Contents GRI Standards Index Table - Innolux … 2016 INNOLUX CSR Report 4 Contents GRI Standards...

2016 INNOLUX CSR Report 21

Contents GRI Standards Index Table

21

Editorial Principle 2

A Message from the Chairman 4

Innolux Company Overview 5

CSR Operations and Performances 7

1 Stakeholders Engagement ---------------------- 13-17

1.1 Stakeholder Communication and Participation 13

1.2 CSR Materiality 17

2 Corporate Management and Development 19-42

2.1 Corporate Organization 19

2.2 Company Governance 20

2.2.1 Company Governance Organization 21

2.2.2 Business Ethics and Internal Control 24

2.2.3 Legal Compliance 26

2.3 Risk Management 28

2.4 Operational Performance 29

2.4.1 Financial Performances 31

2.4.2 Customer Satisfaction 37

2.5 Sustainable Supply Chain 39

2.5.1 Supply Chain Risk Management 39

2.5.2 Low-carbon Supply Chain 42

4 Humanistic Vision to People, with S.M.I.L.E ------ 71-97

4.1 Safety 72

4.1.1 Health and Safety Strategies and Management 73

4.1.2 Health and Safety Risk Management 75

4.2 Mental & Physical Wellness 77

4.3 Initiative on Social Care 81

4.3.1 Participation in Charity Services 81

4.3.2 Educational Empowerment 82

4.4 Living 83

4.4.1 Health Risk Management 83

4.4.2 Daily Life 85

4.4.3 Disability Care 86

4.5 Employee –friendly Workplace 87

4.5.1 Recruitment and Staffing 87

4.5.2 Compensation and Benefits 93

4.5.3 Training and Development 95

4.5.4 Zero Distance Communication 97

Appendices ------------------------------------------- 99-112

Independent Assurance Opinion Statement 99

GRI Standards Index Table 101

3 Green Vision To Earth, with L.O.V.E. ------------------- 45-70

3.1 Green Living 46

3.2 Green Operations 47

3.2.1 Climate Change Mitigation and Adaption 49

3.2.2 Energy Resources Management 53

3.2.3 Water Resources Management 57

3.2.4 Pollution Control and Environmental Impact Reduction 61

3.2.5 Environmental Material Flow Information 65

3.3 Green Value Chain 67

3.3.1 Smart Green 67

3.3.2 Green Innovation 68

3.3.3 Lean Green 70

3.3.4 Green Environment 70

Contents

21 21

Editorial Principle

Report Assurance

This report is verified by SGS-Taiwan (an independent third party) as one that fully meets the GRI Standards Type 2 assurance level (Comprehensive Disclosure) based on AccountAbil ity 1000 Assurance Standard (AA1000AS). The independent assurance statement is included in the appendix of this report.

Contact Us

Contact Window：Ms Sandra Tseng , CSR DepartmentPhone：+886 6 505 1888 ext 47042 Email: [email protected]：www.innolux.comHeadquarters Address：160 Kesyue Road, Hsinchu Science Park, Jhunan Township, Miaoli County 35053.Copyright： All rights reserved. Please request written consent and authorization for any reprinting articles.

For nine consecutive years, Innolux has issued the annual Corporate Social Responsibility Report. This report was written in accordance to the GRI Standards which was released on October 19, 2016 by the Global Reporting Initiative (GRI).

Issue Period

According to the Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies, Innolux issues Corporate Social Responsibility Reports annually in June and publishes the reports on its website as well. Last report was released in June 2016. The next report for year 2017 is expected to be published in June 2018.

Report Scope and Boundary

• The boundary of this report includes materiality o f I n n o l u x Ta i w a n , N i n g b o ( N i n g b o I n n o l u x Optoelectronics Co., LTD, Ningbo Innolux Display LTD.) , Foshan(Foshan Innolux Optoelectronics LTD.), Nanjing (VAP Optoelectronics (Nanjing) Corp.N, Kunpal Optoelectronics Ltd, Nanjing Innolux Optoelectronics Ltd.) and Shanghai (Innocom Technology (Shenzhen) Co. Ltd.) sites of China interna l ly and customer , suppl iers and loca l communities externally.

• To facilitate information and data management, e m p l o y e e s f r o m t h e H u m a n R e s o u r c e s D e p a r t m e n t , L e g a l D e p a r t m e n t , I n t e l l e c t u a l Property Department, Finance Department, Facility Engineering Department, Environmental Safety and Health Department, General Administration Department, R&D Department, Procurement Department, Quality Assurance Department, Sales Department, Public Relations Department, and Innolux Education Foundation were invited to collaborate with the CSR Department in collating data. The data were then reviewed through an internal administrative process. Cost and accounting information in the company annual report was reviewed and verified by certified accountants. Data concerning environment and greenhouse gas inventory and those concerning the management of occupational safety and health were inspected annual ly by a th ird party in accordance with ISO14001, ISO 14064-1, and OHSAS 18001.

• Data were obtained for the period from Jan. 1 to Dec. 31, 2016. The financial statements were compiled in accordance with the International Financial Reporting Standards (IFRS). The numbers listed in the financial statements are in NTD. Environment and health and safety performances are expressed using universal indices. Numbers and indices with special meanings have been noted and explained accordingly.



43

Company VisionTo become the most valuable panel display solutions provider.

Company MissionTo become an enterprise with competitiveness ;

To make returns for shareholders;

To have customer satisfaction;

To make employees proud;

To expand the horizons of humanity.

43 43

A Message from the Chairman

Year 2016 was not easy for Innolux. In the first half we faced drastic decline in turnover owing to earthquake damage and rising cost. Fortunately, with support and efforts from our colleagues, customers, supply chain partners and investors, Innoulx managed a speedy recovery. The upturn of panel industry in the latter half of year also gave us a boost.

Panel industry is a key strategic material of the country which involves more than 300 process and complicated supply chains. Innolux possess the most complete range of panel and assembly plants of the world. A new strategy has been developed to cope us with the latest industrial trend. The Business Unit (BU) approach management aims to create the best value from the perspective of business. On the other hand, INX 4.0 and automation are also ready to upgrade the manufacturing model to smart factory. Smart office is the ground for the sustainable operation of customization, differentiation and personalization.

Both steady growth and innovation are the keys to Innolux’s development. The upgrade of technology and product are vital to the company’s operation. With our diverse efforts, Innolux was the only panel maker to be the multiple winners of 25th Taiwan Excellence Achievement Award and 25th Taiwan Excellence Gold Award in 2016. We will thrive on new applications with the best strategies and partner with supply chain to invent value-added products and provide satisfying solutions and products.

Innolux is progressing in CSR development with reference to the United Nation’s 17 SDGs (Sustainable Development Goals). We will reduce environmental impact via the means of circular economy model. The progress in the fields of water-conservation, GHG management, waste reduction, MFCA, chemicals recycling, and supply chain carbon reduction are obvious. And we are heading for a further refinement to realize the approach of a low-carbon company.

Jyh-Chau Wang, Chairman

To foster talents for company’s sustainable development, Innolux collaborated with local universities to cultivate specialists for automation and R&D. The employment rate of internships from STUST, KSU and KYU achieved 86%. Our efforts in disability employment deployed from Taiwan to China sites. The disability employment rate in Ningbo, Foshan and Nanjing sites outperformed the local requirements.

2017 is a year of innovation to Innolux. With INX 4.0, we are ready to face the challenge of panel industry by leading the product specification and market trend. We will demonstrate a true CSR value together with our stakeholders.



65

Innolux Corporation established in 2003 and merged with Chi Mei Optoelectronics and Toppoly Optoelectronics in March 2010. In 2016 the number of employees worldwide is 65,294. Innolux makes its R&D center in Taiwan to trains core technical manpower. Innolux’s production sites and sales locations span the globe. With its major TFT plants located in Jhunan and Tainan, both in Taiwan, Innolux has also established overseas module plants in the Chinese cities of Ningbo, Nanjing, Foshan, and Shanghai.

Innolux has a complete range of 3.5G, 4G, 4.5G, 5G, 6G, and 7.5G-8.5G production line, making it the world's total display solutions provider offering a full range of large/medium/small LCD panels and touch-control screens. Innolux offers advanced display integration solutions employing innovative, differentiated technology, including 4K2K ultra-high resolution, 3D naked eye, IGZO, LTPS, AMOLED, OLED, and touch-control solutions. Innolux is active in drafting specifications, and is a market trend leader. Its all-inclusive product lines span the full range of TFT LCD panel modules and touch panels, including TV panels, desktop monitors, notebook computer panels, and medical and automotive panels. Innolux supplies customers that include many of the world's leading information and consumer electronics manufacturers.

Innolux Company Overview

Innolux Milestone

August 1998Chi Mei Optoelectronics (CMO) established.

December 1999TPO Displays established.

January 2003Innolux Display Corp. (INX) established.

October 2006I N X l i s t s i t s s h a r e s o n t h e T a i w a n S t o c k E x c h a n g e , becoming the fastest company t o b e l i s t e d i n t h e p a n e l industry.

March 2010INX announced the completion of merger with CMO and TPO, becoming the largest merger in the history of the panel industry.

March 2012CMI Board of directors elected Dr. Hsing-Chien Tuan as the new Chairman.

January 2013C h i M e i I n n o l u x C o r p o r a t i o n ( C M I ) c h a n g e d i t s n a m e t o “Innolux Corporation”.

December 2014Recorded “3 New Highs” since the merger in 2010: Total Gross margin, net prof it margin and operat ing profit margin after-tax; Also “2N e w L o w s ” : N u m b e r o f d a y s holding inventory and total net debt. Aug. 6,1998 Chi Mei Optoelectronics (CMO) established.

1998

1999

2003

2006

2010

2012

2013

2014

2016

June 2016INX Board of directors elected Mr. Jyh-Chau Wang as the new Chairman.

65 65

Innolux Global Presence

Product Application

Applications

•TV•Medical•Industrial Display •Touch•Monitor•Notebook•Tablet•Avionics/ Automotive•Smart Phone•Wearable devices•Public Display•E-Whiteboard

Main product are TFT-LCD panels and touch solutions

Sales Office

Taiwan, China, Japan, Singapore, South Korea, Holland, USA, Germany

Production Site

Taiwan: Jhunan, Tainan

China: Ningbo, Foshan, Nanjing, Shanghai

Taiwan

Taiwan 34,430

China 30,599

Others 265

Global Labor Distribution

Japan

Holland

South Korea

China

USA

Germany

Total 65,294

Signapore



87

Corporate Social Responsibility Operations and Performances

CSR Policy and Implementation Plan

Innolux considers the social and environmental opportunity and risk as the factors of operations management to pursue sustainable development. The goal is to achieve a balance between improving employees’ income, assisting local community development, engaging in charity and ecology.

Innolux established its Corporate Social Responsibility Policy which was approved by the Chairman in 2010 and revised it in 2016. The Electronic Industry Code of Conduct (EICC) serves as the core principle, while corporate governance, environmental protection, employee care, supply chain SER management and community participation represent the five main policy directions. Innolux is committed to strengthening its communication with interested parties and reaching their expectations.

CSR Committee and Promotion Organization

Innolux established a designated CSR Department and in 2011 set up CSR Committee under the supervision of Chairman Jyh-Chau Wang and Vice President Chih-Ming Chen. Major executive management of Taiwan and China production plants serves as the committee member.The short and long term CSR strategies are established in the CSR committee. Annual management review meetings are also held to review the risks and opportunities concerning corporate governance, environment, and society. In 2016, three workgroups were established to focus on individual sustainable topics including low-carbon green management, employee-friendly workplace and risk management.

Global CSR trend and material stakeholders’ interested topics were reported to the Chairman in the 2016 CSR quarterly meeting. The progress of EICC VAP audit results, young worker management, Carbon Disclosure Project (CDP) development, the impact of COP21, national carbon emissions policy, internal audit results, and supplier SER management were included in the meeting. In 2016, 19 CSR targets were established with 13 of them achieved and 6 of them failed. In 2017, the best efforts will be input to further drive the CSR improvement.

It is planned that 2017 CSR performances and new year plan will be included in the agenda of the board meeting to help the realization with the force and assistant from the board of directors.

Sustainable New Millennium

2016 is the year of Sustainable New Millennium. The 17 SDGs (Sustainable Development Goals) approved of Transforming our World: The 2030 Agenda for Sustainable Development of United Nations Sustainable Development Summit 2015 started on Jan 1, 2016.

Active Participation in Associations and Societies

Innolux voluntarily participates in related industry association and society activities such as Taiwan TFT LCD Associat ion, Taiwan Electr ical and Electronic Manufacturers’ Association, Taiwan Digital Television I n d u s t r y A l l i a n c e , C h i n e s e S o c i e t y f o r Q u a l i t y , ClimateChange.tw, the Allied Association for Science Park Industries, TCSF, the Chinese Institute of Environmental Engineering, and Environmental Management Accounting Network-Taiwan. Innolux has actively responded to industry opinions and demands, and has provided experience in the hopes of contributing to the healthy development of the panel industry.

Matching of Innolux CSR Policy and SDGs

Innolux reviewed its CSR policy established 2010 and sustainable strategy and verified the compliance with SDGs in 2015. The same was also reported to Chairman Wang in the annual CSR management review meeting. The promotion of CSR which was in line with SDGs was continued in 2016.

87 87

• Goal: Enhance employee-

friendly workplace

• Convener: Manufacturing

Technology Center

• P r o j e c t : M a i n t a i n a n d

o p t i m i z e d i s a b i l i t y

employment through the

upgrade of assistance facility

at workplace and external

training.

WG3: Employee care workgroupWG1: Low-carbon green management

• Goal: Manage the r isk and

opportunity of climate change

• C o n v e n e r : G r e e n P r o d u c t

Management Department

• P r o j e c t : R e d u c e m a t e r i a l

waste throughout the product

l ifecycle by MFCA analysis.

Continuous deployment of 3R

projects and optimization.

WG2: Risk management

• G o a l : S u p e r v i s e a n d

support the promotion of

legal compl iance and r isk

management system.

• C o n v e n e r : L e g a l A f f a i r s

Department

• P r o j e ct : 1 ) R e d uce l a bor -

management dispute over

the reward and punishment

policy by setting up democratic

procedures. 2) Promotion of

anti-corruption: all Taiwan and

China indirect labor should

fill out anti-corruption survey

which will be analyzed by the

legal affairs department to

identify the risk.

CSR Committee Organization and Workgroups

Committee Member（OU Head)

CSR Committee

Bureau: CSR Department

Function DepartmentsWorkgroups

Ningbo LCD

Module &

Component Center

Foshan LCD M

odule & Com

ponent Center

Tainan and Shanghai LCD M

odule & Com

ponent Center

Jhunan TFT Manufacturing Center

LTPS/TFT Manufacturing Center

Tainan TFT Manufacturing Center

Public Relations

Manufacturing

Hum

an Resources

General Adm

inistration

Procurement

Facility Engineering

EHS

Green Product M

anagement

Legal Affairs

Low-carbon green m

anagement w

orkgroup

Risk managem

ent workgroup

Employee care w

orkgroup



109

Innolux CSR Policy Innolux—Mid/Long-Term GoalsUN Sustainable

Development Goals2016 Action

Provide care and empowerment, help people with disabilities, and develop a

co-prosperity consumption system.

Assist local farmer via employee daily spending.•

Continuously collaborate with charity and convenience store to offer job opportunities.•

Improve health care to enhance the physical-mental balance of the

employees. Promotion the care to the fellows.

Organize health care and cancer screening activities.•

Organize maternity protection activity and management.•

Assist employees in achieving mental/physical balance and provide a safe

work environment.

• Employee-friendly workplace promotion in Taiwan.

• Comprehensive upgrade of daily life services.

Cultivate talent through adequate training and certification.

• Assist 65 internships and employ 56 members through academia collaboration.

• Upgrade the leadership power of China via the deployment of Taiwan’s “Leadership course”.

• Enhance the leadership ability of the 1st tier supervisor via various kinds of training.

Create a work environment favorable to people with disabilities and promote

employment.• Set up the goal of disability employment of 946 person-time.

Collaborate with universities to identify and foster external talents; Open

communication and use innovation to retain internal talents.• Inno-star project to foster potential talent; provide diverse career path for employees through internal transfer application system.

Provide competitive salaries and benefits. • Retain talents with competitive compensation package. The turnover rate of 2016 dropped 13.65% (vs. 2015).

Create the best benefits for the shareholders to become a competitive

corporation.• Enhance technologies including OLED to further promote industry 4.0. Continue to promote small and medium displays.

Build a safe environment and reduce occupational hazards by following

international environment safety management systems.

• Accelerate the progress of earthquake prevention project owing to the incident of Meinong earthquake with the measures including

damage-prevention audit, source management of chemicals and prevention activities of occupational injury.

Respect human rights based on the UN global compact. • Compliance of local regulation and EICC regarding labor human rights management.

Enhance water efficiency via new technology.• Strike to reduce the water consumption intensity to the approach of “efficient zero-discharge”. TFT-LCD stage water consumption

intensity reduced 7.5% compared to 2015.

Enhance energy efficiency via new technology. • Further reduce electricity consumption intensity. Set up solar panel systems which generated 17 times of energy compared to 2015.

Approach to the optimization of resources management and reduce

environmental impact.

• Green products with energy and material saving design.

• Deploy MFCA (Material Flow Cost Accounting).

• Enhance the recycling rate of chemicals.

• Set up KPI for organic sludge, inorganic sludge and SRS residue reduction.

Approach to low-carbon company.• Completed 43 energy and emissions reduction projects. Install burning-type to reduce FCs emissions. Support the government project

of water recycling.

Promote green value-chain.

• Supply chain risk management.

• Optimize Product Carbon Footprint database.

• Enhance the scale of suppliers taking part in MFCA.

• Supplier annual inventory reduction target achieved.

Sustainable Development Strategy and United Nation's Sustainable Development Goals (SDGs)

Community Engagement

Employees Care

Environmental Protection

Supply Chain SER Menagement

109 109

Innolux CSR Policy Innolux—Mid/Long-Term GoalsUN Sustainable

Development Goals2016 Action

Provide care and empowerment, help people with disabilities, and develop a

co-prosperity consumption system.

Assist local farmer via employee daily spending.•

Continuously collaborate with charity and convenience store to offer job opportunities.•

Improve health care to enhance the physical-mental balance of the

employees. Promotion the care to the fellows.

Organize health care and cancer screening activities.•

Organize maternity protection activity and management.•

Assist employees in achieving mental/physical balance and provide a safe

work environment.

• Employee-friendly workplace promotion in Taiwan.

• Comprehensive upgrade of daily life services.

Cultivate talent through adequate training and certification.

• Assist 65 internships and employ 56 members through academia collaboration.

• Upgrade the leadership power of China via the deployment of Taiwan’s “Leadership course”.

• Enhance the leadership ability of the 1st tier supervisor via various kinds of training.

Create a work environment favorable to people with disabilities and promote

employment.• Set up the goal of disability employment of 946 person-time.

Collaborate with universities to identify and foster external talents; Open

communication and use innovation to retain internal talents.• Inno-star project to foster potential talent; provide diverse career path for employees through internal transfer application system.

Provide competitive salaries and benefits. • Retain talents with competitive compensation package. The turnover rate of 2016 dropped 13.65% (vs. 2015).

Create the best benefits for the shareholders to become a competitive

corporation.• Enhance technologies including OLED to further promote industry 4.0. Continue to promote small and medium displays.

Build a safe environment and reduce occupational hazards by following

international environment safety management systems.

• Accelerate the progress of earthquake prevention project owing to the incident of Meinong earthquake with the measures including

damage-prevention audit, source management of chemicals and prevention activities of occupational injury.

Respect human rights based on the UN global compact. • Compliance of local regulation and EICC regarding labor human rights management.

Enhance water efficiency via new technology.• Strike to reduce the water consumption intensity to the approach of “efficient zero-discharge”. TFT-LCD stage water consumption

intensity reduced 7.5% compared to 2015.

Enhance energy efficiency via new technology. • Further reduce electricity consumption intensity. Set up solar panel systems which generated 17 times of energy compared to 2015.

Approach to the optimization of resources management and reduce

environmental impact.

• Green products with energy and material saving design.

• Deploy MFCA (Material Flow Cost Accounting).

• Enhance the recycling rate of chemicals.

• Set up KPI for organic sludge, inorganic sludge and SRS residue reduction.

Approach to low-carbon company.• Completed 43 energy and emissions reduction projects. Install burning-type to reduce FCs emissions. Support the government project

of water recycling.

Promote green value-chain.

• Supply chain risk management.

• Optimize Product Carbon Footprint database.

• Enhance the scale of suppliers taking part in MFCA.

• Supplier annual inventory reduction target achieved.



1211

2016 Taiwan Corporate Sustainability Award by TCSA

• Outstanding prize for blood donation by Ministry of the Interior—Tainan site.• Advance Unit of Safe Production Management—Ningbo and Shanghai site.• Average disability employment rate 1.46%, a total of 946 person-times.• Nanjing site awarded Outstanding Unit for Disability Employment by Nanjing Disabled Person's Federation.• Foshan site awarded Guang Dong Province Demonstration Unit for Disability Employment .

• CDP scored A- grade (leadership level).• "Best Performance in Water-Saving Unit" by the Water Resources Agency, Ministry of Economic Affairs-Fab8.• Clean Production Certification by Industrial Development Bureau, Ministry of Economic Affairs.• Advance Unit of Energy Conservation and Clean Production—Ningbo site.• ISO 50001 and Clean Production certification-Foshan site.• TFT-LCD stage GHG emission intensity 37.5 kgCO2e/m2, a reduction of 5.5% (vs. 2015).• TFT-LCD stage GHG emission intensity 0.330m3/m2, a reduction of 7.6% (vs. 2015).• Taiwan process water recycled amounted to 249.3 million tones with a recycling rate of 95.4%.• Taiwan site awarded “Excellence Enterprise in Green Procurement Award” for 8 consecutive years.

2016 Honors and awards

• 25th Taiwan Excellence AwardI. Taiwan Excellence Achievement Award, the highest national prize.II. 100” 4K2K LCD TV module awarded Taiwan Excellence Gold Award.III. 5.5” FHD LCD module, 17.3 FHD panel for gamers with high color saturation, smooth and clear image, 23.8”ultra- thin frameless desktop monitor were awarded Taiwan Excellence Award.

• Ningbo site awarded Outstanding Foreign Corporation of Zhejiang Province.• A total of 530 patents approved and possess 8,000 patent worldwide.• Award for International Trade for consecutive 6 years and Target Market Contribution Award, the only multiple winner in 2016.

• Innolux awarded Taiwan Corporate Sustainability Awards-- Corporate Sustainability Report Golden Awards of ICT group.

• Innolux awarded Taiwan Corporate Sustainability Awards--Sustainable Water Management Awards .

Economic

Social

Environmental

1211 1211

1413 2016 INNOLUX CSR Report



1.1 Stakeholder Communication and Participation

1

Stakeholders Engagement

In economic field, Innolux faces the challenges of capacity adjustment of the industry, producing high unit revenue for more than 60 thousand employees worldwide, and satisfying customer’s need in 2016. In environmental field, water and energy conservation is the key when Innolux is the 11th manufacturer of Taiwan in terms of scale. Innolux is also obliged to risk management of more than 1,000 suppliers. In social field, we aim to help the minority groups to build up their independence. Based on the above, stakeholders from internal, external areas are identified including employees, shareholders/investors, customers, suppliers, government, community, NGOs and media.

Innolux Corporation aims to create maximum social value through excellent operations, and enhance the relationships with the stakeholders and comprehend global CSR trend through the communications with them. Diverse and unobstructed communication channels are established such as the provision of investor services, supplier areas, business service/product inquiries, media liaison, and a whistleblower mailbox on the company website. In addition, a corporate social responsibility mail box ([email protected]) can also be accessed to facilitate a timely response.

Stakeholders of Innolux Corporation |

Employees

Media

Customers

Government authorities

Communities

Shareholders/ investors NGOs

Suppliers


ch1 - Stakeholders Engagement


With reference to AA1000 Stakeholder Engagement Standard (AA10000SES), Innolux analyzes relevant stakeholders and materiality. Concerned issues of corporate governance, environment, social fields are responded.

1.2 Materiality Analysis

Step 3: Concerned CSR issues

A Failure Mode and Effects Analysis (FMEA) is adopted to perform an assessment. The assessment is based on three key principles, “whether stakeholder is concerned with the communicated issues”, “the level of concern with the issues on the part of stakeholder”, and “the level of effect that the issues have on realizing the goal of strategic communication”. The assessment results are used to determine the weight of the evaluation criteria as indicated by the Analytic Network Process (ANP). Subsequently, the Risk Priority Number (RPN) of each issue is calculated for prioritization.

Based on the preliminary results of step 2, internal and external operations analysis, and global trends like SDGs, a brief report was made to the CSR management representative, Chairman Jyh-Chau Wang during the annual management review meeting. A total of 16 material CSR issues and 2016 CSR KPI were decided.

MaterialityStep4：Material issues management

Material issues are responded by the aspects of economy, environment and society. Relative management objectives and strategies are listed below. The boundaries of the effects and management will be disclosed in corresponding chapters of this report and on the CSR section of Innolux’s official website.

16Concerned CSR issues

Completeness

Step2: Issues collection and analysis

• Topics collection includes issues proposed by the CSR Committee, corporate risk and opportunity, industry trend, Electronic Industry Code of Conduct (EICC), customer audit feedback, global trend like SDGs and GRI Standards. By combining the object ives of communicat ion, 29 topics were collected.

• Questionnaires were collected from stakeholders to analyze their concerned issues.

Sustainability

Step 1: Establish objectives of communication

The objectives of communication with stakeholders via the

Corporate Social Responsibility Report

1. Respond to the concerned issues of the stakeholders.

2. Disclose the input in the governance, economic and

environmental field.

Inclusion

Step of Materiality Analysis




Stakeholder Major Communication Channel Frequency Concerned issues

Employees

1. Communication hotline 67885, mailbox and disability care group.

2. Labor-management meeting, Meeting with the Executives3. DL interview, seminars for disability group and new

employees.4. Innolux Monthly.5. Satisfaction survey.

1. Irregular2. Irregular3. Irregular4. Bimonthly5. Irregular

‧Compensation and benefits‧Financial performances‧Recruitment and staffing‧Training and development

Customers

1. VOC (Voice of Customer) system.2. INNOLUX Intelligent Portal for immediate interaction with

the customers.3. Top management meeting.4. Customer satisfaction survey and ananlysis.5. Customer audit or questionnaire.6. Designated account service for immediate response.

1. Irregular2. Irregular3. Irregular4. Annual5. Irregular6. Irregular

‧Product quality and customer satisfaction‧Sustainable supply chain management‧Greenhouse gas emission and carbon management‧Green product management

Shareholders/

investors

1. Annual report.2. Shareholders’ meeting.3. Investors’ hotline and mailbox.4. Participation in seminars held by local and overseas

investment agencies.5. Interview with the analysts.

1. Annual2. Annual3. Irregular4. Irregular5. Irregular

‧Financial performances‧Corporate governance‧Recruitment and staffing‧Sustainable supply chain management

Suppliers

1. Procurement strategy meeting.2. Supplier communication meeting.3. Material quality meeting.4. Annual suppliers’ meeting.5. Suppliers’ notice.

1. Weekly2. Monthly3. Monthly/ quarterly4. Annual5. Irregular

‧Sustainable supply chain management‧Green product management‧Pollution control

Government

1. Collaboration with the government.2. Law and regulation hearing.3. Communication with the government through science

park administration and TTLA.4. Support the government’s initiatives.5. Designated Corporate Communication Department for

timely response.

1. Irregular2. Irregular3. Irregular4. Irregular

‧Greenhouse gas emission and carbon management‧Energy resources management‧Environmental education‧Disability employment

Media1. Designated media mailbox and hotline.2. Press release.3. Press conference.

1. Irregular2. Irregular3. Irregular4. Irregular

‧Financial performances‧Recruitment and staffing‧Corporate governance‧Water management

Community1. Designated community communication department.2. Participating in community activities.3. Participating in NGOs seminar.

1. Irregular2. Irregular3. Irregular

‧Pollution control‧Community participation and social charity‧Occupational health and safety‧Recruitment and staffing

NGOs1. Collaboration with NGOs to hold CSR projects.2. NGOs funding.3. Invite NGOs to take part in seminars.

1. Irregular2. Irregular3. Irregular

‧Community participation and social charity‧Disability employment‧Pollution control‧Occupational health and safety

Communication Channel and Frequency




CSR議題

Economy

Environment

Society

13.67

13.58

13.45

13.42

13.30

13.06

13.03

12.95

12.80

12.65

12.53

12.34

12.08

11.85

1.Financial performance

15.Occupational health and safety

12.Green product management

5.Product quality and customer satisfaction

4.Water resources management

14.Community participation and social care

3.GHG emission

2.Energy resources managemen

8.Disability Employment

Legal compliance

6.Pollution control

Labor/management relations

Customer Privacy

Material

Local procurement

Antitrust

11.39

11.02

10.84

10.22

10.10

9.92

9.72

9.48

9.40

8.36

7.55

7.42

7.35

7.14

6.96

Corporate governance

9.Compensation and benefits

10.Supply chain management

11.Employee-friendly workplace

16.Recruiting and retaining of competent employees

13.Integrity management

7.Personnel training

Development and innovation of products and technologies

Grievance and communication mechanisms

Risk management

Labor human rights

Biodiversity

Diversity and equal opportunity

CSRIssue PRN

Material Issue

Average Issue

Concerned CSR issues




1.2 CSR MaterialityThe material aspects that Innolux is concerned about have a considerable impact on each production plant and subsidiary within the organization as well as affiliated companies and stakeholders (i.e., customers, suppliers, and communities) outside of the organization. Details could be found in the corresponding chapters of the report.

Aspect Material issuesTopic-specific

GRI Standards (2016)2016 performances

Reference

page #

Economy

Financial performances

GRI 201- Economic performanceGRI 202- Market presenceGRI 203- Indirect economic impactsGRI 204- Procurement practices

• Enhance technologies inc lud ing OLED to further promote industry 4.0. Continue to promote small and medium displays.

• 2016 gross margin 9.1%, operating profit Margin 2.2%, EPS NT$0.19.

30

Product quality and customer satisfaction

GRI 201- Economic performanceGRI 418- Customer privacy

• Enhance product quality, technology and service satisfaction through d e d i c a t e d p r o j e c t s . C u s t o m e r satisfaction of 2016 rises 6%(vs.2015).

37

Environment

Energy resources managemen GRI 302- Energy

• Completed 43 energy and emissions reduction projects. 2016 electricity consumption intensity was 70.3 KWh/m2, a rise of 5.25% (vs.2015), owing to the reasons of earthquake and capacity and failed to attain the target of 2.5% reduction.

• Set up solar panel systems which g e n e r a t e d 1 7 t i m e s o f e n e r g y compared to 2015.

53

GHG emission GRI 305- Emissions

• GHG emissions reduction achieved through various reduction plan in Taiwan site. FCs emission was 0.109 MMTCE. Electricity consumption GHG of China sites was 0.0788MMTCE. Both targets were achieved.

• CDP scored A- grade (leadership level).• Collaborate with suppliers in carbon

reductions through Product Carbon Footprint database, suppliers taking part in MFCA and supplier annual inventory reduction.

