the contractual maturity date for
non-derivative financial liabilities and to the expected maturity date for derivative
financial liabilities. The amounts disclosed in the table are the contractual undiscounted
cash flows.
298
Non-derivative financial liabilities:
December 31, 2014
Short-term
borrowings
Accounts payable
Other payables
Long-term
borrowings
(including current
portion)
Other financial
liabilities
Financial guarantee
contracts
December 31, 2013
Short-term
borrowings
Accounts payable
Other payables
Long-term
borrowings
(including current
portion)
Other financial
liabilities
Financial guarantee
contracts
Less than
1 year
$ 1,300,000
Between 1
and 3 years
$
-
Between 3
and 5 years
$
-
Over 5
years
$
-
Total
$ 1,300,000
118,902,792
18,688,940
-
-
-
118,902,792
18,688,940
61,122,573
37,234,105
-
-
98,356,678
-
11,230,850
-
6,344
11,237,194
10,140,660
-
-
-
10,140,660
Less than
1 year
$ 1,943,565
Between 1
and 3 years
$
-
Between 3
and 5 years
$
-
Over 5
years
$
-
Total
$ 1,943,565
111,001,671
15,090,951
-
-
-
111,001,671
15,090,951
155,756,775
-
-
-
155,756,775
-
12,111,981
5,992
38
12,118,011
13,528,490
-
-
-
13,528,490
Derivative financial liabilities:
December 31, 2014
December 31, 2013
Between 1
and 3 years
Less than 1 year
$
605,016
1,351
$
689,097
-
299
-
$
Between 1
and 3 years
Less than 1 year
$
Total
$
21,918
605,016
1,351
Total
$
689,097
21,918
(13) Fair value estimation
A.The table below analyses financial instruments measured at fair value, by valuation method. The
different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data.
The following table presents the Company’s financial assets and liabilities that are measured at
fair value at December 31, 2014 and 2013:
December 31, 2014
Financial assets:
assets
Equity securities
Debt securities
Level 1
$
Level 2
-
2,537,965
220,000
$ 2,757,965
for hedging
$
-
-
300
$
52,453
Level 3
Total
$
-
$
52,453
$
563,496
563,496
$
605,016
$
-
$
1,351
606,367
$
-
$
52,453
3,101,461
220,000
$ 3,373,914
$
605,016
$
1,351
606,367
December 31, 2013
Financial assets:
assets
Equity securities
Debt securities
Level 1
$
Level 2
-
959,461
220,000
$ 1,179,461
for hedging
$
-
$
227,703
Total
$
-
$
227,703
$
644,661
644,661
$
689,097
$
-
-
Level 3
21,918
$
711,015
$
1,604,122
220,000
$ 2,051,825
$
$
-
227,703
689,097
21,918
$
711,015
B.The fair value of financial instruments traded in active markets is based on quoted market prices
at the balance sheet date. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly occurring market transactions
on an arm’s length basis. The quoted market price used for financial assets held by the Company
is the closing price. These instruments are included in level 1. Instruments included in level 1
comprise primarily equity instruments and debt instruments classified as financial
assets/financial liabilities at fair value through profit or loss or available-for-sale financial
assets.
C.The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in level 2.
D.If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
E.Specific valuation techniques used to value financial instruments include:
(a)Quoted market prices or dealer quotes for similar instruments.
(b)The fair value of interest rate swaps is calculated as the present value of the estimated future
cash flows based on observable yield curves.
(c)The fair value of forward foreign exchange contracts is determined using forward exchange
rates at the balance sheet date, with the resulting value discounted back to present value.
301
(d)Other techniques, such as discounted cash flow analysis, are used to determine fair value for
the remaining financial instruments.
F.All of the resulting fair value estimates are included in level 2 except for certain forward foreign
exchange contracts where forward exchange rates are not observable directly in the market.
G.The following table presents the changes in level 3 instruments as at December 31, 2014 and
2013:
At January 1
$
Acquired in the period
Gains and losses recognized in other comprehensive income (
Disposed in the period
$
At December 31
Equity securities
2014
2013
644,661 $
441,853
135,456
216,621)
313,274
- (
110,466)
563,496 $
644,661
(14) Turnaround plan
The Company’s current liabilities exceeded its current assets by $42,313,979 as of December 31,
2014. The Company’s management adopted the following measures to improve its operations and
financial position:
A.Negotiation with the creditor banks as to the debt issue
On April 5, 2012, the Company signed an “Agreed-upon Repayment Agreement” with creditor
banks. Under the agreement, creditor banks agreed to extend the due dates for the repayment of
the Company’s short, medium and long-term loans and to renew the Company’s credit lines to
safeguard creditors’ rights and ensure the Company’s continuing operations. More information
is described in Note 6(12)C.
In order to repay the unpaid balance of the medium and long-term syndicated loans from the
approved the proposal for the Company to apply for a syndicated credit line of NTD$68.5
billion with financial institutions.
B.Capital increase by cash
According to the “Agreed-upon Repayment Agreement” (the Agreement) stated in Note 6(12)C,
the Company shall increase its capital in certain amount of cash within three years starting from
2012. From 2012 to 2014, the Company has completed some cash capital increase required by
the Agreement. For more information, please refer to Notes 6(16)B and D.
As the Company has received bank’s approval for extending capital increase, based on
shareholders’ interest, the issuance of the GDR was cancelled in accordance with the Financial
Supervisory Commission (FSC)’s approval. Details are provided in Note 6(16) C.
C.Improvements in operations
The Company continuously adjusts its product lines according to the market demands to
increase operating revenue and gross profit. The Company also tries to strictly control various
302
expenses and expenditures to effectively enhance operational performance to create cash
inflows from operating activities.
D.Capital expenditure control program
Future capital expenditures will focus on the upgrading technology, improving efficiency and
expanding production capacity. Capital expenditure budgets and amounts will be controlled
strictly to maximize the benefits of capital expenditures.
303
13. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU
(1) Related information of significant transactions
A.Loans granted during the year ended December 31, 2014:
No.
1
2
2
2
2
3
4
5
General
ledger
account
Other
receivables
Creditor
Innolux
Optoelectronics
Europe B.V.
Ningbo Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Borrower
Chi Mei
Optoelectronics
Germany GmbH
Ningbo Innolux Other
Technology Ltd. receivables
Innolux
Technology
USA Inc.
Innolux
Technology
Europe B.V.
Maximum
outstanding
balance during
the year
Is a
ended
party
2014
Related $ 30,776
parties
Actual
amount
drawn
down
Balance at
December
31, 2014
$
30,776
$
Interest
rate
-
-
-
$
-
Reason Allowance
for shortfor
Limit on loans
term
doubtful Collateral
granted to
a single party
Operating $
$- $ 227,690,063
support
Ceiling on
total loans
granted
$ 227,690,063
Note
A
Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
3,165,000
2.7641% Short-term
~2.7807% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
949,500
949,500
2.7626% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
949,500
949,500
949,500
2.6506% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
3,620,680
3,620,680
3,563,266
5.400% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
189,900
189,900
189,900
0.16% Short-term
~0.56% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
1,491,707
1,491,707
1,461,161
0.007% Short-term
~0.269% financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
822,900
-
-
Ningbo Innolux Other
Technology Ltd. receivables
Related
parties
3,339,075
3,165,000
Ningbo Innolux
Display Ltd.
