Primax - Annual Report 2015 | FinancialReports.eu

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Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. No.669, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) Tel: +886-2-2798-9008 www.primax.com.tw

H u m a n M a c h i n e I n t e r f a c e E x p e r t

1. Names, titles, telephone numbers and e-mail addresses of the Spokesperson and Deputy Spokesperson: Spokesperson: Sean Lin / Title: Special Assistant to the Chairman / Telephone: 886-2-2798-9008 / E-mail: [email protected] Deputy Spokesperson: Cherryie Chen / Title: Investor Relation Manager / Telephone: 886-2-2798-9008 / E-mail: [email protected]

2. Registered address and telephone of corporate headquarters Registered address of corporate headquarters: No. 669, Ruiguang Road, Neihu District, Taipei City / Telephone: 886-2-2798-9008

3. Name, address, website, and telephone number of share registration and transfer agent Name: SinoPac Securities / Address: 3F, No. 17, Bo ’ ai Road, Zhongzheng District, Taipei City / Telephone: 886-2-2381-6288 Website: http://www.sinopac.com

Names of CPAs: YUNG-HUA HUANG, CHI-LUNG YU / Name of CPA firm: KPMG Taiwan Address: 68F., No.7, Section 5, Sinyi Road, Sinyi District, Taipei City / Telephone: 886-2-8101-6666 Website: http://www.kpmg.com.tw

5. Names of the exchanges in foreign countries where the stock of PRIMAX is listed for trading and the means for inquiry of the securities: No

6. Company website: http:// www.primax.com.tw

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I. Letter to shareholders

01 1. 2015 Financial Performance 02 2. 2016 Business Strategy and Technology Developments 02 3. Commitment to Sustainability and Corporate Social Responsibility 03

04

Establishment date 04 2. Company background 04

III. Corporate Governance Report 05

Organizational system 05 2. Profiles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch officers 07
Profiles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year 11
Corporate governance operation 16 5. CPAs fees 30 30
CPAs replacement
If the Company's Chairman, General Manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its CPA or at an affiliated enterprise, their names, titles, and the service time with the accounting firms and affiliated enterprise should be disclosed 31

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The change in equity transfer and equity pledge of the directors, supervisors, managers, and shareholders with over 10% shareholding in the most recent year and as of the printing date of the annual report. 31
The Top-Ten shareholders who are related party mutually, or spouse, and relatives within the second degree of kinship 32
The stock shares of one invested business held by the Company, the Company's directors, supervisors, and managers, and the business controlled by the Company directly or indirectly, and the consolidated shareholding ratio. 33
IV. Capital Overview 35 1. Capitalization 35 2. Composition of Shareholders 37 3. Distribution Profile of Share Ownership 38 4. List of Major Shareholders 38 5. Market price, net worth, earnings, and dividends per share within two (2) years and the related information 38
1. The Company's dividend policy and its implementation 39 7. The impact of the stock dividend proposed in the shareholders' meeting on the Company's business performance and the earnings per share: No dividend distribution scheduled 40
1. Remuneration to employees, directors, and supervisors 40 9. The Company's buying back shares 41 10. The process of corporate bonds, preferred stock, and GDR 41 11. Employee stock warrant status 41

Primax Electronics Ltd. 2015 Annual Report

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VII. Review and analysis of the financial
status and financial performance,
and risk management 178
1. Financial status 178
2. Financial performance 179
3. Cash flow 180
4. The impact of major capital expenditures on financial business in the
most recent year 180
5. Investment policy in the most recent year, main reason for its profits
or losses, improvement plan and the investment plans within the
year 181
6. Risk analysis and evaluation 182
185
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The process of new restricted employee shares 44 13. Stock acquisition or transfer from other companies with new shares issued 46
Fund plan and its execution 46

V. Operation overview 47 1. Business content 47 2. Market and production and sales overview 63 3. The number of staffs, average service years, average age and academic degree of staffs in the last two years and as of the printing date of the annual report. 70

Environmental protection expenses information 70 5. Labor relations 71 6. Material contracts 72

VI. Financial review 73 1. The condensed balance sheet and consolidated income statement of the last five years 73

The financial analysis of the last five years 78 3. The Audit Committee's review report on the 2015 financial statements 83 4. The 2015 consolidated financial statements and notes had been audited by the CPAs 84
The 2015 Proprietary financial statements and notes had been audited by the CPAs. 136