51

Water resources management GRI 303- Water

• TFT-LCD stage water consumption intensity target achieved and reduced 7.5% (0.330m3/m2) compared to 2015.

57

Pollution controlGRI 301- MaterialsGRI 306- Effluents and wastesGRI 307- Legal compliance

• Chemicals recycl ing rate of 2016 increased rate (vs.2015): TMAH 54.2%, PGMEA 1.2%, NMP 0.9%.

• Taiwan Fab KPIs were set for organic sludge, inorganic sludge and SRS residue reduction. The targets of inorganic sludge and SRS residue reduction were achieved.

• Waste intensity KPI for China sites achieved, 1.2187Kg/m2, a reduction of 17.2% (vs. 2015).

61

Green product management

GRI 301- MaterialsGRI 301- Product and serviceGRI 416- Customer’s health and safety

• Annual supply chain conflict minerals survey 100% completed.

67

Supply chain management

GRI 204- Procurement practicesGRI 308- Supplier Environmental Assessment GRI 414- Supplier Assessment for Labor PracticesGRI 414- Supplier Assessment for impacts on society

• Supplier annual inventory reduction target achieved. Top 87% supplier by spend (70 suppliers) provided GHG inventory with reduction amount 130,429.1 tCO2e.

• 10 suppliers taking part in MFCA with reduction amount 4,418 tCO2e/year.

42

Concerned CSR issues table




Aspect Material issuesTopic-specific

GRI Standards (2016)2016 performances

Reference

page #

Society

Compensation and benefitsGRI 405- Equal remuneration for women and men

• R e t a i n t a l e n t s w i t h c o m p e t i t i v e compensation package. The turnover rate of 2016 dropped 13.65% (vs. 2015).

93

Personnel trainingGRI 404- Training and educationGRI 412- Investment

• Assist 65 internships and employ 56 members through academia collaboration with STUST, KSU and KYU. Employment rate was 86%.

• Upgrade the leadership power of China via the deployment of Taiwan’s “Leadership course”. A total of 13 seeded teachers in China finished the course.

• Enhance the leadership ability of the 1st tier supervisor via various kinds of training. The leadership ability rose 6.1%.

95

Disability EmploymentGRI 405- Diversity and equal opportunity

• Taiwan 1.17%, outperform the requirement (1%).

• Ningbo, China 1 .64%, outperform the requirement (1.5%); Foshan, China 1.76%, outperform the requirement (1 .5%); Nanjing, China 2 .22%, outperform the requirement (1.5%); Shanghai, China 0.73%, inferior to the requirement (1.6%).

95

Employee-friendly workplace

GRI 103- Labor practices grievance mechanismsGRI 103- Human rights grievance mechanismsGRI 103- Grievance mechanisms for impacts on societyGRI 401- EmploymentGRI 402- Labor/management relations

• Respond to employees’need in the Employee-friendly workplace project. More than 20 suggestions were collected with process rate 100%. Acceptance rate of employees achieved 96%.

• Comprehensive upgrade of dai ly l i fe services in China sites. The turnover rate of 2016 dramatically dropped from 12.87% (2015) to 3.89%.

86

Integrity management

GRI 103- Grievance mechanisms for impacts on societyGRI 205- Anti-corruptionGRI 419- Legal compliance

• A d v o c a c y o f a n t i - c o r r u p t i o n w e r e conducted via email to suppliers. Integrity survey were completed against top 50 customers and suppliers.

• A l l d i r e c t l a b o r ( Ta i w a n a n d C h i n a ) completed anti-corruption policy training with completion rate >95%.

24

GRI 413- Local communities

• Continuously collaborate with charity and convenience store to offer job 19 opportunities.

• Assist local farmer via employee daily spending at the monthly farmers’ market at the facility.

81

Occupational health and safety

GRI 403- Occupational health and safety

• Taiwan: Damage-prevention audit and earthquake damage prevention project.

• Source management of chemicals extended to the import/export stage to comply with the legal requirement.

72

Recruiting and retaining of competent employees

GRI 405- Diversity and equal opportunityGRI 406-Non-discriminationGRI 407-Freedom of association and collective bargainingGRI 408- Child laborGRI 409- Forced or compulsory laborGRI 412- Assessment

• Inno-star project to foster potential talents at preferred universities. A total of 459 persons (indirect labor) were recruited in 2016.

• Provide diverse career path for employees through internal transfer application system.

87




2.1 Corporate Organization

Joint Ventures and Subsidiaries

The operations of Innolux and its subsidiaries cover TFT-LCD development, manufacturing, sales and after sales service. A small numbers of affiliates focus on investment businesses to strengthen vertical integration and strategic investments, thereby facilitating future operations. Innolux consists of 48 subsidiaries, comprising 18 controlling companies, three entrepôt trading companies, 14 companies in China, 9 foreign companies, and 4 investment companies. Subsidiaries related to the boundary of this report include Ningbo site (Ningbo Innolux Optoelectronics Ltd and Ningbo Innolux Display Ltd.), Foshan site (Foshan Innolux Optoelectronics Ltd), Nanjing site (VAP Optoelectronics (Nanjing) Corp, Kunpal Optoelectronics Ltd, Nanjing Innolux Optoelectronics Ltd), and Shanghai site(Shanghai Innolux Optoelectronics Ltd.). You may refer to P.113 of annual report for more details.

2

Corporate Management and Development




2.2 Company Governance

Innolux has enacted the “Corporate Social Responsibility Policy” and the “Ethical Corporate M a n a g e m e n t B e s t P r a c t i c e P r i n c i p l e s f o r Innolux Corporation” to disclosure information and implement integrity principle to achieve good corporate governance. Our board is comprehensive and composed of independent directors. We adhere to the law and regulations and publicize the critical management information in real time. The board has established the remuneration committee, Audit Committee, and Audit Office to assit with the manager and the board to reasonably ensure the reliability and the compliance of the performance of management and the financial report. As mentioned above, we can see Innolux’s efforts on corporate governance.

1. Articles of Incorporation of Innolux Corporation2. Election Rules of Directors3. Rules and Procedures for meeting of the board of Directors4. Procedures for Acquisition or Disposal of Assets5. Procedures for loaning of Funds to Others6. Procedures for Endorsement & Guarantee7. Policies and Procedures for Financial Derivates Transactions8. Code of Ethics for Directors and Officers9. Rule of Shareholders Meeting10. Compensation Committee Charter11. Ethical Corporate Management Best Practice Principles for Innolux Corporation12. Audit Committee Charter13. Corporate Governance Principles

The aforementioned policies are posted on the company websitehttp://www.innolux.com/Pages/TW/InvestorRelations/Corporate_Governance/Major_Internal_Policies_TW.html

Major Rules of Corporate Governance

Corporate Organization

HR Management Center

Quality Management Center

Finance & Accounting Center

Finance & Accounting Center

Strategic Procurement Center

Operation Management Center

EHS Group Division

Product Center

Manufacturnig Technology Center

TFT Manufacturing Center

LCD M

odule & Com

ponent Center

Mobile D

evice Center

Audit OfficeAudit Committee

TV AII Product Technology Center

Shareholders' Meeting

Board of Directors RemunerationCommittee

Chairman

President CSR Committee

Product Center




Board Operations

The board of directors is the company's highest level of governing unit responsible for major operational decisions, including appointing and supervising management personnel, monitoring operation performance, enforcing laws and regulations, establishing the company charter, resolving issues raised in shareholders' meetings, and maximizing shareholders' equity.The board meeting is held at least once a quarter. Ad hoc meeting will be held when necessary. The Board of the Directors shall evaluate operation strategies, risk management, the annual budget, and business performance, as wel l as superv ise major capita l expenditures, and investment. Please refer to the Market Operation Post System and annual report for more details.

2.2.1 Company Governance Organization

Remuneration Committee and Audit Committee are set up to strengthen the monitor and supervision and to assist the fulfillment of the Board of Directors’ duty of protecting the benefit of the company, employee and shareholders and other stakeholders. The monitoring includes the effectiveness of the implementation of the internal control system, the fair presentation of the financial reports, the hiring (and dismissal), independence, and performance of the certificated public accountants, the compliance with relevant laws and regulations and the management of the existing or potential risks of the Company., regular assessment of the remuneration, performances and remuneration policy of the directors. Please refer to the annual report for more details.

Board election

The composition of the board of directors shall be determined by taking diversity into consideration. It is advisable that directors concurrently serving as company officers not exceed one-third of the total number of the board members, and that an appropriate policy on diversity based on the company's business operations, operating dynamics, and development needs be formulated and include, without being limited to, the following two general standards:1. Basic requirements and values: Gender, age, nationality,

and culture.2. Professional knowledge and skills: A professional

background, profess ional sk i l ls , and industry experience.

The election of board of directors is performed in according to Article 192-1 of Company Act.Nomination system is adopted and the system is expressly stipulated in the Articles of Incorporation. The shareholders shall elect the directors from among the nominees listed in the roster of director candidates. The board of directors should be equipped with the knowledge, skill and qualification to provide professional advice on the company’s operation, technology and financial management and monitor the strategy and operation of the company to create the best benefit for the shareholders. Please refer to the Market Operation Post System for the continuing education for directors.

Innolux formulate the Ethical Corporate Management Best Practice Principles, including complying with corporate ethics, maintaining operational transparency, valuing shareholders' rights, respecting stakeholders' rights and interests, and implementing the responsibilities of company managers.The Board of Directors was re-elected on 24 June, 2016 in the shareholders' meeting.• A total of 7 board members, including 3 independent

directors were elected.• A total of 3 meetings were held between 24 June,

2016 to 31 December, 2016. The operation of board of directors please refer M.O.P.S. or Annual Report of INX.

Board and supervisor remuneration

The compensation of board members and supervisors is based on the regulations specified in the company charter and the level of participation and the value of contributions to the company operations in line with industry standards. If the annual accounts indicate a net profit, the Board of Directors shall propose remunerations for the board and the supervisors according to the regulations in the company charter and submit the proposal to the shareholders’ meeting for approval. Please refer to P.19 of annual report for more details.

Title Name Gender Current position at Innolux

Chairman Jyh-Chau Wang Male CEO

Institutional Director Te-Tsai Huang Male --

Institutional Director Chuang-Yi Chiu Male --

Institutional Director Chin-Lung Ting Male Executive Vice

President

Independent Director Chi-Chia Hsieh Male --

Independent Director Bo-Bo Wang Male --

Independent Director Stanley Yuk Lun Yim Male --

Members of the Board｜

Please refer to the annual report for more details of the board of directors.

Mr. Jyh-Chau Wang was elected by the Board as the Chairman and President on June 24, 2016. To realize the best practice of corporate governance, the Board approved on March 15, 2017 that Mr.Robert Shiao (Chih-Hung Shiao) became the President & COO, effective from March 16, 2017. Mr.Shiao is expected to assist Chairman and CEO Jyh-Chau Wang in global network and to co-operate with the group.




Remuneration Committee

To continually strengthen corporate governance and connect with international standards, Innolux has established the Remuneration Committee in August 2011. The Remuneration Committee, authorized by the board of directors, oversees the overall remuneration policy of board members, supervisors, and general and vice managers (including financial and accounting managers), faithfully exercise authority, and propose board reviews. The Remuneration Committee consists of independent board directors with at least five years of work experience and relevant qualifications, sufficient for maintaining independence, professionalism, and fairness. In addition, professional feedback from external experts is considered as a method to understand the thoughts and opinions of stakeholders towards remuneration matters.Based on the Remuneration Committee Charter established by the company, regularly assesses the remuneration of directors and managers, including remuneration for remuneration, shareholding, dividends, retirement benefits or severance pay, allowances and other measures of substantial rewards.In addition, the Remuneration Committee shall convene at least twice a year. Since establishment, the committee has convened 18 meetings as of December 2016.

Remuneration Committee Members｜

Title Name

Independent Director Chi-Chia Hsieh

Independent Director Bo-Bo Wang

Independent Director Stanley Yuk Lun Yim

Salary Income Ratio

Innolux’s annual salary income is composed of salary, various allowances, rewards, and employee bonuses from the surplus. The amount of employee bonus is based on the proposed allotment approved by the board. The remuneration of executives is based on regulations and approval by the Remuneration Committee. Related information has been appropriately disclosed in the company annual report.According to the analysis in 2016, the highest annual salaries were 41 and 6.8 times higher than the median salaries in Taiwan and China, respectively. In addition, calculated the ratios of annual compensation raise % of the highest-paid individual to the median of annual compensation raise % for all employees in 2015 and 2016 were both negative numbers, compare 2016 with 2015 were 0.42 times in Taiwan. In China, there are slightly reduce the highest-paid and 2016 were -0.002 times than 2015.

Site/Year Y2013 Y2014 Y2015 Y2016

Taiwan 11 26 35 41

China 6 6 7.7 6.8

Ratio of the annual compensation of the highest-paid individual to the median annual total compensation for all employees｜

Note1: The median annual total compensation for all employees and the median of annual compensation raise % for all employees excluded the highest-paid individual.The compensation package of the highest-paid individual and all employees includes wage, management allowance, various bonuses, various allowances, employee dividends (including stock dividend and cash dividend), provision of dormitory or company vehicle, etc.

Note2: Ratio of salary change formula:Ratio of salary change=A/BA. Y2016(the highest-paid)- Y2015(the highest-paid)/ Y2015(the highest-paid)B. Y2016(the median-paid)- Y2015(the median-paid)/ Y2015(the median-paid)

Conflict of interest avoidance

The rules governing the conduct of board meetings clearly stipulate an article related to avoiding conflict of interest of the board. Board members may only assert their point of view and reply to inquiries regarding items on the agenda which they themselves or the corporations they represent have a vital interest in, which in turn may harm the interests of the company. They may not participate in the discussions or the voting and shall avoid involvement in the said process. They shall also not exercise the voting rights of board members on their behalf. Board members shall self-regulate and shall not support each other.INX has elected 3 independent directors to provide recommendations based on their professionalism and experience during the company's decision-making. The Board should also take the opinion of independent directors fully into consideration during the discussion of any proposal. Independent directors' reason for agreeing or disagreeing with a vote must also be included in the meeting minutes. These uphold the principle of avoiding conflicts of interest to protect company interests effectively.




Audit Committee

The Audit Committee is set up according to the Securities and Exchange Act, and consists of 3 independent directors. The Audit Committee assists the Board in the effectiveness of the implementation of the internal control system, the fair presentation of the financial reports, the hiring (and dismissal), independence, and performance of the certificated public accountants, the compliance with relevant laws and regulations and the management of the existing or potential risks of the Company. The Audit Committee meets at least once every quarter. In 2016, 3 Audit Committee meeting were held with 100% attendance rate.

Title Name

Independent

DirectorChi-Chia Hsieh

Independent

DirectorBo-Bo Wang

Independent

DirectorStanley Yuk Lun Yim

Member of the Audit Committee ｜

According to Article 6 of the Audit Committee Charter, decisions could be adopted with the consent of two-thirds or more of the entire board of directors and be submitted to the board of directors for a resolution. Please find below the issues discussed in the Audit Committee.

• Financial report• Audit and accounting policy and procedure• Internal control system• Important t ransact ion of asset and

derivatives• I m p o r t a n t l o a n o r e n d o r s e m e n t o r

guarantee• Raise or issue of valuable papers• Legal compliance• Potential conflict of interests for managers

and directors• Employee complaint• Corruption investigation• Company risk management• Hir ing, dismissal or remuneration of

certified public accountants• Hiring and dismissal of the supervisors

of finance, accounting or internal audit department


ch2 - Corporate Management and Development


2.2.2 Business Ethics and Internal Control

Legal advice

For contract review, the employees can submit an application at the Contract Review System. Each case will be assigned to a specific Legal for a further review processing. If Innolux colleagues have any legal issues related to the work or company, they can call or email the legal department window for inquiries.They also have to submit an application at the Contract Review System to record the handling process.

In order to ensure that all employees of InnoLux adhere to high ethical standards when they engage in business conducts, InnoLux has established and issued “Ethical Corporate Management Best Practice Principles for InnoLux Corporation,”“Innolux Code of Ethics for Directors and Officers,”“Innolux Code of Conduct for Employees,” to standardize the responsibilities of employees required when they engage in business conduct and to create a corporate culture of integrity. The abovementioned bylaws have been posted on the Company’s official website, Taiwan Stock Exchange's Market Observation Post System and Company’s internal website for employees’ reference.

Anti-Corruption Policies and the Integrity Commission

The anti-corruption policy of Innolux is stipulated in “Corporate Social Responsibility Manual,”“Ethical Corporate Management Best Practice Principles for Innolux Corporation,” “Innolux Code of Conduct Specifications,”“Innolux Corporation Code of Ethics for Directors and Officers” and “Code of Conduct for Innolux Employees.”

To ensure that our employees comply with the regulations, Innolux requires a l l incoming employees to s ign the“Honesty, Integrity & IP Protection Agreement.“ Moreover, Innolux has also demanded in 2016 that all IDLs in Taiwan and mainland sites must receive a digital anti-corruption training. In addition, to promote awareness to our anti-corruption policy, we disclosure the regulations on our internal website, and publicize at startup screen.

Item Description

MaterialityIntegrity is the management bedrock of Innolux. Corruption breaks the company’s discipline institution, impacting on the corporation’s management and reputation. We have to establish the culture of integrity and honesty to build up the good image of the corporation.

Boundary within the organization – corporationoutside the organization – front-end suppliers and back-end suppliers

Management

Set up the Ethical Corporate Management Best Practice Principles for Innolux Corporation, the Code of Ethics for Directors and Officers, and the Code of Conducts for all employees to regulate the employees to hold their responsibility in business area. Set up the business culture of integrity and honesty, and continuous promotion and training. Innolux also sets up the speak-up mail box to monitor and assess the potential corruption risk and implements the integrity committee.

Medium-to- long term strategy

Strictly comply with the related national and international regulations of anti-corruption. No tolerance to any behaviors violating the business ethics. Promote the policy of anti-corruption to our supply chain.

2016 performance

• Finish Innolux’s anti-corruption promotion and integrity survey for the top 50 customers (including the agents) and suppliers.

• Implement the training for more than 95% of the indirect employees in the Taiwan and China sites.

• We have held the integrity commissions meeting for twice in 2016. One report was decided as a violation after investigation. We also strengthen the promotion to correct employees’ cognition on corruption to protect the corporate discipline.

2017 promotionWe plan to process the anti-corruption questionnaire survey in Taiwan and China sites, providing the Innolux employees the internal report channel to disclosure the issue of conflict of interests, and the violation of integrity.

Integrity Management｜ [Management approach of material issue]

Integrity and righteousness are the foundation of Innolux. InnoLux strictly complies with Anti-corruption regulations and apply zero-tolerance policy in misconduct. Innolux also expects our suppliers to comply with Innolux’s anti-corruption policies.Suppliers should follow the regulation of ”Supplier CSR Code of Conduct Operating Standards” and are required to sign Innolux’s Supplier's Undertaking and Integrity Questionnaire for InnoLux to evaluate the corruption risk.




Internal Audit Organization and Operation

The board of directors has established the Audit Office to implement various on-site audits or document reviews in the audit plan authorized by the board. The Audit office shall audit regulatory compliance, process design, system compliance, accurate financial reporting, operation performance and efficacy, and when necessary, provide various departments with recommendations for improvements. This is to assist the board of directors and managers in reasonably ensuring that internal control systems are being continuously and effectively implemented. Relevant audit results will be periodically reported to the board of directors. Furthermore, the Audit Office will supervise and assist each department in conducting their own annual internal control system assessment to realistically carry out company self-monitoring mechanism.

Mailbox for Anti-Corruption Reporting

Innolux has established a mailbox for anti-corruption reporting ([email protected]). Employees and external personnel can use this mailbox to make anonymous reports regarding misconducts. Innolux has established investigation teams to investigate corruption-related cases. Moreover, investigations will be conducted privately, and after the investigation is completed, investigators will deliver an investigation report to the Integrity Commission for deliberation. If misconduct has occurred is determined, internal punishments will be imposed or it will be pursued in accordance with the law. In 2016, 39 incidents had been reported, filed, and investigated and among them, 66.67% of the cases have been closed by the end of that year. Pending cases will be continually investigated by the investigation teams.In 2016, a total of two Integrity commission meetings had been convened and one reported incidents had been confirmed as a violation of company integrity regulations by one of our suppliers. InnoLux has strongly communicated this kind of important case to employees to establish their correct concept and maintain disciplines in the workplace.

2016 Number of Cases Reported via the Anti-Corruption Mailbox ｜

Item Reported cases

No. ofprocessed cases

No. ofresolved

cases

Internal feedback 7 4 3

External feedback 32 9 23

Total 39 13 26

Percentage ofhandled cases 100% 100% 66.67%

NoteInternal communications indicate cases filed by employees or claimed to be employees.

The digital anti-corruption training (as of February 2017)｜

Type/ Site Item Taiwan China

Senior

managers

No. of trainees 59 4

No. of people trained 59 4

Passing rate 100% 100%

Employees

No. of trainees 10,564 5,906

No. of people trained 10.564 5,906

Passing rate 100% 100%

Anti-corruption Training

The digital anti-corruption training courses include topics of personal Information protection, trade secret, and anti corruption. Those courses focus on the regulations, the relevant cases and the responsibilities. Statistics show that a 95% graduation rate has been reached in the 2016 and our company will continue to push employee who has not completed the training to finish it.

Audit Office

AuditCommittee

RemunerationCommittee

Internal Audit Organization

BoardChairman of the Board

Shareholders’ Meeting

President




2.2.3 Legal Compliance

Compliance with CSR Related Regulations

Innolux establishes the Corporate Social Responsibility Policy and the Innolux Code of Conducts Specifications. The mentioned documents regulates that: Innolux has to complied with the local related regulation to engage in the operation activity and to set up the structure of corporate governance and related ethics standards. Meanwhile, Innolux strengthens employees’ consciousness of compliance through training and internal promotion. If there were any employees violating the laws, the regulations on labor safety, the labor contract and any corporation’s ethical regulations, Innolux will conduct the violation event according to the related laws and the punishment provisions. And the punishment on the employee will also reasonably influence the evaluation result of performance.

Innolux also sets up the work group of risk management in order to monitor and support the efficient promotion of law compliance and system of risk management. Besides it also sets up the action proposal to continually improve.

To comply with relevant laws and regulations, Innolux established the Legal Requirements Management System in 2012 for control and management. In 2016, 245 laws and regulations have been collected related to labor rights and business ethics, covering sites in Taiwan and China. Based on the EICC Code of Conduct, the list of laws and regulations is updated and identified every fiscal quarter. Additionally, risk assessments on labor rights and business ethics are performed every year to improve the items of medium and high risks. For example, in 2016 we have assessed the revision contents of the Personal Information Protection Act, the Enforcement Rules of the Personal Information Protection Act, the Labor Standards Act, the Enforcement Rules of the Labor Standards Act, the Copyright Act.

Compliance with Antitrust Laws

Innolux strictly complies with related antitrust policies and regulations. To raise employees’ awareness of compliance of InnoLux’s antitrust policy, various training and promotional methods are continually implemented (e.g., screensavers, computer boot screens, and e-papers).Furthermore, InnoLux conducts key antitrust law training for supervisors whose job titles are deputymanagers or above, employees from procurement, sales, R&D marketing, and other employees who have direct contact with customers or suppliers and require them to sign the Letter of Commitment to Comply with Antitrust Laws. For incoming employees, InnoLux provides an digital introductory training course of antitrust policy to make them fully aware of company policy and related regulations.

To have effective controls to thecommunicating with competitors, employees shall read and comply with our antitrust policy. If there is a legitimate business reason to communicate with our competitors, employees shall fill in Exceptional Email Domain Application Form to request authorization.

C om pl i a nc e wi th the Pe r s ona l Infor m a t i on Protection Act

To promote awareness of Personal InformationProtection among InnoLux employees, InnoLux requires its employees to take online training courses. Important issues of personal information protection and privacy protection have been disseminating to raise employeecompliance awareness.

Meanwhile, we understand business relationships with customers and suppliers are founded upon respects and protections for the intellectual property rights, proprietary information and trade secrets. Thus, InnoLux demands that all IDLs in Taiwan and mainland sites must receive training regarding the Trade Secret Act. Also, Innolux emphasizes the importance of trade secret protection to its employeesby using e-papers and screensavers.




The customers concerning of the issues of EICC

In 2016, our customers had conducted 11 on-site audit and 39 questionnaires to realize the Innolux’s implementation condition of EICC Code of Conduct. The customers still emphasized on the labor human rights and the juveniles management. Innolux has been tracking and monitoring the mentioned situation through internal audit and the labor human rights platform which regularly held. Regarding to the aspect of environmental protection, several customers pay attentions to the emission and management of GHG. Innolux conduct GHG inventory and the promotion of reduction proposals from many years ago. We also disclosure the performance of carbon management by the carbon disclosure project(CDP) and the CSR report. Our customers deeply appreciates our actions and give us positive feedback.

CSR Training and Promotion

Innolux promote the law and regulations on business ethics and raise employees’ awareness via diverse channels like the training courses, poster, and newsletter. We provide the relevant courses like anti-corruption, personal data protection, business secrets protection and anti-trust to raise employees ‘ compliance awareness.

For new employees, Innolux has included the Innolux Code of Conduct in their training. The content includes the Company Code of Conduct, Employee Code of Conduct, and CSR policies and the promotion of actual accomplishments. In 2016, a total of 23,074 people were trained with a total of 12,759 hours. Furthermore, we arrange the operation supervisors to take the training course to strengthen their understanding to the EICC Code. In 2016, a total of 140 people were trained with a total of 518 hours. Relevant human rights training were also provided to security personnel. The human rights course are included in the annual items of promotion. The training material is also easily read and accessible for the security personnel. The Taiwan and mainland sites have employed 562 security personnel, registering a 100% rate of trained employees.

CSR Internal Audit

To a d h e r e t o t h e E I C C C o d e o f C o n d u c t a n d customers’relevant requirements , we continually manage and improve the issues of environmental protection and security and health through ISO14001 and OHSAS 18001 system. The CSR department also conducted internal audit annually to implement the operation of CSR management system. In the end of 2016, we based on the articles of EICC Code of Conduct V5.1 and the issues concerned by the customers, like working hours, juveniles, storm water management to conduct the audit. Innolux owns 6 production sites, and has performed 5 onsite audits at Jhunan (Taiwan), Tainan (Taiwan), Foshan (China), Ningbo (China), and Nanjin (China), achieving an 83.3% audit rate. The audits identified 40 risk points, which will be systematically and continually improved by each competent unit.

The distribution of 2016 internal audit results |

WorkingHours

Wages andBenefits

Occupational Safety

Emergency PreparednessOccupational Injury

and Illness

Sanitation, Food, and Housing

Health andSafety Communication

Hazardous Substances

Storm Water Management

Protection of Identityand Non-Retaliation

29%

8%3%

8%

5%

10%

14%

5%

5%

10%3%

Young Workers




The corporation is faced with the risks and threats of laws and regulations, economy, nature, competition, technology, damaged corporation reputation, and interruption of operation. Innolux has set up the mechanism of risk management, regularly review the related risks of finance, laws and regulation, climate change, water resource, supply chain, IT security, occupational safety and health.

Financial Risk Management

Hedging strategies are established by the Finance Department according to the local and global economic development, company operations and stock market status. Hedge transactions were made based on the internal control system and related procedure. The result would be disclosed as stipulated by law and reported to the board of directors.Financial risks are categorized into Credit Risk, Market Risk, Liquidity risk and Asset and operation interruption risk. Conservation approach management is imposed to establish related risk management target.

Item Description

Credit Risk

Set transaction method and credit transaction limits based on customers’ financial situation and credit rating. Periodically review accounts receivable payment status and collect on due payments. Analyze industry and customer operation status and respond with appropriate measures to ensure operation performances.

Market Risk

(A) Finance Department assesses the impact of exchange rate and interest rate changes on company assets and debts to establish hedging strategy and implement hedged transactions. Hedged transactions are primarily focused on avoiding real position risk and taking on financial products with simple structures that are highly fluid. The subjects of transactions are various financial institutions.(B) For foreign exchange rate risks, the company hedges by balancing asset and debt. Derivative financial product transactions engaged in by this company are in coordination with company operations and has the objective of hedging against exchange rate risks. In response to operation and investment activity needs, the company has borrowed floating debt to prevent financing cost uncertainties caused by market interest rate fluctuations. At an appropriate time, the company will commit to interest rate hedging financial products to lock interest rate risks.

Liquidity Risk

To increase liquidity, fund allocation focuses on preserving capital and maintaining high fluidity. At the same time, the company is expanding long and short-term financial channels to diversify financing sources and prevent sudden financial market events from causing system liquidity risks. At the appropriate time, the company will use capital market investment tools to strengthen capital structure.

Asset and Operation Interruption Risk

To prevent natural disasters or accidents from causing damage to company assets or interrupt ing operat ions, var ious r isk management costs, insurance costs, and reserved quota have been assessed and insurances have been purchased to transfer related risks.

Information Security Risk Management

Innolux is committed to protecting the confidential information of the company, our clients, suppliers, and employees, as well as company intellectual property, which is the key of the competitive advantage. This is to ensure the overall benefit of the company, our clients, employee, and shareholders, and to maintain company competitiveness.

INX MApp

Innolux has established a private corporate mobile messaging platform (INX MApp) to prevent security risks when employees use public communication software. This platform also increases the overall information communication efficiency and achieves the objects of rapid response and decision-making for work-on-the-go.

2.3 Risk Management

Main security protection mechanisms of the mobile messaging platform:

1. The organizational structure is integrated to the authorization system, which automatically removes permissions when personnel resign.

2. A privatized mobile platform prevents leakage of information to public systems.

3. The INX MApp can only be successfully installed after staff authentication.

4. Group member control system prevents non-job-related personnel from acquiring confidential information.




Product Proportion in Operations |

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.

Market Share

Because of Meinong earthquake in the first quarter of 2016, Innolux’s market share of large size panel decreased 2% percentage to 15% compared to 2015. According to IHS report, Innolux is the world’s third-largest LCD panel supplier in 2016. By application, Innolux’s LCD monitors took 16% market share (ranked #4); LCD TV panel took 15% market share (ranked #3), notebook pane (excl. tablet) took 23% (ranked #2). In the market of small medium size display, Innolux’s smart phone panel took 6% market share.

Market Competition

The TFT-LCD panel industry is competitive. Countries that invested in the industry are, as listed by the order of area produced, South Korea, Taiwan, China, and Japan. In 2016 Vendors from Mainland China expanded capacity radically with the government substantial support, and got into every application market, making the competition more and more severe in 2016. In response to severe market changes, Innolux will continue to optimize its production size, product design abil ity, quality yield, delivery operations management, and financial stability to enhance competitiveness.

Application Global market share Global ranking

Notebook panel (excl. tablet) 23% 2

LCD TV panel 15% 3

LCD monitor panel 16% 4

2016 Market Share｜

2.4 Operational Performance

OtherLarge modules

Notebook modulesMedium size modulesLCD monitor18.0%

20.2%

16.2%

44.3%

Y2013

1.3%

Y2014

15.3%

19.4%

16.3%

48.4%

0.6%

Y201510.7%

18.8%

13.7%

55.8%

1.0%

Y2012

40.3%

4.1%

21.4%

20.8%

13.4%

Y201611.54%

19.54%

15.37%

52.51%

1.04%

Taiwan（domestic）

33.26%

China20.82%

HongKong23.33%

Europe 4.53%

America 4.04%

Other14.02%

Main product selling area

Market Analysis |




R&D and Product Planning

Other than R&D in display technology, and upgrade of process and capacity, Innolux also engages in emerging technologies by investing appropriate resources and cultivating 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 etc.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 chain integration and development of products with high added values to make our products more competitive in both pricing and specifications to provide customers with value-added solutions and services and to provide terminal end consumers with added excitements in visual enjoyment.

