GEM - Interim / Quarterly Report 2017

GEM Terminal Ind. Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2017 and 2016 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders GEM Terminal Ind. Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of GEM Terminal Ind. Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of March 31, 2017 and 2016 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement of Auditing Standards No. 36, “Review of Financial Statements” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China (ROC). A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the ROC, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

Deloitte & Touche Taipei, Taiwan Republic of China

May 10, 2017

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the ROC and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally applied in the ROC.

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the ROC. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Available-for-sale financial assets - current (Note 7) Notes receivable (Note 8) Accounts receivable, net (Note 8) Other receivables Current tax assets (Note 4) Inventories (Note 10) Other financial assets - current (Notes 9 and 25) Other current assets (Notes 13 and 25) Total current assets NONCURRENT ASSETS Property, plant and equipment (Notes 12, 25 and 26) Deferred tax assets (Note 4) Prepayments for equipment (Notes 12 and 26) Other financial assets - noncurrent (Note 9) Long-term prepayment for lease (Notes 13 and 25) Other noncurrent assets Total noncurrent assets		March 31, 2017 (Reviewed) Amount % $ 1,184,289 20 19,741 - 134,341 2 923,212 16 1,386 - 307 - 840,823 15 433,553 8 124,895 2 3,662,547 63 1,866,919 32 117,029 2 54,185 1 3,138 - 93,514 2 6,486 - 2,141,271 37	December 31, 2016 (Audited) Amount % $ 1,718,386 27 - - 145,982 2 1,119,164 17 1,792 - 294 - 744,156 12 313,061 5 118,808 2 4,161,643 65 1,988,977 31 112,739 2 39,540 1 3,209 - 99,465 1 7,470 - 2,251,400 35	March 31, 2016 (Reviewed)
				Amount % $ 1,719,343 28 7,289 - 129,801 2 786,302 13 3,069 - 2,296 - 568,378 10 359,034 6 97,382 2 3,672,894 61 2,133,373 35 107,146 2 34,601 - 3,328 - 99,337 2 7,206 - 2,384,991 39

TOTAL $ 5,803,818 100 $ 6,413,043 100 $ 6,057,885 100

LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 16 and 25) Short-term bills payable (Note 16) Notes payable (Note 14) Accounts payable (Note 14) Other payables (Note 15) Current tax liabilities (Note 4) Long-term borrowings - current portion (Notes 16 and 25) Other current liabilities Total current liabilities NONCURRENT LIABILITIES Long-term borrowings (Notes 16 and 25) Deferred tax liabilities (Note 4) Net defined benefit liabilities (Notes 4) Total noncurrent liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY(Note 18) Ordinary shares Capital surplus Retained earnings Legal reserve Unappropriated earnings Total retained earnings Others equity Total equity TOTAL		March 31, 2017 (Reviewed)		December 31, 2016 (Audited) Amount % $ 843,215 13 50,000 1 198,220 3 530,916 8 193,170 3 13,353 - 625,036 10 4,490 - 2,458,400 38 1,007,366 16 105,086 1 44,414 1 1,156,866 18 3,615,266 56 1,692,000 26 271,315 4 338,662 6 391,565 6 730,227 12 104,235 2 2,797,777 44 $ 6,413,043 100	March 31, 2016 (Reviewed)
		Amount % $ 779,639 13 50,000 1 150,476 3 374,735 6 154,184 3 2,156 - 656,990 11 3,895 - 2,172,075 37 872,157 15 99,196 2 44,260 1 1,015,613 18 3,187,688 55 1,692,000 29 271,315 5 338,662 6 373,437 6 712,099 12 (59,284) (1) 2,616,130 45 $ 5,803,818 100			Amount % $ 744,951 12 50,000 1 99,215 2 304,258 5 185,434 3 7,264 - 412,000 7 4,624 - 1,807,746 30 1,137,335 19 97,746 1 46,179 1 1,281,260 21 3,089,006 51 1,692,000 28 271,315 4 338,662 6 330,497 5 669,159 11 336,405 6 2,968,879 49 $ 6,057,885 100

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

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

OPERATING REVENUE, NET OPERATING COSTS (Notes 10, 19 and 24) GROSS PROFIT OPERATING EXPENSES (Notes 19 and 24) Marketing General and administrative Research and development Total operating expenses LOSS FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Note 19) Other income Other gains and losses Finance costs Total non-operating income and expenses CONSOLIDATED LOSS BEFORE INCOME TAX INCOME TAX EXPENSE (BENEFIT) (Notes 4 and 20) CONSOLIDATED NET LOSS OTHER COMPREHENSIVE INCOME (LOSS) (Notes 18 and 20) Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 Amount % $ 794,379 100 710,494 89 83,885 11 33,246 4 51,904 7 6,198 1 91,348 12 (7,463) (1) 7,058 1 (4,942) (1) (12,793) (1) (10,677) (1) (18,140) (2) (12) - (18,128) (2) (166,748) (21) (587) -		2016
				Amount % $ 761,553 100 679,787 89 81,766 11 33,205 4 49,936 7 8,127 1 91,268 12 (9,502) (1) 6,398 1 (1,235) - (10,493) (2) (5,330) (1) (14,832) (2) 1,158 - (15,990) (2) (21,514) (3) (172) - (Continued)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

Income tax relating to items that may be reclassified subsequently to profit or loss Other comprehensive loss for the period, net of income tax TOTAL COMPREHENSIVE LOSS FOR THE PERIOD NET LOSS ATTRIBUTABLE TO: Owner of the Company TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Owner of the Company NET LOSS PER SHARE (Note 21) Basic Diluted		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 Amount % $ 3,816 - (163,519) (21) $ (181,647) (23) $ (18,128) (2) $ (181,647) (23) $ (0.11) $ (0.11)		2016
				Amount % $ 3,719 1 (17,967) (2) $ (33,957) (4) $ (15,990) (2) $ (33,957) (4) $ (0.09) $ (0.09)

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

(Concluded)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

		Equity Attributable to the Owners	Equity Attributable to the Owners	of the Company
Ordinary Shares $ 1,692,000 - - - $ 1,692,000 $ 1,692,000 - - - $ 1,692,000	Capital Surplus $ 271,315 - - - $ 271,315 $ 271,315 - - - $ 271,315	Retained Earnings	Total $ 730,227 (18,128) - (18,128) $ 712,099 $ 685,149 (15,990) - (15,990) $ 669,159	Other Equity
				Unrealized Loss on Available Exchange Differences on Translating Remeasurement -for-sale Foreign of Defined Financial Assets Operations benefit Plans $ - $ 97,341 $ 6,894 - - - (439) (163,080) - (439) (163,080) - $ (439) $ (65,739) $ 6,894 $ (278) $ 347,230 $ 7,420 - - - (110) (17,857) - (110) (17,857) - $ (388) $ 329,373 $ 7,420
		Unappropriated Legal Reserve Earnings $ 338,662 $ 391,565 - (18,128) - - - (18,128) $ 338,662 $ 373,437 $ 338,662 $ 346,487 - (15,990) - - - (15,990) $ 338,662 $ 330,497

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

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated loss before income tax Adjustments for: Depreciation expense Amortization expense Allowonce (reversal of allowance) for doubtful accounts Finance costs Interest income Loss on disposal of property, plant and equipment, net Gain on sale of investments, net Write-down of inventories Other non-cash items Changes in operating assets and liabilities Notes receivable Accounts receivable Other receivables Inventories Other current assets Notes payable Accounts payable Other payables Other current liabilities Net defined benefit liabilities Cash generated from (used in) operations Interest received Income tax paid Net cash generated from (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in other financial assets Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term bills payable Decrease in short-term bills payable	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2017 $ (18,140) 61,222 1,358 1,098 12,793 (3,344) 432 (488) 6,445 1,247 11,641 195,479 (5) (101,742) (7,266) (47,744) (156,181) (21,047) (630) (2,471) (67,343) 3,755 (12,606) (76,194) (43,186) 23,334 (65,687) 648 (120,421) (205,312) 746,279 (756,833) 150,000 (150,000)	2016 $ (14,832) 64,972 1,273 (2,534) 10,493 (3,505) 1,106 (996) 1,134 1,901 21,692 198,851 (1,405) 10,162 (2,263) (148,860) 34,905 (15,842) (45) (30,030) 126,177 5,046 (16,060) 115,163 (98,266) 104,945 (82,246) 24 141,526 65,983 548,467 (455,789) 50,000 - (Continued)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