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Other important events

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VIII. Special notes 186 1. Affiliated company's information 187 2. The process of private placement in the most recent year and as of the printing date of the annual report 193
1. The disposition of the Company's stock shares by the subsidiaries in the most recent year and as of the printing date of the annual report 193 193

4. Other supplementary information

The occurrence of the events affecting shareholders' equity or securities price as defined in Article 36, Paragraph 2 Section 2 of Securities Exchange Act in the most recent year and as of the printing date of the annual report 193
affiliated companies, if any, on the Company's financial position in the most recent year and as of the printing date of the annual report 177

iii Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report iv

1. 2015 Financial Performance

（ 1 ） Financial Results

The consolidated revenues of Primax group in 2015 amounted to NT$65,589,293 thousand, an increase of 26% over 2014. The consolidated net income amounted to NT$1,816,935 thousand, an increase of 13% over 2014.

（ 2 ） Budget Execution

（ 3 ） Cash Flow Analysis

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Unit: NT$1,000
Item 2015 2014 Net change
Net cash inflow (outflow) from operating activities 5,022,351 3,354,195 1,668,156
Net cash inflow (outflow) from investing activities (1,974,604) (3,756,779) 1,782,175
Net cash inflow (outflow) from financing activities (2,227,894) 2,279,602 (4,507,496)
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（ 4 ）

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I. Letter to shareholders

Ladies and Gentlemen:

Notwithstanding of the severe market challenges around the world, the consolidated revenues and profits of Primax group kept growing to a record high in 2015, mainly because of its diversified product portfolio, solid customer base, and continuous investments in new technology. New products were launched from different business units and new facilities were initiated successfully. In PC segment, the growth momentum came from more high-end products and different human machine interface applications, such as NB trackpads and gaming peripherals. In non-PC segment, on the other hand, the camera module business was growing because of increasing demands for high-end cameras and adoptions of OIS (Optical Image Stabilization). At the same time, audio products also enjoyed stable growth through new business developments and promising project deliveries. Non-PC segment has become Primax's growth engine, driven by camera module and audio business. Aside from the revenue growth, Primax continues its efforts to manage costs and expenses in order to protect profits and to maximize total return to shareholders.

The following is the operation highlight of Primax in 2015

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Item 2015 2014
Return on Equity (%) 15.65 18.03
Operating Income to paid-in capital (%) 49.14 42.10
Profit before tax to paid-in capital (%) 56.05 47.11
Net Profit Margin (%) 2.77 3.08
Earnings per share (NT$) 4.06 3.57
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（ 5 ） R&D Investments

Primax group spent NT$2,104,487 thousand on research and development in 2015. This investments were mainly for new product and new technology developments, as well as manufacturing process improvements, mainly automation.

2. 2016 Business Strategy and Technology Developments

the reduction of production cost, as the PC market is relatively mayure and fairly stable. At the same time, new application technologies will also be developed to align with market needs in peripherals for PC gaming and advanced touch products to support stable growth in this segment. For non-PC segment, including camera module, fingerprint module, multifunction printers, and wired/wireless audio products, Primax will reinforce the upgrade of R&D capabilities. With extended application of image products, camera feature migration for smartphones, and the evolution of acoustic technologies, Primax will continue to develop new products and technologies, such as high-end camera module, fingerprint module, and high-end audio systems and headphones. It's

Focus on the IT industry's continuously moving towards the development of cloud technology, mobile devices, digital home, and the Internet of Things (IoT), Primax will continue its efforts to the research and development of core technologies such as touch, fingerprint module, backlight keyboard, wired/ wireless audio products, and packaging process of high-end camera modules. In addition, Primax will actively develop new products to optimize the product profile and therefore support both top line and bottom line growth.

In terms of the sales development strategy of our two business segments, for PC segment, Primax seeks to continue the upgrade of product quality and

01 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 02

not only to increase the market share, but also to leverage existing technologies for new products for different applications and platforms in the mid to long term. PC peripheralPC peripheralPC peripheralIn terms of production, the Phase Five building of the Dongguan Plant was completed in 2015 and has been successfully put into production that will become the Company's fully integrated automated audio products production center and it willsignificantly improve our capacity and efficiency. The Chongqing new plant upon its completion will be the main production base for PC peripheral products

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and will be extended to more automation process of human-machine interface products. It will also serve as the second largest production base of the Primax Group outside Dongguan, both to diversify the risk of single-site production and to improve the scale and efficiency.