The R&D organization of Innolux is divided into Technology Development and Product Development Departments. Innolux has employed 4,075 R&D staff members, which accounts for 6.2% of its total employees worldwide. In2016, Innolux invested a total of NT$ 11,132,000,000 in R&D, which accounts for 3.88% of the operating revenue in 2016.

R&D Investment By Year |

R&D Investment, Unit: NTD 1,000

Y2014 Y2015Y2013

12,265,650 12,177,08314,404,490

2.80%

3.96%

Y2016

11,132,079

3.68%

2.90%

% of revenue




With the impact of the earthquake on Feb 6, 2016 in South Taiwan, the annual consolidated revenue amounted to NT$287.1 billion, gross profit amounted to NT$26.1 billion, operation profit amounted to NT$6.4 billion, net income amounted to NT$1.87 billion, and earnings per share amounted to NT$0.19 per share.

Results of operation plan

Item 2013 2014 2015 2016

Operating revenue 422,730,500 428,661,898 364,132,984 287,089,277

Gross profit (loss) 37,759,115 50,385,001 46,640,105 26,088,491

Operating profit (loss) 15,349,268 28,173,396 22,430,709 6,413,249

Non-operating profit (loss) (9,705,915) (5,639,056) (7,571,522) (1,421,129)

Net income (loss) 5,095,019 21,676,908 10,814,141 1,870,687

Earnings (loss) per share 0.57 2.31 1.09 0.19

Income tax expense (benefit)

548,334 857,432 4,045,046 3,121,433

Capital expenditure 18,370,343 20,526,552 24,511,490 44,152,843

Employee remuneration 38,023,935 46,106,336 46,113,875 40,787,857

R&D expenditure 12,265,650 12,177,083 14,404,490 11,132,079

Total assets (year-end) 508,200,885 482,516,555 387,442,336 371,479,548

Total capital (year-end) 91,094,288 99,545,364 99,532,372 99,521,488

Total market value of equity (year-end)

103,392,017 153,299,861 98,935,178 115,444,926

Government subsidies 353,344 222,933 271,746 183,109

Expenditure on pensions 1,769,124 2,010,717 2,294,465 2,034,184

Unit: NT$ 1,000 (except when earnings (loss) per share are in NTD)

Note: Innolux adopted the International Financial Reporting Standards (IFRS), International Accounting Standards, the Interpretation Statements, and the Regulations Governing the Preparation of Financial Reports by Security Issuers acknowledged by the Financial Supervisory Commission for compiling the consolidated financial report.

Consolidated Financial Report

Item Description

Materiality Create the maximum benefits for shareholders, and become the corporation with competitiveness

Boundary Within the organization

ManagementImprove the technology, consolidate the OLED technology, continually promote Industry 4.0, continually grow the small-and-medium-sized product, and improve the management ability.

Medium-to- long term strategy

Integrate the value chain, and develop the high-value-added product with the advantage and competitiveness of price and specification. Provide the customers with more value-added solutions and services, and provide the customers with high quality visual enjoyment.

2016 performance Gross margin of 9.1%, operating margin of 2.2%, EPS NT$0.19.

2017 promotionContinually optimize the production scale, promote the industry-leading automatic production, improve the product design ability, quality yield, delivery operations management, and financial stability to enhance competitiveness.

Financial Performances｜ [Management approach of material issue]

Investor Communication

I n n o l u x i s c o m m i t t e d t o p r o v i d e investors with transparent information disclosure system and set up Investor R e l a t i o n s D e p a r t m e n t a n d S t o c k Administration Section to implement the spokesman mechanism, publish the annual report and the information c o m m u n i c a t i o n m e c h a n i s m . F o r example, the responsible department regular ly publ ishes the sa les and shipment report, holds the earning release meeting to publicize the financial performance and management result, and the annual ly shareholders’ meeting. At the same time, Innolux actively participate in the national and international investment seminar and the investor panels initiated by the security companies. In order to ensure that investors can obtain company’s messages correctly, timely and efficiently, we disclose all our financial information onto “Investors Relations” on our official website and on Taiwan Stock Exchange’s Market Observation Post System. To protect stockholders’ rights and treat them equally, Innolux enacts internal regulation to constrain the insiders on using the unpublicized m a r k e t i n f o r m a t i o n t o t r a d e o f securities. Shareholders may propose their suggestions to the company in writing during the annual shareholders’ meetings as stated in the Company Law. Proposal to the company could also be made through investors and shareholder service hotline or e-mail as listed on company’s official website.

I n v e s t o r R e l a t i o n s U R L : h t t p : / /w w w . i n n o l u x . c o m / P a g e s / T W /InvestorRelations_TW.htmlInvestor Relations URL: [email protected]

2.4.1 Financial Performances




Patent Distribution｜

Region United States China Taiwan Other

2016 25% 26% 38% 11%

2015 16% 30% 47% 7%

508,200,885

Y2013

91,094,288

482,516,555

99,545,364

387,442,336

99,532,372

Y2014 Y2015 Y2016

371,479,546

99,521,488

Y2013 Y2014 Y2015

103,392,017

153,299,861

98,935,178

Y2016

115,444,926

The Best Contribution Award from Taiwan External Trade Development Council (TAITRA)

In 2016, Innolux received The Best Contribution Award and Target Market Contribution Award from TAITRA, the only multiple winner of the year.

The overall panel industry turned down vigorously in Q3 2015. Innolux’s export amounted to 7.649 billion USD in 2015 amid the decline, and was ranked the 5th of the Best Contribution Award, becoming a consecutive-6-years-winner. The strategy of developing emerging markets, Mexico bid, 4K TV to Europe and USA, and automotive display panel gained Innolux an export amount of 594 million USD in 2015 to the target marketnote1, with a raise of 70.85% from 2014 (348 million USD). This success made Innolux ranked the 3rd of the Target Market Contribution Award 2016.

note1 Target Market: Indonesia, India, Vietnam, United Arab Emirates, Turkey, Mexico, Brazil, South Africa, USA, Germany.

Outstanding Contribution Award for Foreign Corporation

Outstanding Contribution Award for Foreign Corporation is held by Department of Commerce of Zhejiang Province which aims to encourage foreign investment and exchange of corporation management experience. Winners are always regarded as outstanding and influential business. Innolux-Ningbo site was awarded the honor with its economic contribution and excellent business management.

18,370,343

Y2013

12,265,650

20,526,552

12,177,083

24,511,490

14,404,490

Y2014 Y2015 Y2016

44,152,843

11,132,079

R&D and Intellectual Property Empowerment

Through close cooperation between the Intellectual Property Department and the R&D Department, Innolux has continuously improved the intellectual awareness of R&D personnel. The intellectual property personnel not only master market movement, but also actively develop high value patents aiming at potential technology. Innolux has prepared and completed the planning of patents for these panel displays in order to build a sound and solid intellectual wall. Furthermore, Innolux provides a complete and generous patent reward system to encourage its employees to continue improve and propose innovative technology. Innolux has obtained more than 480 patents worldwide in 2016, and has accumulatively gained 8,000 patents around the world.

Total capital (year-end)Total assets (year-end)

Unit: NTD 1,000

Unit: NTD 1,000 Capital expenditure R&D expenditure

Unit: NTD 1,000

Market value of equity – year-end total




2016 Innovative Breakthroughs

Large panels

• Surpassing industry peers this year, INX is the first to exclusively mass produce the ultra-high end 65-inch 8K4K (7680 x 4320) TV panel, which is currently the world’s highest resolution for television panel. INX delivers more realistic, natural images than the existing 4K2K resolution products, allowing end users to enjoy next-generation image quality.

• Employing groundbreaking technology, INX’s 100-inch 4K2K ultra-high resolution TV panel is the largest 4K2K size in Taiwan’s panel industry. It can replace the TV wall installations for the ultimate visual impact.

• The borderless, ultra-thin 65-inch large-size 4K2K model represents a technical breakthrough in creating an ultra-thin profile for large-size TV panels; not only does it have ultra-high resolution in large sized displays but also a trendy ultra-thin and stylish design.

• INX mass produced the 17.3-inch FHD TN 120Hz notebook panel, which is the first 120Hz high color saturation panel designed for gamers. It boasts image quality equivalent to high-end monitor panels. The smooth and anti-ghosting image playback features reduces ghosting and motion blur in fast paced games with quick movements and alleviates gamers’ eye fatigue.

• INX developed the ultra-lightweight, thin and narrow-bezel 13.3-inch FHD AAS notebook panel, which is the world’s thinnest at only 1.7mm.

• The 17.3-inch UHD AAS notebook panel is only 4.0mm thick, making a breakthrough existing perceptions of the 17.3-inch panel being thick and heavy. It also features high resolution, high color saturation and 100% Adobe RGB, providing larger color gamut and more precise color reproduction for professional color users.

Taiwan Excellence Achievement Award and Gold Award

Innolux was awarded Taiwan Excellence Achievement Award, which was regarded as the highest national honor, by the MOEA in the 25th Taiwan Excellence Awards ceremony. Its “100-inch 4K2K LCD TV module” was awarded Taiwan Excellence Gold Award. Innolux was the only multiple winners of Achievement and Gold awards. The other products like 5.5-inch FHD ultra-slim LCD module, 17.3-inch world’s 1st gaming panel, 23.8-inch ultra-slim frameless desktop monitor display were awarded Taiwan Excellence Label.

8k4k 65" (7680 x 4320)

Global best resolution TV

100" 4k2kUltra-high resolution TV panel

The largest 4K2K panel in Taiwan




Medium and small panels

• Innolux developed the 5.5-inch FHD Slim BLU panel, which has an overall thickness equivalent to an OLED module. Integrating the light guide plate and optical film, it is designed using less components with simplified assembly, making it lightweight and thin, f and reaching a price-performance ratio comparable to OLED.

• Innolux developed the 5.7-inch QHD ultra-thin bezel panel by combining the optical alignment with LTPS+AAS technology. It features the 2560x1440 resolution for clear, sharp text and images. The 0.7mm ultra-thin bezel allows more design flexibility to reach thin, lightweight and portable.

• Innolux developed the 5 .5 - inch WQHD Flexible AMOLED offers super refined 534 ppi resolution on a curved surface. It is ultra-thin, features high contrast, high color saturation, and high resolution for clearer images. Built on a plastic substrate, its curved surface also enables more flexibility in end product design.

Automotive panel

• Based on the str ict rel iabi l i ty requirement of automotive application, INX developed a series of cover glass and lamination technologies including different shape such as S shape and free shape, safety glass, AG/AR/AS, and with multi-touch functions.

• Innolux developed a series of automotive CIDs (Center Information Display) and digital instrument cluster displays with large size, high resolution, wide viewing angle, high contrast and high color saturation. They also feature high reliability and low reflective.

• Innolux developed the 12.3-inch high brightness automot ive AMOLED d isp lay . Featur ing h igh brightness, high contrast, high color saturation and high resolution, it is particularly suitable for automotive use at night. Even in dark conditions, it is able to provide high contrast and realistic colors.

Touch panels

• Based on the TOD (Touch On Display) technology for small and medium products such as smart phones and tablets, INX developed the large format touch panel, the 15.6-inch FHD AAS panel with touch function for notebook computers, to meet the requirements of modern people.

• Building on the base of TOD technology, INX developed a series of TID (Touch In Display) high-end smart phone panel products. Utilizing panel and IC integration technology, these panels do not require the additional touch panels, allowing they to appear thin, lightweight, ultra-narrow bezel, and high resolution features.

Special application

• Innolux developed a series of industrial displays with high brightness, wide viewing angle, fast response, and wide operation temperature. They are suitable for various environmental conditions, whether indoor/outdoor, in subzero or high temperatures.

• Innolux developed a series of color medical displays with high resolution, high brightness, high contrast, wide viewing angle, and low color shift. They display accurate and timely medical examination images to help doctors diagnose illnesses correctly.

Innovative Product Awards

Innolux’s S Shape and Curved automotive touch panel

Innolux was granted the Innovative Product Awards for its automotive display technologies: S Shape Display (R =170mm) , 1-axis Curve Display (R =500mm), and Curve with Touch Display (R =500mm). The products are the first in the world with the biggest curve with radius ranged from 170mm~500mm, produced by distinguishing LCD panel bending process. The application of specific material enhances a comprehensive adherence to prevent peeling brought by stress. The combination of touch panel function, durability and weather-resistance makes the automotive display unparalleled ever. The mix of S Shape panel and exclusive TID touch technology marks another breakthrough. Innolux will continue to lead the trend of automotive panel together with the customers.

1-axis Curve Display (R=500mm)

S Shape Display (R=170mm)

Curve with Touch Display (R=500mm)




Excellent Engineer Competition Activity

Innolux holds the “excellent engineer competition activity” every half of one year. Every factory assigns their excellent representatives to participate in the activity. The competition items include of many creative aspects like revolution of monitor mechanism, the automation nanny system of INNOLUX 4.0, the manufacturing process of thinning, the enhancement of capability and yield. The activity enhances the interaction and inspiration of concepts among different sites, and encourages the person actively improving quality, and ignites the intention for engineers to propose their improvement proposal.

2nd: SEALSHIFT deviation test ADJ

3rd: INNOLUX 4.0 automatic nanny system

1st: NIKN wave equation




Automation Promotion

Innolux believes automation will be a breakthrough of the corporation. In 2016, line P3 at Ningbo site spent only 29 days to finish the equipment customs check, move-in, plug-in, testing and completion of the first panel, it would not have been done without the co-operation and support from the team members of Procurement, Customs Affairs, IT, Fab, and LCM. On April 15, 2016, the output of the first panel from line P3 implied an important step towards Industry 4.0 of the Ningbo site. Ningbo site will continue its effort in automation and head for a better competitiveness.

The first panel of automated production of line P3 at Ningbo site

Innolux believes automation will be a breakthrough of the corporation. In 2016, line P3 at Ningbo site spent only 29 days to finish the equipment customs check, move-in, plug-in, testing and completion of the first panel, it would not have been done without the co-operation and support from the team members of Procurement, Customs Affairs, IT, Fab, and LCM. On April 15, 2016, the output of the first panel from line P3 implied an important step towards Industry 4.0 of the Ningbo site. Ningbo site will continue its effort in automation and head for a better competitiveness.

!

• The first P3 automated integrated line for mobile phone has successfully mass produced in Tainan site. From back light to module, we have produced 330K pieces in one month, and extended to import the Soldering to OTP, completing the automation for the whole production line.

• We have successfully passed the customers’ verification for automotive application P1 line and began to mass produce. It also employed to Shanghai Site.

• Complete several inspection equipments, like PCBI API, BLU API, LOT2 API, AIS electronic inspection machine. Shanghai s ite targets to import an automated

assembly for the automotive products to enhance the production yield, increase UPPH and lower the quality problems. The smart automation team breaks through the obstacles of space and time, finishing set-up of the automotive P line and the packed body of lines. It also produces the first product by the automation line. The people in shanghai site closely cooperate with the smart automation team, and create the record of the shortest set-up time for P line and the fastest activation time for the product.

!Promote the large scale of smart automation plan, and import the automation equipment and ask the smart automation team to develop the Radio Frequency Identification (RFID) system and the face recognition system. The face recognition system can efficiently monitor the mobility of people, avoiding the blind side of public security. We also integrate the smart logistics and RFID system to collaborate the suppliers and factories towards Industry 4.0.

Finish the mass production of In Line OCA 6.X sec, the mass production of the project of upgrading MP P1 to P3, implement the comprehensive automation from BEOL site to Module site. It greatly enhances the activation of machines and economize manpower.

*P1: 40% or more automation; P2/3: 80% or more automation; P3: product design using plastic spray instead of plastic adhesive.

• Import three P3 automated integrated assembly line, achieve the stage breakthrough of P3 line which is from no P3 line to the implementation of it.

• To employ the automated guided vehicle (AGV) system to three sites, and achieve the goal of automated guided in all bonding sections of every site.

• Actively promote the smart inspection, all inspection stops import the automated Panel inspection to greatly economize manpower and enhance the yield.

The above promotion is prepared for the Industry 4.0 and Big data.

2016 promotion performance

NJ

NG

BSH

TWFS




2.4.2 Customer Satisfaction

Quality Management

Innolux is not only committed to the research and development and innovation, but also all coworkers of Innolux jointly strive for strict quality controls. The establishment of a quality management system and a corporate culture, which is characterized by staff participation and constant improvements, as well as a constant pursuit of maximum customer satisfaction serve the purpose of achieving a positive partnership with customers and a win-win-win situation for Innolux and its suppliers and customers.According to ISO9001, IATF16949, ISO13485, AS9100, ISO17025, QC080000 ... and other international standards require the establishment of quality management system, the development of quality manual, as the company to implement a comprehensive quality management guidelines and The basis of the quality objectives of each departments.And Innolux to provide meet with market trends and customer demand for services and products in order to achieve customer satisfaction and business continuity purposes.

Customer Satisfaction

Customer satisfaction declined in 2015. Innoluxunderstood that customer request to improve. Promote a series of Continuously Improvement Project, through the operation of the project platform to enhance the quality, technology and service performance. Customers were also positive feedback on our efforts by customer satisfaction survey in 2016.Through past experience, Innolux continues to push the Improve project activities in 2016. The relevant departments, such as design quality, supplier chain quality, manufacturing quality, and customer services quality would establish the process flow and performance indicator to achieve the quality goal and focus items. And strengthen the "Innolux Intelligent Portal - intelligent platform" applications, to enhance competitiveness and enhance customer satisfaction. In the products and services, Innolux very pay attention to customer information confidentiality and privacy。Throughout the year 2016, Innolux did not receive any fines for violating product and service information labeling or any complaints in regards to privacy breach or information leakage.

Analysis of Customer Satisfaction Survey｜

Y2014 Y2015 Y2016

Item Description

Materiality

Achieve the customers’ satisfaction and earn their trust are important for sustainability management. In 2015, a decline in customer satisfaction was noted. Therefore, we have to control and monitor the quality risk, satisfy customers’ need and strengthen the corporation competitiveness.

Boundary inside the organization (corporation) and outside the corporation (customer)

ManagementThe sales, R&D, design, production, testing, after sales service, and feedback are all pursuant to the relevant regulations and the articles stipulated in the quality system, such as ISO 9001 and ISO/TS 16949. We are continually devoted to R&D to satisfy the customers’ need.

M e d i u m - t o - l o n g term strategy

Persist in the strict quality management. Sustainably achieve the highest satisfaction level. Create a three-way win situation for customers, Innolux, and vendors.

2016 performance Enhance the performance of quality, technology and service through the implementation of the project platform. In 2016, customer satisfaction was an increase of 23.5% from 2015.

2017 promotionContinue the 2016 improvement project: formulate the goals and key focuses of design/ procurement/manufacture/sale, consolidate the application of INNOLUX Intelligent Portal to enhance the competitiveness and customer satisfaction.

Product quality and customer satisfaction｜ [Management approach of material issue]

3.63 3.773.36 3.413.53

3.723.89

3.803.88

3.623.55

Comprehensive index

Quality index Technology index Service index

Notes:• Scoring method: scoring based on the ranking between Innolux

and other LCD panel suppliers.• 5: Excellent, 4: Good, 3: Satisfactory, 2: Unsatisfactory, 1: Very

Poor• The above questionnaire survey includes TV, notebook , and

monitor (display) customers.

3.64




System name Verification unit Verify the plant area

ISO 9001 Quality management system Bureau Veritas JN/ TN/NGB/FS/NJ/SH

ISO 13485Medical equipment quality management system

DNV TN(FabD, FabB, FabC)

ISO17025 Laboratory management system DQS JN/TN/FS/NJ/SH

ISO /TS16949Automotive industry quality management system

Bureau Veritas T3, FabA, FabB, FabC, FabD, SH

QC080000Hazardous Substances Process Quality Management System

DNV JN/TN/NGB/FS/NJ/SH

ISO14001 Environmental management system DNV JN/TN/NGB/FS/NJ/SH

ISO14064-1 Greenhouse Gas Emissions Verification DNV JN/TN/NGB/FS/NJ/SH

ISO50001 Energy Management Systems EACC FS

OHSAS 18001Occupational Health and Safety Assessment Series

TW(DNV)/ CN(CQC) JN/TN/NGB/FS/NJ/SH

CNS15506 TOSHMS DNV JN/TN

Management system and certification

FS factory area passed the ISO / IEC 17025 laboratory management System certification

Defending quality is the prerequisite for business survival, Foshan factory r e l i a b i l i t y v e r i f i c a t i o n center need to have the internationally recognized test ing technology and laboratory management c a p a b i l i t i e s , s o t h e certification team members and colleagues overcame the challenges and passed the ISO / IEC 17025 System certif ication in January 2016.The certification of ISO / IEC 17025 indicates the ability to carry out calibration and testing of technical capacity in order to strengthen the quality to win customer trust.




2.5 Sustainable Supply ChainThe suppliers have always been important partners in Innolux’s operations. Our CSR promotion also considers the participation of the overall supply chain. In addition to the quality and delivery, we strongly urge our suppliers to value human rights, environmental protection, as well as health and safety, improving the suppliers’ environmental, social, and governance (ESG) management to mutually establish a sustainable supply chain.

2.5.1 Supply Chain Risk Management

Supplier CSR Risk Management

Innolux has formulated the Supplier Corporate Social Responsibility Code of Conduct Operating Standard based on the EICC Code of Conduct. In April 2015, EICC 5.0 was publicized and Innolux immediately inspected and adjusted supply chain management documents to ensure the suppliers follow various labor, ethics, environmental, and health and safety regulations.

Innolux requires all new suppliers to sign the “Supplier’s Undertakings” as a promise to follow EICC regulations. For existing suppliers, Innolux will conduct risk assessment in social, financial, and environmental aspects of the key component suppliers. Audit control will be implemented for suppliers that receive high risk results. Suppliers with actual and potential negative deficiencies will be monitored and asked to improve. Suppliers are required to provide improvement plans for items that fail to meet the requirement one month after receiving the audit report. A supplier who fails to efficiently lower the risk during the counseling period will be blacklisted for corporation.

Since 2010, when risk assessment was first introduced, the number of audited suppliers has accumulated to 734 as of 2016. Until now, no supplier has been blacklisted due to relevant CSR issues.

Supply chain quality management

Suppliers are an important partner for INX operations, enhance the sustainable competitiveness of enterprises, and strive to develop long-term cooperation with suppliers to develop sustainable supply chain.So for selection criteria for suitable new suppliers are based on suppliers’ finance, technology, quality, price, green energy aspects, and other key targets, select the right quality suppliers.

2016 through the supplier publicity letter and QMP (Quality Management Plan), etc., so that suppliers understand the quality of the surface requirements; and the use of "SCAR (Supplier Corrective Action Request system)" timely and complete feedback supplier quality information and let suppliers can quickly understand the relevant issues. In addition, in order to mark sure the supplier quality to establish V-line CIP control, and 2DP / PZS to advance to confirm the supplier process capability and make sure the capacity is stable.Note: 2DP/PZS：2DP( 2 day production) / PZS (Pre Process Series )

In 2016, risk assessments for 151 key suppliers were carried out, involving about 259 thousand personnel. 5 suppliers were identified to have high risks. 64 findings, mainly related to emergency preparation and working hours are identified in the on-site audit. The rate of closed-case is 56% . The rate is low because the arrangement of on-site audit is mainly conducted in December of 2016. We will follow up the improvement actions by the suppliers.

Registration for the qualified suppliers

Suppliers assessment in advance

All candidate suppliers have to sign the suppliers undertaking Or candidate suppliers have to fill in the form of CSR risk assessment to identify their risk

Supplier audit

The suppliers fill in the form of CSR risk assessment

Conduct the risk assessment and identification

Conduct on-site audit to the high-risk supplier

Track the audit findings and close the improvement cases

Unqualified suppliers

Convene the meeting to decide the unqualified suppliers list

Carry out suppliers counseling

I m p l e m e n t t h e follow-up audit

Close the qualified case and make the unqualified suppliers list

Procedure of Supplier CSR management




Conflict Minerals Management in Responsible Procurement

Innolux bans the use of “conflict minerals” obtained using armed forces or from invasion of others’ rights. This ban is incorporated in the Restricted Substances Management Standard. The company will screen high risk component suppliers, inventory their metal’s place of origin, and require suppliers to sign a guarantee not to use conflict metals. In 2016, the accumulated suppliers who joined the inventory amounted to 605. The suppliers are requested to work with Conflict-Free Sourcing Initiative (CFSI) certified smelters only. Non CFSI smelters need to be replaced. A total of 46 replacements were made.

Compliant Un- Certification

Y201414

Y2015Y2013 Y2016

85

422 488

49

3

602

Supplier conflict minerals survey |

Procurement Risk Management1. Disaster Risks

By negot iat ing with the suppl iers’ mater ia l preparations based on the required preparation time for each material and component, sufficient storage has been built to ensure smooth operation of the supply chain.To prevent shortage risks or single sourcing, product and material development assessment is used to select two or more qualified suppliers. If single sourcing occurs, a new qualified supplier will be chosen based on product needs through selection and evaluation process to ensure sustainable supply.

2. Shortage Risks

To prevent natural disasters or uncontrollable factors from affecting the stability of material supply, Innolux has set three criteria for its suppliers. The suppliers with the following characteristics are given higher priority:1. Has factories in at least two different places, and

if possible, in different counties or cities2. Has at least two sources of raw materials (Innolux

requires its supplier to have two sources of material selection).

3. If the aforementioned conditions cannot be fulfilled, the suppliers are asked to increase their stock storage so as to meet all customer needs.

For example, when Japan’s Mount Aso volcano erupted in Kumamoto Ken in April 2016, photo resist supplier’s Kumamoto factory could not produce due to blackout. Supplies from the second factory in Tochigi Ken were instantly provided to avoid delaying product delivery to customers.

Four Major Aspects of Supplier Management and Guidance

1. Supplier ManagementOrganize monthly/quarterly quality meetings with suppliers based on material properties or important components. Use an innovative product risk assessment platform (NUDD) and assess production yield for newly developed parts to lower failure cost after mass production. Material for automation project was listed as key target in 2016 to raise the quality.

2.Supplier Audit and GuidanceVisit and audit against key suppliers are scheduled annually. Suppliers have to propose correction plan with definitive target and deadline once findings are identified to fulfill Innolux’s requirement.

3. Supplier Management System CertificationUrge suppliers to protect the environment and improve safety and hygiene. All new supplier applicants are required to obtain international quality, environmental, and occupational safety and health certifications, such as ISO 9001, ISO 14001, and OHSAS 18001. Applicants who have not obtained such certifications must propose plans to do so.

4. Supplier RatingConduct monthly raw material supplier assessments for shipment failure rate on arrival, line rejection rate, and customer complaint categories. Innolux performed guidance and audits for unsatisfactory suppliers in 2016. The ratio of “A” graded suppliers in 2016 is 2.7% more when compared to 2015.

Y2014 Y2015Y2013Y2012

68.1%72.4% 74.3% 81.1% 83.8%

Y2016

2.7 %vs.2015

*Data include all module suppliers for TVs, notebooks, monitors, and touch panels.

D: score ＜ 65 (listed for guidance and quantity adjustment)

C: 85 ＞ score ≧ 65 (listed for guidance)B: 95 ＞ score ≧ 85

A: score ≧ 95,

Supplier Rating |




Local Supply

I n n o l u x’ p r o d u c t i o n i s c o n c e n t r a t e d i n Ta i w a n and China. Its supply chain mainly comprises of machine equipment, key components (such as glass substrates, liquid crystal, photo resist, al ignment fi lm, polarizer, backlight modules, driver ICs, and printed circuit boards), materials, energy resources, and transportation suppliers and relevant contractors. Localization could shorten material preparations time, speed up development of new products, reduce the cost and carbon emission during the transportations, and also create three-way win for Innolux Corporation, vendors, and local economy.

Descending order of the t r a n s a c t i o n a m o u n t s o f front-end materials is glass substrates, l iquid crystal, photo resist, and alignment film; for back-end materials it is electronic components, m e c h a n i c a l m a t e r i a l s , packages, optics, and touch module. Around 89.42% front-end materials suppliers are from Taiwan in 2016, 5.68% from Japan, 2.40% from Korea, 2.31% from China; for back-end materials for our China sites, around 34.3% suppliers are China local. For back-end materials in Taiwan factories, around 93.2% suppliers are Taiwan local.

1: Front-end materials refer to resources and materials required in early stage of TFT, CF, and LCD productions; mainly used in Taiwan sites.2 : B a c k - e n d m a t e r i a l s r e f e r to components and materials r e q u i r e d i n L C M m o d u l e production; mainly used in China sites.3: Japanese and Korean vendors p e r f o r m e d o n l y R & D a n d manufacturing, but not capital management. Orders are placed against overseas distributers.

Key Component ratio

Local (Taiwan)

Non-Local (Japan, South Korea, China, United States)

Y2015

Y2014

Y2013

Y2016

91.6% 8.4%

71.1% 28.9%

87% 13%

89.4% 10.6%

Procurement Amount Ratio

34.3%

Local (China)

Non-Local (Taiwan, Japan and others)

Y2015

Y2014

Y2013

Y2016

53%

51%

49% 51%

49%

47%

65.7%

Y2015

Y2014

Y2013

Y2016

Local (Taiwan)

Non-Local (Japan, South Korea, China, United States and others)

82%

91%

88%

93.2%

18%

9%

12%

6.8%

South Korea2.40%

China2.31%

United States0.19%

Taiwan (Local)

89.42%

Japan5.68%

China (Local)

34.3%

Taiwan (Local)93.2%

Back-End Materials

Front-End Materials

2016 Taiwan Site >

Front-End Materials

Back-End Materials

Others(chemicals, alignment film,

gases, etc.)

Glass49%

Liquid crystal17%

Photoresist12%

Target5%

Optics47%

Electroniccomponents

39%

Packagingmaterials

3%

Touchmodules

2%

Mechanicalmaterials

9%

2016 China Site >

2016 Taiwan Site >

others9.7%

Taiwan54.3%

Japan1.0%

South Korea0.7%

Japan0.5%

others1.4%

UnitedStates

0.2% China4.6%

17%




2.5.2 Low-carbon Supply Chain

Item Description

Materiality

INNOLUX faces different challenges and pressures on low carbon request, like the carbon reduction plan required by customers, the ‘carbon footprint label’by the international trading requirement, and the trend affected by COP21’s Paris Agreement. The supply chain should cooperate on the issue of“carbon reduction.”


Management

Engage the suppliers in the suppliers conference to promote green value.Implement responsible procurement to promote the management of conflict minerals. Establish Product Carbon footprint database and“Material Flow Carbon Reduction Promotion Plan”to build the low carbon value chain.

Medium-to-long term strategy

Be the influential leader in supply chain. To cooperate with suppliers to promote the green value chain and establish the low carbon supply chain.

2016 performance

• There have been 81 suppliers participating in and providing their materials to the Product Carbon footprint database .