Other
receivables
Related
parties
949,500
Ningbo Innolux
Display Ltd.
Other
receivables
Related
parties
Foshan Innolux
Optoelectronics
Ltd.
Other
receivables
Innolux Hong
Kong Ltd.
Receivables
from related
parties
Receivables
from related
parties
Innolux Hong
Kong Ltd.
Nature
of loan
Short-term
financing
Amount
of
transactions
with the
borrower
304
No.
6
7
8
9
Creditor
Borrower
Bright
Kunpal
Information
Optoelectronics
Holding Limited Ltd.
Innolux
Technology
Germany GmbH
Innolux Hong
Kong Ltd.
Innolux
Technology
Japan Co., Ltd.
General
ledger
account
Other
receivables
Innolux Hong
Kong Ltd.
Receivables
from related
parties
Shanghai Innolux Receivables
Optoelectronics from related
Ltd.
parties
Leadtek Global Other
Group Limited receivables
Maximum
outstanding
balance during
the year
Is a
ended
party
2014
Related $ 63,300
parties
Actual
amount
drawn
down
Balance at
December
31, 2014
$
-
$
Interest
rate
-
Nature
of loan
- Short-term
financing
Amount
of
transactions
with the
borrower
$
-
Reason Allowance
for shortfor
Limit on loans
term
doubtful Collateral
granted to
a single party
Operating $
- $- $
105,729
support
Ceiling on
total loans
granted
$
105,729
Note
B
Related
parties
24,927
-
-
- Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
499,941
-
-
- Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
Related
parties
1,375,920
1,375,920
1,375,920
1.475% Short-term
financing
-
Operating
support
-
-
-
227,690,063
227,690,063
A
C
Innolux
10 Innolux
Optoelectronics Corporation
Japan Co., Ltd.
Other
receivables
Related
parties
396,900
396,900
396,900
1.380% Business
association
2,256,506
-
-
-
-
569,824
569,824
11 Foshan Innolux Nanhai Chi Mei
Ltd.
Ltd.
Other
receivables
Related
parties
2,532,000
-
-
- Business
association
-
-
-
-
-
227,690,063
227,690,063
A,D
Note A: The Company – Innolux Corporation
2.The financial limit on loans granted shall not exceed 40% of the company’s net equity. If it is for short-term capital needs, the limit shall not exceed 30% of the company’s net equity.
3.The policy for loans granted to direct or indirect wholly-owned overseas subsidiaries is as follows: for short-term capital needs, financial limit shall not be below the 40% requirement, but should not exceed 100% of
the company’s net equity.
Note B: The subsidiary - Bright Information Holding Limited
2.The financial limit on loans granted shall not exceed 30% of the company’s net equity.
3.For the short-term capital needs of direct or indirect wholly-owned subsidiaries, the above two limitations are not required. However, the financial limit on loans granted shall not exceed 100% of the company’s net
equity.
305
Note C: Innolux Optoelectronics Japan Co., Ltd.
1.For the company’s short-term capital needs, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the parent
company.
2.The financial limit on loans granted shall not exceed 30% of the company’s net equity, based on the most recent audited financial statements of the parent company; with intercompany transaction, the company’s
financial limit on loans granted shall not exceed 40% of the company’s equity.
3.The amount of loans provided by the company and intercompany shall not exceed 40% of the company’s equity.
Note D: Foshan Innolux Optoelectronics Ltd. entered into a merger agreement with Nanhai Chi Mei Optoelectronics Ltd. on January 1, 2014 and Foshan Innolux Optoelectronics Ltd. is the surviving company.
B.Endorsements and guarantees provided during the year ended December 31, 2014:
Guaranteed party
Endorsement
/guarantee
Number provider
0
Innolux
Corporation
Name
Leadtek
Global
Group
Limited
Nature of
relationship
An indirect
whollyowned
subsidiary
Limit on
endorsement/
guarantee
amount provided
to each
counterparty
Maximum
balance for
the year
Ending balance
Actual amount
drawn down
$113,845,032
$16,901,100
$16,901,100
$10,140,660
Ratio of
accumulated
Amount of
endorsement/
endorsement/ guarantee to net
Maximum
guarantee equity per latest
endorsement/
collateralized
financial
guarantee amounts
by properties
statements
allowable
$
-
7.42%
$113,845,032
Provision of
endorsement/
guarantees
by parent
company to
subsidiary
Y
Provision of
Provision of
endorsements
endorsement/
/guarantees to
guarantees
by subsidiary the party in
Mainland
to parent
company
China
N
N
Note
A,B
Note A: Limits on endorsement/guarantee amount provided to each counterparty did not exceed 0.5% of the Company’s net equity based on the most recent audited financial statements of the Company. Maximum
endorsement/guarantee amounts allowable should not exceed 1% of the Company’s net equity based on the most recent audited financial statements of the Company. For subsidiaries with over 90% of shares directly
or indirectly owned by the Company, the endorsement/guarantee amount provided by the Company shall not exceed 10% of the Company’s net equity. The limitation is not required for direct or indirect wholly-owned
subsidiaries of the Company.
Note B: Accumulated endorsement/guarantee amount provided by the Company shall not exceed 50% of the Company’s net equity.
C.Holding of marketable securities at the end of the year (not including subsidiaries, associates and joint ventures):
306
Securities held by
Relationship
with the Company
December 31, 2014
Number of shares
Book value
Percentage
Fair value
Common stock
Innolux Corporation
AvanStrate Inc.
None
900,000
Innolux Corporation
TPV Technology Ltd.
None
Innolux Corporation
Chi Lin Optoelectronics Co., Ltd.
None
Innolux Corporation
Epistar Corp.
Innolux Corporation
Corporation
$
80,302
1
$
80,302
150,500,000
1,031,587
6
1,031,587
48,283,725
483,194
19
483,194
None
89,072
5,603
-
5,603
None
45,068,305
1,500,775
9
1,500,775
None
assets - current
-
220,000
-
220,000
Bond
Innolux Corporation
Unsecured subordinated bonds of Cathay
Financial Holdings
Common stock
Trillion Science, Inc.
None
1,439,180
2,252
2
2,252
China Electric Mfg. Corp.
None
13,000,000
140,400
3
140,400
Tera Xtal Technology Corporation
None
4,900,000
56,693
3
56,693
Advanced Optoelectronic Technology, Inc.
None
Financial asset at fair value
11,165,222
605,155
8
605,155
J TOUCH Corporation
None
1,080,749
19,507
1
19,507
Fitipower Integrated Technology Inc.
None
10,000,000
343,350
8
343,350
G-TECH Optoelectronics Corporation
None
6,311,734
184,934
2
184,934
307
Note
Securities held by
Relationship
with the Company
December 31, 2014
Number of shares
Entire Technology Co., Ltd.
None
7,506,326
Ltd.