3. Commitment to Sustainability and Corporate Social Responsibility

Primax will have the second CSR Report published this year. At the same time, this report will be prepared in accordance with the GRI G4 standards and will apply to SGS for certification in accordance with the AA1000 Type I high assurance level in order to demonstrate our commitment to sustainability and corporate social responsibility.

We believe that solid corporate governance is a priority in fulfilling corporate social responsibility. The substantive supervision and authorization by top management is the only way to have a sustainable and effective execution. Therefore, corporate governance is the first priority to Primax in the corporate social responsibility plan. We also set up a dedicated CSR office to handle the related tasks full-time, which will regularly report to the Board of Directors the strategies, action plans, and progress in order to ensure the implementation at all global operations bases.

The "People-oriented" belief is one of the core values of Primax. In addition to the "Healthy Workplace" to be continued this year, we have also planned the "Peace of Mind Workplace" and "Friendly Workplace" aiming for a higher level of employee care goal to

provide employees with love, respect and a sense of belonging. These sensible employees welfare measures will help attract more talents to join the Primax family, to maintain the stability of the staff team and to support the Company's long-term strategic planning positively.

As a leading consumer electronics supplier, we expect ourselves to lead the industry and to preclude the use of toxic substances from a variety of consumer electronics products. We have eliminated most mercury and arsenic in our products and use lead-free raw materials. In addition, we have outlined the environmentally friendly objectives of "reducing energy consumption density and hazardous waste emission". The Company aims to achieve better energy efficiency with absolute strength and determination.

In addition to the annual reports, Primax will also continue to issue annual Corporate Social Responsibility Reports to regularly disclose nonfinancial operating results; also, refer to the feedback of stakeholders, learn from external experts and leading companies, and act to achieve sustainability

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Chairman: Liang, Li-Sheng

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General Manager: Yang, Hai-Hung

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II. 1. Establishment date: March 20, 2006

2. Company background:

． March 2006: The company was approved to establish on March 20 2006. Formerly titled as Primax Electronics Ltd., the company had initial capital of NT$1,000,000.
． October 2007: The company was renamed as Primax Electronics Ltd.
． December 2007: The company acquired PRIMAX Technology Co., Ltd. (hereinafter, former "PRIMAX"). The company remained the acquirer and former PRIMAX remained the acquiree.
． February 2008: The company renamed as PRIMAX Electronics Limited with Mr. Liang, Li-Sheng acted as the Chairman.
． December 2009: IPO of the company shares.
． December 2009: The company listed it stock for trading in the emerging stock market of Taiwan.
． December 2009: The Board of Investment, MOEA, approved PRIMAX to invest for the establishment of PRIMAX Kunshan Plant via a third place.
． February 2011: The Board of Investment, MOEA, approved PRIMAX to invest for the establishment of PRIMAX Chongqing Plant via a third place.
． October 2012: PRIMAX successfully listed its stock for trading at TWSE.
． October 2012: New capital of NT$235,290,000, raised by issuing new shares and made its stated capital amounting to NT$4,269,698,210.
． January 2014: PRIMAX successfully acquired 70% of the equity shares issued by speaker manufacturer Tymphany Group and made registration of change in shareholding.
． January 2015: PRIMAX successfully acquired 30% of the equity shares issued by automobile and aerospace precision machinery manufacturer, GLOBALTEK.