Increase in long-term borrowings Repayment of long-term borrowings Interest paid Net cash generated from (used in) financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2017 $ 100,000 (198,750) (13,907) (123,211) (129,380) (534,097) 1,718,386 $ 1,184,289	2016 $ 390,502 (302,500) (11,697) 218,983 (4,102) 396,027 1,323,316 $ 1,719,343

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

(Concluded)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

GEM Terminal Ind. Co., Ltd. (the “Company”) was incorporated in July 1993 under the laws of the Republic of China (ROC). The Company mainly manufactures and sells the following products:

Series terminals, plug inserts, housing and electronic connectors for AC and DC power cords.
Electric and motor parts terminal.
Electric and communication terminal.
Optical communication passive devices.
Lead frames.

The Company’s shares have been traded on the Taiwan Stock Exchange since September 2001.

The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were authorized for issue on May 10, 2017.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERNATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) Amendment to IFRS 8 “Operating Segments”

IFRS 8 was amended by the Annual Improvements to IFRSs: 2010-2012 Cycle to require disclosure of the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker. The judgements made in applying aggregation criteria should be

disclosed retrospectively upon initial application of the amendment in 2017 (refer to Note 29).

2) Amendments to IFRS 13 “Fair Value Measurement”

The basis for conclusions of IFRS 13 was amended by the Annual Improvements to IFRSs: 2010-2012 Cycle to clarify that when the amendment becomes effective in 2017, the short-term receivables and payables with no stated interest rate is measured at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IFRS 13 was also amended by the Annual Improvements to IFRSs: 2011-2013 Cycle to clarify that the scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

3) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

The Group has not applied the following IFRSs issued by the IASB but not yet endorsed and issued into effect by the FSC.

The FSC announced that amendments to IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Amendment to IFRS 2 “Classification and Measurement of January 1, 2018 Share-based Payment Transactions” IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 (Continued)

New IFRSs Amendments to IFRS 15 “Clarifications to IFRS15 Revenue from Contracts with Customers” IFRS 16 “Leases” Amendment to IAS 7 “Disclosure Initiative” Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of investment property” IFRIC 22 “Foreign Currency Transactions and Advance Consideration”	Effective Date Announced by IASB (Note 1)
	January 1, 2018 January 1, 2019 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment

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assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

Impairment of financial assets

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Transition

Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial application recognized in the current period and restatement of prior periods is not required.

2) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations from January 1, 2018.

When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 and related amendment are effective, an entity may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

3) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

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Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion and interest portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within financing activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

4) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that unless the tax law restricts the utilization of losses to deduction against income of a specific type, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of Compliance

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of IFRSs annual financial statements.

b. Basis of Consolidation

See Note 11, table 5 and 6 for the detailed information of subsidiaries (including percentage of ownership and main business).

c. Other significant accounting policy

Except for the following, please refer to the summary of significant accounting policy in the consolidated financial statements for the year ended December 31, 2016.

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1) Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

2) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income by applying to the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The same critical accounting judgments and key sources of estimation uncertainty of consolidated financial statements have been followed in these consolidated financial statements as those applied in the preparation of the consolidated financial statements for the year ended December 31, 2016.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits with original maturities less than 3 months	March 31, 2017 December 31, 2016 $ 2,982 $ 1,500 845,820 1,311,602 335,487 405,284 $ 1,184,289 $ 1,718,386	March 31, 2016 $ 1,877 1,303,724 413,742 $ 1,719,343

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

Domestic listed shares Overseas listed shares	March 31, 2017 December 31, 2016 $ 369 $ - 19,372 - $ 19,741 $ -	March 31, 2016 $ 2,385 4,904 $ 7,289

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8. NOTES AND ACCOUNTS RECEIVABLE, NET

Notes receivable Notes receivable - operating Accounts receivable Accounts receivable Less: Allowance for doubtful accounts	March 31, 2017 December 31, 2016 $ 134,341 $ 145,982 $ 936,673 $ 1,132,152 13,461 12,988 $ 923,212 $ 1,119,164	March 31, 2016 $ 129,081 $ 796,426 10,124 $ 786,302

a. Accounts receivable

The average credit period of sales of goods was 30-120 days. The Group considered any change in the credit quality of the accounts receivable since the date credit was initially granted to the end of the reporting period. The Group recognized an allowance for doubtful accounts of 100% against all receivables over 360 days because historical experience revealed that receivables that are past due beyond 360 days were not collectible. Allowance for doubtful accounts is recognized against accounts receivables between 0 days and 360 days based on estimated uncollectible amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

There were no accounts receivable that were past due and not impaired at the end of the reporting period. Inspection on customers’ credit was taken regularly and aging analysis was preformed based on the past due date.

Aging analysis of accounts receivable was as follows:

Not past due Past due 1-60 days Past due 61-90 days Past due 91-180 days Past due over 181 days	March 31, 2017 December 31, 2016 $ 851,435 $ 1,042,293 79,064 81,935 1,462 3,629 238 377 4,474 3,918 $ 936,673 $ 1,132,152	March 31, 2016 $ 722,647 67,170 3,792 8 2,809 $ 796,426

Movements of the allowance for doubtful accounts on accounts receivable were as follows:

Balance, beginning of period	Collectively Assessed for Impairment
	For the Three Months Ended March 31
	2017 2016 $ 12,988 $ 12,720 (Continued)

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Allowance (reversal of allowance) for doubtful accounts Effect of foreign currency exchange differences Balance, end of period		Collectively Assessed for Impairment	Collectively Assessed for Impairment
		For the Three Months Ended March 31
		2017 $ 1,098 (625) $ 13,461	2016 $ (2,534) (62) $ 10,124 (Concluded)

b. Credit risk of notes and accounts receivable

The Group’s receivables are significantly concentrated in certain individuals, most of which have similar business operations and economic features. Concentration of credit risk occurs when the counterparties to financial instrument transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

The balances of the notes and accounts receivable from customers with carrying amounts that were 10% or more of the account totals as of each reporting date were as follows:

Group A 9. OTHER FINANCIAL ASSET Time deposits with original maturities more than 3 months Pledge time deposits Refundable deposits Current Non-current	March 31, 2017 December 31, 2016 $ 180,293 $ 196,144 March 31, 2017 December 31, 2016 $ 240,485 $ 241,574 192,940 71,353 3,266 3,343 $ 436,691 $ 316,270 $ 433,553 $ 313,061 3,138 3,209 $ 436,691 $ 316,270	March 31, 2016 $ 170,822 March 31, 2016 $ 270,890 88,000 3,472 $ 362,362 $ 359,034 3,328 $ 362,362

The pledge information of other financial assets refer to Note 25.