OED Holding Ltd.
None
Ltd.
General Interface Solution (GIS) Holding
Limited
None
Ltd.
Perfect Optronics Limited
Nets Trading Ltd.
PilotTech Global Fund
Book value
Percentage
Fair value
177,900
5
16,000,000
3,553
6
3,553
40,500,000
900,242
14
900,242
None
22,000,000
178,621
2
178,621
None
90
28,204
-
28,204
308
$
$
177,900
Note
D.Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital:
Beginning balance
Marketable
Financial
securities
statement
Nature of
Company name type and name
account Counterparty relationship Shares/units
Amount
Innolux
Toppoly
Investments
A
B
126,847,000 $ 3,064,699
Corporation
Optoelectronics accounted
(B.V.I.) Ltd.
for under
the equity
method
Acquisition
Disposal
Shares/units
Amount
17,600,000
$ 531,608
Shares/units
-
Amount
$
Ending balance
Carrying Gain (loss)
value
on disposal
-
$
-
$
Shares/units
Amount
-
144,447,000
$ 3,596,307
Note
Toppoly
Toppoly
Investments
(B.V.I.) Ltd.
(Cayman) Ltd. for under
the equity
method
A
C
126,817,000
3,040,776
17,600,000
531,608
-
-
-
-
144,417,000
3,572,384
Toppoly
Nanjing Innolux Investments
(Cayman) Ltd. Ltd.
for under
the equity
method
A
C
-
2,935,314
-
531,608
-
-
-
-
-
3,466,922
436,572
45,068,305
1,500,775
D
-
-
D
22,000,000
25,745
E
Innolux
Corporation
Chi Mei
Materials
Technology
Corporation
for-sale
financial
assets - noncurrent
None
80,184,305
2,372,660
-
- (35,116,000)
Innolux
Corporation
Contrel
Technology Co., for-sale
Ltd.
financial
assets - noncurrent
None
17,009,330
464,322
-
- (17,009,330)
Warriors
Technology
Investments
Ltd.
Perfect
Optronics
Limited
None
-
-
66,000,000
77,236 (44,000,000)
for-sale
financial
assets - noncurrent
Note A: Cash capital increase implemented by an investee.
Note B: A subsidiary of the Company.
309
1,308,457 ( 871,885)
314,798 ( 464,322) ( 149,524)
317,743 ( 51,491)
266,252
Note C: An indirect wholly-owned subsidiary.
Note D: The beginning carrying balance included profits and losses from investments. The beginning shares included stock dividends.
Note E: Ending book value excludes gain (loss) on valuation of financial assets.
E.Acquisition of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.
F.Disposal of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.
G.Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more:
310
Transactions
(payable)
Percentage
Company
Counterparty
Company
Purchases/
sales
of purchases/
Amount
Percentage
sales
Terms
60 days
Innolux
Corporation
Sales
$ 5,497,697
1
Innolux
Corporation
Co., Ltd.
Sales
3,977,339
Innolux
Corporation
Honfujin Precision Electronics An indirect wholly-owned
Sales
Innolux
Corporation
Innolux
Corporation
Lakers Trading Ltd.
Innolux
Corporation
Unit price
Terms
Balance
of balance
Similar with
general sales
No significant
difference
$ 1,543,053
2
1
general sales
No significant
difference
1,875,465
3
3,558,807
1
general sales
No significant
difference
1,282,691
2
Sales
2,687,589
1
-
1,757,646
-
No significant
difference
No significant
difference
-
Sales
general sales
45 days
Single purchases
target, no basis
for comparsion
186,694
-
subsidiary
Sales
1,231,983
-
60 days
Similar with
general sales
No significant
difference
173,861
-
Innolux
Corporation
Foshan Innolux Optoelectronics An indirect wholly-owned
Ltd.
subsidiary
Sales
850,573
-
90 days
Similar with
general sales
No significant
difference
1,649
-
Innolux
Corporation
Inc.
subsidiary
Sales
714,609
-
45 days
Similar with
general sales
No significant
difference
133,856
-
Innolux
Corporation
subsidiary
Sales
635,548
-
60 days
Similar with
general sales
No significant
difference
-
-
Innolux
Corporation
(Wuhan) Co., Ltd.
Sales
391,448
-
general sales
No significant
difference
93,428
-
Innolux
Corporation
FuTaiJing Precision Electronics An indirect wholly-owned
(Yantai) Co., Ltd.
Sales
341,756
-
No significant
difference
7,469
-
subsidiary
Co., Ltd.
311
60 days
Similar with
general sales
Note
Transactions
(payable)
Percentage
Company
Counterparty
Company
Purchases/
of purchases/
sales
Amount
$
Percentage
sales
Terms
Unit price
191,636
-
60 days
Similar with
general sales
No significant
difference
-
No significant
difference
2,036
-
No significant
difference
-
-
for comparsion
No significant
difference
-
-
-
60~90 days Single purchases
after
target, no basis
acceptance for comparsion
No significant (
difference
726,789)
1
898,860
-
for comparsion
No significant (
difference
609,775)
1
Purchases
296,646
-
No significant (
difference
16,826)
-
Processing
expense
Processing
expense
Processing
expense
Processing
revenue
78,866,584
20
for comparsion
60-90 days
Cost plus
36
53,598,757
14
60-90 days
Cost plus
35,408,180
9
60-90 days
Cost plus
41,971,830
91
90 days
Similar with
general sales
No significant ( 42,634,612)
difference
difference
difference
No significant
19,784,634
difference
Futaijing Precision Electronics An indirect wholly-owned
(Beijing) Co., Ltd.
Sales
Innolux
Corporation
Ambit Microsystem (Shanghai) An indirect wholly-owned
Co., Ltd.
Sales
133,220
-
60 days
Similar with
general sales
Innolux
Corporation
HongFuJin Precision
Electronics (HengYang) Co.,
Ltd.
Sales
101,020
-
45 days
Similar with
general sales
Innolux
Corporation
Corporation
equity method
Purchases
4,407,106
1
Innolux
Corporation
Co., Ltd.
Purchases
1,820,509
Innolux
Corporation
Chi Lin Optoelectronics Co.,
Ltd.
The company is a corporate
director of Chi Lin
Purchases
Innolux
Corporation
Co., Ltd.
Innolux
Corporation
Innolux
Corporation
Innolux
Corporation
Ningbo Innolux
Optoelectronics
Ltd.
Lakers Trading Ltd.
subsidiary
subsidiary
of balance
Balance
179,404
Innolux
Corporation
Terms
312
$
28
7
92
Note
Transactions
(payable)
Percentage
Company
Foshan Innolux
Optoelectronics
Ltd.