03 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 04

（ 2 ） The business operations of each main department

III. Corporate Governance Report

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1. Organizational system

（ 1 ） Organizational Structure

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Shareholders
Remuneration Meeting
Committee
B oard of Directors
Audit
CSR Office
Committee Chairman
Audit Office
CEO
Investor Relations
Global Computer Legal Affairs and IT Human
Peripherals Intellectual Property Resources
deployment Unit Rights Division Department Department
Quality Finance and
C hina Non-Computer Technology Assurance Administration
Peripherals Unit R&D Center Department Division
J apan
USA
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Department Main job responsibilities
1. Supervising the adequate presentation of the Company's financial statements.
2. Supervising the commission (discharge) of the CPAs and their independence and
performance.
Audit Committee
3. Supervising the effective implementation of the Company's internal control.
4. Supervising the Company's compliance with the relevant laws and regulations.
5. Supervising the control of the Company's existing or potential risks.
6. Supervising the performance of the Company's internal audit department.
1. Enact the policy, system and standard and structure of remuneration to the directors
(including the Chairman), general manager, and vice general manager in accordance
with the Company's objectives, operational performance and competitive
environment, and has it reviewed as required.
Remuneration
Committee 2. Periodically assess the operational performance of the chairman, general manager,
and vice general manager and approve the contents and amount of their respective
salaries and compensation.
3. Assess and approve the welfare standard of the general manager and vice general
manager.
The CSR Office is established by the Chairman with the authorization of the Board of
Directors:
1. Responsible for enacting CSR policies, systems or related management approach
2. Assist each business and staff unit to promote and implement corporate social
CSR Office responsibility projects in response to the Company's economic, environmental and social issues
3. Study domestic and foreign benchmark enterprises' best practices of business
sustainable practices and provide advice and guidance to the relevant departments
for practice in order to continue to strengthen the Company's competitiveness of its
sustainable operations
Review and audit the implementation of the internal control system, and regularly
report it to the Board of Directors and management, and measure operational
Audit Office efficiency with recommendations for improvement suggested in a timely manner in
order to ensure effective implementation of the internal control system and to improve
the effectiveness of the overall organization
Investor Relations A spokesman system and operation, investor relations activities and opinions process,
external information disclosure, and media publishing and contact related business
1. Quality system planning and supervision
2. Design quality and technology upgrade
Quality Assurance
3. Product quality upgrade
Department
4. Customer complaints process and improvement
5. Employee quality training plan and implementation
Legal Affairs and
Intellectual Property Rights Intellectual property rights management and legal affairs handling
Division
Finance and
1. Dealing with accounting, finance, tax and shareholder service matters
Administration Division 2. Supporting project implementation and promotion matters
1. Employees and Human Resource Management
Human Resources 2. Salary and benefits management
3. Education and Training and Development
Department 4. General Affairs Services
5. Health and Safety Management
It is divided into PC peripheral products and non-PC peripheral products; also, each
business group is in charge of research and development and marketing.
R&D:
New product research, design and development
Product Business Group
New product project assessment, analysis and planning
New product manufacturing technology and document and data transfer
Marketing
Product planning, marketing and market development
Be responsible for the research, design and development of the core technology of all
Technology R&D Center products.
1. Organize and plan the safety, implementation and system integration of the
Company's electronic information
2. The enactment and maintenance of computerized information management system
and current manual processes analysis and future operating process design
3. The new application system planning and development and the function expansion
IT Department and update of the developed application system
4. User education and training and operational planning