• “Material Flow Carbon Reduction Promotion Plan” :Innolux has make carbon emmission inventory for 10 suppliers . The supplier’s self carbon reduction have achieved 4418 tCO2e/year.

• Supplier GHG inventory project has been continually implemented for 8 years. In 2016, carbon emission inventories for 72 suppliers were completed. It achieved the targeted goal, a reduction of 130,959 tCO2e.

2017 promotion

• Continue product carbon emission inventory, and establish a more comprehensive product carbon footprint database.

• Material Flow Carbon Reduction Promotion Plan: We plan to increase the number of inventoried suppliers to 60 and will establish the model of collaboration on material reduction to enhance the effect of material using.

• Goal: Increase the carbon reduction of supplier inventory to 133,100 tCO2e.

Low-carbon Supply Chain｜ [Management approach of material issue]

Continuous Promotion of Low Carbon Supply Chain

In 2009, Innolux began conducting the supplier greenhouse gas inventory. In 2012, suppliers were selected based on their CDP questionnaire response and procurement ratio to participate in low carbon supply chain promotions. In 2016, inventory subjects were 72 suppliers who account for 87% of the procurement total. Suppliers must complete an ISO 14064-1 verification (or publicly disclose the amount of greenhouse gas emission), a supplier carbon management risk form, a greenhouse gas reduction plan, and a water usage report. Based on the inventory and calculation of the suppliers’ overall company emission data, the 2016 inventory found that the suppliers’ 2015 contributions of carbon reduction totaled to 130,959 tCO2e, which exceeded the goal of 130,000 tCO2e in reduction. The objective for 2017 is to reduce carbon emission by 130,600 tCO2e.Note: The amount of carbon reducing calculation is based on the reduced amount vs. actual annually production capacity.

Year Inventory Subjects

Greenhouse Gas Inventory Suppliers

Inventoried for

water usageKey Suppliers

CO2 Reduction

Contribution(tCO2e)

2016• Suppliers that account for 87% of expenditure• Suppliers of materials with high carbon emissions• Suppliers inventoried

72 130,959 63

2015• Suppliers that account for 85% of expenditure• Suppliers of materials with high carbon emissions• Suppliers inventoried in 2014

60 125,541 57

2014• Suppliers that account for 80% of expenditure• Suppliers of materials with high carbon emissions• Suppliers inventoried in 2013

51 112,806 43

2013 • Suppliers that account for 70% of expenditure• Suppliers of materials with high carbon emissions 43 88,622 ---

2012 •Suppliers that account for 60% of expenditure 38 59,009 ---

Supplier GHG inventory




Product Carbon Footprint Database

Product Carbon Footprint mainly follows PAS2050 Carbon Footprint evaluation steps as the standard, to assist and understand the carbon emit information in product life cycle. In the end, make the goal to control and reduce carbon emit. 2016 keeps tracking the product models of 2015, which increased 7 suppliers, and accumulated to 81 suppliers of participation. In the future, the carbon footprint inventory will keep improving the database, to reply to customer and distributors in timely bases, so as to response to the trend of international carbon reduction trade.

Supply Chain Communications and Experience Sharing

In order for suppliers to understand Innolux’s green product policies, concepts, and latest regulation on controlled substances. Annual supplier conferences are held every year to illustrate the promoted topics in detail and share experience, through participation in green activities to reach growth for both sides.In 2016, supplier conferences are held in Tainan, Ningbo and Foshan. There are 288 suppliers attend the conference, in total 375 people. The major topics are Innolux restricted substance management update, material flow cost accounting, product carbon footprint system, latest regulation development, and intermediate Q&A of iGCD system.

①Restricted substance management②Low carbon 3C management③Greenhouse gases inventory④MFCA experience sharing with suppliers⑤Introduction of iGCD system⑥Regulations and promotions of volatile organic compounds⑦Introduction of update law & regulations

Y2011

Y2012

Y2013

Y2014

Y2015

Y2016

TW/NGB/FS TW/NGB/FS TW/NGB/FS

①Greenhouse gases inventory

TN TW/NGB/FS TW/NGB/FS

Historical agenda of supplier meeting

①Conflict minerals inventory② Restricted substance management③ Low carbon 3C management④ Greenhouse gases inventory⑤Digital education course

①Conflict minerals inventory②Restricted substance management③Low carbon 3C management④Greenhouse gases inventory⑤Material flow cost accounting⑥Introduction of iGCD system⑦Regulations and promotions of volatile organic compounds

① Restricted substance management② Greenhouse gases inventory③ Product carbon footprint inventory

① Restricted substance management② Low carbon 3C management③ Greenhouse gases inventory④ Digital education course

Year Item TW NGB FS Total

2016No. of participants 218 95 62 375

No. of suppliers 167 75 46 288





Historical data of supplier meeting｜




Supply Chain Resource Utilization Enhancement Plan

In order to actively promote the green participation of the supply chain, Innolux becomes the driving force to involve suppliers. In 2015 and 2016, Innolux initiated the “Supply Chain Material Carbon Reduction Promotion Project” and selected 10 suppliers from total 18 voluntarily participants. By providing the inventory tools and consultation for suppliers, visiting the factory sites, assisting in data review, and providing data analysis and recommendations, Innolux tracked the progress of carbon reduction, confirmed the final results and produced the final inventory report. A total of nine materials were improved in 3R aspects, with efficiencies of about NTD 19.87 million and carbon reduction of about 4,418 tCO2e per year. In 2017 Innolux plans to link upstream suppliers and downstream customers to cooperate on saving materials together, by taking MFCA as the base, to corporate with supplier specification, to optimize Innolux product portfolio and quantity, to improve material utilization, and to save both supply chain cost and carbon emissions.

MFCA Circulation material flow _ upstream and downstream material saving modeRemark:1. Material Saving (Positive Logistics) By combining the information of suppliers and customers material loss, seeks for the best combination of cost and the low-carbon production.2. Waste Material Recyclization (Reverse Logistics) Through MFCA inventory, suppliers and Innolux combine the material flow on both sides to establish the waste material recycling platform.

Positive Logistics

Reverse Logistics

2015 supplier carbon reduction commenced

Innolux carbon reduction since 2011

SupplierPROCESS

Product(Maker)

Material(Maker)

MaterialLoss

M o n e t a r y donation ratio（Maker)

InnoluxPROCESS

Product(Innolux)

Material(Innolux)

MaterialLoss

2017 cooperation in material-saving

M o n e t a r y donation ratio（Innolux)




3

Green Vision To Earth, with L.O.V.E.

Green Vision

In the Environmental dimension, we care the environment by green vision “To Earth, with L.O.V.E.” through green living, green operations, green value chain and green environment to spread corporate influence on the sustainability of the earth.

GreenLiving

GreenOperations

GreenValue Chain

GreenEnvironment

To Earth, with

L.O.V.E.


ch3 - Green Vision To Earth, with L.O.V.E.


3.1 Green Living

Diving club took part in the beach-cleaning activity on June 12 at Northeast coast.

Nanjing site held activity to echo tree-planting festival on March 12 with 200 persons participation.

Foshan site held tree-planting activity on April 7. A total of 108 trees were planted by 108 employees.

Green catering

In 2008, Innolux presented canteen menu with organic vegetables choice combining the ideas of organic, local and seasonality.During 2010 ~2016, a total of 1,726 tons of organic vegetables was provided in the canteen to save the use of 1,605 tons of pesticide. In 2011, “One red-meat free day” activities was announced to help save carbon emissions. With emloyees’ support, the red-meat free day increased to two days a week. The accumulated carbon emissions as of 2016 was 4,024 tCO2e.

Green office

Innolux offers free shuttle bus for shift workers’commute. Cross-plants shuttle bus is also arranged for employees. Default setting of air-conditioner including automatic turn-

off in 1 hour, default temperature at 26℃ has been implemented in the facility for years. Re-arrangement of elevators mode, plug-off for washroom air-conditioning, office appliances at night to save electricity consumption. No bottled water is sold at facility convenience stores, paper-saving initiatives are some examples to encourage the employees to join

the green living.!

!

!




3.2 Green Operations

Through the means of Technology Committee of the Facility Engineering Department, the Safety Health and Environment Committee, and the CSR Committee, together with its 3 workgroups, Innolux has promoted clean production processes, carbon reduction and energy conservation, product green designs, and pollution prevention. In 2016, all facilities in Taiwan and China are ISO 14001 certified. Ningbo site was awarded the honor of advance unit of energy conservation and clean production enterprise. Foshan site passed the certifications of ISO15001 energy management and clean production. Taiwan site received various awards including Excellence Enterprise in Green Procurement Award for 8 consecutive years.

Fab/AwardAuthority

Outstanding Water Conservation Enterprise Award, Water Resources Agency[Ministry of Economic Affairs]

Outstanding Energy Conservation Enterprise Award, Bureau of Energy[Ministry of Economic Affairs]

Green Building Label,[Ministry of the Interior]

Clean Production, Industrial Development Bureau[Ministry of Economic Affairs]

Clean Factory, [Ministry of Economic Affairs]

TaiwanSite

T1 v

T2 v v (Gold) v

T3 v

Fab1

Fab2 v v (Excellent) v (Gold)

Fab3 v (Gold) v v

Fab4 v v (Excellent)

Fab5 v v (Outstanding)

Fab6 v v (Outstanding)

Fab7 v (Outstanding)

Fab8 v v (Excellent)

FabC

Promotion of green enterprise

Fab3 passed the green production evaluation

T2 awarded green building certification (gold level)




ItemAmount

Unit: NTD

Operating Cost

Pollution prevention costs: air pollution prevention, water pollution prevention, and other forms of pollution prevention

959,460,101

R e cyc l ing and r e use costs : g e n e r a l / h a z a r d o u s w a s t e recycling/reduction, external w a s t e d i s p o s a l t r e a t m e n t , energy conservation

691,312,357

Global environmental protection c o s t s : g r e e n h o u s e e f f e c t prevention

436,100

Environmental Management Cost: Environmental training costs, certification fees, environmental detecting and monitoring, activities, environmental management system

160,599,710

Environmental Protection R&D Cost: End-of-pipe treatment R&D costs, production process pollution reduction R&D costs, marketing and R&D costs for pol lut ion reduction

630,225

Customer and Supplier (Up- and Down-Stream) Relationship Cost: Green procurement, product recycl ing, packaging material recycling, other customer environmental requirements

20,149,366

Social Activity Cost: C o m m u n i t y r e l a t i o n s c o s t s , c o r p o r a t e marketing costs, other social activity costs

1,713,183

Loss and Compensation Cost: Pollution clean-up and restoration, pollution litigation and compensation, other losses and compensation

0

Total 1,834,301,042

2016 Environmental Expenditures in Taiwan Site｜

Environmental Accounting

In 2008, Innolux introduced the environmental accounting classification, becoming the first company in Taiwan to establish such classification by integrating the purchase requisition system and accounting system according to the EPA’s Environmental Accounting Guidelines for Taiwan’s Industries. The classification aimed to manage and identify the company’s environmental expenditure, and to encourage employees to promote measures that make source improvements and generate end-of-pipe treatment benefits. The system is going to establish stage by stage in China sites. In 2016, Innolux promoted various environmental activities and improvement solutions. The environmental expenditure in the Taiwan sites in 2016 amounted to NT $1.834 billion.

2,738,298,4512,622,568,936

Y2014 Y2015

1,834,301,042

Y2016

Environmental Issues Communicated

All corporation internal and external environmental feedback are reported and monitored with online system. Any cases need to be improved will cosigned to the department concerned with the report and confirmed closure by ESH department. There is no significant environmental issue and all reported cases are closed.

Items/Cases Internal Feedback

External Feedback

Number of Reported Cases in Taiwan and China 92 300

Number of Processed and Resolved Cases 92 300

Percentage of Processed and Resolved Cases 100% 100%

2016 Environmental Issues Communicated｜

Corrective and preventive action for Violation of Environmental Protect Laws:

There were 2 penalties for violations of environmental protect laws in Tainan site in 2016:

2. In LTPS6 construction, the open space runoff reduction project was constructed without the Kaohsiung EPB approval. A fine of $45,000 was imposed by Kaohsiung Environmental Protection Bureau according to Article 18 of the Water Pollution Prevention Law on June 17th.

1. In LTPS6 construction, the contractors carried out the mixed dumping operations, and the vehicle path did not suppress dust effectively with sprinkle water. A fine of $100,000 was imposed and a deadline for improvement was required by Kaohsiung Environmental Protection Bureau according to Article 23 of the Air Pollution Control Act on May 2nd.

Corrective and preventive action: The contractors have to provide adequate dust suppression equipment, maintenance of the vehicle path, and training to strengthen the understanding of the construction of air pollution control measures. The above was completed by the end of May.

Corrective and preventive action: The project has been constructed and maintained according to runoff waste reduction plan with the Kaohsiung EPB approval. The above was completed by the end of August.

Amount (Encompasses Taiwan Sites)

Environmental Accounting |

Unit: NTD




3.2.1 Climate Change Mitigation and Adaption

Climate Change Management Organization

Climate change management is under review in the CSR Committee. In Q3 2016, a dedicated workgroup, Low-carbon green management workgroup, was set up under the committee to manage the risk and opportunity of climate change. Relevant progress and KPIs will be quarterly reviewed in the CSR committee.

Paris agreement was approved in the COP 21 meeting in 2015 and will become effective in 2020. Taiwan proposes its INDC (Intended Nationally Determined Contribution) target of 50% GHG reduction in 2030 (vs. BAU) and long-term target of 50% reduction (vs.2005) though it is not a member of the UNFCCC. Innolux will evaluate the impact to its asset, capacity, supply chain, market and finance brought by the national GHG reduction target and regulation adjustment and allocate adequate mitigation resources to achieve the approach of low-carbon enterprise.

Climate Change Management Organization

Bureau：CSR Department

Convener Green Product Management Department

CSR

MIS

Green Product M

anagement

Departm

ent

ESH

Facility Engineering D

epartment

Committee Member（OU Head)

CSR Committee

FunctionDepartments

Workgroups

Low-carbon green management workgroup

Employee care workgroup

Risk management workgroup




3.2.1.1 Climate Change Risks and Opportunities

Opportunity

Implement procurement risk dispersion management and establish a “Business Continuity • Management Team”n to analyze the impact of natural disasters on business operations, plan contingency measures and drills, reinforce client confidence, and enhance company competitiveness.Regular meet with science park, water company, irrigation association to discuss water • allocation issues; support water sustainability by signing the MOU of Reclaimed Water program held by Tainan City Government and Tainan Science Park Administration.

2. International Conventions and Local Regulations

1. Physical Disasters

Opportunity

In terms of the Regulations for the Formulation and Implementation of Energy Saving • Targets, Innolux filed the report for its 12 plants in Taiwan in 2016. Fab 5 and Fab 7 failed to reach the 1% reduction owing to earthquake damage and capacity extension. Relevant corrective actions were proposed and approved.

The energy conservation of Innolux’s China sites satisfied the local regulations:Ningbo site achieved the target of 11.65 kilogram standard coal/10,000 dollars set by • Ningbo Municipal Commission of Economy and Informatization in 2016.Foshan site achieved the target of 0.69 kilogram standard coal/unit set by Guangdong • Province Commission of Economy and Informatization in 2016.Nanjing site achieved the target of 1.2T standard coal/10,000 unit set by Nanjing Municipal • Commission of Economy and Informatization in 2016.

Innolux established solar energy system prior to the regulatory requirement. The total • solar energy generated in 2016 was 23,221,594 kWh, a 277 times of 2012.In 2016, Tainan site received the science park approval to lease out the venue for vendor • to set up facility. It is estimated in February 2017 the project will be approved by the authority.

The enhancement of water efficiency helps reduce cost. Water usage fee could be • deducted upon conditions like clean production certification, green building label etc. Innolux satisfies multiple conditions and will continue to explore better efficiency.

Business risks are gradually escalating due to the decreasing effective storage levels of dams caused by deposition, the degrading water environments caused by the extremes in precipitation, and the increasing droughts and f loods caused by climate change.

Risk

Risk

Ta i w a n’s R e g u l a t i o n s f o r t h e Formulation and Implementationof Energy Saving Targets stipulates that users with a capacity exceeding 800 KW should achieve an average annual energy conservation rate of >1% between 2015 and 2019.

China’s 13th Five-Year Energy Saving Plan sets targets for the energy consumption and major pollutants discharge that will impact the company operation.

Tainan site is subjected to a municipal c a r b o n r e g u l a t i o n r e l e a s e d i n December 2014 to complete a solar energy system with capacity as least 10% of the contracted electricity amount in 3 years.

Water Act was amended in May 2016 to request company in water conservation. Water usage fee will be imposed against companies and caused increase in operation cost.

3. Company Reputation and Consumer Behavior Changes

Opportunity

Innolux issues annual CSR report and participates in the CDP to show stakeholders • the results of its efforts in climate change management. Innolux achieves a score of A- (leadership level) the 2016 CDP.Promote low-carbon logistics to improve transport and management. A total of 1,136,879.5 • tone was saved during 2012 to 2016.Innolux established the Product Carbon Footprint Calculation System. As of 2016, a total of • 81 suppliers joint provide component data to make a more comprehensive database.Innolux collaborated with supply chain to promote MFCA (Material Flow Cost Accounting) • with a total of 60 suppliers already took part in it. In 2016, Innolux worked with 10 suppliers to achieve a reduction of 4,418 tCO2e.

Risk

Global development like carbon label and Paris agreement represent a better supply chain collaboration in carbon reduction is expected.

Many Innolux’s customers are E I C C m e m b e r s a n d r e q u e s t t o environmental data disclosure.




3.2.1.2 Climate Change Mitigation and Adaption

Greenhouse Gas Inventory

The greenhouse gas emission of Innolux was 3.251 million tCO2e. The data had been collected for 12 years and all passed the third party verification according to ISO 14064-1. Innolux conducts a greenhouse gas emission inventory throughout the entire company each year using its self-developed “Greenhouse Gas Information Platform,” which helps effectively reduce inspection time, maintain information consistency, and enhance emissions information control.The organizational boundary of greenhouse gas inventory is according to operational control in 2016. There are 7 greenhouse gases have been inventoried which are CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3, and use the Y2007 AR4 version for GWP values. Innolux sets up the rolling base year for the baseline due to the most GHG emission is from purchased electricity about 85%±5% and affect the amount of emissions in accordance with the actual power factor every year.

CDP

CDP invites enterprises to disclose their greenhouse gas emiss ion volumes and contingency strategies for t h e i n v e s t m e n t r i s k a n d o p p o r t u n i t i e s c o n c e r n i n g cl imate change since 2003 . I n n o l u x t o o k p a r t i n t h e disclosure and was scored as A- (leadership level) in 2016, becoming the highest scoring company in the panel industry of the Greater China Region.

!

GHG Emissions Inventory |

Scope 1 Scope 2

Y2016Y2015Y2014

3.135

0.511

3.646

2.804

0.439

3.243

2.794

0.457

3.251

Scope 1 + Scope 2

Low-Carbon Logistics

Innolux has invested considerable efforts into the development of green logistics. Empty imported containers are directly converted into full exported containers to avoid the waste of resource in transporting empty containers to the container storage area, thereby improving the utilization of inbound, transit, and outbound containers, enhancing the turnover for the use of supplier trailers, reducing carbon emissions, and creating cost-saving benefits. These efforts create a three-way win situation for the company, logistics vendors, and the environment.

In 2016, Innolux identified the shipment that could not be shipped by sea owing to schedule issues and arranged intermodal transport of land and sea instead of air freight to reduce 85,000tCO2e carbon emissions.The accumulated carbon reduction through logistics management upgrade from 2012 to 2016 was 1,136,879.5 note1tons.

Note1:carbon emission=transport distance X weight of goods X CO2 coefficient X number of trips

Item Description

Materiality

With the global development like Paris Agreement of COP 21, and different national requirements like Enforcement Rules of Greenhouse Gas Reduction and Management Act and 13th Five-Year Energy Saving Plan, and customers ‘requirement, the action responding to low-carbon trend is essential.


ManagementGHG emissions inventory with standard operating procedures; establishment of GHG reduction KPI; input in solar energy, promotion through Technology Committee of the Facility Engineering Department and CSR committee

Medium-to-long term strategy Approach to low-carbon green enterprise through energy conservation.

2016 performance

• the GHG emission intensity per input substrate at TFT-LCD stage of Taiwan sites was 37.5 kgCO2e/m2 in 2016, which was reduced 5.5% compared with year 2015. Electricity consumption GHG of China sites was 0.0788MMTCE which excelled the target 0.0871MMTCE.

• Three local scrubbers were installed in Taiwan site to remove FCs. FCs emission was 0.109 MMTCE in 2016 (target 0.112MMTCE).

2017 promotion

• Intensity target for electricity consumption of TFT-LCD stage is 3% reduction (vs. 2016). GHG emissions target of electricity in China sites is 0.0853MMTCE.

• FCs emissions target of Taiwan site is 0.100 MMTCE.• Apply for the EPA carbon offset program.• Collaborate with suppliers in carbon reductions through Product Carbon Footprint database,

suppliers taking part in MFCA and supplier annual inventory reduction.

GHG Emissions｜ [Management approach of material issue]

(unit: million tCO2e)




Inventory Scope:Quantitative and qualitative inventory of various FCs, such as SF6, NF3, and CF4, and fuels in public systems.

Emissions Y2014 Y2015 Y2016

Taiwan 0.495 0.428 0.442

China 0.016 0.011 0.015

Total 0.511 0.439 0.457

Scope 1: Direct GHG Emissions

Inventory Scope: Quantitative and qualitative inventory of purchased electricity.

Emissions Y2014 Y2015 Y2016

Taiwan 2.681 2.388 2.453

China 0.454 0.416 0.341

Total 3.135 2.804 2.794

Scope 2: Indirect Energy-Based GHG Emissions

Greenhouse Gas Reduction

Among the greenhouse gas emissions of Innolux, 85% was originated from purchased electricity (Scope 2) and 13% was from FCs (Scope 1). Thus, Innolux sets energy conservation goals each year to enhance energy utilization efficiency and improve the manufacturing process of specific procedures. Innolux is going to apply the carbon offset project in 2017.About the Greenhouse Gas Management Indicators of Innolux, the GHG emission intensity per input substrate at TFT-LCD stage of Taiwan sites was 37.5 kgCO2e/m2 in 2016, which was reduced 5.5% compared with year 2015. The GHG emission from purchased electricity of China sites was 0.0788MMTCE in 2016, achieved the target of 0.0871MMTCE.

FCs Emissions Reduction

Innolux installed additional combustion local scrubbers to eliminate FCs. In 2016, there were additional three local scrubbers installed to eliminate more FCs. The total removal of FCs*1 was 2,103,841 tons in 2016. The total emissions of FCs was 0.112 MMTCE in 2016, achieved the target. The target of emissions of FCs is going to be 0.100MMTCE.

*1: The total removal of FCs is calculated the reduction relative to baseline emissions according to real FCs usage and amount local scrubbers installing followed by the methods of IPCC 2006.

Item Y2014 Y2015 Y2016

FCs reduction 2,465,694 2,139,043 2,103,841

(Unit: tCO2e)FCs reduction by removal equipment |

Inventory Scope：• Emission amount for business travel (airplane) and commuting (transport vehicle dispatch) in 2016 was 0.006 million tCO2e.• Emission amount for waste transport, incineration, and bury in 2016 was 0.019 million tCO2e.

Item / Year Y2014 Y2015 Y2016

Waste TreatmentNote1 0.032 0.010 0.019

Business Traveland CommutingNote2 0.003 0.008 0.006

Total 0.035 0.018 0.025

Scope 3: Other Indirect GHG Emissions

Note1: Carbon emission coefficients are adopted from Ecoinvent v3.01.Note2: Airplane emissions is included in 2015 and 2016 emissions only. The scope of waste treatment extended to China in 2016.

GHG Emissions per Input Substrate at TFT-LCD stage (Scope1+Scope2)

41.743.2

37.5

Y2015Y2014 Y2016

Unit: kgCO2e/m2

- 5.5 %vs.2015




GHG Emission Intensity |

0.123

0.1040.109

Y2015Y2014 Y2016

FCs Emission |

Unit: MMTCEFCs emission amounts

GHG Emissions




Energy Efficiency Review

The major energy consumption of Innolux includes electricity, diesel, natural gas and solar e n e r g y . I n 2 0 1 6 , t h e t o t a l consumption was 5,245 GWh. Electricity was the major source (5,119 GWh, 97.6%), followed by natural gas (122.7 GWh, 2.3%). Diesel occupied only 3.41 GWh (0.1%).

Technology Committee of the Facility Engineering Department

Innolux manages energy efficiency indicators through the Technology Committee of the Facility Engineering Department and its platforms of various aspects including water, electricity, gas and air conditioning. Relevant KPI will be reviewed in the CSR Committee meeting quarterly. In 2016, a total of 33 projects were deployed via the technology committee, 40 documents were produced and 43 energy conservation cased were completed. Solar energy system is under development. A total of 156 members were trained as airflow specialists to promote the concept of airflow and air quality thus optimizing the environment of the clean room and energy efficiency.

Energy Consumption |

Y2016Y2015Y2014

4,817

Y2012 Y2013

114.743.20

4,942

123.023.22

5,026

129.623.26

4,955

127.363.14

5,119

122.703.41

Unit: GWHelectricity Natural gas Diesel

Foshan site passed GB/T 23331-2012idtISO 50001:2011 energy management certification

Based on the incentive policy of the government, the Facility Engineering Department and ESH of Foshan site established the energy management system and passed 3rd party certification. The system optimized the energy efficiency throughout the stream and paid obvious contribution to the site’s energy-saving performance.

Energy Resources Management｜ [Management approach of material issue]

3.2.2 Energy Resources Management

Item Description

MaterialityGlobal concern of energy riskEnhance company’s energy efficiency and recycling rate, achieve win-win situation for the company and the environment.


Management

The major energy consumption of the company includes electricity, diesel, natural gas and solar energy. Electricity is the major source (97.6%). Each site establishes energy enhancement plans and exchange through the Technology Committee of the Facility Engineering Department and quarterly CSR committee meeting

Medium-to- long term strategy Develop new technology, enhance energy efficiency

2016 performance

• Taiwan site completed 43 energy and emissions reduction projects. 2016 electricity consumption intensity failed to attain the target of 2.5% reduction owing to the reasons of earthquake.

• Set up solar panel systems which generated 17 times of energy compared to 2015.• China sites achieve the requirement of the 13th Five-Year Energy Saving Plan in 2016

2017 promotion Intensity target for electricity consumption of TFT-LCD stage is 3% reduction (vs. 2016).




Energy Efficiency Review

The electricity consumption of Innolux in 2016 was 5,119 GWh, 4,772 GWh (93.2%) was in Taiwan and 347 GWh was in China.

Electricity Consumption |

4.817

4.421

396

4.528

413

4.583

443

4.548

407

Y2013 Y2015Y2014Y2012

4.772

347

Y2016

4.9425.026 4.955

5.119

unit: million kWhTaiwan China Corp.

A total of 43 energy conservation projects of 2016 include improvement of inhale air of compressor, frequency conversion for cooling pump, reduction of pressure damage by deployment of tailor-made dryer filter etc. The “TFT-LCD Electricity

Consumption per Unit Area” was 70.4 kWh/m2 , a rise of 5.3% compared to 65.2kWh/m2 of 2015, and failed to reach the target of 2.5% reduction. The causes include capacity increase and earthquake damage. The strong earthquake on February 6 interrupted the normal production. During recovery extra energy was consumed to sustain the air and cooling system and maintain the clean room condition. In 2017, projects like replacement of cooler of centrifugal compressor, introduction of frequency conversion PV vacuumer, compressor heat recovery and transformation of cooling pump will be performed to enhance energy efficiency. The target of 2017 is to reduce 3% in electricity consumption per unit area.

Energy Conservation Performance

「Electricity consumption of TFT-LCD input substrate」

Target: 65.2KWh/m2

Actual: 70.4 KWh/m2

2016 unattained

Y2015Y2014 Y2016 Y2017

66.5 66.8

70.468.3

TW

Target: 0.594 kwh/pcActual: 0.574 kwh/pc

2016 attained0.57

0.530.52

0.56

Y2015Y2014 Y2016 Y2017

NGB


2016 attained

Y2015Y2014 Y2016 Y2017

6.916.58

3.36 3.30

FS


2016 attained

2.17 2.22

2.702.62

Y2015Y2014 Y2016 Y2017

SH


2016 attained

0.1350.185

0.435 0.428

Y2015Y2014 Y2016 Y2017

NJ

2017 Target-3 %

vs.2016

2017 Target-2 %

vs.2016

2017 Target-2 %

vs.2016

2017 Target-1.5 %

vs.2016

2017 Target-3 %

vs.2016




Regulatory Issues

Measures within the organization Saving Estimation(kWh/year) Site

Install frequency converter to the cooling pump 6,429,974 Tainan

Replace all illumination with LED light at Tainan, estimated cost 25 million dollars 6,001,682 Tainan

Adjust the blade specification of 5 compressors from 150 psi to 115 psi to save energy 4,580,167 Tainan

Install filter at the inhale of compressor to enhance the air quality input, thus saving energy 4,015,825 Tainan

Replace T1 and T2 clean room illumination with LED light 415,611 Jhunan

Install frequency converter to water pump of organic reclaimed water system to save electricity 154,176 Jhunan

Energy recovery of elevator 36,978 Tainan

Adjust the cooling tower to control the discharge water temperature according to the external enthalpy density to save energy 341,333 Ningbo

Replace with 11,450 pieces of LED light with cost RMB 950,000 1400,000 Foshan

Install frequency converter to the cooling pump of ice condenser to reduce electricity consumption 288,899 Nanjing

Replace secondary pump of 21# ice condenser with primary pump 23,400 Nanjing

Achieved an average of 1.27% note 1

Ningbo Municipal Commission of Economy and Informatization:

Taiwan Site

complied with regulations

Note1: In terms of the Regulations for the Formulation and Implementation of Energy Saving Targets, Innolux’s Fab 5 and Fab 7 failed to reach the 1% reduction owing to capacity extension and earthquake damage. Relevant corrective actions were proposed and approved. No violation of regulations are identified.

Bureau of Energy, Ministry of Economic AffairsRegulations for the Formulation and Implementation of Energy Saving Targets:Annual energy conservation rate of 1% or more (2015-2019)

Ningbo Site

11.65 kilogram standard coal/10,000 dollars

Progress in 2016

Note Target status will be reviewed in 2020.

0.62 kilogram standard coal/unit

Foshan Site

13th Five-Year Energy Saving Plan0.69 kilogram standard coal/unit(2016~2020)

Guangdong Province Commission of Economyand Informatization

Nanjing Municipal Commission of Economy andInformatization

13th Five-Year Energy Saving Plan1.2 T standard coal/10,000 units(2016~2020)

1.15 T standard coal/10,000 unit

Nanjing Site

2016 Major Energy Conservation Projects

Progress in 2016

Progress in 2016Progress in 2016

13th Five-Year Energy Saving Plan8.15 kilogram standard coal/10,000 dollars(2016~2020)




Self-generated solar energy for low-carbon environment

The solar panel system of different sites gradually operated in 2016, with a total annual energy generation of 23,221,594 kWh, 17 times of 2015. The growth of Ningbo site was 9.8 times and Foshan was 40.3 times. The sites operating solar panel system included Jhunan, Tainan, Ningbo and Foshan. The energy was 100% for self operating purpose.Tainan site is subjected to a municipal carbon regulation released in December 2014 to complete a solar energy system with capacity as least 10% of the contracted electricity amount in 3 years. Tainan site has to set up at least 3,992kW capacity. The facility is planned to be set on the roof floor of the buildings. Application for the authority approval is ongoing. The project is expected to be finished by October 2017.