Nanjing Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Technology Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Shanghai Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Display Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Innolux
Technology
Japan Co., Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Shanghai Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Company
Purchases/
Lakers Trading Ltd.
subsidiary
Processing
revenue
subsidiary
Counterparty
sales
of purchases/
Amount
Percentage
sales
Terms
Unit price
Terms
Balance
$36,601,008
48
60 days
Similar with
general sales
No significant
difference
of balance
$22,267,762
94
Processing
revenue
34,677,066
97
90 days
Similar with
general sales
No significant
difference
7,884,481
97
Processing
revenue
Processing
revenue
19,610,772
92
90 days
90
17
90 days
No significant
difference
No significant
difference
6,966,625
16,648,612
Similar with
general sales
Similar with
general sales
-
-
Lakers Trading Ltd.
subsidiary
Processing
revenue
12,863,897
95
60 days
Similar with
general sales
No significant
difference
3,069,946
95
Lakers Trading Ltd.
subsidiary
subsidiary
Processing
revenue
Processing
revenue
3,116,868
98
90 days
100
47
60 days
No significant
difference
No significant
difference
986,622
1,226,867
Similar with
general sales
Similar with
general sales
2,158,754
58
subsidiary
Service
revenue
306,702
85
60 days
Similar with
general sales
No significant
difference
45,553
94
Ltd.
subsidiary
Sales
2,079,743
2
90 days
Similar with
general sales
No significant
difference
965,551
3
Nanjing Innolux
subsidiary
Sales
723,106
4
60 days
Similar with
general sales
No significant
difference
142,914
3
the equity method
3,169,506
4
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
Lakers Trading Ltd.
Purchases
313
-
-
Note
Transactions
(payable)
Percentage
Company
Company
Purchases/
Purchases
Co., Ltd.
Terms
Unit price
$ 2,921,686
3
Similar with
general sales
No significant ($ 1,188,883)
difference
6
Purchases
1,903,333
2
Similar with
general sales
No significant (
difference
388,841)
1
Purchases
1,860,997
2
Similar with
general sales
No significant (
difference
688,812)
3
the equity method
Purchases
1,546,583
1
60 days after
goods are
shipped
90 days after
goods are
shipped
60 days after
goods are
shipped
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
-
-
Ningbo Innolux Hon Hai Precision Industry
Purchases
1,022,838
3
Similar with
general sales
No significant (
difference
300,694)
3
Ningbo Innolux Ningbo Chi Mei Materials
Technology Ltd. Technology Co., Ltd.
the equity method
Purchases
779,482
2
Similar with
general sales
No significant
difference
-
-
-
-
Ningbo Lin Moug Optronics
Co., Ltd.
Co., Ltd.
sales
Amount
Percentage
sales
Ningbo Innolux
Optoelectronics
Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Counterparty
of purchases/
90 days after
goods are
shipped
90 days after
goods are
shipped
Terms
Balance
of balance
Foshan Innolux
Optoelectronics
Ltd.
Corporation
equity method
Purchases
701,095
1
90 days after
goods are
shipped
Similar with
general sales
No significant
difference
Ningbo Innolux
Optoelectronics
Ltd.
Purchases
539,927
1
90 days after
goods are
shipped
Similar with
general sales
No significant (
difference
173,670)
1
An investee company
equity method
Purchases
412,044
-
Similar with
general sales
No significant (
difference
26,952)
-
Purchases
364,731
1
90 days after
goods are
shipped
120 days after
goods are
shipped
Similar with
general sales
No significant (
difference
200,785)
2
Foshan Innolux GIO Optoelectronics Corp.
Optoelectronics
Ltd.
Ningbo Innolux Ningbo Lin Moug Optronics
314
Note
Transactions
(payable)
Percentage
Company
Counterparty
Company
Purchases/
the equity method
Purchases
Ningbo Innolux
Display Ltd.
Ningbo Innolux
Display Ltd.
Co., Ltd.
Foshan Innolux
Optoelectronics
Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Ampower Technology Co., Ltd. The company is a corporate
director of Ampower
Jizhun Precision Industry
(Huizhou) Co., Ltd.
Innocom
Technology
(Shenzhen) Co.,
Ltd.
of purchases/
sales
Amount
Percentage
sales
Terms
Unit price
Terms
179,536
4
Similar with
general sales
No significant
difference
Purchases
155,767
3
Similar with
general sales
Purchases
130,295
-
Processing
expense
167,217
9
90 days after
goods are
shipped
90 days after
goods are
shipped
90 days after
goods are
shipped
30 days
Processing
expense
114,341
6
30 days
$
Note A: Accounts for the cost of goods sold ratio.
315
Balance
$
of balance
-
-
No significant (
difference
63,614)
6
Similar with
general sales
No significant (
difference
3,401)
-
Similar with
general sales
No significant (
difference
21,059)
3
Similar with
general sales
No significant (
difference
23,662)
4
Note
H.Receivables from related parties exceeding $100 million or 20% of the Company’s paid-in capital:
Balance of
Relationship with
Company
Counterparty
the Company
Innolux Corporation
Innolux Corporation
Co., Ltd.
Overdue receivables
receivable from
Turnover
related parties
rate
$
Action adopted for
Amount
$
Allowance for
Subsequent
overdue accounts
-
doubtful accounts
collection
7.12
1,875,465
3.85
110,139
Subsequent
collection
78,424
-
1,282,691
3.28
209,867
Subsequent
collection
378,539
-
489,164
-
71,285
Subsequent
collection
106,435
-
-
-
8,405
-
-
$
provided
1,543,053
661,954
$
-
Innolux Corporation
Innolux Corporation
Kang Zhun Electronical
Technology (Kunshan) Co.,
Ltd.
Innolux Corporation
Co., Ltd.
186,694
11.39
-
Innolux Corporation
Futaijing Precision Electronics An indirect wholly-owned subsidiary of Hon Hai
(Beijing) Co., Ltd.
179,404
2.14
1,802
Innolux Corporation
173,861
9.93
-
-
-
-
Innolux Corporation
Inc.
133,856
5.93
-
-
96,199
-
Foshan Innolux
Lakers Trading Ltd.
22,267,762
2.34
17,331,083
Subsequent
collection
3,896,237
-
Ningbo Innolux
19,784,634
2.29
4,667,893
Subsequent
collection
3,165,386
-
Nanjing Innolux
7,884,481
3.73
-
-
2,943,828
-
Ningbo Innolux
Technology Ltd.
6,966,625
3.10
928,046
Subsequent
collection
2,025,388
-
Shanghai Innolux
Lakers Trading Ltd.
3,069,946
5.48
579,608
Subsequent
collection
579,608
-
Innocom Technology
Lakers Trading Ltd.
2,158,754
0.77
1,622,044
Subsequent
collection
-
-
316
Subsequent
collection
Balance of
Relationship with
Company
Counterparty
the Company
Overdue receivables
receivable from
Turnover
related parties
rate
Amount
6.45
965,551
2.87
54,787
142,914
5.36
-
111,123
-
111,123
Shanghai Innolux
Nanjing Innolux
Innocom Technology
I. Derivative financial instruments undertaken during the year ended December 31, 2014: Please refer to Notes 6(2) and 6(4).
J. Significant inter-company transactions during the year ended December 31, 2014:
317
$
Allowance for
Subsequent
overdue accounts
986,622
Ningbo Innolux Display Lakers Trading Ltd.
Ltd.
Ningbo Innolux
Ltd.