5. Disaster recovery management planning and execution
6. Equipment Planning and Management
7. Computer operation management
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05 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	2. Profles of the Directors, Supervisors, General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers （1）Directors and Supervisors Directors and Supervisors（1）	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %
Title	Nationality or Place of	Name	Date Eltd	Term Y	Date First	Shareholding when elected		Current shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement			Main experience dti d d				Currently hold a position with th C				Other ofcers, directors, or supervisors who are a spouse or a relative within the second degree of kinship
	Registration		ece	(ears)	Elected	Shares	%	Shares	%	Shares	%	Shares		%	(eucaon an egree)				e ompany and others				Title						Name				Relationship
Chairman Republic of China Liang, Li-Sheng 6.29.2015 3 years 10.23.2009 (Note 8) 1,500,001 0.34 1,500,001 0.34										0 0		0 0 Department of Business Administration, Tamkang University Chairman of DestinyTechnologyCorporation Note 1											Director/General Manager Yang, Hai- Hung In-law
Director/General Manager Republic of China Yang, Hai-Hung 6.29.2015 3 years 10.23.2009 (Note 8) 1,962,465 0.45 1,812,465 0.41										0 0		0 0 Master of Mechanical Engineering, University of Texas, USA General Manager of Products Division of PRIMAX Note 2											Chairman Liang, Li- Sheng In-law
Director Republic of China Yang, Chi-Ting 6.29.2015 3 years 3.11.2011 1,926,963 0.44 1,926,963 0.44										1,900,962 0.43		0 0 MBA, University of Southern California, USA Chailease HoldingCompanyLimited Chief Auditor Note 3											－－－
Director and Business Unit General Manager Republic of China Pan, Yung- Chung 6.29.2015 3 years 9.5.2014 8,291,046 1.89 8,291,046 1.88										0 0		0 0 Department of Electronics, Feng Chia University Vice General Manager of Business Department of PRIMAX Note 4											Director and General Manager of Business Department Pan Yung- Tai Brothers
Director and Business Unit General Manager Republic of China Pan Yung-Tai 6.29.2015 3 years 9.5.2014 4,617,987 1.05 4,852,599 1.10										815,517 0.18		0 0 Department of Mechanical Engineering, Chung Yuan Christian University Vice General Manager of Ether Optronics Note 5											Director and General Manager of Business Department Pan, Yung- Chung Brothers
Director and Vice General Manager Republic of China Tsao, Chung- Feng 6.29.2015 3 years 6.29.2015 3,078,651 0.70 3,148,651 0.71										406,586 0.09		0 0 EMBA, National Taiwan University PRIMAX Senior Assistant General Manager None											－－－
Independent Director Republic of China Ku, Tai-Chao 6.29.2015 3 years 3.30.2010 0 0 0 0										0 0		0 0 Bachelor of Law, National Taiwan University Vice President of Taiwan Stock Exchange Corporation None											－－－
Independent Director Republic of China Wei, Yung-Tu 6.29.2015 3 years 6.29.2015 500,000 0.11 620,000 0.14										0 0		1,000,000 0.23 MBA, University of Georgia USA President of Deloitte & Touche Note 6											－－－
Independent Director Republic of China Cheng, Chih-Kai 6.29.2015 3 years 6.29.2015 0 0 0 0										0 0		0	0 Department of Management Science, National Chiao Tung University, Senior Vice President of Synnex USA Note 7										－－－
													Directors and Supervisors（2）										04.30.2016
													Conditions Name			Whether meet one of the following professional qualifcation requirements together with at least fveyears of work experience?				Meet the independence criteria (Note)												Number of other public companies in which the individual is concurrently serving as an Independent Director
																An instruction or higher position in a Department of Commerce, Legal Afairs, Finance, Accounting, or Other Academic Department related to the business needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certifed Public Accountant, or Other Professional or Technical Specialist who has passed a national examination and been awarded a Certifcate in a profession necessary for the business of the Company	With work experience in the areas of commerce, legal afairs, fnance, or accounting, or otherwise necessary for the business of the Company		1	2	3		4	5	6	7	8		9	10
													Liang,Li-Sheng			－－ＶＶＶＶＶ												ＶＶ 0
													Yang,Hai-Hung			－－ＶＶＶＶＶ												ＶＶ 0
													Yang,Chi-Ting			－－ＶＶＶＶＶＶＶＶＶＶＶ 0
													Pan Yung-Tai			－－ＶＶＶＶ												ＶＶ 0
													Pan,Yung-Chung			－－ＶＶＶＶ												ＶＶ 0
													Tsao,Chung-Feng			－－ＶＶＶＶＶＶＶＶＶＶ 0
													Ku,Tai-Chao			－－ＶＶＶＶＶＶＶＶＶＶＶ 0
													Wei,Yung-Tu			－ＶＶＶＶＶＶＶＶＶＶＶＶ 3
													Cheng,Chih-Kai			－－ＶＶＶＶＶＶＶＶＶＶＶ 0