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10. INVENTORIES

Finished goods Work in process Raw materials Supplies	March 31, 2017 December 31, 2016 $ 302,508 $ 254,907 253,943 240,218 219,414 183,321 64,958 65,710 $ 840,823 $ 744,156	March 31, 2016 $ 243,901 156,954 109,778 57,745 $ 568,378

The cost of inventories recognized as costs of goods sold were $710,494 thousand and $679,787 thousand for the three months ended March 31, 2017 and 2016, respectively, which included the following items:

Write-down of inventories Others		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ 6,445 41 $ 6,486	2016 $ 1,134 860 $ 1,994

11. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements were as follows:

Name of Investor Name of Investee Main Businesses and Products The Company Global Electronics Terminal (Cayman) Co., Ltd. (Global (Cayman)) Note 1 Genius Terminal Co., Ltd. (Genius Terminal) Notes 1 and 2 GEM Terminal (Cayman) Co., Ltd. (GEM Terminal (Cayman)) Note 1 Global (Cayman) Vibo Gem International Co., Ltd. (Vibo) Notes 1 and 2 Global Electronics Terminal (HK) Co., Ltd. (Global (HK)) Note 2 Genius Terminal Genius Terminal (HK) Ltd. (Genius (HK)) Note 2 GEM Terminal (Cayman) Vietnam Gem Electronic and Metal Co., Ltd (GEM (VN)) Note 3 Vibo Suzhou Gem Opto-Electronics Terminal Co., Ltd. (GEM (Suzhou)) Note 3 Dongguan Gem Electronics & Metal Co., Ltd. (GEM (Dongguan)) Note 3	Percentage of Ownership
	March 31, 2017 December 31, 2016 March 31, 2016 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Name of Investor
Name of Investee
Main Businesses and
Products
The Company
Global Electronics
Terminal (Cayman) Co.,
Ltd. (Global (Cayman))
Note 1
Genius Terminal Co., Ltd.
(Genius Terminal)
Notes 1 and 2
GEM Terminal (Cayman)
Co., Ltd. (GEM Terminal
(Cayman))
Note 1
Global (Cayman)
Vibo Gem International
Co., Ltd. (Vibo)
Notes 1 and 2
Global Electronics
Terminal (HK) Co., Ltd.
(Global (HK))
Note 2
Genius Terminal
Genius Terminal (HK)
Ltd. (Genius (HK))
Note 2
GEM Terminal (Cayman)
Vietnam Gem Electronic
and Metal Co., Ltd
(GEM (VN))
Note 3
Vibo
Suzhou Gem
Opto-Electronics
Terminal Co., Ltd. (GEM
(Suzhou))
Note 3
Dongguan Gem
Electronics & Metal Co.,
Ltd. (GEM (Dongguan))
Note 3

Percentage of Ownership

March 31,
2017
December 31,
2016
March 31,
2016
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Note 1: International investment.

Note 2: International trading.

16 -
Note 3: Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production.

12. PROPERTY, PLANT, AND EQUIPMENT

The Company purchased land for $7,908 thousand. On this land, a resort will be constructed for the employees. However, a part of the land is agricultural land that cannot be transferred to the Company because of statutory limitations; thus, the Company registered the property rights in the name of an individual temporarily, and in December 2014, its registration is transferred to chairman’s name. The land is mortgaged to the Company and the agreement stipulated unconditional conveyance of the land to the Company.

a. Movements of cost and accumulated depreciation were as follows:

Three months ended March 31, 2017

Cost Balance at January 1, 2017 Additions Disposal Reclassification Effect of foreign currency exchange differences Balance at March 31, 2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expenses Disposal Effect of foreign currency exchange differences Balance at March 31, 2017 Carrying amounts at January 1, 2017 Carrying amounts at March 31, 2017	Land $ 146,218 - - - - $ 146,218 $ - - - - $ - $ 146,218 $ 146,218	Buildings Machinery and Equipment Transportation Equipment $ 1,049,205 $ 1,676,636 $ 56,535 821 6,576 109 (152 ) (7,928 ) (827 ) - 11,272 - (47,370) (56,352) (2,064) $ 1,002,504 $ 1,630,204 $ 53,753 $ (405,473 ) $ (956,901 ) $ (47,939 ) (11,058 ) (29,486 ) (757 ) 138 6,975 789 16,529 16,517 1,705 $ (399,864) $ (962,895) $ (46,202) $ 643,732 $ 719,735 $ 8,596 $ 602,640 $ 667,309 $ 7,551	Others $ 731,408 8,817 (1,443 ) 4,862 (33,756) $ 709,888 $ (397,720 ) (19,921 ) 1,368 18,897 $ (397,376) $ 333,688 $ 312,512	Construction in Progress and Equipment to be Inspected $ 137,008 20,211 - (16,156 ) (10,374) $ 130,689 $ - - - - $ - $ 137,008 $ 130,689	Total $ 3,797,010 36,534 (10,350 ) (22 ) (149,916) $ 3,673,256 $ (1,808,033 ) (61,222 ) 9,270 53,648 $ (1,806,337) $ 1,988,977 $ 1,866,919

Three months ended March 31, 2016

Cost Balance at January 1, 2016 Additions Disposal Reclassification Effect of foreign currency exchange differences Balance at March 31, 2016 Accumulated depreciation Balance at January 1, 2016 Depreciation expenses Disposal Effect of foreign currency exchange differences Balance at March 31, 2016 Carrying amounts at March 31, 2016	Land $ 146,218 - - - - $ 146,218 $ - - - - $ - $ 146,218	Buildings Machinery and Equipment Transportation Equipment $ 805,786 $ 1,801,237 $ 59,910 - 22,536 82 (300 ) (5,722 ) - 623 15,067 - (5,819) 4,732 (263) $ 800,290 $ 1,837,850 $ 59,729 $ (396,915 ) $ (988,068 ) $ (47,383 ) (9,124 ) (36,590 ) (987 ) 271 4,949 - 4,028 (16,332) 209 $ (401,740) $ (1,036,041) $ (48,161) $ 398,550 $ 801,809 $ 11,568	Others $ 669,520 8,132 (1,922 ) 9,336 (3,914) $ 681,152 $ (371,758 ) (18,271 ) 1,594 2,399 $ (386,036) $ 295,116	Construction in Progress and Equipment to be Inspected $ 398,523 118,360 - (29,138 ) (7,633) $ 480,112 $ - - - - $ - $ 480,112	Total $ 3,881,194 149,110 (7,944 ) (4,112 ) (12,897) $ 4,005,351 $ (1,804,124 ) (64,972 ) 6,814 (9,696) $ (1,871,978) $ 2,133,373

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b. Estimated useful lives

Depreciation is provided on a straight-line basis over estimated useful lives as follows:

Buildings Factory 10-50 years Main building 5-25 years The major component part of the factory 10-20 years The major component part of the office 10-55 years Machinery and equipment 4.67-15 years Transportation equipment 3-12 years Others 3-20 years

Refer to Note 25 for the carrying amount of property, plant and equipment that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group.

c. Investing activities affecting both cash and non-cash items

Acquisition of property, plant and equipment Capitalized interest Increase (decrease) in prepayments for equipment Decrease (increase) in payable for purchased equipment Cash paid for acquisition of property, plant and equipment		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ 36,534 (956) 14,645 15,464 $ 65,687	2016 $ 149,110 (1,759) (59,148) (5,957) $ 82,246

13. LONG-TERM PREPAYMENT FOR LEASE

Current (included in other current assets) Noncurrent (included in long-term prepayment for lease)	March 31, 2017 December 31, 2016 $ 1,879 $ 1,983 93,514 99,465 $ 95,393 $ 101,448	March 31, 2016 $ 2,035 99,337 $ 101,372

Prepayments for lease are for land use rights and property use rights in Mainland China and Vietnam, as of March 31, 2017, the remaining amortization year of land use rights in Mainland China is 30-44 years, the remaining amortization year of land use rights and property use rights in Vietnam is 37-48 years. Prepayment for lease with carrying amount of RMB 1,200 thousand is in the process of obtaining the land use right certificate.

Refer to Note 25 for the carrying amount of prepayments for lease that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group.

14. NOTES PAYABLE AND ACCOUNTS PAYABLE

The Group’s notes payable and accounts payable were from operating activities and were not secured by collaterals.

18 -

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms, therefore, no interest was charged on the outstanding trade payables.