$
Action adopted for
-
-
doubtful accounts
collection
$
provided
89,598
$
-
681,627
-
-
-
-
Subsequent
collection
-
-
Subsequent
collection
Number
Relationship
(Note A)
terms (Note B)
combined revenue or
total assets
635,548
-
-
35,408,180
-
8
8,444,162)
-
2
General ledger
Transaction
account
Amount
0
Innolux Corporation
1
Sales
0
Innolux Corporation
1
Processing expense
$
0
Innolux Corporation
1
Accrued expense
0
Innolux Corporation
1
Sales
1,757,646
-
-
0
Innolux Corporation
1
Accounts receivable
186,694
-
-
0
Innolux Corporation
1
Purchases
296,646
-
-
0
Innolux Corporation
1
Sales
714,609
-
-
0
Innolux Corporation
1
Accounts receivable
133,856
-
-
0
Innolux Corporation
1
Sales
1,231,983
-
-
0
Innolux Corporation
1
Accounts receivable
0
Innolux Corporation
Lakers Trading Ltd.
1
Sales
0
Innolux Corporation
Lakers Trading Ltd.
1
Processing expense
0
Innolux Corporation
Lakers Trading Ltd.
1
Accrued expense
0
Innolux Corporation
1
Processing expense
0
Innolux Corporation
1
Accrued expense
0
Innolux Corporation
1
Sales
850,573
1
3
Service revenue
2
Lakers Trading Ltd.
3
2
Lakers Trading Ltd.
2
2
(
173,861
-
-
2,687,589
-
1
53,598,757
-
12
32,726,649)
-
8
78,866,584
-
18
42,634,612)
-
10
-
-
306,702
-
-
Processing revenue
12,863,897
-
3
3
Accounts receivable
3,069,946
-
1
3
Sales
723,106
-
-
3
Accounts receivable
142,914
-
-
3
Lakers Trading Ltd.
3
Processing revenue
36,601,008
-
8
3
Lakers Trading Ltd.
3
Accounts receivable
22,267,762
-
5
3
3
Processing revenue
16,648,612
-
4
4
3
Processing revenue
34,677,066
-
8
4
3
Accounts receivable
7,884,481
-
2
5
Lakers Trading Ltd.
3
Processing revenue
1,226,867
-
-
5
Lakers Trading Ltd.
3
Accounts receivable
2,158,754
-
1
6
3
Processing revenue
41,971,830
-
9
318
(
(
Number
Relationship
(Note A)
General ledger
account
6
3
Accounts receivable
6
3
Sales
Transaction
Amount
terms (Note B)
combined revenue or
total assets
$ 19,784,634
-
5
2,079,743
-
-
6
3
Accounts receivable
965,551
-
-
7
3
Processing revenue
19,610,772
-
4
7
3
Accounts receivable
6,966,625
-
2
8
Lakers Trading Ltd.
3
Processing revenue
3,116,868
-
1
8
Lakers Trading Ltd.
3
Accounts receivable
986,622
-
-
Note A: Relationship with the transaction company:
1. The parent company to the subsidiary.
3. The subsidiary to the subsidiary.
Note B: Except for no comparable transactions from related parties, sales prices were similar to non-related parties transactions and the collection period was 30~120 days; the purchases from related parties were at market
prices and payment term was 30~120 days upon receipt of goods.
Note C: Amount disclosure standard: purchases, sales and receivables from related parties in excess of $100 million or 20% of capital.
319
(2) Information on investees
The information on the name, the location…etc of the investee companies is shown below (not including investees in Mainland China):
Original cost
Name of
company
Investee company
Innolux
Corporation
Bright Information
Holding Ltd.
Innolux
Corporation
Ltd.
Innolux
Corporation
Golden Achiever
International Ltd.
Innolux
Corporation
Location
December 31,
2014
December 31,
2013
$
$
119,724
Number of shares
Percentage
of ownership
(%)
74,924
4,910,000
100
Book value
$
Investment
Net income (loss) income (loss)
of the investee recognized by the
company
Company
185,214
423
114
Investment holdings
348,999
779,152
31,783,000
100
BVI
Investment holdings
9,083
9,083
39,250
100
Samoa
Investment holdings
7,858,300
8,000,912
246,768,185
100
16,796,396
324,999
311,917
Innolux
Corporation
Keyway Investment
Management Limited
Samoa
Investment holdings
197,554
197,554
5,656,410
100
277,422
5,890
5,890
Innolux
Corporation
Ltd.
Samoa
Investment holdings
32,925,315
32,925,315
693,100,000
100
41,425,623
4,430,141
4,356,784
Innolux
Corporation
(B.V.I.) Ltd.
BVI
Investment holdings
3,596,307
3,064,699
144,447,000
100
5,945,861
740,811
740,811
Innolux
Corporation
Innolux Hong Kong
Holding Ltd.
2,107,291
2,107,291
1,158,844,000
100
2,393,227
493,840
518,932
Innolux
Corporation
Limited
BVI
Order swap company
-
-
50,000,000
100
Innolux
Corporation
Yuan Chi Investment
Co., Ltd.
Taiwan
Investment company
1,217,235
1,217,235
-
Innolux
Corporation
InnoJoy Investment
Corporation
Taiwan
Investment company
1,078,166
1,078,166
Innolux
Corporation
Europe B.V.
121,941
121,941
320
(
(
21,849) (
111,306
$
Samoa
Netherlands Importing, exporting, buying,
116,227
$
573)
111,306
6,829
358,432) (
96,260) (
96,260)
100
918,468
31,904
31,904
167,405,392
100
1,670,083 (
162,272) (
162,272)
180
100
152,269
7,361
7,361
Original cost
Name of
company
Investment
company
Company
Percentage
of ownership
(%)
Book value
$ 1,572,495
December 31,
2014
December 31,
2013
Number of shares
$ 1,335,486
$ 1,335,486
80
100
Investment holdings
1,717,714
1,717,714
14,062,500
47
Samoa
Investment holdings
86,149
145,600
726,941
32
Taiwan
Photographic and optical
instruments manufacturing
73,500
-
7,350,000
49
73,164
686
336
-
-
4,333
35
-
-
-
Manufacturing of electronic
equipment
819,312
819,312
78,195,856
33
-
-
-
Taiwan
organic light emitting diodes
361,382
361,382
155,500,000
97
24,799 (
5,702) (
5,541)
GIO Optoelectronics
Corp.
Taiwan
components of back light module
on TFT-LCD
800,892
800,892
63,521,501
24
449,994 (
112,745) (
26,811)
Innolux Holding
Ltd.
Samoa
Investment holdings
7,296,530
7,426,240
226,504,550
100
15,261,115
71,583
71,583
Innolux Holding
Ltd.
Suns Holding Ltd.
Samoa
Investment holdings
555,422
568,324
18,177,052
100
1,404,398
255,129
255,129
Innolux Holding
Ltd.
Lakers Trading Ltd.
Samoa
Order swap company
-
-
1
100
241,128
-
-
Innolux Holding
Ltd.
Innolux Corporation
USA
Distributor company
6,348
6,348
2,000
100
Investee company
Location
Innolux
Corporation
Japan Co., Ltd.