（ 1 ） Directors and Supervisors

(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under someone else's name(s), in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
(5) Not a director, supervisor, or employee of an institutional shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five (5) in holdings.

（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers	（2）Profles of the General Manager, Vice General Manager, Assistant General Manager, department heads, and branch ofcers						04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %	04.30.2016 / Unit: Shares / %
Title			Date	Shareholding		Spouse & Minor Shareholding			Shareholding by Nominee Arrangement		Main experience	Currently serving	Manager who is the spouse or a relative within the second degree of kinship
	Nationality	Name	Elected	Shares	%	Shares	%		Shares	%	(education and degree)	duties at other company	Title	Name	Relationship
Director/General Manager Republic of China Yang, Hai- Hung 07.02.2010				1,812,465 0.41		0 0		0 0 Master of Mechanical Engineering, University of Texas, USA General Manager of Products Department of PRIMAX Note 1					－－－
Director and General Manager of Business Department Republic of China Pan, Yung- Chung 12.28.2007 (Note 8)				8,291,046 1.88		0 0		0 0 Department of Electronics, Feng Chia University Vice General Manager of Business Department of PRIMAX Note 2					Director and General Manager of Business Department Pan Yung- Tai Brothers
Director and General Manager of Business Department Republic of China Pan Yung- Tai 12.28.2007 (Note 8)				4,852,599 1.10		815,517 0.18		0 0 Department of Mechanical Engineering, Chung Yuan Christian University Vice General Manager of Ether Optronics Note 3					Director and General Manager of Business Department Pan, Yung- Chung Brothers
Director and Vice General Manager Republic of China Tsao, Chung- Feng 12.28.2007 (Note 8)				3,148,651 0.71		406,586 0.09		0 0 EMBA, National Taiwan University PRIMAX Senior Assistant General Manager None					－－－
Senior Vice General Manager Republic of China Lee, Yi- Ping 1.2.2013				81,000 0.02		0 0		0 0 MBA, University of Central Missouri, USA CFO, Delta Networks, Inc. Note 4					－－－
Vice General Manager Republic of China Chou, Yen- Chou 1.17.2011				412,000 0.09		0 0		0 0 Doctoral of Industrial Engineering, University of Cincinnati USA Senior Assistant General Manager of Operations,Hon Hai Group None					－－－
Vice General Manager Republic of China Liu, Chia- Lun 2.1.2012				147,000 0.03		0 0		0 0 Master of Industrial Engineering and MBA, California State Polytechnic University, Pomona USA Senior Director of TOP VICTORY ELECTRONICS (TAIWAN) CO., LTD. Note 5					－－－
Vice General Manager Republic of China Lee, Chiu- Sheng 10.1.2014				400,000 0.09		42,000 0.01		0 0 Department of Industrial Engineering, National Tsing Hua University FOXCONN VP Operations Note 6					－－－
Vice General Manager Republic of China Chiang, Yan-Ying 4.1.2015				684,106 0.15		0 0		0 0 Department of Labor Relations, Chinese Culture University; EMBA, National Chengchi University PRIMAX Senior Assistant General Manager None					－－－
Vice General Manager Republic of China Chang, Ching-Kai 4.1.2015				589,703 0.13		0 0		0 0 Department of Information Engineering, Tamkang University PRIMAX Senior Assistant General Manager None					－－－
Vice General Manager Republic of China Chang, Yao-Han 10.7.2015				75,000 0.02		0 0		0 0 Tamkang University Graduate Institute of International Afairs and Strategic Studies PRIMAX Senior Assistant General Manager None					－－－
Vice General Manager Republic of China Wei, Hao- San 10.7.2015				353,732 0.08		20,000 0.005		0 0 Electrical Engineering Institute, California State University, Long Beach (USA) PRIMAX Senior Assistant General Manager Note 7					－－－
Assistant General Manager Republic of China Pan, Yen- Jen 12.5.2013				15,000 0.003		0 0		0 0 Department of Accounting, Soochow University Assistance General Manager, Auditing Services,PwC Taiwan None					－－－

（ 2 ） General Manager, department heads, and branch officers

Note 4: Primax Tech. (Cayman Holding) Ltd. Director, Primax Ind. (Cayman Holding) Ltd. Director, and Destiny Technology (Japan) Corporation Director.
Note 6: Dongguan PRIMAX Electronic Telecommunication Products Co., Ltd. Director and General Manager, Kunshan Primax East Poly-Electronics Co., Ltd. General Manager, and Primax Electronics (Chongqing) Corp. Ltd. General Manager.