Solar power generation capacity

Y2012

83,814

Unit: kWh

Y2014 Y2015Y2013

82,387 85,8611,298,338

Y2016

23,221,594

Total solar energy generated (Corp.) |Solar energy generated by site |

Y2016

Y2015Taiwan

Ningbo

Foshan

Unit: kWh

87,038

61,157

842,540

8,275,487

14,884,950

368,760




3.2.3 Water Resources Management

Water recycling, Water neutralization, Reclaimed water

Three major development targets

Water sustainability map2016

Process water recycling Taiwan site

One drop of water used

for 4 times

Effective zero discharage at Fab5

One drop of water can be used

for 7 times

Water Resources Management Policies

Water scarcity was listed as top 5 global risks in the Global Risk Report of World Economic Forum 2016. Innolux performed business impact analysis and business continuity planning based on water resource risks, outlining water conservation and water recycling/reuse as the two focal aspects. Because water resources and water quality management are closely associated with local regions, various sites are required to formulate water-related plans and goals based on their production characteristics and local laws and regulations. They are also requested to use the cross-site energy and water conservation platform to share their efforts, which are reviewed by the CSR Committee, to enhance water efficiency and reduce the impact of water shortage.

Item Description

MaterialityWater resources management is a key element of global sustainability development. The process of Innolux consumes a large amount of water, in addition to the seasonal water shortage in Taiwan, an effective water resources management could reduce operating risk.


Management

Development of alternative water source, protection of water source, efficient water quality management and reuse, optimization of water supply system, participation in government’s water source protection management, internal monthly Technology Committee meeting and quarterly CSR committee meeting to review the water efficiency

Medium-to-long term strategy Develop new technology to enhance water efficiency

2016 performance Water consumption per unit input substrate area reduced 7.5% to 0.330m3/m2 compared to 2015, target achieved.

2017 promotion Water consumption per unit input substrate area further reduces 6% (vs.2016).

Water Resources Management｜ [Management approach of material issue]

Water recycling of Innolux

Reduce: Reduce the withdrawal amountReuse: Repetitive useRegeneration: Re-workRecycle: RecyclingRecovery: Development of alternative water sources




Water Risk Management

Item Jhunan Tainan Ningbo Foshan Nanjing Shanghai

Water Withdrawal (million tons)

4.32 18.64 0.63 0.65 0.33 0.15

Proportion 17.4% 75.4% 2.6% 2.6% 1.3% 0.6%

SourceYonghe MountainReservoirLiyutan Reservoir

STSP: Nanhua Dam,Zengwun Dam, KSP: Agongdian River,Nanhua Dam, Gaoping River Weir

Ninghai Baixi Reservoir TanzhouWaterway Qinhuai River Yangtze River

Destination of Water Discharged

Hsinkung River STSP: Yanshuei RiverKSP: Agongdian River East Sea Xinan Chong New Qinhuai

River

Mid and lower reaches Yangtze River

Water Conditions

Taiwan’s annual rainfall is approximately 1,650 mm which is not regarded as scarcity. However, owning the high population density, geographic restriction and uneven rainfall season, the average rainfall per person is only 1/5 of the global average value. Efficient water management is essential to company operation. • Water conservat ion projects are

scheduled for implementation each y e a r t o g r a d u a l l y i m p r o v e w a t e r efficiency.

• Business continuity management c o n t i n g e n c y m e c h a n i s m s w e r e established to regulate water use and cross-site dispatch and to reduce production.

•Approximately1,650 mm of rainfall a year•Non-water stress




Floods and Storms

High risk High risk Extremely high risk

Extremely high risk High risk

Innolux established the “Typhoon/Storm Contingency Protocol,” which stipulated the use of gutters, roads, pipes, flood valves, water pumps, sandbags, and other blockage or drainage facilities, and listed various subsistence equipment, such as distribution boards, emergency generators, water tanks, and wastewater pumps as key management items. Moreover, the company established a liaison mechanism with the municipal irrigation and drainage station to promptly receive water conditions and reduce the impact of storm disasters. Moreover, the company collaborated with the release of the EICC 5.0 to complete runoff risk assessments of various sites and implement key monitoring procedures during storms, thereby avoiding flood and the occurrence of secondary pollution.

In 2016, Innolux introduced i-FM (intelligent Facility Management) to maintain the various data in one system including water supply status in Taiwan since 2008, equipment efficiency of each facility, incident tracking, material management etc. The system helps Innolux predict the future water supply status and strengthen the risk management even in water shortage period.

Innolux withdrew 24.73 million tons of water in 2016. Most of the water was used in the front-end production processes in the Taiwan site, accounting for 92.8% of the total water usage. Innolux adopted the water risk assessment tool developed by the WRI to identify the situation of sites located in dry areas and the risks of floods and storms, and consequently formulate appropriate management countermeasures.

Water Resources and Risk Analysis

Archive

iFM database

Find variables and connections

Big data applicationsSuppliesmanagement

Equipmentefficiency

Problemanalysis

Newsannouncement

Incidenttracking

iFMDatabase

Database queryTrend managementEffectiveness detection

Zero wasteZero discharge




Increasing the Recycling Rate of Process Water

The Taiwan site saved 249.3million tons of process water in 2016 (equivalent to roughly 99,720 standard-sized swimming pools), for an average process water recycling efficiency of 95.4%*. These results exceeded the requirement of 85% regulated by the Science Park Administration.*process water recycling rate=(recycling amount of process water + amount of recycled use) / (process water withdrawal+ accumulated amount of recycled water used)

Effective Zero Wastewater Discharge

Fab 5 of Tainan introduced the global latest reclaimed water technology, NEWater, and high efficient MBR+RO equipment to recycle the originally discharged wastewater. The 3rd phase installation was done by the end of 2015. In Q4 2016, the effluent amount of Fab 5 reduced to < 800 CMD(m3/day), the unit area water consumption reduced to < 120 L/M2. Fab 5 achieved a 99.5% recycling rate for the process water and was the effective zero wastewater discharge demonstration plant of Tainan site.Fab 5 was regarded as a case study by the Southern Region Water Resources Office, Water Resources Agency, Ministry of Economic Affairs in 2016 Zengwun Dam Management and Promotion Exchange Program. The participants visited Fab 5 in August 2016 and paid respect to Fab 5’s continuous efforts in water recycling.

Drought resistance

Reclaimed Water Resources Development Act was approved by the government in December 2015 to enhance national drought resistance. In July 2016, Innolux was the first to support using reclaimed water in panel manufacturing by signing a letter of intent to support Yongkang reclaimed water used in STSP and Tree Valley parks,together with Ministry of Economic Affairs, Ministry of the Interior, Ministry of Science and Technology and Tainan City Government.The Tainan City Yongkang Recycling Plant is one of the six demonstration plants and will be open in 2019. At the first stage Innolux will use 4,000 tons of reclaimed water a day with ultimate goal of 6,000 tons a day. The reclaimed water can serve as a replacement of municipal water with stable quality, thus reduce the impact of water shortages during drought periods, co-create renewable water-friendly environments, and promote sustainable water resources.

!

Measures within the organization Water ConservationEstimation (tons/yr) Site

T2: Install new MBR+RO system to recycle the water discharged by DMSO (wastewater treatment system) 365,000 Jhunan

Fab 7: TMAH FR discharged water recycling project to recycle 2,000 CMD water 730,000 Tainan

Fab 7: Add new water tank to the MBR system to improve nitrification and denitrification thus enhance the amount of recycled water of 1,000 CMD 365,000 Tainan

Fab 6: Replace a new filter of MBR-A to increase recycled water of 707 CMD 258,055 Tainan

Reciprocal supply of water between HA and HB buildings. Excess water of HB was transported to HA cooling tower to save water 25,000 Foshan

Improvement of water replenishing system of cooling tower at LCM1 and LCM2 to recycle water of lamination process and ROR water for cooling tower use 42,927 Nanjing

Wastewater of equipment cleaning used as flushing water 103,831 Shanghai

2016Major Water Conservation Projects

Tainan SiteAdd new water tank to the MBR system to improve

nitrification and denitrification

Tainan SiteReplace a new filter of MBR-A




Water Efficiency Review

The total water withdrawal in 2016 reached 24.73 million tons, with the Taiwan sites using 22.96 million tons and the China sites using 1.77 million tons.

27.41

Y2013 Y2015Y2014Y2012

24.19

26.2526.22 25.9224.37

28.91

1.7722.96

24.73

Y2016

29.23

2.063.01 2.993.04

Regulatory impact

Innolux withdrew 22.96 million tons of water in 2016. Water Act in Taiwan was amended in May 2016 to request company in water conservation. Panel manufacturing is regarded as one of the top 7 water-consuming industries. Water usage fee will be imposed against companies and caused increase in operation cost.

Opportunity

To continuously enhance water efficiency and recycling, Innolux Taiwan installed new MBR+RO at T2, recycled RO system condensed wastewater at Fab 7, and installed MBR wastewater facility at Fab 8. A total amount of 1.72 ton of water could be saved a year.The enhancement of water efficiency helps reduce cost. Water usage fee could be deducted upon conditions like clean production certification, green building label etc. Innolux satisfies multiple conditions and will continue to explore better efficiency.

Water Conservation Performance |

「Water consumption of TFT-LCD input substrate」

Target: 0.356 m3/m2

Actual: 0.330 m3/m2

2016 attained

Target: 0.0025 m3/pcActual: 0.0022 m3/pc

2016 attained

Target: 0.00397m3/pcActual: 0.00366m3/pc

2016 attained


2016 attained


2016 attained

0.3790.357

0.3300.310

Y2015Y2014 Y2016 Y2017

0.0025

0.00230.0022

0.0021

Y2015Y2014 Y2016 Y2017

0.03560.0307

0.0151 0.0139

Y2015Y2014 Y2016 Y2017

Y2015Y2014 Y2016 Y2017

0.001510.00121

0.00366 0.00329

Y2015Y2014 Y2016 Y2017

0.0150.016

0.0190.018

Regarding the “water consumption per unit input substrate area” index, Innolux reduced water usage from 0.357m3/m2 in 2015 to 0.330m3/m2, for a reduction of 7.5% and outperformed the original target. In 2017, Innolux anticipates further reducing water use per unit area by 6% through the means including MBR extension & SS improvement, secondary water for wastewater scrubber, enhanced PIT recycled and reused rate and recycling process water etc.

TW

NGB

FS

NJ

SH

Total water usage |

unit: million m3Taiwan ChinaCorp.

Regulatory Issues

2017 Target-6 %

vs.2016

2017 Target-5 %

vs.2016

2017 Target-8 %

vs.2016

2017 Target-10 %

vs.2016

2017 Target-2 %

vs.2016




The process of TFT-LCD at Innolux involved dozens of different procedures. Specific pollution prevention and monitor system is set to reduce the environmental impact brought by waste, wastewater, hazardous substance and noise. The cooperation of cross-department and industrial-academia and monitor of Facility Engineering Department Committee meet the requirement of regulation and company operation.

Innolux produced a total of 17 .89 mil l ion tons of wastewater in 2016. Of which, the Taiwan sites produced 16.82 million tons, comprising 94% of the overall amount, and China sites produced 1.07 million.

Item Y2014 Y2015 Y2016

COD (tons) 2,152.7 1,778.5 2,101.7

BOD (tons) 703.3 556.4 708.5

SS (tons) 1,003.3 867.7 679.3

Water Pollution Prevention

The types of wastewater produced during various production processes include wastewater from cleaning, dying, etching, developing, stripping, as well as water containing chrome and fluoride. Because the wastewater covers organic, acid / alkal i and metals and other characteristics of different wastewater, the operational wastewater are diverted and separately collected from the design stage to effectively enhance the efficiency and stability of wastewater treatment equipment. Then, based on the type of wastewater, a combination of biological, fluidized bed crystallization, and coagulation and sedimentation treatment methods is employed to process the wastewater, ensuring that the discharge complies with park regulations.

Innolux recycled the organic/acid/alkaline process water to the pure water system or cooling tower as secondary water after testing. Chemicals in the water was also recycled and reused to reduce pollutants and waste, thus greatly enhance the effectiveness.

The Indium Tin Oxide (ITO) and molybdenum(Mo) used in the TFT-LCD manufacturing are left in the etching wastewater. Innolux by the means of resin adsorption recycled the indium(In) and molybdenum(Mo) in the wastewater to not only enhance the effectiveness of wastewater recycling, but also meet the discharged water regulatory requirement (In<0.1mg/L, Mo<0.6mg/L).

• In：Recycled chemical reworked as indium pill or ITO target for process use by the vendor

• Mo：The molybdenum was treated to become molybd ferr. to serve as the ingredient of special alloy and #316 stainless steel.

• Water recycling financial implication: 25 million dollars a year

Waste reduction effectiveness

3.2.4 Pollution Control and Environmental Impact Reduction

Wastewater quality indicator |

Item Description

Materiality Enhance green competitiveness through reducing the environmental impact of manufacture and cope up with the global environmental regulations requirements


ManagementInstall pollution prevention and control facilities to control air pollution, increase wastewater recycling efficiency, enhance waste utilization, and reduce waste. KPIs were established and review regularly

Medium-to-long term strategy Promote optimal resource utilization on sites and reduce environmental impact

2016 performance

• China site’s VOCs treatment complied with Article 45 of Law of the People 's Republic of China on Prevention and Control of Atmospheric Pollution•

Taiwan Fab KPIs were set for organic sludge, inorganic sludge and SRS residue reduction. The targets of inorganic sludge and SRS residue reduction were achieved.

• NMP 0.9%, PGMEA 1.2%、TMAH 54.2%。Chemicals recycling rate of 2016 increased rate (vs.2015): TMAH 54.2%, PGMEA 1.2%, NMP 0.9%。

2017 promotion• Gradually increase the chemicals recycling rate.• Continuous promotion of organic sludge, inorganic sludge and SRS residue reduction.• Total waste intensity target for China site is 1.1865Kg/m2.

Pollution Control｜ [Management approach of material issue]

Taiwan ChinaCorp.

Y2015Y2014

21,807,195

Y2016

19,822,541

18,288,30919,946,773

1,860,44217,891,7741,534,232

1,067,54816,824,226

Wastewater Discharge Statistics |

unit: tons




Regulatory impact

•Ammonia（Taiwan Site）Tainan science park adjusted effluent standard and increased the charge from Jan 1, 2017.

Innolux collaborated with the International Water Quality Analysis Center of National Cheng Kung University (NCKU) to conduct a project, optimization of effluent boron treatment of optoelectronic industry. It optimizes the boron treatment to meet the standard of <1.0 mg/L.

No. Project Site

1 Install sludge dryer to reduce the humidity of organic sludge from 85% to 60% which saved 1,872 tons of waste a year Jhunan

2 Adjust the DO of the biological aeration tank to 1~1.5PPM to reduce the NaOH solvent amount. By reducing biological nitrification, 5,900 kg of NaOH is saved a month Tainan

3 Install fluorine treatment facility to reduce the input amount of CaCl . It could reduce risk of unstable fluorine ions in the wastewater Tainan

4 Addition of in-land film tank to the MBR system to reduce 30 mg/L of effluent COD Tainan

5 Reduce the input of coagulation tank chemical to reduce the usage of Polymer by 26,605kg/month Tainan

6 Add new water tank to the MBR system to improve nitrification and denitrification thus enhance the effluent NH3-N concentration to < 20 mg/L Tainan

7 Segregated collection is imposed against fluorine wastewater to reduce the F ion concentration of the effluent to <10 mg/L Tainan

Fab2 installation of F- treatment facility

Fab 3 addition of in-land film tank to MBR

Regulatory impact

•Boron pollutant（Taiwan Site）Tainan science park imposed special pollutant charge in effluent including boron from Jan 1, 2017. Innolux has to upgrade the treatment facility in order to meet the standard.

Risk and Opportunity

Innolux established operation parameter index to stabilize the nitrification and denitrification and met the new standard with the current treatment facility. The collaboration with NCKU to experiment to build a anaerobic fluidized bed bioreactor (AFMBR) to remove ammonia in the wastewater. It also aims to further process the wastewater of the concentrated sludge.

2016 Major Water-Pollution Prevention Projects

Regulatory Issues





Air Pollution Prevention Mechanisms

The air pollutant discharged by Innolux comprises VOCs, NOx, NH3, SOx, Cl, HCl, HNO3, H3PO4, and particulate matter. Air pollutant is filtered during processing to sort out organics, acids, alkalis, and particulate matter. These substances are then sent to specific treatment facilities according to their type for processing to meet the discharge limit.

Chemical Recycling Efficiency

Innolux upholds the “3R” principle when treating chemical waste liquid. The company not only implements recycling measures on its production lines, but also collaborates with suppliers and treatment vendors to achieve waste utilization through purification and recycling. These efforts have helped Innolux to improve recycling rates each year, particularly in 2016. In terms of the recycling rates of various chemicals, Innolux achieved 76.8% for stripper, 83.1% for NMP, 69.1% for PGMEA, and 38.4% for TMAH. The company plans to continue improving its purification-recycling rate and reduce the energy consumption of delivery.

TMAH recycling system

Packaging Material Reduction

Innolux increases the efficiency of recycling of packaging materials supplied by upstream suppliers by controlling its procurement procedures and collaborating with downstream customers in recycling and reusing packaging materials. The weight reduction of packaging materials, the carbon saved by enhanced loading volume, and the use of recycled materials instead of new ones collectively reduced 23,701 tCO2e in 2016. The recycling rate of DSPK Box was 75.8%, PP Box was 57.6% and Hard Box was 54.8$.• Carbon reduction design: The dimensions of the hard box

were modified after December 2012; therefore, the carbon reduction value was calculated based on weight and quantity reduction of materials.

• Carbon reduction through recycling: The purchase quantity of recycled materials was screened to convert the weight of the reduced new production materials and the weight of the reduced carbon emissions.

• Carbon reduction design and carbon reduction through recycling do not include MD (medium and small size products) packaging material.

Y2014 Y2016Y2013

9,805

5,416

12,021

7,138

9,907

15,192

Y2015

13,338

10,363

Schematic diagram of recycling process

INX Factory

Quality Department Manufacturing Department

Customer's factory

Item Y2011 Y2012 Y2013 Y2014 Y2015 Y2016

Stipper 76 78 77.6 76.2 77.2 76.8

NMP 56 53 61 67.5 82.4 83.1

PGMEA 0 35 55 62.8 68.3 69.1

TMAH 0 13 16 20.1 24.9 38.4

Chemical Recycling and Reuse Rate｜

Regulatory impact

The Environmental Protection Agency (EPA) handled the public hearing of "Draft revision of air pollution control fee rate for stationary pollution sources" on Dec. 27, 2016. The amendment is planning to raise the applicable rates for air pollution control fees for the 1st and 4th quarters of each year.

This amendment will increase our air pollution control fee charges. Innolux is currently working with TTLA for the industry self-built coefficient of air pollution control fee. If the EPA approves it, it will be more reasonable to use the new factor to calculate the air pollution fee charges.


Packaging Material Carbon Reduction |

Carbon reduction design (tCO2e)

Carbon Reduction through Recycling (tCO2e)

Recycling of packing materials, quality inspection prior to warehouse

Quality inspection prior to use of recyclied packing materials in a shipment

Quality screening of recycled materials prior to the loading




Type Treatment Taiwan China Corp.

Hazardous waste

Incineration 722 171 893

Landfill 0 0 0

Recycling

Recovery and reuse

(off-site)21,323 0 21,323

Recycling 0 49 49

Physical treatment 3,619 0 3,619

Others

solidification treatment 822 0 822

Chemical treatment 5,223 9 5,232

Overseas Treatment 12.01 0 12.01

Amount 31,721 230 31,951

General Waste

Incineration 6,965 1,201 8,167

Landfill 1,931 0 1,931

Recycling

Recovery and reuse

(off-site)24,071 0 24,071

Recycling 8,653 17,318 25,971

Physical treatment 6,465 0 6,465

Otherssolidification treatment 0 0 0

Chemical treatment 0 0 0

Amount 48,086 18,519 66,605

Waste Reduction

Innolux is committed to promoting waste reduction and utilization at the source. Innolux produced roughly 98,556 tons of waste in 2016; of which, 66,605 tons were non-hazardous waste and 31,951 tons were hazardous waste. The recycled proportion was 82.16% in whole company. All waste is treated by qualified treatment vendors with periodical audits for checking legitimacy. There were 3 vendors suspected of illegal events in 2016. Although the incidents were not related with our waste, but consider the follow-up legal issues for the vendors, we stopped cooperating and enabled the backup vendors immediately.

31,721

48,086

18,519

230

28,746.5

45,917.236,178.0

422.0

28,962.0

41,775.3

26,700.6

256.2

Y2014 Y2015 Y2016

Waste Treatment Ratio |

Y2014 Y2015 Y2016

8.60%

9.59%

79.72%

2.10%

8.81%

2.17%

83.72%

5.29% 6.14%

9.19%

2.50%

82.17%

Year Item Cadmium Batteries

2016Weight (tons) 12.01

Proportion 0.038%

2015Weight (tons) 0

Proportion 0

2014Weight (tons) 7.42

Proportion 0.025%

Overseas Treatment of Hazardous Waste |

Incineration

LandfillRecyclingOthers

Process Waste |

unit: tonsGeneral Waste Hazardous Waste

Taiwan China Taiwan China Taiwan China

2016 Process Waste




3.2.5 Environmental Material Flow Information

Production

Raw Material Purchasing

R&D

Transportation & Sales

Glass Substrate 75,688 tons

Liquid Crystal 94.2 tons

Aluminium Etch 19,003.7 tons

Developer 21,404.9 tons

Stripper 14,237.8 tons

Thinner 6,051.6 tons

Photo Resists 6,221.5 tons

Purchased Electricity 18,421,888 GJ

Renewable Energy（Solar Power） 83,957 GJ

Natural Gas（LNG） 442,409 GJ

Disel 12,286 GJ

NMP Recycling Rate 83.1 %

Stripper Recycling Rate 76.8 %

PGMEA Recycling Rate 69.1 %

TMAH Recycling Rate 38.4 %

Municipal 24,727,484 m3

Rainwater 589,931 m3

Eco-friendly Refrigerant 　11.03 tons

Scope 1 *1 0.457 million（tCO2e）

Scope 2 *1 2.794 million（tCO2e）

Scope 3 0.025 million（tCO2e）

VOCs * 2 163.9 tons

SOx * 2 46.2 tons

NOx * 2 15.3 tons

Wastewater 17,891,774 m3

COD * 3 2,101.7 tons

BOD * 3 708.5 tons

SS * 3 679.3 tons

Recycled Amount 240,354,817 tons

Process Water Rete 　95.4 %

Hazardous Waste 31,951 tons

General Waste 66,605 tons

Large-Size（>10 inches）

110.69 Million pieces

Medium/Small- Size（<10 inches） 224.88 Million pieces

Panel Output

2016 Data

Major Materials |

Energy Consumption |

ODS -Ozone Depleting Substances |

Water Withdrawal |

Recycled and Reused Materials |

Customer

1. Taiwan site’s heating value coefficient of electricity 860kcal/kWh, solar energy 860860kcal/kWh, natural gas 8,000kcal/m3, diesel 8,400kcal/L are adopted from 2015 Energy Handbook of Bureau of Energy, Ministry of Economic Affairs. China site’s heating value coefficient of electricity 860kcal/kWh, diesel 10,200kcal/kg, natural gas 8,505kcal/m3 are adopted from 2016 China Energy Statistical Yearbook.

2. For VOCs, NOx, and SOx, the measured values were converted into emission intensity (kg/m2), then the total emission was calculated using the actual panel area.

3. COD, BOD, and SS are calculated based on actual test results.4. The scope of data includes Taiwan and China, with the exception of SOx, NOx and “Recycled Process Water” which only encompassed

the Taiwan site.

GHG Emissions |

Air Pollution Emission |

Wastewater Discharge |

Recycled Process |

Waste Disposal |

Input Output




Environmental Information

Item Y2013 Y2014 Y2015 Y2016

Energy Use

Water Use (million m3) 29.23 28.91 26.25 24.72

Power Use (MWh) 4,941,587 5,025,675 4,954,781 5,119,279

Diesel (MWh) 3,223 3,261 3,144 3,413

LNG (MWh) 123,018 129,622 127,364 122,701

Material Use

Aluminum Etch (tons) 16,552.00 17,670.00 19,280.60 19003.73

Developer (tons) 22,378.1 20,800.8 21,294.3 21,404.9

Thinner (tons) 7,133.3 7,466.9 15,048.3 6,051.6

Photo Resists (tons) 6,070.6 6,499.3 7,190.7 6,221.5

Stripper (tons) 16,108.0 16,111.0 6,647.2 14,237.8

Liquid Crystal (tons) 62.7 101.1 100.01 94.2

GHG Emission

Scope1 (million tCO2e) 0.523 0.511 0.452 0.457



Wastewater Discharge

Wastewater (m3) 21,895,687 21,807,195 19,822,541 17,891,774

COD (tons) 1,723.2 2,152.7 1,778.5 2,101.7

BOD (tons) 334.1 703.3 556.4 708.5

SS (tons) 621.9 1,003.3 867.6 679.3

Process Water Recycling

Process Water RecyclingRate (%)

82.8% 84.9% 94.2% 95.4%

Process Water Recycling Volume (tons)

65,154,840 69,873,633 235,957,877 240,354,817

Waste Disposal

Total Waste (tons) 112,364 111,264 97,694 98,556

General Waste (tons) 71,941.1 82,095.2 68,475.9 66,605

Hazardous Waste (tons) 40,423.0 29,168.5 29,218.2 31,951

Air Pollution Emission

VOCs (tons) 111.2 151.9 104.7 163.9

SOx (tons) 14.1 15.2 42.3 46.2

NOx (tons) 9.3 16.3 15.8 15.3




3.4 Green Value Chain

Innolux extend the core aspects of low-carbon green product management where takes “energy saving,” “material conservation,” and “non-toxic materials” as the three primary factors in product design and manufacturing management. Based on these factors, the company further formulated four major green strategies, namely smart green, green innovation, lean green, and green engagement, to fulfill low-carbon green management, contribute to the economy, environment, and society, and achieve sustainable development.

3.3.1 Smart Green

Innolux ful ly promote smart green, by enhancing fundamental reports and optimize related systems. Internally, Innolux focuses on green product management data informationization. Externally, Innolux consolidate supply chain platform. For large customer base with different standard of non-toxic control requirements, Innolux continue to strengthen the intelligent management to respond positively and to face the environmental risks early. In the mean time, management efficiency and resource utilization are improved through the intelligent integration of the value chain based on data to reach the goal of costs saving and innovation supporting.

The Integrated Green Component Database (iGCD) System

iGCD system plays an important role on non-toxic management, as a supply chain to implement material environmental verification and safety verification platform. iGCD system officially implemented in 2015 and expand system functions in 2016, such as, SVHC and VOC data sheets, in order to manage the material toxicity information promptly and control the risk of hazardous substances.iGCD system is the material parts non-toxicity information collecting platform, one more step further, to be the platform for supplier chains to reach green policy. By updating parts verification Q&A, new questions and suggestions are shared to improve the information quality and execution efficiency of supply chain. By the knowledge sharing of audio digital courses, suppliers can download and watch at any time, to master the green environmental protection regulations and related knowledge, to achieve the sharing of teaching resources with the spirit of green participation.

Item Description

Materiality With the growing number of international convention, protocol and standards, the source and production management help enhance ecology and global competitiveness.


Management

“Energy saving,” “material conservation,” and “non-toxic materials” are the three primary factors in product design and manufacturing management. Based on these factors, the company further formulated four major green strategies, namely smart green, green innovation, lean green, and green engagement.

Medium-to-long term strategy Promote green and low-carbon value chain

2016 performance

Complete 100% supply chain annual conflict minerals survey and smelter certification inventory. Release of i-GCD System to control the hazardous substance risk of components. Strengthen the VOC control on automotive panel. Continue the QC080000 hazardous substance management system and energy-saving and material-saving product design.

2017 promotion Establish GPMS conflict minerals information platform and conduct material GP verification and conflict mineral inventory through the system.

GreenEngagement

GreenInnovation

Material Conservation

Energy Saving

Non-ToxicMaterial

SmartGreen

LeanGreen

Green product management｜ [Management approach of material issue]




3.3.2 Green Innovation

Innolux has continued to seek innovative opportunities in value chains, as well as identify methods to reduce environmental impact and optimize resource utilization efficiency while upholding the three core principles, specifically, non-toxic materials, energy saving, and material conservation. Innolux also centers efforts on refining its non-toxic product designs. In 2015, it became the first company to initiatively develop a vehicle panel that detects and controls VOCs. In 2016, the company step further to enhance the management method. Furthermore, energy saving and material conservation mechanisms are incorporated into its product design and development stages, enhancing the green competitiveness of its products.

Non-Toxic Product Designs

Prohibition/Limitation of Chemical Substances Used in Products

Innolux reviewed the international environmental protection directives, as well as industrial and customer specifications, and developed the Innolux Restricted Substances Management Standard to rigorously evaluate the integrity of its products, components, and materials, ensuring their compliance with requirements, and meet international regulations and customer non-toxic products management trend.

Management of Banned and Restricted Substances |

The automotive industry has strict request for safety requirements. In the hazardous substances management of vehicle panel, Innolux takes the lead in the panel industry. Since 2013, Innolux took VOC into the hazardous substances management scope. At the end of 2014, to initiate VOC research and analyze VOC contain within products. Moreover, the company a imed to analyze the concentrat ion and distribution trends of VOCs in various materials for a true understanding of how to manage VOC in various products.Innolux started to request suppliers to uncover VOC contains in September 2015. In 2016, continues to accumulate the database volume, as well as stepping into the second phase development, to request for VOC test report for vehicle components to enhance database quality, including eight test items of Benzene, toluene, xylene, ethylbenzene, styrene, formaldehyde, acetaldehyde, and acrolein.

Y2013 Y2014 Y2015

58 items of substance

1.Cobalt dichloride, TBBP-A, DMF are forbidden.2.Antimony, Benzo[def]chrysene content are constricted.3.Addition of Phthalates content standard.4 . A d d i t i o n o f S u r f a c t a n t s , Antimicrobial , Biocidal, Natural rubbercontent standard.5.Addition of VOC content standard

VOC Management for Vehicle

Y2008Incorporated the QC 080000 management system

Y2013All sites passed the QC 080000 management system certification Y2015

• Continue implementing the management system

•New certified sites:Nanjing – KunboFoshan – LCM3 plantFoshan – affiliates

Y2015 Q3

Full disclosure-component VOC content of supply chain

Y2016 Q3

VOC test report for automotive component

Outlook

Full control- scope including key material and auxiliary material

Y2015 Q1

Product VOC content analysis

Y2016

46 Substance Categories

1.RoHS + HF2.REACH SVHC


1. Threshold l imit for the use of lead are upwardly revised.

2. The number of banned substances has increased

3. Illegal wood, paper, and plant materials used for packaging are added to the banned list.

4. Death minerals are added to the list of monitored items.


1. CFR and BFR threshold l imits are added to the control limit of substance.

2. NP/NPE/Red P are listed as banned substances.

3. IARC 1 and 2A carcinogens are listed as banned items.

4. T he par t s d e f ine d as Gr e e n 1 o r G r e e n 2 s h o u l d m e e t C F M requirements.

5.VOC management is added.