Japan
Researching, manufacturing and
selling of the film transistor
liquid crystal display
Innolux
Corporation
Cayman
Innolux
Corporation
Jetronics International
Corp.
Innolux
Corporation
FI Medical Device
Manufacturing Co., Ltd.
Innolux
Corporation
iZ3D, Inc.
Innolux
Corporation
Chi Mei Lighting
Technology Corporation
Taiwan
Innolux
Corporation
Chi Mei El Corporation
Innolux
Corporation
USA
Research and development and
sale of 3D flat monitor
321
1,477,199 (
(
(
1,771) (
88,218) (
$
68,864
$
68,864
276,629) (
90,897)
85,293)
41,869
1,722) (
1,722)
Original cost
Name of
company
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Book value
Investment
company
Company
December 31,
2013
Number of shares
Investment holdings
$ 3,572,384
$ 3,040,776
144,417,000
100
$ 6,181,164
-
-
162,897,802
100
780,296
233,398
233,398
-
-
35,000,000
100
2,095,946)
320,095
320,095
3,073,072
3,073,072
375,810
100
2,410,215
35,651
35,651
Location
(Cayman) Ltd.
Cayman
Innolux Hong
Innolux Hong Kong Ltd. Hong Kong Order swap company
Kong Holding Ltd.
Innolux Hong
Innolux Technology
Kong Holding Ltd. Europe B.V.
Percentage
of ownership
(%)
December 31,
2014
Investee company
Innolux Hong
Kong Holding Ltd. Hong Kong Holding
Ltd.
Netherlands Holding company and R&D
testing company
(
$
740,811
128,257) (
$
740,811
Innolux Hong
Innolux Technology
Kong Holding Ltd. Japan Co., Ltd.
Japan
Distributor company
1,815,603
1,815,603
201
100
1,647,930 (
128,257)
Innolux Hong
Innolux Technology
Kong Holding Ltd. USA Inc.
USA
Distributor company
263,685
263,685
1,000
100
326,317
31,730
31,730
Innolux
Optoelectronics
Europe B.V.
Germany GmbH
Germany
Importing, exporting, buying,
10,324
10,324
250
100
26,937
3,753
3,753
Innolux
Optoelectronics
Japan Co., Ltd.
USA, Inc.
USA
Selling of electronic equipment
and computer monitors
2,400
2,400
1,000
100
258,769
23,063
23,063
Rockets Holding
Ltd.
Ltd.
Samoa
Investment holdings
314,740
314,740
10,000,001
100
255,806
36,380
36,380
Rockets Holding
Ltd.
Mega Chance
Investments Ltd.
Samoa
Investment holdings
573,940
573,940
18,000,000
100
421,268
1,221
1,221
Rockets Holding
Ltd.
Magic Sun Ltd.
Samoa
Investment holdings
1,146,370
1,146,370
38,000,001
100
1,018,638
3,328
3,328
Rockets Holding
Ltd.
Ltd.
Samoa
Investment holdings
5,391,125
5,391,125
164,000,000
100
13,534,845
36,362
36,362
322
Original cost
Name of
company
Rockets Holding
Ltd.
Investee company
Nets Trading Ltd.
Suns Holding Ltd. Warriors Technology
Investments Ltd.
Location
Samoa
Investment company
Samoa
Investment company
Germany
Testing and maintenance
company
December 31,
2014
December 31,
2013
$
$
27,477
Number of shares
Percentage
of ownership
(%)
Investment
company
Company
Book value
-
900,001
100
$
30,441
$
-
$
-
555,422
568,324
18,177,052
100
1,404,397
255,127
255,127
33,735
33,735
100,000
100
63,152
41
41
Innolux
Technology
Europe B.V.
Innolux Technology
Germany GmbH
Best China
Investments Ltd.
Asiaward Investment
Ltd.
314,740
314,740
77,830,001
100
255,806
36,380
36,380
Mega Chance
Investments Ltd.
Main Dynasty
Investment Ltd.
573,940
573,940
139,623,801
100
421,267
1,221
1,221
Magic Sun Ltd.
Sun Dynasty
Development Ltd.
1,146,370
1,146,370
295,969,001
100
1,018,638
3,328
3,328
Yuan Chi
Investment Co.,
Ltd.
Chi Mei Lighting
Technology Corporation
Taiwan
Trading business, manufacturing
of electronic equipment and
lighting equipment
263,812
263,812
19,673,402
8
-
-
-
Yuan Chi
Investment Co.,
Ltd.
GIO Optoelectronics
Corp.
Taiwan
components of back light module
on TFT-LCD
6,881
6,881
467,519
0
732 (
112,745) (
Yuan Chi
Investment Co.,
Ltd.
Chi Mei Logistics Corp.
Taiwan
-
124,485
-
0
-
5,843
2,863
Yuan Chi
Investment Co.,
Ltd.
TOA Optronics
Corporation
Taiwan
Selling electronic materials,
trading business, manufacturing
of electronic equipments and
lighting equipments
423,606
423,606
58,007,000
40
105,740) (
45,764)
323
364,907 (
203)
(3) Information on investments in Mainland China
A.Basic information:
Profit
Transactions during
Balance of
Jan. 1, 2014~Dec. 31, 2014
(in thousands of NTD)
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
-
$ 4,016,756
1,202,700
Main activities of
investee
Capital
(Note A)
Method of
Investment
(Note D)
Balance of
amount remitted
from Taiwan on
January 1, 2014
Innocom
Technology
(Shenzhen) Co.,
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
$ 5,190,600
1
$ 4,016,756
Innocom
Technology
(Chengdu) Co.,
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
1,202,700
1
1,202,700
-
-
OED Company
Manufacturing and
selling of electronic
paper
256,112
1
63,300
-
-
Ningbo Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
9,811,500
2
1,396,613
-
Ningbo Innolux
Technology Ltd.
Manufacturing and
selling of LCD
backend module and
related components
4,114,500
2
4,114,500
-
Foshan Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
12,121,950
2
12,121,950
Ningbo Innolux
Display Ltd.
Manufacturing and
selling of LCD
backend module and
related components
949,500
3
949,500
Name of investee
in Mainland China
-
(1,163,508)
recognized
Net income of
63,300 (
$
Ownership
Profit
during
Book value
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
36,362
$ 13,534,833
$ 1,173,844
3,328
1,018,638
-
-
12,989
-
36,362
100
3,328
100
140,976)
5
233,105
2,070,696
100
2,070,696
20,601,650
5,463,896
-
4,114,500
491,039
100
491,039
3,218,102
-
-
-
12,121,950
1,866,041
100
1,868,407
18,607,398
-
-
-
949,500
34,860
100
34,860
260,746
-
324
Profit
Name of investee
in Mainland China
Main activities of
investee
Capital
(Note A)
Balance of
Balance of
amount remitted
from Taiwan on
January 1, 2014
Jan. 1, 2014~Dec. 31, 2014
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
$
$
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
$
$
71,744
47,951
-
VAP
Optoelectronics
(Nanjing) Corp.
Manufacturing and
selling of LCD
backend module and
related components
208,890
6
9,495
-
-
Nanjing Innolux
Optoelectronics
Ltd.