3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	3. Profles of the Remuneration to Directors, Supervisors, General Manager, and Vice General Managers in the most recent year: （1）Remuneration to Directors in the most recent year (2015)	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares	Unit: NT$1,000 / 1,000 shares
Title	Name	Remuneration to Directors								Ratio of total remuneration (A+B+C+D) to net income (%) (Note 1)		Relevant Remuneration Received by Directors Who are Also Employees														Ratio of total remuneration (A+B+C+D +E+F+G) to net income (%) (Note 1)			Compensation Paid to Directors from an Invested Company Other than the Company's Subsidiary
		Base Compensation (A)		Pension (B)		Compensation to Directors (C) (Note 2)		Bonus to Directors (D)				Salary, Bonuses, and Allowances(E)		Pension (F)		Proft Sharing- Employee Bonus (G) (Note 3)					Exercisable Employee Stock Options (H) (Note 4)		New Restricted Employee Shares (I) (Note 5)
		The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Company	All Consolidated Entities	The Coman		All Consolidated Entities			The Company	All Consolidated Entities	The Company		All Consolidated Entities	The Company		All Consolidated Entities
																py Cash Stock		Cash Stock
Chairman Liang, Li-Sheng			11,298	0	0	28,640	28,640	430	430	2.28	2.28	44,339	44,339	0	0	0	0	0	0		211	211	240		240	4.78		4.78	0
Director/General Manager Yang, Hai-Hung
Director Yang, Chi-Ting
Director and General Manager of Business Department Pan, Yung- Chung
Director and General Manager of Business Department Pan Yung-Tai
Director and Vice General Manager Tsao, Chung- Feng (Note 6)
Independent Director Ku, Tai-Chao
Independent Director Wei, Yung-Tu (Note 6)
																Name of director
													Range of remuneration paid to each director of the Company
																Total remuneration paid (A+B+C+D)								Total remuneration paid (A+B+C+D+E+F+G)
																The Company				All Consolidated Entities				The Company			All Consolidated Entities
													Less than NT$2,000,000			Liu,Jong-Shi Liu,Jong-Shi Liu,Jong-Shi Liu,Jong-Shi
													NT$2,000,000 (inclusive) ~ NT$5,000,000 (exclusive)			Yang, Hai-Hung; Pan Yung-Tai; Pan, Yung-Chung; Tsao, Chung-Feng; Yang, Chi-Ting; Ku, Tai-Chao; Wei, Yung-Tu and Cheng, Chih-Kai Yang, Hai-Hung; Pan Yung-Tai; Pan, Yung-Chung; Tsao, Chung-Feng; Yang, Chi-Ting; Ku, Tai-Chao; Wei, Yung-Tu and Cheng, Chih-Kai Yang, Chi-Ting; Ku, Tai-Chao; Wei, Yung- Tu and Cheng, Chih- Kai Yang, Chi-Ting; Ku, Tai- Chao; Wei, Yung-Tu Cheng, Chih-Kai
													NT$5,000,000 (inclusive) ~ NT$10,000,000(exclusive)			－－ Tsao, Chung-Feng Tsao, Chung-Feng
													NT$10,000,000 (inclusive) ~ NT$15,000,000 (exclusive)			Liang, Li-Sheng Liang, Li-Sheng Liang, Li-Sheng; Pan, Yung-Tai; and Pan, Yung-Chung Liang, Li-Sheng; Pan, Yung-Tai; and Pan, Yung-Chung
													NT$15,000,000 (inclusive) ~ NT$30,000,000(exclusive)			－－ Yang, Hai-Hung Yang, Hai-Hung
													NT$30,000,000 (inclusive) ~ NT$50,000,000(exclusive)			－－－－
													NT$50,000,000 (inclusive) ~ NT$100,000,000 (exclusive) －－－－
													NT$100,000,000 and more －－－－
													Total 10 10 10 10

（ 1 ） Remuneration to Directors in the most recent year (2015)

（ 2 ） Remuneration to supervisors in the most recent year (2015)

Unit: NT$1,000

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Remuneration to supervisors Ratio of total
remuneration Any
Remuneration Remuneration Service (A+B+C) to net remuneration
(A) (B) operation fees income (%) received from
Title Name (Note 1) (C) (Note 2) the invested
company
The All The All The All The All other than the
Company Consolidated Entities Company Consolidated Entities Company Consolidated Entities Company Consolidated Entities subsidiaries
Tsai,
Supervisors You-Wei
(Note 3)
Hsu,
Supervisors Chiang-Chan 0 0 3,360 3,360 0 0 0.1895 0.1895 None
(Note 3)
Chang,
Supervisors Deh-Tsai
(Note 3)
----- End of picture text -----

Note 1: Refers to the earnings distribution proposal in the most recent year (2015) resolved by the Board of Directors

(03.24.2016) for an amount of NT$32,000 thousand to be distributed as remuneration to directors and supervisors. The remuneration amount to be distributed in current year will be proportionally to the amount distributed last year.

Note 2: The Company's 2015 net income amounted to NT$1,773,122 thousand.

Note 3: The full election of the Board Directors was held on 06.29.2015 with the Audit Committee formed by the Independent Directors to replace the Supervisors.

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Name of supervisors
Range of remuneration paid to
each supervisor of Total remuneration paid (A+B+C)
the Company
The Company All Consolidated Entities (D)
Tsai, You-Wei, Hsu, Chiang-Chan, Tsai, You-Wei, Hsu, Chiang-Chan, and Chang,
Less than NT$2,000,000
and Chang, Deh-Tsai Deh-Tsai
NT$2,000,000 (inclusive) ~ －－
NT$5,000,000(not inclusive)
NT$5,000,000 (inclusive) ~ －－
NT$10,000,000 (not inclusive)
NT$10,000,000 (inclusive) ~ －－
NT$15,000,000 (not inclusive)
NT$15,000,000 (inclusive) ~ －－
NT$30,000,000 (not inclusive)
NT$30,000,000 (inclusive) ~ －－
NT$50,000,000 (not inclusive)
NT$50,000,000 (inclusive) ~ －－
NT$100,000,000 (not inclusive)
－－
NT$100,000,000 and more
Total 3 3
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（ 3 ） Remuneration to General Manager and Vice General Manager in the most recent year (2015)