Y2016continuous improvementcompletion of certification renewal

Continuous Promotion of the QC 080000 Hazardous Substances Management System

To maintain the effectiveness of managing hazardous substances, Innolux has implemented the QC 080000 management system since 2008. In addition, the company receives annual audits and reviews from third party international notary units. All Innolux’s Taiwan plants have completed the QC 080000 management certification since 2013 and maintained QC 080000 operations in 2014. In 2015, the Nanjing (Kunbo) and Foshan (LCM3 and affiliates) sites were included in the list of certified sites, both of which receive external audits. Through the continuous improvement of the management system, successfully completed the certificate transfer in 2016.




Product Design for Energy Reduction Design

Innolux products design in a wide range of applications, different application areas have their own development team, development teams are constantly challenging for energy-saving and material optimization of green design.

Use positive type liquid crystal Use negative type liquid crystal

• To enhance the penetration rate of mobile phone panels, by using negative liquid crystal to replace the positive liquid crystal, the penetration rate increased from 4.3% to 4.99%, increased 16%, and converted to electricity units about saving 0.1 kWh.

• The backlight becomes unnecessary and could be eliminated.• Using the negative liquid crystal and still keep the backlight film, the brightness

and contrast can performed more effective, and can be utilized in high-end product applications.

! Directly do the coating on the back board

Covered the plastic sheets on the steel back board

• Reduce the use of material sheets and directly do the powder coating on the back board, to replace the previous use of plastic sheets.

• To reduce the Light Guide Plate thickness from 2.5t to 2t, which decrease the weight by 20%.

2.Product Lightening and Thinning：

Product lightening and thinning has been the trend of panel products, from the reduction of c o m p o n e n t s i z e a n d weight to the overa l l design, which not affect t h e f u n c t i o n , e v e n improve the performance of shown, and achieve the goal of product lightening and thinning.

3.Implement low energy consumption technology：

Green energy products are increasingly valued, how to make products use low energy consumption but still keep the same p e r f o r m a n c e , a n d effect ively reduce the impact to the earth; it is now an important task.

!VESA 15.6 NB/ B/L Narrow 15.6 NB/ B/L

Narrow Border Product

1.Narrow border technology development:

By reducing the size of c o m p o n e n t s t o s a v e border space, and arrange with the new developing p l a s t i c m a t e r i a l a n d enhancing product ion process ability, so that it can be closely arranged to significantly reduce the border and to enhance product competitiveness.

• The original plastic components in VESA NB (including, housing / LGP / LB Cover) Weights 51.6g (2.8 + 47.2 + 1.6).

• New Narrow NB plastic components (including, LGP and LB Cover) Weights 48.6g (47.2+1.4).

• Beside reducing the use of frame borders, lamps and so on, the weight of the plastic material is reduced about 5.8%, which the effective area of the panel is also increased.

Design examples in 2016




3.3.3 Lean GreenIn September 2015, the Paris United Nations Climate Change Conference, the latest carbon reduction agreement "Paris Agreement" was signed. Various countries have undertaken aggressive actions to curb the impact of climate change and suppress greenhouse gas emissions. Innolux adopts the principles of lean green and green management to constantly improve the efficiency of its products, invests considerable effort in eliminating resource wastage in its production processes, and decrease the amount of carbon emitted in suppliers’ production processes.

Continuous Improvement in MFCA

Innolux introduced the Material Flow Cost Accounting (MFCA) and relevant resource utilization improvement as well as material/carbon reduction plans in 2011. Foshan BLC site passed and received ISO 14051 accreditation in 2012, and company took the Foshan BLC site methodology and experience as the template and implement to the BLC sites of Foshan, Ningbo, and Nanjing, as well as the Tainan SMT site, FAB3 site, and Jhunan T3 site in Taiwan. 2016 continues the 3R (Reduce, Reuse, Recycle) improvement projects from 2015. Starts from the project initiate in 2012, until 2016 the amount of material benefited from 3R in the front-end production process and the backlight has been accumulated to $186 million and the carbon reduction benefit is about 3,132 tCO2e.

Action Reuse Reduce Recycle

Strategy Recycle and reuse

Reduction of negative products

Sales of waste

Benefit Medium High Low

Priority 2 3 1

RemarkIt takes cost to process before reuse

Enhance material efficiency and reduce procurement cost

Ready to be implemented. The value of waste is low

3.3.4 Green Engagement

In the 3rd quarter of 2016, CSR committee established a green low-carbon team, to implement MFCA analysis method. To view the material loses of product life cycle from input to output, to focus on quantizing improvement value, and to establish 3R improvement strategy to reduce material loses, so as to reduce the product cost and carbon emit.In the future, the 3R project will parallel implement to various plants, and continue to check on the material loss, and expect to search for effective 3R measures to assist company towards the economy benefits.

Product life cycle must have sufficient supply chain support to lead products to innovation and growth. Innolux actively promotes the range of influences of its supply chains based on the implementation of green product policies, concepts, and experiences. Moreover, the company encourages the sharing of professional knowledge and experiences, frequently inviting suppliers to collaboratively promote green initiatives.

Through the iGCD system, suppliers a r e a b l e t o d o w n l o a d d i g i t a l materials from the bulletin board and take the courses without time and location restricts. Currently Innolux offers courses include green product control requirements and VOC control requirements. The 2016 Suppliers’ Conferences were held in the Tainan, Ningbo, and Foshan sites. The topics cover the low-carbon and non-toxicity aspects, including the restricted substance control , low-carbon 3 C m a n a g e m e n t , g r e e n h o u s e gas audits, MFCA, iGCD system implementation, VOC regulations and propaganda, and newest update of regulations.

Supplier

Var ious courses have been a r r a n g e d f o r d i f f e r e n t d e p a r t m e n t s s i n c e 2 0 0 8 , assisting employees to gain a greater understanding of the core concepts of low-carbon green product designs. The overall pass rate for courses was above 90% in 2016.

Employees

Material flow

analysis

Focus on material

and process3

R im

pro

vem

en

t strategy

Y2008

Training planning

Y2012Introduction of online learning at Taiwan site

Y2015 - Y2016Release of online learning at Greater China Region

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7271 2016 INNOLUX CSR Report 7271 2016 INNOLUX CSR Report

Humanistic Vision to People

“To People, with S.M.I.L.E” is Innolux’s humanistic vision to take care of employees and promote community and societal development in the aspects of safety, mental and physical wellness, initiative on social care, and living and employee-friendly workplace. We also continue to enhance humane harmony and co-prosperity.

S.M.I.L.E

Safety

Mental PhysicalWellness

Initiative

Living

Employee-friendlyWorkplace

4

Humanistic Vision to People, with S.M.I.L.E


ch4 - Humanistic Vision to People, with S.M.I.L.E


4.1 Safety

Health and Safety Management

The Innolux Environmental Health and Safety Policy was established and comprehensively developed based on regulations such as ISO14001, OHSAS 18001, and TOSHMS.

W h e n i t c o m e s t o c h e m i c a l management, product life cycle within the organization, pre-introduction assessment, transport safety, disposal management are a l l considered and conducted according to legal requirement. In 2016, the chemical management extended to import/

export customs end to realize source management and enhance corporate safety.

Item Description

MaterialityUnited Nation Sustainable Development Goals (SDGs), SDG 3: Ensure healthy lives and promote wellbeing for all at all ages. Building the health and safety work environment is the key of sustainable development and is also important for company to gain competitive advantages.


Management

Comply with the applicable domestic and international laws and regulations. Continually improve the health and safety performances. Embed the risk management in enterprise culture. Develop and promote risk-management integrated construction.Build the health management system. Provide the alert reminder and improved health activities to let associate to get mental and physical wellness.


Comply with International Environmental, Health and Safety Policy, create a health and safety work environment and reduce the occupational accident.

2016 performance

Loss control management ability is strengthened comprehensively step by step and the relevant audits are continuingly conducted. To analyze the increased injury frequency rate (F.R) and disabling severity rate (S.R), we run projects by focusing on risk management in China sites such as the risk assessment and hazard prevention of the human factor engineering, the factory environment improvement plan and the employee suggestion program etc. The occupational accidents of contractors decreased and no occupational disease case happens. The number of employees participating in the health improvement activities and cancer screening programs amounted to 22,573 people.

2017 promotion

1. Implement the new environment management system2. Corporate level BIA & RA analysis3. Loss control management audit and the improved earthquake prevention project4. Continually hold the health improvement program and cancer screening programs

C e r t i f i c a t e o f R e c o g n i z a t i o n : Disaster prevention of confined operating area s h a r i n g s e m i n a r f r o m Occupational Safety and Health Administration, Ministry of Labor.

ESHIP

Safety in Operation

Environment Protection

Risk Management

Mental and Physical Health

Hygiene Management

● International Trends

● Energy Preservation and Carbon Reduction● Waste

Reduction● Loss and Prevention

Auditing●Risk Warnings● Business Continuity

Plan

●Psychological Counselling●Weight Loss Activity●Health Examination

●Accident Prevention● Construction

Management●Automatic Inspection

●Epidemic Prevention Planning●First Aid Training●Human Factors Prevention

Occupational Health and Safety｜ [Management approach of material issue]



ESH Educational Training

Educational training is the base of ESH management system for promoting and employing its practical operations. At intervals, Innolux holds training courses to equip employees with the general knowledge about safety and health, as well as professional knowledge and technical skills. The courses include environmental protection management, l o s s c o n t r o l m a n a g e m e n t , b u s i n e s s c o n t i n u i t y management, site and equipment safety, chemical hazards and prevention, fire management, occupational injury and illness prevention, and health seminars. A total of 337,181 people were trained in 3,063 sessions of ESH educational courses (including new staff trainings) held in 2016; on average each employee participated in over 5 ESH educational trainings per year.

4.1.1 Organization Design and Labor Participation

Organization Design and Labor Participation

Innolux has established an Environment Safety and Health Division operating under the direction of the President. The division is responsible for the operation of the ESH management system. Moreover, precautionary measures for loss control management and business continuity were devised as decision-making reference for managerial personnel. This encourages the practice of enterprise risk management (ERM).

Every quarter, an “ESH Committee Conference,” is convened for issues such as the objective progress, internal and external communication, performance measurement, and evaluation results to be discussed. In 2016, 777 labor representatives from the Taiwan site attended the meeting, accounting for about 38% of the committee members; 252 labor representatives from the China site attended the meeting, accounting for about 37% of the committee members.

3,063131,811240,000 245,441 277,858

493,601

337,181

6241,000

1,3461,609

1,999

Y2011 Y2012 Y2013 Y2014 Y2015 Y2016

Participants

ESH Educational Training |

Sessions

!

!Convene ESH Committee Conference

Tainan site Extinguishing trainings

Nanjing site Safety propaganda week




Vendor Management

I n n o l u x c a r e s a b o u t t h e s a f e t y o f c o n t r a c t o r s . Contractors’ awareness of ESH management is strengthened through regular bidirectional meetings and irregular construction safety training courses. For high-risk operations, contractors must work with Innolux on hazard identification, risk assessment/ analysis, and emergency response plans. In the event of any accidents, Innolux’s “ESH Accident Notification and Investigation System” is used in accident investigation and analysis, as well as the execution of correction and precautionary measures. In addition, ESH management department refers accidents occurred from other companies. After investigating and analyzing accident causes, we take actions to prevent from happening again. For example, set up safe operation procedure and safety range for loading and unloading Cargo. The 2016 Contractors’ rate of accidents was 0.23 (per 1 million hours of work), injury rate (IR, per 200,000 hours of work) was 0.05, the lost day rate (LDR) was139, and work-related fatalities rateNote was 0.02.

Note:：work-related fatalities rate: number of work-related fatalities x 200,000 hours of work / total hours of contractors’ work

Occupational Hazard Reduction

Innolux conducts accident management and general improvements through an e-system, which performs statistical analysis on occupational hazards and risks for employees and contractors. Intrinsic safety is strengthened by applying hazard source management to potential risks. To prevent the recurrence of accidents, a “Parallel Deployment system” was employed to various plants simultaneously.

The 2016 work-related fatalities was 0, Injury rate, (IR) was 0.09, and the lost day rate (LDR) was 1. The 2016 disabling injury frequency rate (FR) and disabling injury severity rate (SR) respectively increased 4.0% and 12.1% but Lost Workday Cases and Restrictive Workday Cases was decreased compared to 2015. Therefore, each plant promoted projects such as ergonomics risk assessment, hazard prevention, environment al and employee proposition for improvement, etc. Also, the weight for employee proposition to improvement projects and parallel deployment in the performance management mechanisms was enhanced to encourage employee to participate. In order to build a safe working environment, each plant was required to set up an annual goal and was given challenges regarding Lost Workday Cases and Restrictive Workday Cases in 2017.

Note: Workers who died of occupational injuries or illnesses during the period of employment by the organization in 2016.

Item/Year 2011 2012 2013 2014 2015 2016

workerNote 0 0 0 0 0 0

Work-related fatalities ｜

Note:：1. Data scope: full-time employees and contract employee2. FR: Disabling accidents per 1 million hours of work

(equation: number of disabling accidents x 1 million hours of work / total hours of work).

3. SR: The number of lost workdays due to accidental injuries per 1 million hours of work (equation: accumulated number of lost workdays due to accidental injuries x 1 million hours of work / total hours of work).

4. IR: The number of lost and restrictive workday cases per 200,000 hours of work (equation: number of lost workday cases and restrictive workday cases x 200,000 hours of work / total hours of work).

5. LDR: The number of lost workdays due to accidental injuries per 200,000 hours of work (equation: accumulated number of lost workdays due to accidental injuries x 200,000 hours of work / total hours of work).

6. Lost days count by calendar day, and doesn’t contain accidental and return day.

7. Those data doesn’t contain “adhesive bandage accident” which can be treated by oneself, and those which were not sure if it’s a real injury or not, which result to a preliminary examination by medical personnel to conclude he/she is uninjured.

Item Gender Taiwan China Corp.

Disabling Injury Frequency Rate

（FR)

Female 0.24 0.07

0.25

Male 0.39 0.26

Total 0.32 0.19

Disabling Injury Severity Rate（SR)

Female 6 1

7

Male 8 9

Total 7 7

Injury rate（IR）

Female 0.09 0.01

0.09

Male 0.21 0.07

Total 0.15 0.05

Lost day rate（LDR）

Female 1 0

1

Male 2 2

Total 1 1

2016 Occupational Hazards｜

FR and SR Trends for Occupational Hazards｜

0.49

0.26

0.18 0.21 0.23 0.25

Y2011 Y2012 Y2013 Y2014 Y2015 Y2016

5

43

5

6

7Disabling Injury Frequency Rate (FR)

Disabling Injury Severity Rate (SR)

Year 2011 2012 2013 2014 2015 2016

rate of accidents 0 0 0.21 0 0.35 0.23

• Vendors mean contractual workers with INX and work in INX management area, including labor outsourcing.

• Vendors’ rate of accidents = number of vendor injuries × 1,000,000/contractors’ total number of work hours.

• Data is from Taiwan site only.

Vendors’ rate of accidents｜



In 2014, Innolux completed the overall risk inventory for different sites and conducted subsequent analysis and classifications. Each site has to complete improvement and continuously set up annual KPI based on inventory results. In compliance with risk audit & improvement plans, INX implemented Subject Matter Audit, SMA) to further confirm implemented situation and workers’ execution ability in 2015. In 2016, Taiwan site continuously implemented SMA and SMA were carried out in China sites to manage risk. In response to Meinong earthquake impact on February 6th, INX re-cooperated with National Center for Research on Earthquake Engineering, National Cheng Kung University, National Chiao Tung University and National Kaohsiung First University of Science and Technology to develop projects for minimize the impact of earthquake to strengthen non – structural seismic capacity. It aimed to reduce loss, recovery period and business interruption impact caused by earthquake.

Business Continuity Management

Since the introduction of ISO 22301 business continuity management system in 2012, Innolux has identified potential weaknesses through business impact analysis (BIA) and risk assessment (RA). In the event of a major business crisis, company operation can be maintained in a shortage of resources.

2016 risk management promote key projects |

After Meinong earthquake, INX composed BCP Crisis Management Team immediately to restore production in the shortest period. In addition, INX implemented a series of projects to minimize the impact of earthquake.

Keep carrying out three thematic audits in 2015, including the firefighting systems’ automat ic checks, comprehens ive planning of fireproof/smoke proof areas, and gear and equipment safety, and expanded from Taiwan to Chain sites. Through systemic audit model, INX found potential risk in each plant to establish next direction of “Loss Prevention Management“.

In the event of Meinong earthquake on February 6th, INX not only established BCP Cr is is Management Team and restored manufacturing based on the practice previously, with the internal and external market and order status, INX also reviewed and revised our response process and BCP Guideline to strengthen the feasibility and coverage, and developed a reference for each plant to plan and implement BCP.

The project aimed to reduce the number of items that were found to be prone to risks. In 2016, competent departments and ESH units jointly discussed and implemented improvement measures to ful ly enhance al l aspects of r isk prevention.

Improvement Projects

Auditing Projects

Advanced Projects

Advanced Projects

4.1.2 Occupational Safety and Risk Management

INX invited domestic and foreign experts of earthquake protection to convene training courses.

Revised INX BCP Guideline

1. Project of Tools Seismic Resistance Inspection & Reinforced Brace PromotionEstablishing task forces to re-inspect the status of tools and optimize conditions assessment for reinforcement.

2. Project of Facilities & Systems ReinforcementTo improve ability against earthquake by parallel deployment, ex: Partition in clean room / Ceiling / Cable Tray.

3. Holding seismic precaution workshopInviting Fubon Insurance consultants, domestic & foreign scholars, field experts to provide training course. Such as Fire Piping & Non-Structural Seismic Protection Design, The Research of High-Tech Fabrication Seismic Protection Improve After 0206 Event.

4. Enacting The Taiwan Site Tools Seismic Anchored & Braced Safety StandardEnact safety rules according to existing equipment procurement standards and reference of the domestic earthquake standards, making specification of seismic support & strength (structure) of bolt design checklist.

5. Applying project of seismic protection improvement with government support: Counseling Seismic Retrofit of capacity in large-scale suspension production tools by the domestic experts and scholars.

Improve the Attributes of Risk

Prevention

Thematic Audit for Risk Prevention

BCP Guideline

Minimize the impact of

earthquake




Work round the clock

At 03:57 on 6 February 2016, an earthquake with the 6.4 magnitude struck the Meinong District of Kaohsiung and Innolux has experienced a huge “quake.” After the earthquake, many of Innolux employees were back to the company within a short time and the management held the emergency meeting to make crisis management. INX engineers and contractors work around the clock to repair the manufacturing machines and through effective collaboration and cooperation, the factory is restored within the shortest time.

Unfortunately, one of our employees passed away in this tragedy. To assist the suffered employees to rebuild their home, we immediately provide subsidies to 16 employees including one who passed away, employees who lost their families and those whose houses have been damaged totally or partially by the earthquake. Besides, we bring the fruit gift boxes and greeting cards to 17 employees who were with minor injuries at work. Besides, we also apply the insurance claims and provide psychological counseling for them to help them get back to normal life as soon as possible.Innolux indeed appreciates employees and contractors for their day-and-night restoration work. We transformed this earthquake crisis to a successful collaboration.

!

!

!

Command Team in the Emergency Meeting

Comfort greeting to the suffered employees in the Earthquake

Employees and Contractors in day-and-night Restore Work



4.2 Mental & Physical Wellness

Innolux is committed to building a Friendly Workplace Environment, maintaining the health and safety work environment and holding the mental and physical wellness activities. We provide the competitive salary, diverse employee benefits, and transparent communication charnels and employee life service programs including food, clothing, living condition, transportation and entertainment for employees.To decrease the turnover rate is the KPI of Friendly Workplace Environment performance. The 2016 turnover rate in China and Taiwan sites was 4.71% which is much lower than 13.65% in 2015.

Clubs creation

Innolux has a diverse selection of clubs to satisfy staff’s needs for activities. These clubs not only facilitate exercises, stress relief, and hobbies, but also enhance employees’ mental and physical wellness.In 2016, Taiwan site had a total of 40 clubs, while China site had 23 clubs. The clubs’ subsidies and resources created an energetic and joyful working environment.

Innolux cares about the mental and physical wellness of its employees. Hardware such as the Innolux Recreation Center and Tree Valley Recreation Center and various activities were provided to help employees release pressure. Taiwan site has employee welfare committees. It establishes various welfare systems, (E.g. meal subsidy/welfare allowance) organizes leisure activities, actively promotes employee clubs, helps employees maintain a healthy work-life balance and sets up a friendly employee benefits website to help employees take care a healthy work-life balance.China site provides comfortable accommodation, dining facilities and organizes health activities in the dormitory area, actively develops recreational activities. Employees get activity message with posters in the company.It offers transportation service for shopping or travels during major festivals and hol idays in the Ningbo and Foshan sites. Employees take care of health and convenience in non-working time.It sends employee souvenirs before Chinese New Year, provides subsidy and other life matters during Chinese New Year. (E.g. caring activities during Chinese New Year / New Year’s eve party, subsidy from the company)

2016 Diverse Clubs

Softball club won Miaoli County Year 2016 softball championships - Champion

O n S e p t e m b e r 2 5 t h , j o g g i n g c l u b participated in Tainan science park public welfare road race

Taiwan

Item Description

MaterialityHumans are the core of sustainable development. Innolux is committed to creating the employee-friendly working environment for over 60 thousand worldwide employees to strengthen the company coherence. We strive to decrease the employees’ complaints and turnover rate to upgrade corporate image.


Management

Maintain the health and safety work environment and offer the physical health and mental wellness activities. Provide the competitive salary package, a variety of employee benefits, transparent communication channels and the enhanced employee life service programs including the aspects of food, clothing, living condition, transportation and entertainment.Set performance Indicators to review the performance.

Medium-to- long

term strategyProvide the mental and physical wellness work environment.

2016 performance

• In Taiwan sites, we conduct the survey of “Friendly Workplace Environment” program to by find employees’ real needs. Employees’ feedback questions include female-friendly environment, nursery care, parenting services, allowance, bonus, employee loans, employee communication, employee cafeteria and transportation service, health improvement, decreased working hours and charity etc. The executed improvement reach 100% and the accepted rate is 96%.

• In China sites, we focused on the enhanced programs including food, clothing, living condition, transportation and entertainment and the turnover rate is magnificently decreased to 3.89% lower than that of 12.87% in 2015.

2017 promotion

• We will continually conduct the survey questionnaire to collect the employees’ opinions of the “Friendly Workplace Environment”, find out their real needs and study the related strategies.

• Enhance the employee life service programs including the aspects of food, clothing, living condition, transportation and entertainment.

Employee-friendly workplace｜ [Management approach of material issue]




NG

BFS

NJ

Star Dance Club Bicycle Club Parenthood Club

Love Club Mountaineering Club Fishing Club

Dance club Kendo Club Yoga Club

! ! !

2016 Diverse Clubs



Mental & Physical Wellness

Hand in hand-happiness of kite

In the childhood, my parents and I were running hand in hand with the wind in beautiful time of kite flying time. After painting the kite, outing hand in hand with children in the weekend, strolling along grassland, running with the wind. It is flying a kite into the sky, let happiness index like rising of the kite, everyone is more closely.

Activities Person-time

The golden monkey group, make spring new year - Spring Festival Gala 2,200

Spring Festival Fitness Challenge 350

"The most beautiful moment I touched " snapshot activity 6,150

"Create a group of heart, the Dragon Boat Festival was" parent-child activities 5,248

Civilized literacy promotion activities 13,152

"Children, a group of heart happy mid autumn festival" family day activities 230

Play basketball, youth basketball competition 2,680

Competitive green, shiny life - the sixth football game 2,300

Excellent staff and family travel activities 25

Full sprint activities done in one vigorous effort. 20,100

"The most beautiful moment I touched," the activities of taking photos at hand

To transfer the "cohesion, innovation and prosperity" concept, Ningbo plant initiated "The most beautiful moment I touched " snapshot activity to recording the people, scenes and incident of Innolux. Activities have been echoed with the collection of more than 600 pieces of works. After screening, evaluation team voted 60 pieces of work to enter the WeChat voting stage.

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Excellent staff and family travel activities

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Families Party 400

Happy mothers' party 900

Hand in hand-happiness of kite 2,900

Health/ Families workshop 141

Innolux sports season 5,081

Power of Life 32

Celebrating Christmas party Share happiness 1,200

Innolux sports class 478

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!

Power of Life

Sports season

!

Mid Autumn Festival

TW

NGB





Tree planting activities 130

"Warmth of a summer " family day activities 150

A drum for the "gas" full sprint activities 11,000

Welcome "double egg" activities 3,000

“Warmth of a summer" family day activities, happiness is so simple

At "Family Day" activity, children came to Mom and Dad work place, without slightest cautious. It was like they were back to their own another home. In order to let their families directly understand the work and the environment, a tour from the ecological green to AGV, Lobby, Show Room to TED was arranged to let a beautiful convergence of the attractions, so that everyone is overjoyed. Children expressed the feelings of visiting the factory, bringing extraordinary feelings, the children happy to expect the next family day activities ~


Arbor Day activity 150

The Lantern Festival activity 500

The Lantern Fest ival act iv ity care for women's health 800

The Graffiti activityColorful factory & enjoy life 200

The sports activity 850

The Dragon Boat Festival activity 450

GOGOGO Activity 600

< Colorful, Enjoy life, Better life

Scorching summer, do you feel cool and refreshing if there is more bright beautiful color in factory?My place; My rules. Everybody showed their skills and imagination, the sewers become to the window with beautiful curtain and dolphin which swimming in the sea. The beautiful pictures make you feel cool just like the cool seawater spray into your face. You can participate in, and also can get award through selection.I will give my power to make our factory more beautiful.


Relax‧Close to Nature 80

Family Tour in May 80

Love May day ‧Happy Dragon Boat Festival 75

Calibrate the National Day‧Mid-Autumn Festival 600

Clever female competition 20

At one fling‧ GOGOGO 3,000

Happy Spring Festival‧Warm into the heart‧Employee with disability Spring Celebration Spring Celebration

20

!

!

< Relax‧Close to Nature

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Employee with disability Spring Celebration>

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!

The Dragon Boat Festival activity>

!<The sports activity

FS

NJ

SH



4.3 Initiative on Social Care

Innolux integrates corporate social responsibilities into operation strategy to realize sustainable management. In social area, the focus falls into minority care and charity. With reference to LBG (London Benchmark Group) model, the social input is quantified as a reference of deciding social investment.In 2016, charity donation accounted for 97.15% of input ($1,035,559) while commercial promotion made up the rest 4.55% ($48,500). In 2017, the help to minority, land and individual farmers will be continued.

Type of contribution Amount (TWD)

Cash 857,355

TimeNote1 15,280

In-kind 134,325

Management cost 58,870

Total 1,065,830

Note1: Time contribution: quantified amount for contribution made during working hours or paid service time.

2016 Social charity

Input

4.3.1 Participation in Charity Services

Note2: Including volunteering during working hours/paid hours, and after-work.

The total time contribution by employees Note2 315 hr

Farmers market

Considering the huge spending power of Innolux’s 35,000 employees, monthly farmers market was held from April 2016 to support local minority farmers via direct spending rather than donation. Farmers sold their own crops at the company facility personally or through agency. By the end of 2016, a total of revenue of 205,000 was made for 21 minority farmers and reciprocal benefits were brought to farmers, employees and environment.

Since 2009, Innolux has worked with Taiwan Fund for Children and Families (TFCF) and FamilyMart to set up FamilyMart-TFCF Convenient Stores and Dream & Love stores in the facility. Single-parent, college students, high-school students, and other underprivileged youth are offered with job opportunities to maintain a stable income. In 2016, a total of 19 job opportunities were offered. Employees could also support the minority group through daily spending.

Helping the underprivileged group

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Community participation and social care｜ [Management approach of material issue]




Month of Love and Care

Long term welfare activities

In the 2nd Month of Love and Care activity of Tainan Science Park, fund-raising booths were set up at across Tainan facilities to help support the medical service for underprivileged families in Tainan. A total of $134,000 was raised.

In order to warm up the cold winter, more than 30 loving colleagues in Ningbo site were led by site president Guo Guoxiang, chief director Chen Junyan and other executive management, to pay their third visit to the welfare party for 90 elderly to provide them a group birthday party, free haircut, courtesy gift and wonderful talent show to share with them the warmth of home. In the Mid Autumn Festival, Innolux also brought moon cakes to visit the 90 elderly together with the supervisors from Ningbo free trade zone.

Nanjing‧Christmas activity at Ting-Ting Kindergarten for Hearing-Impaired Children

Christmas warms winter, Innolux delivery love. This year, we celebrated Christmas Eve with the children of Ting-ting kindergartens together.with 50 volunteers played games with the kids happily and brought gifts to them, they were dancing and singing. Everybody was happy. The Condolences is short, but our love is resident. Corporate social responsibility is a long way, so we must be persevere!

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Integrating Academic Knowledge and Industrial Practice

Innolux jointly cultivate professional talents in R&D, collaboration with National Chiao Tung University commencement in 2016 , taught through lectures and concerted manner, the optoelectronics industry professional laid the foundation for students in advance and future career direction. In 2016, the company currently collaborates with Southern Taiwan University of Science and Technology, Kun Shan University, and Kao Yuan University to conduct Industry-University projects. The projects counselled 65 interns and offered employment to 56 outstanding technical talents; the employment rate was about 86%,and get the Ministry of Economic Affairs ”industrial engineer” program benefits 2.164 million dollars.

4.3.2 Educational Empowerment

Innolux Academy

Innolux is committed to enhancing humans’ extreme visual enjoyment, as well as R&D talent recruitment and cultivation. It is dedicated to become an innovative leader for upgraded panel module automation. Collaborating with numerous technical universities in Taiwan to conduct talent cultivation, Innolux established the “Innolux Academy” to provide practical internship opportunities in the enterprise for 4 consecutive years. Moreover, it employed 15 professional lecturers to jointly plan and set up 14 practical courses, as well as provide machine equipment. Professional talents in R&D are cultivated through persistent practical courses and internship projects. Thus, the industry and academia can be seamlessly integrated to help students learn from internship and obtain employment after graduation.

2016 Minority care activities of Innolux Charity Club

Fund raising for employees in needCharity sales booth

Innolux volunteers visiting Holy Family for Special Education

Charity visit at MiaoliTFCF



4.4 Living

4.4.1 Health Risk ManagementHealth Risk Management

The health management system provides cautions and information. T h e m e t h o d o f h e a l t h r i s k analysis was constructed based o n O H S A S 1 8 0 0 1 a n d T O S H M S management system, as well as based on references to resources from the World Health Organization (WHO), international literature and case studies. Thus, the health risks of a particular operation can be assessed. This not only enhanced the concept of autonomous health care, but also introduced health factors into operational risk identification, and increased the awareness of hazard prevention.