15. OTHER PAYABLES

Payable for purchase of equipment Payable for salaries and bonus Payable for VAT and personal income tax Payable for utilities expense Payable for professional service fees Payable for welfare Payable for compensation to employees and remuneration to directors and supervisors Others	March 31, 2017 December 31, 2016 $ 47,865 $ 63,329 36,605 47,771 7,797 4,287 6,608 7,440 6,477 6,035 4,741 4,892 3,504 3,504 40,587 55,912 $ 154,184 $ 193,170	March 31, 2016 $ 68,189 38,632 4,049 8,457 3,934 5,957 - 56,216 $ 185,434

Other payables - others were payables for pension, annual leave, labor and health insurance, rent, and payable for parts purchased.

16. BORROWINGS

a. Short-term borrowings

March 31,
2017
December 31,
2016

Unsecured borrowings
$ 486,040
$ 436,025

Secured borrowings

293,599

407,190

$ 779,639
$ 843,215

Interest rates P.A. on short-term borrowings were as follows:
March 31,
2017
December 31,
2016
Unsecured borrowings (%)
1.50-4.35
1.26-4.35
Secured borrowings (%)
2.28-4.35
3.92-4.35
b Short-term bills payable
March 31,
2017
December 31,
2016

Commercial paper payable
$ 50,000
$ 50,000

March 31,
2016
$ 407,602

337,349
$ 744,951
March 31,
2016
1.25-5.35
3.92-4.35
March 31,
2016
$ 50,000

19 -

Interest rates P.A. on short-term bills payable were as follows:

	March 31,	December 31,	March 31,
	2017	2016	2016
Short-term bills payable (%)	1.16	1.15	1.15

The commercial paper of $50,000 thousand and one year revolving credit facilities was issued and granted by DAH CHUNG Bills Finance Corporation.

c. Long-term borrowings

March 31,
2017
December 31,
2016

Unsecured borrowings
$ 1,458,000
$ 1,556,750

Secured borrowings

71,147

75,652

1,529,147
1,632,402
Less: Current portion

656,990

625,036

$ 872,157
$ 1,007,366

Interest rates P.A. on long-term borrowings were as follows:
March 31,
2017
December 31,
2016

Unsecured borrowings (%)
1.49-2.09
1.49-2.09
Secured borrowings (%)
2.75
2.70-2.93

March 31,
2016
$ 1,549,335

-
1,549,335

412,000
$ 1,137,335
March 31,
2016
1.66-2.75
-

Under the loan agreements with several banks, the Group should maintain certain financial ratios based on reviewed semiannual and audited annual consolidated financial statements. The financial ratio of the Group as of December 31, 2016 and 2015 were in compliance with the requirements stated in the loan agreements.

The Group had sufficient long term credit facility obtained before March 31, 2016, to refinance a portion of the loans on a long-term basis. Therefore, $238,000 thousand was not classified as current portion of long-term borrowings as of March 31, 2016.

17. RETIREMENT BENEFIT PLANS

For the three months ended March 31, 2017 and 2016, employee benefit expenses in respect of the Group’s defined benefit retirement plans were $371 thousand and $496 thousand, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2016 and 2015.

18. EQUITY

a. Share capital Number of shares authorized (in thousands)	March 31, 2017 December 31, 2016 221,000 221,000	March 31, 2016 221,000 (Continued)

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Shares authorized Number of shares issued and fully paid (in thousands) Shares issued	March 31, 2017 December 31, 2016 $ 2,210,000 $ 2,210,000 169,200 169,200 $ 1,692,000 $ 1,692,000	March 31, 2016 $ 2,210,000 169,200 $ 1,692,000 (Concluded)

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

b. Capital Surplus

May be used to offset a deficit, distributed as cash dividends,or transferred to share capital Arising from issuance of common shares Arising from treasury share transactions	March 31, 2017 December 31, 2016 $ 266,411 $ 266,411 4,904 4,904 $ 271,315 $ 271,315	March 31, 2016 $ 266,411 4,904 $ 271,315

The capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

c. Appropriation of Earnings and Dividend Policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to stockholders and do not include employees. The stockholders held their regular meeting on June 22, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the stockholders’ meeting for distribution of dividends and bonus to stockholders. For the policies on distribution of employees’ compensation and remuneration to directors and supervisors before and after amendment, please refer to (e) Employee benefits expense in Note 19.

The Company’s dividend policy is in line with the Company’s operating scale and research and development needs as well as the status of the economy and industry in order to maintain sound management and promote stockholders’ long-term interests. Thus, the Company adopted Residual dividend policy as its stockholders dividends’ policy. Company’s profits may be distributed in the form of cash and/or stock. However, distribution of profits should preferably be in the form of cash dividend. Cash dividends should be at least 10% of total dividends. But if a cash dividend is less than NT$0.2, the Company may choose to appropriate stock dividends instead.

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Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve.

Except for non-ROC resident stockholders all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings for 2016 and 2015 had been approved in the board of directors on March 23, 2017 and the stockholders’ meeting on June 22, 2016, respectively. The appropriations of earnings for 2016 and 2015 were as follows:

Legal reserve Cash dividends	Appropriation of Earnings 2016 2015 $ 4,508 $ 8,784 - 34,320	Dividends Per Share (NT$)
		2016 2015 $ - $ 0.2

The appropriations of earnings for 2016 are subject to the resolution of the stockholders’ meeting to be held on June 14, 2017.

d. Other Equity Items

1) Exchange differences on translating foreign operations

Balance, beginning of period Exchange differences arising on translating the foreign operations Related income tax Balance, end of period		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ 97,341 (166,748) 3,668 $ (65,739)	2016 $ 347,230 (21,514) 3,657 $ 329,373

2) Unrealized gain (loss) from available-for-sale financial assets

Balance, beginning of period Unrealized gain (loss) arising on revaluation of available-for-sale financial assets Related income tax Cumulative gain reclassified to profit or loss on sale of available-for-sale financial assets Related income tax Balance, end of period		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ - (99) 33 (488) 115 $ (439)	2016 $ (278) 824 478 (996) (416) $ (388)

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19. CONSOLIDATED LOSS BEFORE INCOME TAX

Consolidated loss before income tax was as follows:

a. Other income

Interest income Others b. Other gains and losses Foreign exchange losses, net Loss on disposal of property, plant and equipment, net Gain on disposal of investments, net Others c. Finance costs Interest expense of borrowings Less: Amounts included in the cost of qualifying assets Information about capitalized interest was as follows: Capitalized interest (classified under property, plant and equipment and prepayments for equipment) Capitalization rate (%)		For the Three Months Ended March 31
		2017 2016 $ 3,344 $ 3,505 3,714 2,893 $ 7,058 $ 6,398 For the Three Months Ended March 31
		2017 2016 $ (4,823) $ (747) (432) (1,106) 488 996 (175) (378) $ (4,942) $ (1,235) For the Three Months Ended March 31
		2017 2016 $ 13,749 $ 12,252 956 1,759 $ 12,793 $ 10,493 For the Three Months Ended March 31
		2017 2016 $ 956 $ 1,759 1.63-4.08 1.79-5.10

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d. Depreciation and amortization

	For the Three Months Ended March 31	For the Three Months Ended March 31
	2017 2016 $ 61,222 $ 64,972 593 626 765 647 $ 62,580 $ 66,245 For the Three Months Ended March 31
	2017 2016 $ 51,104 $ 54,878 10,118 10,094 $ 61,222 $ 64,972 $ 89 $ 100 1,269 1,173 $ 1,358 $ 1,273 For the Three Months Ended March 31
2017 $ 115,969 5,533 7,500 129,002 7,731 371 8,102 $ 137,104 $ 102,501 34,603 $ 137,104		2016 $ 113,443 6,243 5,823 125,509 8,937 496 9,433 $ 134,942 $ 99,560 35,382 $ 134,942

24 -

In compliance with the amended articles of incorporation of company approved by the stockholders in the meeting in June, 2016 the company accrued employees’ compensation and remuneration to directors and supervisors at the rates no less than 3% and no higher than $4,000 thousand, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors and supervisors. For the three months ended March 31, 2017 and 2016, the Group had incurred net loss, hence, no employees’ compensation and remuneration of directors and supervisors were accrued for the period.