Manufacturing and
selling of LCD
backend module and
related components
4,494,300
4
3,937,260
557,040
-
4,494,300
729,013
100
729,013
5,574,181
-
Ningbo Innolux
Logistics Ltd.
126,600
8
126,600
-
-
126,600
5,729
100
5,729
168,311
-
664,650
7
-
-
-
-
233,398
100
233,398
780,296
-
47,475
8
47,475
-
-
47,475
161
100
161
66,633
-
633,000
9
316,500
-
-
8,949)
47
4,206)
594,508
-
Amlink
(Shanghai) Ltd.
Manufacturing and
selling of power
supply, modem,
ADSL, and other IT
equipments
325
119,695
9,495 (
316,500 (
$
Book value
5
Foshan Innolux
Logistics Ltd.
66,465
Profit
during
126,600
Shanghai Innolux Manufacturing and
Optoelectronics
selling of LCD
Ltd.
backend module and
related components
-
Ownership
Glass thinning
processing service
Kunpal
Optoelectronics
Ltd.
-
Net income of
4
Purchases and sales
of monitor-related
components company
66,465
recognized
66,465
Nanjing Innolux
Technology Ltd.
$
Method of
Investment
(Note D)
Transactions during
11,797
100
942
100
574)
100
(
(
11,797
606,961
-
942
79,430
-
574) (
43,749)
-
Profit
Name of investee
in Mainland China
Main activities of
investee
Kunshan GuannJye Electronics
Co., Ltd.
Manufacturing of
transformers
Interface
Optoelectronics
(Shenzhen) Co.,
Ltd.
Development of new
type of flat panel
display, monitor and
peripherals,
production and
management, and
offer of after-sales
service
Capital
(Note A)
$
Method of
Investment
(Note D)
265,860
10
2,095,230
1
Transactions during
Balance of
Balance of
amount remitted
from Taiwan on
January 1, 2014
Jan. 1, 2014~Dec. 31, 2014
amount
remitted from
investee for
Remittance
out
Remittance
in
Taiwan as of
Dec. 31, 2014
the year ended
Dec. 31, 2014
$
$
$
$
85,139
427,275
-
-
-
85,139
-
recognized
Net income of
$
427,275
Ownership
Profit
during
Book value
remitted to
percentage held
Jan. 1, 2014~
of investment
Taiwan during
by the Company
(Direct/indirect)
Dec. 31, 2014
(Note B)
as of
Dec. 31, 2014
Jan. 1, 2014 ~
Dec. 31, 2014
$
$
$
-
32
-
14
-
-
-
900,242
-
-
B. Information on investments in Mainland China (Note C):
Accumulated amount wired out from Taiwan
to Mainland China as of December 31, 2014
Company
Innolux Corporation
$
29,846,173
Investment amount approved by FIC of MOEA
Ceiling of investment amount of the Company
$
$
44,838,617
-
C. Significant transactions with investees in Mainland China directly or indirectly through the third areas:
The significant transactions between the Company and the investee companies for the year ended December 31, 2014 were eliminated in these financial statements and shown in Notes 13(1) A、G、H、J.
Note A: The relevant figures were listed in NT$. Where foreign currencies were involved, the figures were converted to NT$ using exchange rate.
Note B: Profit or loss recognised for the year ended December 31, 2014 was audited by independent accountants.
Note C: Pursuant to the Jing-Shen-Zi Letter No. 10100485600 of the Ministry of Economic Affairs, R.O.C., dated June 29, 2012, as the Company has obtained the certificate of conforming to the business scope of
headquarters, issued by the Industrial Development Bureau, MOEA, the investment ceiling regulation for Taiwan-based companies investing in Mainland China is not applicable to the Company.
Note D: The investment methods are as follows:
1.Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.
326
3.Through investing in Gold Union Investments Ltd. in the third area, which then invested in the investee in Mainland China.
4.Through investing in Toppoly Optoelectronics (B.V.I) Ltd. in the third area, which then invested in the investee in Mainland China.
5.Through investing in Bright Information Holding Ltd. in the third area, which then invested in the investee in Mainland China.
6.Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.
7.Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China.
8.Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.
9.Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.
10.Through investing in Jetronics International Corporation in the third area, which then invested in the investee in Mainland China.
327
14. SEGMENT INFORMATION
None.
328
INNOLUX CORPORATION
SUMMARY OF CASH AND CASH EQUIVALENTS
DECEMBER 31, 2014
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
Items
Abstract
Amount
$
Petty cash
255
Cash in banks
9,806,981
Demand deposits
Foreign deposits
Time deposits
USD
948,031 In thousands Exchange rate
31.65
30,005,176
JPY
1,384,083 In thousands Exchange rate
0.2646
366,228
EUR
38.47
389,075
HKD
4.08
9,583
KRW
0.0279
1,897
USD
31.65
11,394,000
Cash equivalents
(under repurchase
3,570,000
agreement)
$
329
55,543,195
INNOLUX CORPORATION
SUMMARY OF ACCOUNTS RECEIVABLE
DECEMBER 31, 2014
Items
Abstract
Amount
Remark
Third parties
$
Company A
8,025,263
Company B
5,169,240
Company C
4,015,221
Company D
3,788,902
Company E
3,594,367
45,231,011 Balance of individual
Others
customers is under 5% of
this account’s balance.
69,824,004
Less: Allowance for returns and discount
Allowance for bad debts
(
827,583)
(
138,272)
$
330
68,858,149
INNOLUX CORPORATION
SUMMARY OF INVENTORY
DECEMBER 31, 2014
Items
Raw materials
Abstract
Cost
$
Market price
1,780,875
$
1,512,264
Remark
Use net realisable value as
market price
16,122,356
Work in progress
27,783,376
market price
10,034,934
Finished goods
14,109,275
market price
$
27,938,165 $
43,404,915
(Remainder of page intentionally left blank)
331
INNOLUX CORPORATION
MOVEMENT SUMMARY OF INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
FOR THE YEAR ENDED DECEMBER 31, 2014
Market value or
As of January 1, 2014
In thousand
Company name
shares
Deductions
In thousand
Amount
693,100 $
Additions
36,005,637
In thousand
shares
-
As of December 31, 2014
Amount
$
6,679,524
net equity value
In thousand
shares
Amount
- ($
shares
1,259,538)
693,100
Unit
Ownership (%)
Amount
price
100%
$ 41,425,623
-$
Valuation Pledged as
Total price
basis
42,428,341
Equity
collateral
None
method
251,444
15,866,385
3,452
1,453,150 (
246,768
100%
16,796,396
-
16,818,434
〃
〃
126,847
4,347,392
17,600
144,447
100%
5,945,861
-
6,181,533
〃
〃
1,158,844
2,164,447
-
518,932
- (
290,152)
1,158,844
100%
2,393,227
-
2,366,109
〃
〃
107,817
1,721,618
59,588
110,737
- (
162,272)
167,405
100%
1,670,083
-
1,670,083
〃
〃
-
1,574,455
-
68,864
- (
70,824)
-
100%
1,572,495
-
1,424,560
〃
〃
-
1,015,867
-
31,904
- (
129,303)
-
100%
918,468
-
1,229,247
〃
〃
77,758
1,883,267
2,426
80,184) (
2,055,566)
-
-
-
-
-
〃
〃
14,063
1,526,449
-
61,167
- (
110,417)
14,063
47%
1,477,199
-
879,784
〃
〃
GIO Optoelectronics Corp.