Innolux identifies the hazards of workplaces based on the laws and conducts prevention measures, i n c l u d i n g e d u c a t i o n , r e g u l a r walk-through and observation, e n v i r o n m e n t m o n i t o r , r e g u l a r physical examination, as well as hazard control. The occupational disease rate (ODR) in 2016 was zero.

Site Hazard item Operation description

Taiwan

Ionizing Radiation Operation, maintenance, and sample testing of X-ray machine

NoiseInspection or equipment maintenance in the noise areas of water management, air conditioning, electrical equipment, and operation machine

Indium ITO target grinding and dust cleaning

China

X-ray Operation of X-ray machine

Heat Machine maintenance

NoiseCutting, loading and unloading, machine maintenance; inspection or equipment maintenance in the noise areas of water management, air conditioning, and electrical equipment.

Ultraviolet UV machine and sealing operations

Dust Cutting, abrasive grinding, grinding machines, and etc.

Chemical Note Chemical dispensing, gluing, welding, etc.

Hazard Table of INX

Note: N-heptane, isopropanol, acetone, ethyl acetate, tin dioxide, etc.

Management of Maternal Health Risks

1. Collaborated with the Ministry of Labor and implemented parental leave allowance, enhanced tocolysis leave, and strengthened rights for family care leave. Relevant protection measures were also employed. In reference to the “Guidelines for Maternal Health Care in a Workplace” published by the Ministry of Labor, female employees who return to work within a year after pregnancy and childbirth will undergo health risk assessment, hazard control, risk communication, and their responsibilities may also be adjusted as necessary.

2. Provided health guidance on pregnancy and lactation to pregnant employees, as well as provided a break room and breast milk pump room for them. Thus, Innolux created a female-friendly workplace that considered both maternal protection and workplace equality.

Note: n = the number of cases of work-related illness; “million work h” denotes the total number of workhours (in millions) during the year.

Item Y2011 Y2012 Y2013 Y2014 Y2015 Y2016

Cases of work-related illness 0 0 0 1 0 0

Occupational Illness Frequency Rate Note 0 0 0 0.0039 0 0

Occupational Illness｜

Maternal health care activities

In recent years, the government has issued quite a few laws and regulations to ensure the well -being and protection of female employees. The “Occupational Safety and Health Act” clearly s t a t e s t h a t e m p l o y e r s s h o u l d consider the influences of gender differences and pregnancy on health risks, and implement the necessary maternal health care activities and management. Innolux adopted the following measures for maternal health care.

I n n o l u x g e n u i n e l y c a r e s f o r i t s employees, from preventive health c a r e t o t h e i r d a i l y l i v e s . I t a l s o continues to improve and develop new management systems for employees with disabilities.

SportsCulture

SafetyCulture

FoodCulture

InnoluxHealth Culture

Autonomoushealth

management culture




Health Culture Shaping

As Innolux is concerned about the health of its employees, the Taiwan sites continued the “Innolux’s Health Culture Year” in 2016. In addition to including a “limitless supply of organic vegetables” in staff meals and introducing “weekly red-meat-free day,” other numerous health promotion activities such as “health week” were also implemented. Continuously, Innolux promotes a sports culture by providing high quality sports and recreation centers such as Jhunan Recreation Center and Tree Valley Recreation Center for employees to exercise. The company encourages employees to value personal health and actively promotes the “Innolux’s Health Culture among partners.

Health Promotion and Examination

Innolux provides the health promotion activities for our staff’ health management and promotion, including body weight management, health lectures, and health screening program. Approximately 29,000 and 39,000 employees in Taiwan and China sites participated in annual health examination in 2016 respectively. The participation rate was close to 100%. In addition to the employees, the company also cares about the employees’ families. Innolux simultaneously offers health examinations for the family members and expanded the value of health management to family life. Moreover, Innolux held oral, colon, breast, and liver cancer screening program for early detection and treatment. A total of 22,573 employees participated in these health promotion and cancer screening programs.

Site Special HealthInspection

No. of Participants

Taiwan

Gynecological Cancer 444

Abdominal Ultrasound 515

Colon Cancer (FOBT) 20,074

Oral Cancer 536

China

O c c u p a t i o n a l H a z a r d -Prone Positions 5,368

Young Workers 1,356

Free Clinic 383

2016 Health Promotion Activities｜

2016 Health Prom

otion Activities

Taiwan Site

Gynecological Cancer Screening (Pep smear/Breast sonography/Gynecological sonography)

Foshan Site

Free Clinic of medical, surgical, gynecological, oral, rehabilitation, Chinese medical specialists.

Shanghai Site

Weight loss competition.

Foshan Site

Healthy diet program

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4.4.2 Daily Life

Catering service 2016 New Sensation

Taiwan plant hosted "around the earth best gourmet" activities, and also sponsored irregular snack food sale to bring employees the little happiness by food; Ningbo plant launched special dishes twice a month and adopted the We-Chat convenient service to co-worker; Foshan plant optimized the environment by overall renovation of dining room, while the Shanghai plant had the concept of adding some extra dish during the holiday festive day to create a warm atmosphere of the festival; Nanjing plant restaurant leisure businesses provided western-style snacks, freshly ground coffee, all kinds of snacks and other rich and diverse choices widely acclaimed by the people.

Food security strict checks

Ningbo plant quarterly audit the sources of supplier’s food ingredients; Nanjing plant then required restaurant to do the inspection on vegetable using agricultural chemicals, meat product must have quarantine inspection certificate for selling the foods. Shanghai plant prohibited off-grade quality food, and poultry and related food to enter during the time of epidemic. Foshan factory built a sunshine kitchen to make food security visible.

Innolux with warmness heart

Taiwan plant1. shops serviceThere is a convenience store in the factory providing drinks with discount.Drinks: variety drinks, light meals and pastries, conference lunch box ... and other services.2. Factory serviceProvide bank, insurance, discount stub, factory physician non-scheduled service and plant official trip, ATM self-service.3. There is free massage service in the factory

Foshan plantFoshan plant utilized the idle terminal to transform it into Sisduo supermarkets. A convenient worker plaza was established. Sisduo supermarket was welcomed with a great turnover on the day of launching.

Transportation Service

Ningbo provided exclusive service car to the disabled colleagues for their on/off work, giving concern and love for the disabled, and deliver the warmness of the company's. 2016 Ningbo site established accommodation bus system by installing CCTV in the dormitory area, factory, and waiting area to enable colleagues to view the vehicle timetable for actual departure/arrival time; also completed the APP on-line easy access for traffic condition. While the Shanghai plant rebuilt the vacant space, in addition of motorcycles and bicycle parking spaces, related to quality and congestion of the transportation satisfaction.

Dormitory service

2016 Ningbo plant expansed per capita accommodation area, the accommodation of direct labor was upgraded from 6 persons a room to 4 persons a room, indirect labor from 4 persons a room to 2 persons a room to live more comfortably. Foshan factory promoted apartments for single and buddy-sharing room. In the dormitory entrance there had a delivery express storage box for convenient express receipt. And Nanjing had the additional outdoor leisure square and outdoor fitness equipment to provide a comfortable environment. Taiwan factory dormitory had multi-purpose hall, magazine reading room, pantry, coin-operated laundry room, large clothe drying room, personal mailbox, digital access control, taxi call service, mail/package and other services.

Ningbo

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!

! !Foshan

Shanghai

Foshan

Taiwan Site

FoshanSite

Foshan




4.4.3 Disability Care

TW FSNGB NJ SH

Disabilty employment rate by site｜

Workplace Introduction Scheme for Student with Disabilities by Tainan City GovernmentTo assist the disabled students in Tainan to realize employment direction, Innolux responded to “Corporation workplace exploration” project that was held on Nov. 2016 by the Labor Affairs Bureau of Tainan city Government. The Labor Affairs Bureau invited around 40 disabled students from the Affiliated Hearing Impaired School of National University of Tainan, the Chia Nan University of Pharmacy＆Science, the Tainan University of Technology, the Southern Taiwan University of Science and Technology, and the Taiwan Shoufu University to Innolux for experiencing practical workplace.Innolux elaborately arranged various presentations for types of occupation, job skills, fundamental principles, industry trends, employment attitude corporation values and correct workplace concepts. Moreover, Innolux reached three disabled employees to share their experience and self-identity in working worth with positive inspiration in order to provide more useful awareness of job market for the students.The Chief of Labor Affairs Bureau, Mr. Wang Shin-Gi, also came to express his gratitude toward Innolux. He mentioned that this action was a beginning and hoped to assist disabled students seamless transition from school to workplace by initiating such action with excellent corporation.

Promotion of disability employmentInnolux has established “ Disability-Friendly Workplace Working Group” administrated by CSR Committee in 2016. The working group comprises function departments, such as HR, Manufacturing, Administrative, ESH and CSR etc…to support and promote various disability-friendly workplace matters.

In 2016, the target accession rate was 1% for Taiwan site, 1.5% for Ningbo, Foshan and Nanjing site and 1.6% for Shanghai site respectively and all plants performed well.A total of 946 employees with disability were hired in 2016, the accession rate is 1.46%. In early 2013, Innolux deployed Taiwan’s success to China sites. The accession rate in Nanjing site achieves 2.2% which is far superior to the 1.5 % accession rate regulated by local law and was recognized by Nanjing Disabled Persons’ Foundation as “ the Outstanding Corporation in Disable Employment”; the Foshan plant was also promoted as “ Disabled Employment Demonstration Base in Guangdong Province”. The number of employees with disability in Shanghai plant continuously increased to 16 persons in 2016 ; the staff in Ningbo site made every efforts from hardware to software in factory and dormitory to meet disabled employees’ needs and held several disability care activities. In 2016, the China sites’ disability employment was 541 employees. Moreover, all of the plants in Ningbo, Foshan and Nanjing achieved outstanding performance as they exceeded the 1.5 % accession rate regulated by local laws.

Based on “Disability Job Redesign Implementation Plan” project, Innolux proposed applications for LED scrolling display and sign language interpretation and obtained allowances from the Labor Affairs Bureau of Tainan city Government and the Workforce Development Agency, Ministry of Labor. These assist devices are to aid impaired hearing employees to realize internal important circulation, to improve operation security and to accelerate to adapt new missions when job assignments change.In 2017, the target is to continuously improve disability employment as the accession rate is 1.2% for Taiwan site, 1.5% for Ningbo, Foshan and Nanjing site and 1.6% for Shanghai site respectively.

Item Description

MaterialityTo compliance the protection regulations for disability by local laws and to promote disability employment; integrate “social responsibility” and “business strategy” to have a positive effect on society.


ManagementMake efforts to enhance from hardware to software in factory and dormitory and hold disability care activities and platform to highly meet disability needs and establish a working group to deeper disability employment.

Me d ium-to- long term strategy Create a disability-friendly workplace to promote disability employment.

2016 performance

Meet the accession rate by local raw: The actual 2016 accession rate was 1.17% in Taiwan site overachieved than target 1%; was 1.64% in Ningbo site overachieved than target 1.5%; was 1.76% in Foshan site overachieved than target 1.5% ; was 2.22% in Nanjing site overachieved than target 1.5%; was 0.73% in Shanghai site underachieved than target 1.6%.

2017 promotionContinuously promote disability employment and implement projects for job-skill improvement of current disabled employees. The 2017 target accession rate is 1.2% for Taiwan site, 1.5% for Ningbo, Foshan and Nanjing site and 1.6% for Shanghai site respectively.

Disability Employeement｜ [Management approach of material issue]

Y2013 Y2014 Y2015 Y2016

1.23

1.21 1.20 1.1 70.74

1.54

1.901.76

0.33

0.61

1.48

2.22

0.34 0.54

1.761.64

0.20 0.19

0.610.73



4.5 Employee-friendly Workplace

In 2016 , Innolux Corporation had 34 ,430 employees in Taiwan, 30,599 in China, and 265 in other countries, which made the number of employees 65,294 globally. The yearly event, “InnoStar”, was held continuously in 2016 in order to obtain superior talents with “STAR” personality traits. S stands for speed, as the process engineers with high efficiency; T stands for technology, which is the R&D engineers that develop advanced technology; A as ambition, since ambitious talents with global mobility are always our target in recruiting; and R stands for remarkable people, which is the potential students on campus, and they are also the reason that driven Innolux to keep promoting our industry cooperation with local universities.

Internal Talent Circulation

Innolux established an internal recruitment platform as a mediator for supervisors to search for the internal talents actively and smoothly, and for those who are seeking for transferring opportunities to find their ideal jobs. With specific HR contact windows providing job counseling, the mediating time for supervisors and internal talents is shortened, and also facilitates the circulation of internal talent and provides employees with more diverse opportunities for learning and development.

External Talent Attraction

Innolux also designs a variety of recruitment activities for different groups. In 2016, recruitment activities were held in various schools including National Taiwan University, National Cheng Kung University, National Tsing Hua University, and National Chiao Tung University. By proactively attracting external talent, nearly 3,000 resumes were collected. There are also jobs open for minorities and disabled. Besides, by coordinating with the military service system with the government, around 40 employees were hired by Innolux to serve their military substitute service as R&D engineers.In 2017, Innolux would keep promoting our vision in local universities, and appear as a young company full of vitality. In order to attract new graduates from school, Innolux carries on planning industry cooperation, military substitute service engineers’ recruitment, scholarship program, and summer vacation internship.A total of 2,400 new-hiring are expected in 2017, and there will also be “InnoStar”, the recruitment activity, hold in National Taiwan University, National Cheng Kung University, National Tsing Hua University, and National Chiao Tung University to hunt for 100 potential talents by providing scholarship and intern opportunities for excellent graduate and Ph. D students in top ranking universities in Taiwan.

4.5.1 Recruitment and Staffing

Item Description

Materiality Complete human resource planning to ensure the company enables to obtain proper, adequate and qualified personnel.


Management

External talent: by school recruitment activities, industry-academia collaboration, Research and Development Alternative Services match finding, scholarship projects social-media website;Internal talent: by facilitating the circulation of internal talent and providing more diverse opportunity for learning and development to set up as a measure to achieve Innolux’s philosophy of talent retention.


Recruit the talents who possess the qualities of S.T.A.R, Speed-talents for high-efficiency innovation process, Technology- talents for advanced R&D technology; Ambition-talents for quick global mobility; Remarkable People-talents for school fresh prospects.

2016 performance

Satisfy the company’s need for talent recruitment，follow InnoStar’s objectives and continue to promote industry-academia collaboration and school cultivation projects. By a series of top school recruiting activities and promotions，Innolux successfully recruited 459 indirect labors in 2016。Besides, implement internal recruitment platform effectively to find matches for immediate job openings to achieve talent retention and diverse development.

2017 promotion

Continue to attract talents by school cultivation，industry-academia collaboration Research，Development Alternative Services recruitment and scholarship projects etc and to process internal recruitment platform effectively to achieve talent retention and diverse development. In 2017, Innolux expands recruitment to 400 R&D engineers and 2000 first-line technicians, including 100 talented and innovative graduates.

In Foshan site, Innolux focused on expanding recruitment channels by holding various recruitment activities in order to raise the percentage of employees recruit by company which was 34% in 2016.

Innolux kept promoting our industry cooperation programs with local universities in Taiwan site. There are programs such as campus recruitment activities, military substitute service engineers’ recruitment, and scholarship program. 40% of the employees hired in 2016 graduated from top ranking universities in Taiwan.

Innolux took part in recruitment activities held by government and schools in Shanghai site, and also carry out programs to encourage current employees to pass on the recruitment information to friends and family.

Talent attraction & retention｜ [Management approach of material issue]




Respect for Human Rights

Innolux’s goal is to employ qualified personnel to facilitate the overall business performance. The company cares about diversity and equal opportunities. Innolux does not tolerate employment discrimination based on race, skin color, age, gender, sexual orientation, ethnicity, disability, pregnancy, religion, political affiliation, union membership, and marital status or otherwise. Having a respect for human rights is a universal value. Innolux supports and respects local labor laws and interna-tional labor rights regulations including standards stipulated by the Universal Declaration of Human Rights and the Internation-al Labor Organization. In addition, Innolux references the United Nation’s Guiding Principles on Business and Human Rights to conduct labor and human rights management.

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The Administration Office of Southern Taiwan Science Park, Ministry of Science and Technology invited the companies of the Park to nominate outstanding employees to award their contribution to the industry. In 2016, a total of 19 Innolux employees won the recognition.They are the anonymous heroes of Innolux who devoted themselves in their position with a kind heart. Their achievements are based on their dedication to fulfilling every challenge at work. They are regarded as the realization and the role model of a sharing by Honorable Chairman Tuan in the management meeting “Mistake is better than indifference”.

Step1 ESTABLISHING POLICY

Innolux’s code of conduct: Respecting human • rights is a universal value. When facing em-ployees, clients, and suppliers from around the world, the UN Global Compact should be refer-enced. Thus, all should be treated with equality and individual differences must be treated with respect.Innolux requires suppliers to practice CSR and • abide by regulations on labor and human rights stated in EICC.

Step2 ASSESSING IMPACT

Internal CSR auditing is conducted each year, • covering all aspects of labor human rights. Any violations detected are immediately corrected.Assessments on labor human rights law identi-• fication and legal risks are conducted to ensure that relevant laws and regulations are com-plied. Suppliers that show a medium- to high-risk in • risk assessments are further audited on items such as labor human rights.

Step3 TAKING ACTION

Staff is required to take labor- and human • rights-related training.A hotline and inbox are provided for employees • to discuss human rights issues. Relevant indicators are established and the CSR • Committee regularly supervises labor condi-tions and human rights performance such as ensuring reasonable work hours and disability employment.

Step4 REPORTING PROGRESS

Annual RCS reports on corporate labor condi-• tions and human rights indicators are pub-lished.Innolux’s ideals and objectives for labor hu-• man rights are disseminated through the pro-cess of supplier auditing.

Innolux’s Labor and Human Rights Management

Outstanding Employee



Item

Y2012 Y2013 Y2014 Y2015 Y2016

No. of staff

Percent-

age

No. of staff

Percent-

age

No. of staff

Percent-

age

No. of staff

Percent-

age

No. of staff

Percent-

age

TaiwanDisability 329 1.22% 382 1.24% 436 1.20% 423 1.20% 405 1.18%

ForeignersNote1 44 0.16% 51 0.17% 50 0.14% 37 0.10% 32 0.09%

China

Disability 17 0.03% 190 0.31% 502 0.80% 736 1.64% 541 1.76%

Racial MinorityNote2 2,468 3.81% 2,999 4.77% 3,849 6.05% 2,197 4.92% 2,034 6.60%

ForeignersNote3 4 0.006% 3 0.005% 2 0.003% 0 0 0 0

Workforce Diversity｜

Note1: Foreigners are employees without Taiwanese citizenship working in Taiwan.Note2: Racial minority are ethnic groups are non-Han Chinese employees in People’s Republic of China. Note3: Foreigners are non-domestic nationals working full-time in People’s Republic of China.

Protection of Foreign Workers’ Rights

The foreign laborer management at Innolux follows the Electronic Industry Code of Conduct (EICC CoC), government regulations, and customer requirements, which safeguards their labor conditions and human rights. Brokers’ recruitment and management practices are strictly examined. For example:1. Foreign workers’ dorms must comply with regulations as stated in the Foreign Worker Living Care Plan including

environmental regulations.2. Legitimate agency fees, service charges, and other costs paid by foreign workers must comply with regulations.3. Personal documents, such as passport, should be kept by foreign workers themselves.4. Trainings were implemented for new talents in order for foreign workers to fully understand the work environment and

job duties.5. Seminars are held regularly and complaints channels are offered both at dorm and working area for foreign employees to

freely express their will. 6. The labor agencies are irregularly audited and evaluated yearly to enhance the quality of workers’ daily care and

management. Inspections are conducted randomly to ensure that the environment is safe and clean so that the quality of life and belongingness of foreign worker could be improved.

Employment Type｜

ItemFull-time Part-time

Contract( including for-eign workers)

Commissioned InternsTotal

Female Male Female Male Female Male Female Male Female Male

No. of staff 10,202 16,740 0 0 6,255 1,233 0 0 0 0 34,430

Total 26,942 0 7,488 0 0 34,430

% of total staff 78.25% 0 21.75% 0 0 100%

ItemFull-time Part-time Commissioned Interns

TotalFemale Male Female Male Female Male Female Male

No. of staff

NGB 3,934 9,182 0 0 0 0 0 0 13,116

FS 3,092 7,450 0 0 0 0 0 0 10,542

NJ 1,810 2,702 0 0 0 0 0 0 4,512

SH 1,664 765 0 0 0 0 0 0 2,429

Total 30,599 0 0 0 30,599

% of total staff 100% 0 0 0 100%

2016 Taiwan site

2016 China site




2016 Workforce Structure｜

Site Item

Management Note1

SpecialistAdmin-

istration Staff

Technician Total Percentage of Local Managers Note2Primary

Manage-ment

MiddleManage-

ment

High-End Manage-

ment

Taiwan

<30Female 1 0 0 416 128 6,085 6,630

99.94%

Male 2 0 0 1,396 29 3,261 4,688

30-50Female 202 14 0 948 821 7,778 9,763

Male 1,407 200 9 5,110 162 6,266 13,154

>50Female 5 1 0 10 3 45 64

Male 20 30 9 53 3 16 131

Total 1,637 245 18 7,933 1,146 23,451 34,430

Percentage 4.75% 0.71% 0.05% 23.04% 3.33% 68.11% 100%

China

<30Female 26 0 0 690 285 6,518 7,519

81.57%

Male 69 0 0 1,583 67 14,687 16,406

30-50Female 209 0 0 310 200 2,260 2,979

Male 420 0 0 848 75 2,330 3,673

>50Female 0 0 0 0 1 1 2

Male 2 0 0 1 4 13 20

Total 726 0 0 3,432 632 25,809 30,599

Percentage 2.37% 0 0 11.22% 2.07% 84.35% 100%

2016 Workforce Structure of New Employees ｜

Site Item<30 30-50 >50

TotalFemale Male Female Male Female Male

Taiwan

No. of new employees 2,019 1,224 729 711 1 4 4,688

Total employees - - - - - - 34,430

Percentage of new

employee Note1 5.86% 3.56% 2.12% 2.07% 0.003% 0.01% 13.62%

China

No. of new employees

NGB 1,292 3,660 143 241 0 0 5,336

FS 901 1,992 218 281 0 0 3,392

NJ 178 412 28 64 0 0 682

SH 339 172 165 9 0 0 685

Total 2,710 6,236 554 595 0 0 10,095

Total employees - - - - - - 30,599

Percentage of new

employee Note2 8.86% 20.38% 1.81% 1.94% 0 0 32.99%

Note1: Taiwan new employees ratio= (Taiwan number of new employees/Taiwan year-end number of total employees) X100%.Note2: China new employees ratio= (China number of new employees/ China year-end number of total employees) X100%.

•Above data were taken on December 31, 2016.•Note1: Local managers in the Taiwan site are assistant section/division managers or higher who hold Taiwanese citizenship; local managers in

the China site are Chinese nationals at a middle management (including primary management) level.•Note2: The definition of managers: Primary managers are defined as assistant managers or managers; high-end managers are those in charge of business or central units and above.



Retention Effort

During the interview stage, job description should be consistent with the real work content and should be clearly explained to the applicants. The interviewer should observe the mental condition of the applicant to avoid resignation due to unable to adapt to the work environment. Correctly disseminate the company information during job training to help new employees adapt to the job environment, show them the proper resign process, and also disseminate the influences of absenteeism. When employees send out resignation, Innolux show the care for employees through dismiss interview, and analyze the main factors of resign in order to raise the retention rate.Facing the wave of resignations in the sites in China during Chinese New Year 2016, Innolux implanted several retention programs including offering of bonus for those who volunteers to work on holidays, assisting employees with the transportation between work place and hometown, and providing additional meal during holidays. All those efforts resulted in the decline of turnover rate from 13.27% in 2015 to 4.46% in 2016.




Site Y2012 Y2013 Y2014 Y2015 Y2016

Taiwn 0.50% 0.57% 0.54% 0.40% 0.57%

China 12.23% 10.00% 11.65% 12.87% 3.89%

Total 12.73% 10.57% 12.19% 13.27% 4.46%

• Voluntary resignation: excluding the cases stipulated in article 11, proviso of article 13, article 14 and article 20 of Labor Standards Act.• Formula: Taiwan: monthly voluntary resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100%. China: monthly voluntary resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100%.

Site Y2012 Y2013 Y2014 Y2015 Y2016

Taiwan

<30 0.27% 0.32% 0.31% 0.24% 0.39%

30-50 0.24% 0.26% 0.24% 0.24% 0.40%

>50 <0.01% <0.01% <0.01% <0.01% <0.01%

China

<30 11.81% 9.92% 11.08% 11.75% 3.33%

30-50 0.44% 0.47% 0.88% 1.42% 0.59%

>50 <0.01% <0.01% <0.01% <0.01% <0.01%

Total 12.76% 10.97% 12.51% 13.65% 4.71%

Turnover Rate (by Gender)｜

Site Y2012 Y2013 Y2014 Y2015 Y2016

TaiwanFemale 0.20% 0.23% 0.21% 0.26% 0.42%

Male 0.31% 0.35% 0.34% 0.22% 0.37%

ChinaFemale 4.20% 3.27% 3.25% 9.94% 1.20%

Male 8.05% 7.11% 8.71% 3.23% 2.72%

Total 12.76% 10.97% 12.51% 13.65% 4.71%

• Turnover rate includes voluntary resignation• Formula: Taiwan: monthly resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100% China: monthly resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100%

ItemTW NGB FS NJ SH

Female Male Female Male Female Male Female Male Female Male

No. of absent days (a) 46,816 35,421 11,389 19,877 7,827 15,146 11,389 12,350 24,114 10,267

No. of working days (b)

3,696,574 3,937,818 1,077,802 2,512,923 820,974 2,109,006 655,612 966,350 474,063 221,784

Absence rate (a/b) 1.27% 0.90% 1.06% 0.79% 0.95% 0.72% 1.74% 1.28% 5.09% 4.63%

Absence rate (Total） 1.08% 0.87% 0.78% 1.46% 4.94%

Absence Rate｜

Voluntary Resignation Rate｜

Notes:1. The absence rate is the total number of absent days during the reported period/total number of working days * 100%.2. Total number of working days is the total number of actual working days during the year for indirect laborers or the number of expected

working days during that year for direct laborers.3. Total number of absent days is actual total number of sick leave days (including medical leave), calculated based on the HR system.4. The aforementioned types of leave included: paid or unpaid sick leave and work-related injury leave; menstrual leave and tocolysis leave

were not included.

Turnover Rate (by Age)｜

• Turnover rate includes voluntary resignation• Formula: Taiwan: monthly resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100% China: monthly resignation number/[( number of employees at the beginning of the month + number of employees at the end of the month)/2]*100%



4.5.2 Compensation and Benefits

Compensation and Benefits

Compensation and Benefits is an important issue in Innolux, we attach importance to the external competitiveness of salary and internal equity, planning the compensation of market competitiveness. In addition, annual salary raises and incentive bonuses are comprehensively p lanned and executed according to the company’s f inancial affairs, operat ion, and individual work performances. Stock compensations for mid-term and long-term employment are also planned to encourage and retain outstanding talents. Regularly convene labor meetings to discuss and enhance the communication and cooperation between employers and employees.

At Taiwan site, all the employees enjoy the benefits provided by the company, provided that a contractual agreement providing otherwise shall govern. Full time employee has extra benefit including festive bonuses, group insurance; planning and implementation of annual salary operations according to the operating conditions and personal performance. At China site, full-time employee and informal staff have the same benefits.

Wages: Regular salaries and premiums; Management: Section supervisors or above.

Site/Item Management Non-Management Total

Taiwan Female：Male 0.88:1 0.95:1 0.92:1

China Female：Male 0.96:1 0.96:1 0.96:1

Total Female：Male 0.92:1 0.96:1 0.94:1

The Wage Ratio ( Indirect Laborers)｜

The Wage Ratio of the Standard of the Basic Employee to the local minimum｜

Site TW NGB FS NJ SH

Ratio 1.64 1.45 1.71 1.63 1.35

Note: Basic Employee: Administration staff,Officer staff and Manufacturing staff( including engineer and operator ).

The overall difference in basic wage ratio between male and female employees based on job categories in 2016 was calculated to be less than 0.07. This small difference was analyzed to be a reflection of differences in the distribution of position levels and seniority. It was not caused by gender differences. The overall results showed that Innolux’s employee salaries do not vary due to gender differences.

Item Description

MaterialityIncomplete compensation system will make kernel talents scarce. Develop a compensation policy to consistently attract and retain excellent personnel and to raise working initiative and satisfy diverse requirements for employees.


ManagementInnolux maintains its overall compensation standards through domestic and international wage and benefits reports and compensation policy reviews ensure market-competitive rates is provided to attract and retain excellent talent.

M e d i u m - t o - l o n g term strategy Provide market-competitive wages and benefits.

2016 performance • 2016 Direct labor turnover rate: 6.02%，10.14% decrease compared to 2015.• 2016 Indirect labor turnover rate: 1.48%，0.29% decrease compared to 2015.

2017 promotion1. Continuously review wages and benefits; provide market-competitive packages to attract and

retain excellent talent.2. 2017 target for retention rate: Direct labor 95%, Indirect labor:98%

• External competit iveness: Regular ly p a r t i c i p a t e i n m a r k e t r e s e a r c h f o r compensation policies review

• Internal equity: The salaries are determined by the job duties, employees’ educational background, professional experience, and comparison with salary surveys in the labor market. The salaries do not differentiate in any way based on factors such as gender, age, race, nationality, and religion.

Compensation and Benefits｜ [Management approach of material issue]




Insurance Plan

Other than basic social insurance, labor, health insurance and labor pension, the employees of the Taiwan site are also covered by group insurance including life insurance, accident insurance, medical insurance and cancer risks from the company. There are also discounted self-paying insurance plans for their spouses, parents and children. The China sites also provide social insurance for their employees, which includes pension, medical, unemployment, work injury, and maternity coverage. In addition to the five insurance programs, China sites also provide employees’ business insurance, in order to provide greater indemnity to employees in the event of illness or accidents.

Work-Life Balance Program

• In order to maintain employees’ work-life balance, Taiwan sites operate their own paid-leave systems in accordance with local laws and regulations—including marriage leave, pregnancy checkup leave, maternity Leave, paternity Leave, bereavement leave, military leave, occupational sickness leave, official leave and annual leave. Employees may apply for leave based on their individual needs. This will help employees maintain a balance between work and life.

• The China sites operate their own paid-leave systems in accordance with local laws and regulations—including annual leave, marriage leave, bereavement leave, maternity Leave, pregnancy checkup leave. Employees may apply for leave based on their individual needs.

Complete Pension System and Employee Retirement Arrangements

All the full-time employees are involved in the retirement plan, regularly calculate by an external actuarial firm to check the labor pension fund. According to the actuarial result, the accumulated funds appropriated by the business entity are sufficient to pay labor pensions to the workers, and apply to the local competent authority for ratification to suspend appropriation of contributions to the labor pension reserve.

2016 Labor Pension Contribution Rates｜

Item TW NGB FS NJ SH

Employer

Contribution6% 14% 13% 19% 20%

Employee

Contribution0~6% 8% 8% 8% 8%

Note:• Taiwan site is calculated in accordance with the Labor

Standards Act, Labor Pension Act, and related laws and regulations.