If there is a change in the proposed amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

The bonus to employees and remuneration to directors and supervisors for 2016 which were approved in the board of directors’ meeting on March 23, 2017 were as follows:

	For the Year
	Ended
	December 31,
	2016
Employees’ compensation	$ 1,404
Remuneration to directors and supervisors	2,100

There was no difference between the amounts of employees’ compensation and the remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2016.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

f. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses Foreign exchange losses, net		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ 16,628 (21,451) $ (4,823)	2016 $ 13,638 (14,385) $ (747)

20. INCOME TAX

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

Current tax In respect of the current period	For the Three Months Ended March 31
	2017 2016 $ 1,396 $ 6,911 (Continued)

25 -

Adjustments for prior periods Deferred tax In respect of the current period Exchange rate influence Income tax expense (income) recognized in profit or loss		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ - 1,396 (6,363) 4,955 (1,408) $ (12)	2016 $ 839 7,750 (8,216) 1,624 (6,592) $ 1,158 (Concluded)

b. Income tax recognized in other comprehensive income (loss)

Deferred tax Translation of foreign operations Unrealized loss (gain) on available-for-sale financial asset Integrated income tax March 31, 2017 Unappropriated earnings Unappropriated earnings generated before January 1, 1998 $ 6,684 Unappropriated earnings generated on and after January 1, 1998 366,753 $ 373,437 Imputation credits accounts $ 37,779		For the Three Months Ended March 31	For the Three Months Ended March 31
	2017 $ 3,668 148 $ 3,816 December 31, 2016 $ 6,684 384,881 $ 391,565 $ 37,779		2016 $ 3,657 62 $ 3,719 March 31, 2016 $ 6,684 323,813 $ 330,497 $ 25,469

c. Integrated income tax

The Company had incurred net loss for 2015, according to the resolution approved in the stockholders’ meeting on June 22, 2016, the earnings were not distributed. The creditable ratio for the distribution of earning for 2016 was 9.81% (estimated).

d. Income tax assessments

The tax returns of the Company as of 2014 have been assessed by the tax authorities.

GEM (Dongguan) and GEM (Suzhou) had completed the filing of their income tax returns through 2015 with the tax authorities.

26 -

21. NET LOSS PER SHARE (EPS)

There is no diluted effect for the three months ended March 31, 2017 and 2016 for net loss incurred in the reporting period.

The net loss and weighted average number of ordinary shares outstanding in the computation of basic and diluted EPS were as follows:

Net loss for the periods ended

Net loss used in the computation of basic/diluted net loss per share		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ (18,128)	2016 $ (15,990)

Weighted average number of ordinary shares outstanding (in thousand shares)

Weighted average number of ordinary shares in computation of diluted net loss per share		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 169,200	2016 169,200

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

22. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns through the optimization of the debt and equity balance. The capital structure of the Group consists of net debt and equity of the Group. The Group is not subject to any externally imposed capital requirements, except to maintain certain financial ratios specified under loan agreements. (Refer to Note 16)

Key management personnel of the Group review the capital structure on a quarterly basis. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of liabilities paid and current assets management to balance its entire capital structure.

23. FINANCIAL INSTRUMENTS

a. Fair value - fair value of financial instruments not measured at fair value

The Group’s management believes that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

27 -
b. Fair value - fair value of financial instruments that are measured at fair value on a recurring basis

March 31, 2017

Available-for-sale financial assets Domestic listed shares Overseas listed shares December 31, 2016:None. March 31, 2016 Available-for-sale financial assets Domestic listed shares Overseas listed shares	Level 1 $ 369 19,372 $ 19,741 Level 1 $ 2,385 4,904 $ 7,289	Level 2 $ - - $ - Level 2 $ - - $ -	Level 3 $ - - $ - Level 3 $ - - $ -	Total $ 369 19,372 $ 19,741 Total $ 2,385 4,904 $ 7,289

There were no transfers between Level 1 and Level 2 for the three months ended March 31, 2017 and 2016.

c. Categories of financial instruments

	March 31,	December	31,	March 31,
	2017	2016		2016
Financial assets
Loans and receivables (Note 1)	$ 2,679,919	$ 3,301,594		$ 3,000,877
Available-for-sale financial assets	19,741		-	7,289
Financial liabilities
Measured at amortized cost (Note 2)	3,038,181	3,447,923		2,933,193

Note 1: The balances included in loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, net, other receivables and other financial assets-current and non-current.
Note 2: The balances included in financial liabilities measured at amortized cost, which comprise short-term borrowings, short-term bills payable, notes and accounts payable, other payables, and long-term borrowings (including current portion).

d. Financial risk management objectives and policies

The Group’s major financial instruments include equity investments, notes receivable, accounts receivable, other financial assets, borrowings, notes payable and accounts payable. The Corporate Treasury function provides services to the business, coordinates access to domestic and international

28 -

financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

The Corporate Treasury function reports monthly to the Group's risk management committee.

1) Market risk

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities and of the derivatives exposing to foreign currency risk at the end of the reporting period are set out in Note 27.

Sensitivity analysis

The Group was mainly exposed to the risks from the fluctuations of USD and HKD.

The following table details the sensitivity to a 1% increase and decrease in the functional currency rate against the relevant foreign currencies of the Group’s outstanding foreign currency denominated monetary items at the end of the reporting period. A positive number below indicates an decrease in pre-tax loss associated with the functional currency.

Profit or loss	USD impact For the Three Months Ended March 31 2017 2016 $ 2,561 $ 4,509	HKD impact
		For the Three Months Ended March 31
		2016 2015 $ 1,017 $ 480

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

The carrying amounts of the Group's financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

		March 31,	December 31,	December 31,		March 31,
		2017		2016		2016
Fair value interest rate risk
Financial liabilities	$	435,000	$	478,750	$	662,500
Cash flow interest rate risk
Financial assets		845,717		1,311,499		1,303,621
Financial liabilities		815,532		841,349		399,335

29 -

Sensitivity analysis

The sensitivity analysis below was based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate assets and liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole period.

If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s pre-tax loss for the three months ended March 31, 2017 and 2016 would have been higher/lower by $75 thousand and $2,261 thousand, respectively, which was mainly a result of the changes in floating rate bank deposits and borrowings.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. At the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to the counterparties’ failure to discharge an obligation and because of financial guarantees provided by the Group is the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group adopted a policy of only dealing with creditworthy counterparties, and continuously monitoring the credit exposure and credit rating of the counterparties besides, controlling the credit exposure through the credit line limit of counterparties.

The Group’s receivables are significantly concentrated in certain individuals, most of which have similar business operations and economic features. Credit risk concentration occurs when the counterparties to financial instrument transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Accounts receivable from customers with carrying amounts that were 10% or more of the account total are disclosed in Note 8.

3) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s funding and liquidity management requirements.

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

Liquidity and interest risk rate tables for non-derivative financial liabilities

The following table details the analysis of maturity dates for Group’s non-derivative financial liabilities based on the agreed repayment dates, it’s based on the earliest date that the Group may be required to repay, without considering the probability of execution of the right, and the tables had been drawn up based on the undiscounted cash flows of financial liabilities. The tables included both interest and principal cash flows.

30 -

Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Month March 31,2017 Fixed interest rate liabilities 1.16-4.35 $ 83,184 Variable interest rate liabilities 1.49-2.75 1,611 Non-interest bearing - 358,529 $ 443,324 December 31,2016 Fixed interest rate liabilities 1.15-4.35 $ 415,640 Variable interest rate liabilities 1.49-2.93 19,159 Non-interest bearing - 486,469 $ 921,268 March 31,2016 Fixed interest rate liabilities 1.15-5.35 $ 242,712 Variable interest rate liabilities 1.69-2.57 974 Non-interest bearing - 345,530 $ 589,216	1-3 Months 3 Months to 1 Year $ 218,043 $ 833,147 46,863 342,005 253,457 62,858 $ 518,363 $ 1,238,010 $ 160,586 $ 650,880 27,161 280,035 366,826 66,840 $ 554,573 $ 997,755 $ 129,582 $ 773,117 1,229 97,573 206,694 34,692 $ 337,505 $ 905,382	1-5 Years $ 440,956 443,498 525
		$ 884,979
		$ 483,572 537,204 -
		$ 1,020,776
		$ 842,214 309,767 -
		$ 1,151,981

Taking into account the Group's financial position, management does not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. Management believes that such bank loans will be repaid in one year after the end of reporting period in compliance with the scheduled repayment dates set out in the loan agreements.