63,522
475,253
-
1,552
- (
26,811)
63,522
24%
449,994
-
96,672
〃
〃
1,598,469
8,128) (
-
523,139)
-
(B.V.I.) Ltd.
Innolux Hong Kong Holding
Ltd.
Japan Co., Ltd.
172,299 (
Corporation
332
INNOLUX CORPORATION
MOVEMENT SUMMARY OF INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
Others
17,009
473,259
-
-
806,183
-
$
67,860,212
19,684 (
314,548
$ 11,030,830
17,009) (
492,943)
-
-
-
-
-
〃
〃
- (
673,688)
-
-
447,043
-
-
〃
〃
($
5,794,653)
$ 73,096,389
$
73,094,763
Note 1: Additions include acquisition costs, gains on investment accounted for using equity method, cumulative translation adjustment and recognition of unrealised gain on investees’ financial instruments.
Note 2: Deductions include disposal costs, losses on investment accounted for using equity method, cumulative translation adjustment, cash dividend received, recognition of unrealised loss on investees’ financial instruments and
amounts transfer to available-for-sale financial assets.
333
INNOLUX CORPORATION
SUMMARY OF ACCOUNTS PAYABLE
DECEMBER 31, 2014
Items
Abstract
Amount
Remark
Third parties
$
Company A
2,778,697
Company B
2,095,077
Company C
1,834,951
Company D
1,756,114
25,266,941
Others
Balance of individual
customers is under 5% of
$
33,731,780
334
INNOLUX CORPORATION
SUMMARY OF OTHER PAYABLES
DECEMBER 31, 2014
Items
Amount
Wages, salaries and bonus payable
$
Remark
3,094,127
Payable on machinery and equipment
2,732,538
Payable on processing fees
2,681,807
Payable on employees’ bonus
1,436,187
Payable on utilities expense
1,149,933
Payable on compensation
1,107,750
Payable on repairs and maintenance expense
1,190,227
Others
5,296,371 Balance of individual
accounts is under 5% of this
account’s balance.
$
18,688,940
335
INNOLUX CORPORATION
SUMMARY OF LONG-TERM LOANS
DECEMBER 31, 2014
Type of loans
Self-secured commercial paper
Creditor/managing bank
Contract period
Interest range
Amount
Mega Bills Finance Corporation
2012/11~2015/07
1.686%
International Bills Finance Corporation
2012/11~2015/07
1.686%
35,985
Property, plant and equipment are
China Bills Finance Corporation
2012/11~2015/07
1.686%
35,985
pledged as collateral. Details are
$
Collateral or guarantee
47,681
provided in Note 8.
Chinatrust Commercial Bank
2012/11~2015/07
9,497
1.686%
$
Summary of long-term
syndicated loan
Syndicated loan from 20 banks including Mega International
129,148
2008/11~2016/11
1.9736%
6,168,000
2009/09~2016/11
1.2474%
1,625,544
2010/05~2016/11
2.1850%
30,176,000
2005/03~2015/03
2.2842%
210,000
2008/09~2016/08
2.4737%
1,530,000
2006/06~2015/07
2.1232%
3,043,938
2006/09~2015/07
1.2897%
293,482
Commercial Bank
Commercial Bank
Commercial Bank
Commercial Bank
Syndicated loan from 10 banks including Chinatrust
Commercial Bank
Syndicated loan from 34 banks and bills finance companies
including Chinatrust Commercial Bank
Syndicated loan from 13 banks and bills finance companies
336
INNOLUX CORPORATION
SUMMARY OF LONG-TERM LOANS
DECEMBER 31, 2014
including Chinatrust Commercial Bank
Syndicated loan from 18 banks including Bank of Taiwan
2010/03~2016/09
2.2316%
25,142,638
2006/11~2016/11
2.1042%
8,982,000
2008/09~2016/08
2.2316%
19,316,634
2008/10~2016/11
1.3742%
1,739,294
$
98,227,530
Less: syndicated loan arrangement fees
(
41,252)
Less: current portion (including syndicated loan arrangement fees)
(
61,092,333)
$
337
37,223,093
INNOLUX CORPORATION
SUMMARY OF OPERATING REVENUE
Items
Quantity (in thousands)
Amount
460,938
TFT-LCD products
$
-
Others
5,014,749
$
338
420,990,284
426,005,033
INNOLUX CORPORATION
SUMMARY OF OPERATING COSTS
Items
Amount
$
Beginning raw materials
2,302,234
105,038,529
Incoming inventory
(
2,053,559)
Loss on physical inventory
(
2,442)
Transfer to expenses
(
8,819,025)
Scrapping materials
(
576,141)
Warranty expiration
(
126,378)
Sale of materials
(
68,656)
Less: Ending raw materials
Material consumption
95,694,562
Direct labour
12,210,968
Manufacturing expenses
259,214,028
Manufacturing costs
367,119,558
Add: Beginning work in progress
27,209,678
Incoming inventory
11,523,186
(
16,730,810)
(
614,964)
Warranty expiration
(
10,184)
Scrapping work in progress
(
2,379)
Less: Ending work in progress
388,494,085
Cost of finished goods
12,593,026
Add: Beginning finished goods
853,136
Acquisition of finished goods
(
11,365,526)
(
274,613)
Scrapping finished goods
(
115,249)
Warranty expiration
(
633,762)
Less: Ending finished goods
389,551,097
Cost of goods manufactured
68,656
Add: Cost of sales of materials
693,769
Loss on scrapping inventory
2,442
Loss on physical inventory
Less: Revenue from sale of scraps
Gain on reversal of inventory valuation
(
323,179)
(
383,000)
$
Operating costs
339
389,609,785
INNOLUX CORPORATION
SUMMARY OF MANUFACTURING EXPENSES
Items
Processing fee
Amount
$
Remark
171,898,712
Depreciation and amortisation
53,045,684
Other expenses
34,269,632
Balance of individual accounts is
under 5% of this account’s
balance.
$
259,214,028
340
INNOLUX CORPORATION
SUMMARY OF OPERATING EXPENSES
Items
Wages and salaries $
General and
Research and
Selling
administrative
development
expenses
expenses
expenses
$ 1,422,893
$ 3,851,484
38,558
253,170
1,950,768
2,242,496
Royalty expenses
2,011
-
1,457,998
1,460,009
Indirect materials
2,959
255
1,301,205
1,304,419
738,643
1,775,023
2,850,805
5,364,471
Depreciation
310,036
Total
$
Remark
5,584,413
expenses
Other expenses
Balance of individual
accounts is under 5% of
$1,092,207
$ 3,451,341
$11,412,260
$ 15,955,808
341

2014 Annual Report

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