• China sites in accordance with the Social Insurance Law of the People’s Republic of China and all local sites (provincial /municipal) Human Resources and Social Security, local taxation bureau and 2016 Social security payment base notice to handle and pay social insurance and housing provident fund.

TaiwanThe pension system for Taiwan sites is managed in accordance with the Labor Standards Act, Labor Pension Act, and related laws and regulations, to adequately protect the interests of the employees.

At China sites, social insurances and provident funds are paid in accordance with the local laws and regulations (pension, medical, unemployment, work injury, maternity) to help staff prepare for their retirement.

china

Taiwan Female Male Total

No. of employees eligible for parental leave without pay in 2016 1,840 2,687 4,527

No. of employees applied for parental leave without pay in 2016 608 109 717

A: No.of employees expected to return to work after parental leave without pay in 2016 536 96 632

B: No. of employees actually returned to work after parental leave without pay in 2016 341 60 401

C: No. of employees returned to work after parental leave without pay in 2014 and still working in 2016

218 29 247

D: No. of employees returned to work after parental leave without pay in 2015 306 43 349

Return rate %= B / A 63.6% 62.5% 63.4%

Retention rate % = C / D 71.2% 67.4% 70.7%

Analysis of Parental Leave in 2016｜

Parental leave

Every employee served more than half a year in Innolux with child less than 3 years old is qualified to applying for unpaid parental leave, but the leave is two years at most. When parenting two or more children at a same time, twins for example, the years of unpaid parental leave should combine and two-year is still the upper limit. After taking the leave, employees would be assigning to the original position or be guided to a new position.

The number of employees that qualified to apply for unpaid parental leave in 2016 was estimated based on the number of employees applied for maternity leave or paternity leave between 2014 and 2016.



4.5.3 Training and Development

Training and Development

In order to achieve the company's goal of technology promotion, continuously promote industry 4.0, small and medium-sized products improved, and advanced management ability, the training focused on professional certification and management training in 2016. To enhance the per capita output value of employees and strengthen the overall competitiveness of the organization, we continued to assist colleagues to develop through the improvement of certification mechanism, and then strengthened the company's overall research and development, production, quality and management capabilities.

We had the course for leaders in the factory to enhance the management behavior, and then enhanced the leadership capacity of nearly 6.1%. Besides, we provided practical courses based on needs to enhance the management capacity of nearly 6.3%. Based on their position, employees received their professional certification specification (quality department and production management department have carried out the plan). Moreover, the supervisors’ courses focused on "cross-functional communication and team consensus building", "6W3H2R system thinking", "successful br ief ing ski l ls", "project management" and "cross-functional communication” to improve communication ability and project processing capacity.

2016 Statistical Analysis on Training｜

Average Training Hours

Managers(Section and above) Indirect Labor Direct Labor

Female Male Female Male Female Male

TW 15.1 18.8 12.4 13.1 1.5 3.4

NGB 7.8 10.0 7.4 5.1 3.0 3.9

FS 13.1 14.4 6.9 9.6 27.1 24.6

NJ 23.9 32.7 15.7 16.0 4.6 5.9

SH 24.0 19.3 9.6 18.5 13.1 8.6

No. of people TW NGB FS NJ SH

Induction training 2,322 7,429 3,778 1,005 1,733

Management

training2,874 275 206 214 43

Lecturer training 29 6 120 63 11

Leader training 319 753 276 457 102

Training of policy 24,187 3,697 4,821 3.,151 535

Others 55,852 7,429 116,115 3,038 1,765

Personnel training｜ [Management approach of material issue]

Item Description

Materiality

Enhance the ability of R&D, production, quality and management for the company. A complete certification system enables to assist employees developing abilities to achieve quality and technology improvement, production-automated advancement, middle-small size product increase, executed power implementation and so on.


Management Establish stringent requirements on training and certification to cultivate sufficient and high-quality professional talent.

Medium-to- long term strategy Improve output value per capita and strengthen overall competition of the company.

2016 performance

• Conduct industry-academic collaboration with 3 schools: Southern Taiwan University of Science and Technology, Kun Shan University and Kao Yuan University. Counselled 65 intern students and offered employment to 56 outstanding talents; the employment rate was up to 86%.

• Fully transferred the execution courses for section managers in Taiwan site to all of the plants in China. Cultivated 13 China lecturers to reserve strengths of talent management in China sites.

• Conducted every level of courses for the first-line supervisors to enhance actions and concepts of management. Improved leadership ability of basic-level supervisors in factories by 6.1%.

• Occupation certifications were comprehensively promoted. Completely established different levels of professional courses.

2017 promotion

1. Positively promote different levels of management courses in great China area to build up management strengths.

2. Based on employees’position, occupation and specialty, promote “Position certification” and “Occupation position”to cultivate necessary professional talents for the company and to stimulate employees to strive for perfection.

3. Comprehensively promote quality certification courses to enhance quality design by a “Concept”, “Basic” and “Advanced” 3-phase certification.




Executive 4D-Conference

Performance Management and Development

It’s been 6 years to appraise employees’ performance in accordance with the regulation of “Performance Management and Development” since Innolux launched it in 2010. The aim of this mechanism is not only to make a connection to daily management records and stimulate Talent Review Committee execute their responsibilities objectively in performance appraisal in the end of the year, but also to reach the goal of talent identification and development by designing various difference incentives programs based on appraisal results. In 2016, 62,256 employees participated in the performance appraisals, 58% were male and about 42% were female. The ratio is in line with the proportion of male and female distribution and shows that Innolux makes full compliance with gender equality.

2016 Performance Appraisals｜

International Elite Training in Taiwan

In 2016, elites from overseas visited Taiwan for “Classes for Supervisor”, which emphasized the importance of training and practicing in order to cultivate the potential of talent management and professional ability. By this project, we expected that it could achieve the goals of the organization.

Department of MD Shipping Quality Engineering, Ningbo Site—NIEH CHAO CHEN

During the training, I learned the manager needed skills, experienced the differences between departments and the mode of operation in Tainan inspection center, as well as LCD front process. I could feel the enthusiasm of the headquarters colleagues, but recognized my own deficiencies at the same time (ex: lacked for decision on work and needed to strengthen coordination abilities). In short, this training benefited a lot, thanks to the company of the attention and training.

In 2016, the "4D-Conference" was held to discover the potential of speakers, develop their ability to span multiple environments, and provide a global strategy to be deployed by the speakers displaying their achievement. The total amount of participants was 6,363 and 134 speakers to display, and therefore it achieved the effect of exemplary learning.

Seed Lecturers Courses of Management training

In 2016, section-level courses on execution power with technical transfer were launched for the first time, and it was also the first time to arrange the Taiwan management consulting company to China Site for it. The total amount of China seed lecturers was 13, continuing to reserve management capacity.

!

D e p a r t m e n t o f E l e c t r o n i c s & O p t i c a l M a t e r i a l s Management, Nanjing Site—KUNG WEI FEN

T h e l e c t u r e r imparted lots of management skills, a n d t h e w a y o f teaching with the h a n d o u t s w e r e very attractive. The lecturer’s serious attitude had a great effect on everyone in the whole process in class. The meaning of technical transfer was that it could be used in the work of life.

ItemFe-

male Male

No. of persons

Percentageof total staff

Executive Management 0 20 20 0.03%

Middle Management 22 268 290 0.47%

Junior Management 583 2,366 2,949 4.74%

Professional Technician 1,425 2,279 3,704 5.95%

Others 24,055 31,238 55,293 88.82%

Total 26,085 36,171 62,256 100%

Performance review conducted against employees with tenure more than 3 months.



4.5.4 Zero Distance Communication

Employee Care

Innolux emphasizes harmonious labor relations and has established a specialized unit called “Employee Relations Division” to process employees’ complaints. In addition to convening quarterly labor-employer meetings and employee welfare meetings, full-range communication channels have also been constructed, including bidirectional channels “Employee Care Hotline 67885” and “Employee Care Mailbox [email protected]”.

We had also started up channels such as Help Hotline, Help desk, WeChat for company “communication interactive” and disabled care in our Foshan site in 2016.Nanjing site set up a service booth at the entrance of clean room to handle employees’ complaint, retention and administration at the front line. A total of 3,000 person-time were served and 942 persons were retained. The Ningbo site set the first WeChat interactive platform for the whole group of employees. Employees can react directly in the WeChat platform, such as checking the shift arrangement table,, class performance, meal fee and other information which provides promptly feedback. The per capita use rate of 1.5 times/person/day. And Beilun District, Ningbo City Federation of trade unions also vigorously promotes this platform. By improving the quality and quantity of the benefits Innolux provide, we hope our colleagues can all be happy at work.

Employment Relations

There were 269 cases of complaints about human rights in Taiwan and China sites, and 209 cases of complaints about working conditions. These complaints have been promptly replied and solved. The division cares about employees who filed the complaints, it not only tries to satisfy their reasonable demands, but also traces back to the source of the problem to reduce similar occurrences from happening in the future. For example, it occasionally launches leadership management and communication courses for factory’s management supervisors, which may guide supervisors in leading their teams with more humane management concepts.Cases of sexual harassment are reviewed by the “Sexual Harassment Complaints Committee,” which determines disciplinary penalties according to the severity of the scene. Innolux has dedicated numerous measures to protect employees from sexual harassment. In addition to regular trainings for new talents and factory line managers, and promotion in quarterly quality meetings, advocacy posters and computer startup screens are set up irregularly to convey workplace safety, channels for complaints regarding sexual harassment, and actual cases of sexual harassment. These help create a friendly workplace. There were 16 cases about “sexual harassment” in 2016, which have all been replied and solved.

2016 Statistical Analysis on Employee Complaints｜

Item

Taiwan China

Totalrecruitment

sexual

harassment

leadership

managementrecruitment

sexual

harassment

leadership

management

No. of Cases Reported 17 15 76 21 1 139 269

Percentage of Reported Cases Handled 100% 100% 100% 100% 100% 100% 100%

No. of Reported Cases Solved 17 15 76 21 1 139 269

Percentage of Reported Cases Solved 100% 100% 100% 100% 100% 100% 100%

Item

Taiwan China

Totalsalary and

leaves

health and

safety

labor management

complaints

salary and

leaves

health and

safety

labor management

complaints

No. of Cases Reported 33 12 8 109 47 0 209

Percentage of Reported Cases Handled 100% 100% 100% 100% 100% 100% 100%

No. of Reported Cases Solved 33 12 8 109 47 0 209

Percentage of Reported Cases Solved 100% 100% 100% 100% 100% 100% 100%

Human Rights

Working Condition




Diverse Communication Channels

Innolux values the employee and provides the fast communication platforms. Besides INX newsletters, computer boot screens and screensavers, “I Media” is launched in 2016 to make employees catch up company’s s i tuat ion. From company’s business direction, technology development trend to employees’ daily life, all topics can be filmed as video and broadcast to engineers and director labors. Besides, the newly-launched WingHR app makes it easy for employees to punch their attendance, check salary and attendance record online. As for the “Supervisor Meeting” quarterly held, the management can also ask and reply questions and review the meeting agenda immediately through INXpire APP to have an effective two-way communication. It is planned to launch the internal instant communication channel “iFB” in 2017 to allow employees not to miss any company interesting things.

i-media: diverse communication channels




Independent Assurance Opinion Statement


Appendices





GRI Content Index

GRI Standard Disclosure Chapter PageOmission

Type Remark

GRI 102:General Disclosures

2016

102-1 Name of the organization Innolux Company Overview• 5 - -

102-2 Activit ies, brands, products, and services Innolux Company Overview• 5 - -

102-3 Location of headquarters Innolux Company Overview• 5 - -

102-4 Location of operations Innolux Company Overview• 5 - -

102-5 Ownership and legal form Innolux Company Overview• 5 - -

102-6 Markets served Innolux Company Overview• Market Share•

529

- -

102-7 Scale of the organizationInnolux Company Overview• 2.1 Company Organization• 2.4.1 Financial Performances•

51931

- -

102-8 Information on employees and other workers

4.5.1 Recruitment and • Staffing 87 - -

102-9 Supply chain 2.5 Sustainable Supply Chain• 39 - -

102-10 Significant changes to the organization and its supply chain

No significant re-organization • for Innolux in 2016 - - -

102-11 Precautionary Principle or approach

Operate the company • according to The Rio Declaration: Principle 15 - the Precautionary Approach3.2.1 Climate Change • Mitigation and Adaption

49 - -

102-12 External initiatives

1.2 Corporate Social • Responsibility Materiality3.2.1.1 Climate Change • Mitigation and Adaption

1750

- -

102-13 Membership of associations 2.1 Corporate Organization• 19 - -

102-14 Statement from senior decision-maker Message from the Chairman• 4 - -

102-15 Key impacts, risks, and opportunities2.3 Risk Management• 1.2 Corporate Social • Responsibility Materiality

2817

- -

102-16 Values, principles, standards, and norms of behavior

2.2.1 Corporate Organization• 2.2.2 Business Ethics and • Internal Control2.2.3 Legal Compliance•

212426

- -

102-17 Mechanisms for advice and concerns about ethics

2.2.2 Business Ethics and • Internal Control4.5.4 Zero Distance • Communication

2495

- -

102-18 Governance structure

Corporate Social • Responsibility Operations and Performances2.2.1 Corporate Organization•

719

- -

Standards

102GRI

In accordance 2016 GRI Standards 101,102,103,200,300,400


Appendices



Type Remark

GRI 102:General Disclosures2016

102-19 Delegating authority

Corporate Social • Responsibility Operations and Performances2.2.1 Corporate Organization•

719

- -

102-20Executive-level responsibil ity for economic, environmental, and social topics

2.2.1 Corporate Organization• 19 - -

102-21 Consulting stakeholders on economic, environmental, and social topics

Corporate Social • Responsibility Operations and Performances2.2.1 • Corporate Organization

721 - -

102-22 Composition of the highest governance body and its committees

Corporate Social • Responsibility Operations and Performances2.2.1 • Corporate Organization

721

Data not accessible

No ESG specific criteria considered in the selection of board members

102-23 Chair of the highest governance body 2.2.1 • Corporate Organization 21 - -

102-24 Nominating and selecting the highest governance body 2.2.1 • Corporate Organization 21

Data not accessible

No diversity, independence, and ESG profession and experience specific criteria considered in the selection of board members

102-25 Conflicts of interest

2.2.1 • Corporate OrganizationPlease refer to P.30 of • 2016 annual report for more information of board operations

21 - -

102-26 Role of highest governance body in setting purpose, values, and strategy

Corporate Social • Responsibility Operations and Performances

7 - -

102-27 Collective knowledge of highest governance body 2.2.1 • Corporate Organization 21 - -

102-28 Evaluating the highest governance body’s performance -- -

Not applicable

No diversity policy and effectiveness evaluation for the board in place





Type Remark


102-29 Identifying and managing economic, environmental, and social impacts - -

Not applicable

The CSR management representative was Jyh-Chau Wang who was also the Chairman. However, CSR operation was not brought to discussion in the board meeting.

102-30 Effectiveness of risk management processes - -

Not applicable


102-31 Review of economic, environmental, and social topics - -

Not applicable


102-32 Highest governance body’s role in sustainability reporting

C S R r e por t w as r e v ie w e d • by the CSR Committee and approved by the President

- - -

102-33 Communicating critical concerns

Corporate Social Responsibility • Operations and Performances2.2.1Corporate Organization • (Audit Committee)The agenda of board meeting • was arranged according to t h e I n n o l u x’s R u l e s a n d Procedures for Meeting of the Board of Directors which was derived from Regulations Governing Procedure for Board of Directors Meetings of Public Companies

(http://www.innolux.com/Pages/TW/InvestorRelations/Corporate_Governance/Major_Internal_Policies_TW.html

721

- -


Appendices



Type Remark


102-34 Nature and total number of critical concerns

Corporate Social • Responsibility Operations and PerformancesPlease refer to the Market • Observation Post System for material information of Innolux (http://mops.twse.com.tw/mops/web/t05st01)

7 - -

102-35 Remuneration policies

Corporate Organization • (Remuneration Committee)CSR was not yet a • performance indicator in the remuneration policy

23 - -

102-36 Process for determining remuneration 2.2.1 Corporate Organization• 21 - -

102-37 Stakeholders’ involvement in remuneration

2.2.1 Corporate Organization • (Remuneration Committee)Remuneration Committee was • set up by law but stakeholders were not yet consulted against remuneration policy.

21 - -

102-38 Annual total compensation ratio 2.2.1 Corporate Organization• 21 - -

102-39 Percentage increase in annual total compensation ratio 2.2.1 Corporate Organization• 21 - -

102-40 List of stakeholder groups1.1 Stakeholder • Communication and Participation

13 - -

102-41 Collective bargaining agreements No labor union in place and so • collective agreement - - -

102-42 Identifying and selecting stakeholders1.1 Stakeholder • Communication and Participation

13 - -

102-43 Approach to stakeholder engagement1.1 Stakeholder • Communication and Participation

13 - -

102-44 Key topics and concerns raised1.1 Stakeholder • Communication and Participation

13 - -

102-45 Entities included in the consolidated financial statements 2.1 Corporate Organization• 19 - -

102-46 Defining report content and topic Boundaries

1.2 Corporate Social • Responsibility Materiality 19 - -

102-47 List of material topics 1.2 Corporate Social • Responsibility Materiality 19 - -

102-48 Restatements of information - - - -

102-49 Changes in reportingNo significant alterations has • been made to the scope o f disclosure.

- - -

102-50 Reporting period Editorial Principle• 2 - -

102-51 Date of most recent report Editorial Principle• 2 - -

102-52 Reporting cycle Editorial Principle• 2 - -

102-53 Contact point for questions regarding the report Editorial Principle• 2 - -

102-54 Claims of reporting in accordance with the GRI Standards Editorial Principle• 2 - -

102-55 GRI content index CONTENT INDEX• 101 - -

102-56 External assuranceEditorial Principle• Independent Assurance • Opinion Statement

299

- -





Type Remark

GRI 201:Economic Performance2016

201-1 Direct economic value generated and distributed

2.4.1 Financial Performances• Please refer to P.58 of 2016 • annual report for more information of capital and issue of shares.

- - -

201-2Financial implications and other risks and opportunities due to climate change

3.2.1.1 Climate Change • Mitigation and Adaption 49

Data not accessible

System to quantify to financial implications of climate change risk and opportunity is not yet available

201-3 Defined benefit plan obligations and other retirement plans

4.5.2 Compensation and • Benefits 93 - -

201-4 Financial assistance received from government 2.4.1 Financial Performances• 31 - -

GRI 202:Market Presence2016

202-1Ratios of standard entry level wage by gender compared to local minimum wage


202-2 Proportion of senior management hired from the local community 4.5.1 Recruitment and Staffing• 85 - -

GRI 203:Indirect Economic Impacts2016

203-1 Infrastructure investments and services supported

No relevant Infrastructure • investments or donation in 2016 - - -

203-2 Significant indirect economic impacts

2.3 Risk Management• 2.4.1 Financial Performances• 2.5 Sustainable Supply Chain• 4.5.1 Recruitment and Staffing•

26293987

- -

GRI 204:Procurement Practices2016

204-1 Proportion of spending on local suppliers

2.5.1 Supply Chain Risk • Management 39 - -

GRI 205:Anti-corruption2016

205-1 Operations assessed for risks related to corruption

2.2.3 Legal Compliance• CSR internal audit and supplier • SER audit were conduct according to EICC requirement and no significant risks was found in 2016

26 - -

205-2 Communication and training about anti-corruption policies and procedures

2.2.2 Business Ethics and • Internal Control 24 - -

205-3 Confirmed incidents of corruption and actions taken

2.2.2 Business Ethics and • Internal Control 24 - -

GRI 206:Anti-competitive Behavior2016

206-1Legal actions for anti-competitive behavior, anti-trust, and monopoly practices

Please refer to P.110 of • 2016 annual report for more information

- - -

Standards

200GRI


Appendices



Type Remark

GRI 301:Materials2016

301-1 Materials used by weight or volume

3.2.5 Environmental Material • Flow InformationNo renewable material used. • A total of 147.2 tons of non-renewable material used.

65 - -

301-2 Recycled input materials used - -Not applicable

-

301-3 Reclaimed products and their packaging materials

3.2.4 Pollution Control • and Environmental Impact Reduction (packaging material recycling)

61 - -

GRI 302:Energy2016

302-1 Energy consumption within the organization

3.2.5 Environmental Material • Flow Information 65 - -

302-2 Energy consumption outside of the organization - -

Data not accessible

No quantified data for energy consumption outside the organization

302-3 Energy intensity 3.2.5 Environmental Material • Flow Information 65 - -

302-4 Reduction of energy consumption 3.2.2 Environmental Material • Flow Information 53 - -

302-5 Reductions in energy requirements of products and services 3.3.2 Green Innovation• 68 - -

GRI 303:Water2016

303-1 Water withdrawal by source 3.2.5 Environmental Material • Flow Information 65 - -

303-2 Water sources significantly affected by withdrawal of water

No significant impact to the • water sources identified since the plants located at science parks

- - -

303-3 Water recycled and reused 3.2.5 Environmental Material • Flow Information 65 - -

GRI 305:Emissions2016

305-1 Direct (Scope 1) GHG emissions 3.2.1.2 Climate Change • Mitigation Management 51 - -

305-2 Energy indirect (Scope 2) GHG emissions

3.2.1.2 Climate Change • Mitigation Management 51 - -

305-3 Other indirect (Scope 3) GHG emissions 3.2.1.2 Climate Change • Mitigation Management 51 - -

305-4 GHG emissions intensity 3.2.1.2 Climate Change • Mitigation Management 51 - -

305-5 Reduction of GHG emissions 3.2.1.2 Climate Change • Mitigation Management 51 - -

305-6 Emissions of ozone-depleting substances (ODS)


305-7Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions


Standards

300GRI





Type Remark

GRI 306:Effluents and Waste2016

306-1 Water discharge by quality and destination

3.2.3 Water Resources • Management 57 - -

306-2 Waste by type and disposal method3.2.4 Pollution Control • and Environmental Impact Reduction

61 - -

306-3 Significant spills No significant spills in 2016• - - -

306-4 Transport of hazardous waste3.2.4 Pollution Control • and Environmental Impact Reduction

61 - -

306-5 Water bodies affected by water discharges and/or runoff

Innolux’s plants located • at science parks where wastewater was monitored by the administration office before discharge

- - -

GRI 307:Environmental Compliance2016

307-1 Non-compliance with environmental laws and regulations

3.2.4 Pollution Control • and Environmental Impact Reduction

61 - -

GRI 308:Supplier Environmental Assessment2016

308-1 New suppliers that were screened using environmental criteria


308-2 Negative environmental impacts in the supply chain and actions taken



Appendices



Type Remark

GRI 401:Employment2016

401-1 New employee hires and employee turnover 4.5.1 Recruitment and Staffing• 87 - -

401-2Benefits provided to full-time employees that are not provided to temporary or part-time employees

4.5.2 Compensation and • BenefitsThe compensation and benefits • between permanent and non-permanent employees are more or less the same

93 - -

401-3 Parental leave 4.5.2 Compensation and • Benefits 93 - -

GRI 402:Labor/Management Relations2016

402-1 Minimum notice periods regarding operational changes

Taiwan site legal compliance • reference: Article 16, Labor Standards Act, China site legal compliance reference: Article 26,27 and 30 of Labor Law

- - -

GRI 403:Occupational Health and Safety2016

403-1Workers representation in formal joint management–worker health and safety committees

4.1.1 Health and Safety • Strategies and Operations Management

73 - -

403-2

Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

4.1.1 Health and Safety • Strategies and Operations Management

73Data not accessible

Vendor injury data by gender was not disclosed for Taiwan and China sites owing to the lack of IT system management.

403-3Workers with high incidence or high risk of diseases related to their occupation

4.4.1 Health Management• 83 - -

403-4 Health and safety topics covered in formal agreements with trade unions

No labor union in place so no • collective agreement - - -

GRI 404:Training and Education2016

404-1 Average hours of training per year per employee 4.5.3 Training and Development• 95 - -

404-2Programs for upgrading employee skills and transition assistance programs

4.5.3 Training and Development• 95 - -

404-3Percentage of employees receiving regular performance and career development reviews

4.5.3 Training and Development• 95 - -

GRI 405:Diversity and Equal Opportunity2016

405-1 Diversity of governance bodies and employees 4.5.3 Training and Development• 95 - -

405-2 Ratio of basic salary and remuneration of women to men


GRI 406:Non-discrimination2016

406-1 Incidents of discrimination and corrective actions taken

4.5.4 Zero Distance • Communication 97 - -

GRI 407:Freedom of Association and Collective Bargaining2016

407-1Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk

CSR internal audit and supplier • SER audit were conduct according to EICC requirement and no significant risks was found in 2016

- - -

Standards

400GRI





Type Remark

GRI 408:Child Labor2016

408-1 Operations and suppliers at significant risk for incidents of child labor


- - -

GRI 409:Forced or Compulsory Labor2016

409-1Operations and suppliers at significant risk for incidents of forced or compulsory labor


- - -

GRI 412:Human Rights Assessment2016

412-1Operations that have been subject to human rights reviews or impact assessments

2.2.3 Legal Compliance• 26 - -

412-2 Employee training on human rights policies or procedures 2.2.3 Legal Compliance• 26 - -

412-3

Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening

No significant investment in • 2016 - - -

GRI 413:Local Communities2016

413-1Operations with local community engagement, impact assessments, and development programs

All Innolux plants comply with • local regulations to conduct environmental assessment.Both Taiwan and China sites • held community activities in 2016

- - -

413-2Operations with significant actual and potential negative impacts on local communities

No material negative impact • caused by Innolux against local communities identified in 2016

- - -

GRI 414:Supplier Social Assessment2016

414-1 New suppliers that were screened using social criteria


414-2 Negative social impacts in the supply chain and actions taken


GRI 416:Customer Health and Safety2016

416-1Assessment of the health and safety impacts of product and service categories

3.3.2 Green Innovation• 68 - -

416-2Incidents of non-compliance concerning the health and safety impacts of products and services

No violations against the • regulations of health and safety for Innolux product and service in 2016

- - -

GRI 417:Marketing and Labeling2016

417-1 Requirements for product and service information and labeling - -

Not applicable

Non-finished products. RoHS /HF/GP labeled according to customer’s need

417-2Incidents of non-compliance concerning product and service information and labeling

No product labeling violations • identified in 2016 - - -

GRI 418:Customer Privacy2016

418-1Substantiated complaints concerning breaches of customer privacy and losses of customer data

No violations of customer • privacy and loss of information identified in 2016

- - -

GRI 419:Socioeconomic Compliance2016

419-1Non-compliance with laws and regulations in the social and economic area

No significant penalty identified • in 2016 - - -


Appendices


Management Approach

Material Issue

Material issues GRI Standard Disclosure Chapter Page

1. Financial performances

GRI 103:Management Approach 2016GRI 201- Economic performanceGRI 202- Market presenceGRI 203- Indirect economic impactsGRI 204- Procurement practices

103-1 Explanation of the material topic and its Boundary 2.4.1 Financial Performances• 31

103-2 The management approach and its components 2.4.1 Financial Performances• 31

103-3 Evaluation of the management approach

• CSR Committee and Promotion Organization

• 1.2 CSR Materiality(Step4：Material issues management)

• 2016 Honors and awards

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2. Product quality and customer satisfaction

GRI 103:Management Approach 2016GRI 201- Economic performanceGRI 418- Customer privacy

103-1 Explanation of the material topic and its Boundary 2.4.2 • Customer Satisfaction 37

103-2 The management approach and its components 2.4.2 • Customer Satisfaction 37





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3. Energy resources managemen

GRI 103:Management Approach 2016GRI 302- Energy

103-1 Explanation of the material topic and its Boundary

3.2.2 • Energy Resources Management 53

103-2 The management approach and its components

3.2.2 • Energy Resources Management 53





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4.GHG emission

GRI 103:Management Approach 2016GRI 305- Emissions


3.2.1 • Climate Change Mitigation and Adaption 49


3.2.1 • Climate Change Mitigation and Adaption 49





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5.Water resources management

GRI 103:Management Approach 2016GRI 303- Water


3.2.3 • Water Resources Management 57


3.2.3 • Water Resources Management 57





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6.Pollution control

GRI 103:Management Approach 2016GRI 301- MaterialsGRI 306- Effluents and wastesGRI 307- Legal compliance



61



61





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7. Supply chain management

GRI 103:Management Approach 2016GRI 301- MaterialsGRI 301- Product and serviceGRI 416- Customer’s health and safety

103-1 Explanation of the material topic and its Boundary 3.3 Green Value Chain• 67

103-2 The management approach and its components 3.3 Green Value Chain• 67





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8. Supply chain management

GRI 103:Management Approach 2016GRI 204- Procurement practicesGRI 308- Supplier Environmental Assessment GRI 414- Supplier Assessment for Labor PracticesGRI 414- Supplier Assessment for impacts on society


2.5.2 Low-carbon Supply • Chain 42


2.5.2 Low-carbon Supply • Chain 42





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9. Compensation and benefits

GRI 103:Management Approach 2016GRI 405- Equal remuneration

for women and men


4.5.2 Compensation and • Benefits 93


4.5.2 Compensation and • Benefits 93





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10. Personnel training

GRI 103:Management Approach 2016GRI 404- Training and educationGRI 412- Investment


4.5.3 Training and • Development 93


4.5.3 Training and • Development 93





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11. Disability Employment

GRI 103:Management Approach 2016GRI 405- Diversity and equal

opportunity

103-1 Explanation of the material topic and its Boundary 4.4.3 Disability Care• 84

103-2 The management approach and its components 4.4.3 Disability Care• 84





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Appendices



12. Employee-friendly workplace

GRI 103:Management Approach 2016GRI 103- Labor practices grievance mechanismsGRI 103- Human rights grievance mechanismsGRI 103- Grievance mechanisms for impacts on societyGRI 401- EmploymentGRI 402- Labor/management relations


4.2 Mental & Physical • Wellness 77


4.2 Mental & Physical • Wellness 77





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13. Integrity management

GRI 103:Management Approach 2016GRI 103- Grievance mechanisms for impacts on societyGRI 205- Anti-corruptionGRI 419- Legal compliance


2.2.2 Business Ethics and • Internal Control 24


2.2.2 Business Ethics and • Internal Control 24





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14. Community participation and social care

GRI 103:Management Approach 2016GRI 413- Local communities

103-1 Explanation of the material topic and its Boundary 4.3 Initiative on Social Care• 81

103-2 The management approach and its components 4.3 Initiative on Social Care• 81





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15. Occupational health and safety

GRI 103:Management Approach 2016GRI 403- Occupational health and safety


4.1.1 • Health and Safety Strategies and Management 73


4.1.1 • Health and Safety Strategies and Management 73





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16. Recruiting and retaining of competent employees

GRI 103:Management Approach 2016GRI 405- Diversity and equal opportunityGRI 406-Non-discriminationGRI 407-Freedom of association and collective bargainingGRI 408- Child laborGRI 409- Forced or compulsory laborGRI 412- Assessment


4.5.1 Recruitment and • Staffing 87


4.5.1 Recruitment and • Staffing 87





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Contents GRI Standards Index Table - Innolux … 2016 INNOLUX CSR Report 4 Contents GRI Standards...

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Transcript of Contents GRI Standards Index Table - Innolux … 2016 INNOLUX CSR Report 4 Contents GRI Standards...