The amounts included above for variable interest rate non-derivative financial liabilities were subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

24. TRANSACTIONS WITH RELATED PARTIES

All transactions, balances, revenues and expenses among the Group are eliminated on consolidation, so the information is not disclosed in this note. The details of transactions between the Group and other related parties are disclosed below.

a. Compensation of key management personnel

Short-term benefits Post-employment benefits		For the Three Months Ended March 31	For the Three Months Ended March 31
		2017 $ 2,192 68 $ 2,260	2016 $ 2,253 69 $ 2,322

The remuneration of directors and other members of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

31 -

b. Property lease

The Company leased its Taipei office, factories and storehouse from general manager, Su, Tun-Jen, Su, Tun-Li, and Su, Tun-Yi (second-degree relatives of the Company’s chairman), under one-year operating lease contracts. The rentals for the three months ended March 31, 2017 and 2016 were both $415 thousand, and were recorded as operating expenses and manufacturing cost.

The rental terms were determined by negotiation. The rental rates were similar to the local market rate and the payment terms were at arm’s length.

c. Guarantees

The Company’s chairman, Su, Chung-Hong, and Su, Tun-Li jointly provided the guarantee for the loans of GEM and GEM (Cayman). The Company’s chairman, Su Chung-Hong, provided the guarantee for the loans of Genius (HK), Su, Tun-Li provided the guarantee for the loans of Global (HK) and GEM (VN).

25. ASSETS PLEDGED AS COLLATERAL FOR SECURITY

The Group provided the following assets as collateral for the banks’ short-term and long-term borrowings:

Property, plant and equipment Deposit account (under other financial assets- current) Prepaid rent (including current portion)	March 31, 2017 December 31, 2016 $ 389,231 $ 418,103 192,940 71,353 34,246 36,141 $ 616,417 $ 525,597	March 31, 2016 $ 393,135 88,000 39,721 $ 520,856

26. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

The Group’s significant commitments and contingencies as of March 31, 2017 were as follows:

a. The amounts of contracts for the Group’s purchases of properties and materials were $321,753 thousand, of which $120,027 thousand had not been paid.
b. Unused letters of credit for purchasing raw materials amounts to $11,904 thousand.

27. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

32 -

Foreign
Currencies
Exchange Rate
March31,2017
Financial assets
Monetary items
USD
$ 5,559
30.330
(USD:NTD)

USD
10,280
6.882
(USD:RMB)
USD
10,623
7.765
(USD:HKD)
USD
2,458
22,753
(USD:VND)
HKD
4,477
3.906
(HKD:NTD)
HKD
34,747
0.886
(HKD:RMB)
HKD
947
0.129
(HKD: USD)

Financial liabilities
Monetary items
USD
545
30.330
(USD:NTD)

USD
6,588
6.882
(USD:RMB)
USD
4,165
7.765
(USD:HKD)
USD
9,182
22,753
(USD:VND)
HKD
14,026
3.906
(HKD:NTD)
HKD
111
0.886
(HKD:RMB)

December 31,2016
Financial assets
Monetary items
USD
4,848
32.250
(USD:NTD)

USD
7,322
6.984
(USD:RMB)
USD
12,325
7.751
(USD:HKD)
USD
2,445
22,743
(USD:VND)
HKD
5,885
4,161
(HKD:NTD)
HKD
27,986
0.901
(HKD:RMB)
HKD
944
0.129
(HKD:USD)

Financial liabilities
Monetary items
USD
556
32.250
(USD:NTD)

USD
6,121
6.984
(USD:RMB)
USD
4,945
7.751
(USD:HKD)
USD
7,673
22,743
(USD:VND)
HKD
15,472
4.161
(HKD:NTD)
HKD
332
0.901
(HKD:RMB)

Carrying
Amount
$ 168,610
311,803
322,198
74,560
17,489
135,720

3,697
$ 1,034,077
$ 16,519
199,802
126,316
278,480
54,784

435
$ 676,336
$ 156,334
236,147
397,469
78,841
24,487
116,452

3,928
$ 1,013,658
$ 17,933
197,404
159,462
247,440
64,379

1,382
$ 688,000

(Continued)

33 -

Foreign
Currencies
Exchange Rate
March 31,2016
Financial assets
Monetary items
USD
$ 5,120
32.180
(USD:NTD)

USD
10,012
6.476
(USD:RMB)
USD
9,319
7.751
(USD:HKD)
USD
1,180
22,301
(USD:VND)
HKD
8,049
4.152
(HKD:NTD)
HKD
32,844
0.836
(HKD:RMB)
HKD
940
0.129
(HKD:USD)

Financial liabilities
Monetary items
USD
617
32.180
(USD:NTD)

USD
4,103
6.476
(USD:RMB)
USD
3,289
7.751
(USD:HKD)
USD
3,609
22,301
(USD:VND)
HKD
29,923
4.152
(HKD: NTD)
HKD
342
0.836
(HKD:RMB)

Carrying
Amount
$ 164,761
322,205
299,891
37,979
33,420
136,370

3,902
$ 998,528
$ 19,862
132,040
105,832
116,166
124,239

1,419
$ 499,558

(Concluded)

For the three months ended March 31, 2017 and 2016, realized and unrealized net foreign exchange losses were $4,823 thousand and 747 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the Group’s entities.

28. ADDITIONAL DISCLOSURES

a. Information about significant transactions and investees:
1) Financing provided to others: Table 1 (attached).
2) Endorsement/guarantee provided: None.
3) Marketable securities held: Table 2 (attached).
4) Marketable securities acquired and disposed at cost or price at least NT$300 million or 20% of the paid-in capital: None.
5) Acquisition of individual real estate at cost of at least NT$300 million or 20% of the paid-in capital: None.
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.
34 -
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached).
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4 (attached).
9) Trading in derivative instruments: None.

10) Inter - Company business relationship and material transactions and its amount: Table 8 (attached).

11) Information on investees: Table 5 (attached).
b. Information on investments in Mainland China

Information on any investee company in Mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the Mainland China areas: Table 6 (attached).

Any of the following significant transactions with investee companies in Mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses:

1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 7 (attached).
2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 3 and Table 7 (attached).
3) The amount of property transactions and the amount of the resultant gains or losses: Table 7 (attached).
4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.
5) The highest balance, the end of period balance, the interest rates range, and total current period interest with respect to financing of funds: Table 1 (attached).
6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: Table 7 and Table 8 (attached).

29. SEGMENT INFORMATION

Information reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on type of goods or services delivered or provided.

Each entity of the Group is considered separate operating segment by the chief operating decision maker (CODM). For financial statements presentation purposes, these individual operating segments have been aggregated into a single operating segment taking into account the following factors:

a. these operating segments have similar production and sales processes;
b. these operating segments have similar main businesses and products; and
35 -
c. the finance and business of these operating segments as to the consolidated financial statements are not material.

The Group’s reportable segments were as follows:

GEM Terminal
GEM (Dongguan) and Genius (HK) consolidated information
GEM (Suzhou) and Global (HK) consolidated information
Others

Segment revenues and results, segment assets and liabilities

The following was an analysis of the Group’s revenue and results from operations by reportable segment:

For the Three months ended March 31,2017 Revenues from external customers Inter - segment revenues Segment revenues Segment income (loss) Other income Other gains and losses Finance cost Consolidated loss before income tax Income tax Consolidated net loss March 31,2017 Segment assets Segment liabilities For the Three months ended March 31,2016 Revenues from external customers Inter-segment revenues Segment revenues Segment income (loss) Other income Other gains and losses Finance costs Consolidated loss before income tax Income tax Consolidated net loss March 31,2016 Segment assets Segment liabilities	GEM Terminal GEM (Dongguan)& Genius (HK) $ 111,703 $ 321,649 37,369 66,385 $ 149,072 $ 388,034 $ (4,232) $ 267 $ 4,344,975 $ 1,854,142 $ 1,728,845 $ 862,279 $ 123,807 $ 319,517 18,820 78,591 $ 142,627 $ 398,108 $ (3,766) $ (27,187) $ 4,795,110 $ 2,051,398 $ 1,826,231 $ 841,016	GEM (Suzhou)& Global (HK) $ 360,831 358,615 $ 719,446 $ (10,937) $ 2,820,425 $ 868,477 $ 318,229 256,099 $ 574,328 $ 30,720 $ 2,856,246 $ 707,000	Others $ 196 67,774 $ 67,970 $ 4,570 $ 774,689 $ 379,352 $ - 2,278 $ 2,278 $ (3,038) $ 475,330 $ 222,291	Adjustment and Elimination $ - (530,143) $ (530,143) $ 2,869 $ (3,990,413) $ (651,265) $ - (355,788) $ (355,788) $ (6,231) $ (4,120,199) $ (507,532)	Consolidated Amount $ 794,379 - $ 794,379 $ (7,463 ) 7,058 (4,942 ) (12,793) (18,140 ) (12) $ (18,128) $ 5,803,818 $ 3,187,688 $ 761,553 - $ 761,553 $ (9,502 ) 6,398 (1,235 ) (10,493) (14,832 ) 1,158 $ (15,990) $ 6,057,885 $ 3,089,006

36 -

TABLE 1

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance (Note 2)	Actual Borrowing Amount (Notes 2 and 3)	Interest Rate	Nature of Financing	Business Transaction Amounts	Reason for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limits	Note
													Item	Value
0 0 0 1 2 3	The Company The Company The Company Vibo Global (Cayman) GEM (Cayman)	GEM (VN) GEM (VN) GEM (Suzhou) GEM (Dongguan) Global (HK) GEM (VN)	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes	$ 97,845 90,990 151,650 32,615 13,046 32,250	$ 90,990 90,990 151,650 30,330 12,132 30,330	$ 30,330 - - 30,330 12,132 30,330	2.10 2.10 2.10 2.00 2.00 2.10	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - - -	Business development Business development Business development Business development Business development Business development	$ - - - - - -	- - - - - -	$ - - - - - -	$ 523,226 523,226 523,226 575,174 579,808 67,205	$ 1,046,452 1,046,452 1,046,452 1,150,348 1,159,617 134,410	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1

Note 1: Under the Company’s and the subsidiaries’ “Operational Procedures for Loaning Funds to Others,” if short-term financing is needed, total amounts of these financings should not exceed 40 percent of the Company’s and the subsidiaries’ stockholders’ equity, and individual financing should not exceed 20 percent of the Company’s and the subsidiaries’ stockholders’ equity.

Note 2: The conversion rates on March 31, 2017 were US$ 1: NT$30.33.

Note 3: It was eliminated on consolidation.

37 -

TABLE 2

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD MARCH 31, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			March 31, 2017	March 31, 2017			Note
				Shares		Carrying Amount	Percentage of Ownership	Fair Value
The Company GEM (Suzhou)	Stock E. Sun Financial Holding Co., Ltd. Stock Shanxi Xinghuacun Fen Wine Factory Co., Ltd. China Minsheng Banking Corp., Ltd. Bank of Beijing Co., Ltd. Jiugui Liquor Co., Ltd. Shanghai Pudong Developement Bank Co., Ltd. Industrial Bank Co., Ltd. Ningbo Boway Alloy Material Co., Ltd. Yantai Changyu Pioneer Wine Co., Ltd. Zhejiang Gu Yue Long Shan Shaoxing Wine Co., Ltd. Tsingtao Brewery Co., Ltd	- - - - - - - - - - -	Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current	20,000 27,000 84,000 68,000 29,000 28,000 19,000 20,000 7,000 24,000 2,000		$ 369 3,485 3,139 2,880 2,827 1,976 1,357 1,200 1,138 1,080 290 19,372 $ 19,741	- - - - - - - - - - -		$ 369 3,485 3,139 2,880 2,827 1,976 1,357 1,200 1,138 1,080 290 19,372 $ 19,741

38 -

TABLE 3

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/Sales	Amount	% to Total	Payment Terms	Unit Price	Payment Term	Ending Balance	% to Total
GEM (Dongguan) GEM (Suzhou)	Genius (HK) GEM (Dongguan)	Affiliate Affiliate	Sales Sales	$ 148,880 (HK$35,604 thousand and US$183 thousand) 281,577 (RMB$62,179 thousand)	39 39	120 days after monthly closing 120 days after monthly closing	Note 2 Note 2	Note 3 Note 3	$ 118,685 (HK$29,173 thousand and US$149 thousand) 221,805 (RMB$50,329 thousand)	26 30	Note 1 Note 1

Note 1: It was eliminated on consolidation.

Note 2: The sales price of finished goods is not significantly different from those to third parties, except for the stated sales price of finished goods, other types of sales price have no comparable transactions with those in the market.

Note 3: The sales payment terms of intercompany sales are not significantly different from those to third parties.

39 -

TABLE 4

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL MARCH 31, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance (Note)	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
GEM (Suzhou) GEM (Dongguan)	GEM (Dongguan) Genius (HK)	Affiliate Affiliate	$ 221,805 ( RMB$ 50,329 thousand ) 118,685 ( HK$ 29,173 thousand and US$ 149 thousand )	4.57 6.41	$ - -	- -	$ 151,883 37,901	$ - -

Note: It was eliminated on consolidation.

40 -

TABLE 5

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As	of March 31, 2017	of March 31, 2017	Net Income (Loss) of the Investee	Share of profit (Loss)	Note
				March 31, 2017	December 31, 2016
						Shares / Units	%	Carrying Amount
The Company The Company The Company Genius Terminal Global (Cayman) Global (Cayman) GEM (Cayman)	Global (Cayman) GEM (Cayman) Genius Terminal Genius (HK) Vibo Global (HK) GEM (VN)	Grand Cayman, Cayman Islands Grand Cayman, Cayman Islands British Virgin Islands Hong Kong Hong Kong Hong Kong Vietnam	International investment International investment International investment and trading, etc. International trading Trading and investment International trading Production of hardware; machine processing; electroplating for hardware processing; production and processing of molds and related accessories; plastic products and related plastic accessory production;	$ 1,295,208 392,669 23,282 90,134 1,541,063 3,747 386,780	$ 1,295,208 392,669 23,282 90,134 1,541,063 3,747 386,780	40,137,184 12,598,333 750,000 21,999,998 359,972,616 1,000,000 386,780	100 100 100 100 100 100 100	$ 2,774,604 332,035 69,422 77,040 2,875,860 8,115 332,720	$ (5,926) (3,964) 2,359 2,324 (6,220) 304 4,257	$ (5,637) (4,081) 2,359 2,337 (6,220) 389 (3,832)	Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2

Note 1: It was eliminated on consolidation.

Note 2: Net of unrealized profits.

41 -

TABLE 6

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2017	Remittance of Funds	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of March 31, 2017	Net Income (Loss)of the Investee	% of Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Notes 1 and 3)	Carrying Amount as of March 31, 2017 (Notes 1 and 3)	Accumulated Repatriation of Investment Income as of March 31, 2017
						Outward		Inward
GEM (Dongguan) GEM (Suzhou)	Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production. Production of hardware; machine processing; electroplating for metal processing; production and processing of molds and related accessories; plastic products and related plastic accessory production.		$ 746,841 1,104,742	The investment was made through a corporation established in a third country to invest in companies located in Mainland China. The investment was made through a corporation established in a third country to invest in companies located in Mainland China.	$ 452,130 741,320	$	- -	$ - -	$ 452,130 741,320	$ (368 ) (10,203 )	100 100	$ 4,396 (10,558 )	$ 864,077 1,933,398	$ - -

Investor Company		Accumulated Outward Remittance for Investment in Mainland China as of March 31, 2017		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (Note 2)
The Company		$1,193,450		$1,719,711 (US$56,700 thousand)			$1,569,678

Note 1: Amount was recognized based on the reviewed financial statement.

Note 2: Under the “Principles Governing the Review of Investments or Technical Cooperation in Mainland China” issued by the Investment Commission on August 29, 2008, the maximum amount that can be invested in companies located in mainland China is 60% of the Company’s net value.

Note 3: It was eliminated on consolidation.

42 -

TABLE 7

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Counterparty	Transaction Type	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized (Gain) Loss	Note
				Payment Term	Comparison with Normal Transaction	Ending Balance	%
The Company Genius (HK) Global (HK)	GEM (Suzhou) GEM (Dongguan) GEM (Suzhou)	Sales Purchase Property, plant, and equipment for sale Sales Purchase Sales Purchase	$ 22,588 2,349 10,887 70,731 148,880 909 96,175	120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing 120 days after monthly closing	No significant difference with those to third parties No significant difference with those to third parties No comparable transactions with those in the market No significant difference with those to third parties No comparable transactions with those in the market No significant difference with those to third parties No comparable transactions with those in the market	$ 6,933 (2,285) 6,034 43,261 (118,685) - (85,456)	4 2 16 18 77 - 100	$ 11,671 24 3,740 - (672) - 263

43 -

TABLE 8

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

INTERCOMPANY BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

No.	Investee Company	Counterparty	Nature of Relationship (Note 2)		Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount (Note 1)	Terms	Percentage of Consolidated Total Gross Sales or Total Assets
0	The Company	Genius (HK) Genius (HK) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (Suzhou) GEM (VN) GEM (VN) GEM (VN) GEM (VN) GEM (VN) GEM (VN) Global (HK) Global (HK)	1 1 1 1 1 1 1 1 1 1 1 1 1 1	Sales Accounts receivable Sales Accounts receivable Property, plant and equipment for sale - current Other receivables Sales Accounts receivable Property, plant and equipment for sale - current Other receivables Interest income Other receivables Sales Property, plant and equipment for sale - current	$ 2,026 1,955 22,588 6,933 10,887 6,034 12,250 11,899 5,902 5,726 152 30,566 505 400	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Interest rate P.A. 2.1% According to working, capital conditions to change payment deeding Payment terms are four months Payment terms are four months	- - 3 - 1 - 2 - 1 - - 1 - -
1	GEM (Dongguan)	Genius (HK) Genius (HK) Genius (HK) Genius (HK) GEM (Suzhou) GEM (Suzhou)	3 3 3 3 3 3	Sales Accounts receivable Property, plant and equipment Other income Sales Accounts receivable	148,880 118,685 110 422 15,473 25,487	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months	19 2 - - 2 -
2	Genius (HK)	The Company The Company The Company GEM (Dongguan) GEM (Dongguan) GEM (Dongguan) GEM (VN) GEM (VN)	2 2 2 3 3 3 3 3	Sales Accounts receivable Other receivables Sales Accounts receivable Other receivables Sales Accounts receivable	40,279 41,281 13,503 70,731 43,261 429 10,633 10,361	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months	5 1 - 9 1 - 1 -
3	Global (HK)	The Company The Company GEM (Suzhou) GEM (VN) GEM (VN)	2 2 3 3 3	Sales Accounts receivable Sales Sales Accounts receivable	32,229 14,239 909 42,460 59,661	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months	4 - - 5 1
4	GEM (Suzhou)	The Company The Company Global (HK) Global (HK) Global (HK) Global (HK) Global (HK)	2 2 3 3 3 3 3	Sales Accounts receivable Sales Accounts receivable Property, plant and equipment Other receivables Other income	2,349 2,285 92,591 81,963 3,584 3,493 107	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months	- - 12 1 - - -
							(Continued)

44 -

No.	Investee Company	Counterparty	Nature of Relationship (Note 2)		Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount (Note 1)	Terms	Percentage of Consolidated Total Gross Sales or Total Assets
		GEM (Dongguan) GEM (Dongguan) GEM (Dongguan) GEM (Dongguan)	3 3 3 3	Sales Accounts receivable Property, plant and equipment Other receivables	$ 281,577 221,805 739 842	Payment terms are four months Payment terms are four months Payment terms are four months Payment terms are four months	35 4 - -
5	Vibo	GEM (Dongguan) GEM (Dongguan)	1 1	Other receivables Interest income	30,827 154	According to working, capital conditions to change payment deeding Interest rate P.A. 2.0%	1 -
6	Global (Cayman)	Global (HK) Global (HK)	1 1	Other receivables Interest income	12,339 61	According to working, capital conditions to change payment deeding Interest rate P.A. 2.0%	- -
7	GEM (Cayman)	GEM (VN) GEM (VN)	1 1	Other receivables Interest income	30,508 161	According to working, capital conditions to change payment deeding Interest rate P.A. 2.1%	1 -
8	GEM (VN)	Genius (HK) Genius (HK)	3 3	Sales Accounts receivable	67,774 27,454	Payment terms are four months Payment terms are four months	9 -

(Concluded)

Note 1: It was eliminated on consolidation.

Note 2: 1) Parent to subsidiary
2) Subsidiary to parent
3) Subsidiary to subsidiary
45 -

AI assistant

GEM — Interim / Quarterly Report 2017

52099_rns_2017-11-14_8ac83667-6eca-485c-9281-23b97c75a092.pdf

GEM Terminal Ind. Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Notice to Readers

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Net Loss Per Share) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERNATIONS

1) Amendment to IFRS 8 “Operating Segments”

1) IFRS 9 “Financial Instruments”

Impairment of financial assets

Transition

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1) Retirement benefits

2) Taxation

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

8. NOTES AND ACCOUNTS RECEIVABLE, NET

a. Accounts receivable

10. INVENTORIES

11. SUBSIDIARIES

12. PROPERTY, PLANT, AND EQUIPMENT

Three months ended March 31, 2017

Three months ended March 31, 2016

13. LONG-TERM PREPAYMENT FOR LEASE

14. NOTES PAYABLE AND ACCOUNTS PAYABLE

15. OTHER PAYABLES

16. BORROWINGS

17. RETIREMENT BENEFIT PLANS

18. EQUITY

b. Capital Surplus

c. Appropriation of Earnings and Dividend Policy

d. Other Equity Items

19. CONSOLIDATED LOSS BEFORE INCOME TAX

d. Depreciation and amortization

20. INCOME TAX

b. Income tax recognized in other comprehensive income (loss)

d. Income tax assessments

21. NET LOSS PER SHARE (EPS)

22. CAPITAL MANAGEMENT

23. FINANCIAL INSTRUMENTS

d. Financial risk management objectives and policies

1) Market risk

Sensitivity analysis

b) Interest rate risk

Sensitivity analysis

2) Credit risk

3) Liquidity risk

Liquidity and interest risk rate tables for non-derivative financial liabilities

24. TRANSACTIONS WITH RELATED PARTIES

b. Property lease

c. Guarantees

25. ASSETS PLEDGED AS COLLATERAL FOR SECURITY

26. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

27. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

28. ADDITIONAL DISCLOSURES

29. SEGMENT INFORMATION

Segment revenues and results, segment assets and liabilities

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE THREE MONTHS ENDED MARCH 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD MARCH 31, 2017

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

GEM TERMINAL IND. CO., LTD. AND SUBSIDIARIES

GEM Interim / Quarterly Report 2017