Unit: NT$1,000 / 1,000 shares

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Ratio of total Exercisable New
Bonuses Profit Sharing-
Salary (A) Pension (B) Allowances and Employee Bonus(D) remuneration (A+B+C+D) to net income Employee OptionsStock Restricted Employee Shares
(C)
(Note 1) (%) (Note 2) (Note 3) (Note 4) Compensation
Paid to
Directors from
an Invested
Company
Other than the
Company's
Subsidiary
Director/General Yang, Hai-
Manager Hung
Director and
General Manager Pan, Yung-
of Business Chung
Department
Director and
General Manager
of Business Pan Yung-Tai
Department
Senior Vice
General Manager [Lee, Yi-Ping]
Director/Vice Tsao, Chung-
General Manager Feng
Vice General Pan, Wu-
Manager (Note 5) Lung 30,399 32,037 0 0 84,479 84,479 0 0 0 0 6.48% 6.57% 636 636 1,790 1,790 None
Vice General Chou, Yen-
Manager Chou
Vice General
Liu, Chia-Lun
Manager
Vice General Lee, Chiu-
Manager Sheng
Vice General Chiang, Yan-
Manager (Note 6) Ying
Vice General Chang,
Manager (Note 7) Ching-Kai
Vice General Wei, Hao-
Manager (Note 8) San
Vice General Chang, Yao-
Manager (Note 9) Han
Title Name The Entities All
Company Consolidated
Entities Entities Entities Entities Entities Entities
The Company The Company The Company The Company The Company The Company
All Consolidated All Consolidated All Consolidated Cash Stock Cash Stock All Consolidated All Consolidated All Consolidated
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Note 1: Refers to the earnings distribution proposal in the most recent year (2015) resolved by the Board of Directors (03.24.2016) for an amount of NT$78,500 thousand to be distributed as cash dividend to employees. The employee bonus to General Manager and Vice General Manager had not yet been discussed by the Remuneration Committee as of the printing date of the annual report; therefore, the cash dividend is distributed in current year proportionally to the amount distributed last year.

Note 2: The net income of the Company in 2015 amounted to NT$1,773,122 thousand.

Note 3: Refers to the Company's employee warrant not yet executed by the recipients referred to above as of the printing date of the annual report (05.13.2016).

Note 4: Refers to the number of new restricted employee shares issued by the Company not yet executed by the recipients as of the printing date (05.13.2016) of the annual report.

Note 5: Pan, Wu-Lung retired on 03.31.2015.

Note 6: Chiang, Yan-Ying was promoted as the Vice General Manager on 04.01.2015.

Note 7: Chang, Ching-Kai was promoted as the Vice General Manager on 04.01.2015.

Note 8: Wei, Hao-San was promoted as the Vice General Manager on 10.07.2015. Note 9: Chang, Yao-Han was promoted as the Vice General Manager on 10.07.2015.

13 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 14

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Range of remuneration paid to Name of General Manager and Vice General Manager
each General Manager and Vice
General Manager of the Company The Company All Consolidated Entities (E)
Less than NT$2,000,000 －－
NT$2,000,000 (inclusive) ~
NT$5,000,000 (not inclusive) Chiang, Yan-Ying Chiang, Yan-Ying
Tsao, Chung-Feng, Lee, Chiu-Sheng, Tsao, Chung-Feng, Lee, Chiu-Sheng,
NT$5,000,000 (inclusive) ~ Liu, Chia-Lun, Pan, Wu-Lung Liu, Chia-Lun, Pan, Wu-Lung
NT$10,000,000 (not inclusive) Pan, Yung-Chung and Chang, Yao-Han Pan, Yung-Chung and Chang, Yao-Han
Chang, Ching-Kai and Wei, Hao-San Chang, Ching-Kai and Wei, Hao-San
NT$10,000,000 (inclusive) ~ Chou, Yen-Chou; Lee, Chou, Yen-Chou; Lee,
NT$15,000,000 (not inclusive) Yi-Ping; Pan Yung-Tai Yi-Ping; Pan Yung-Tai
NT$15,000,000 (inclusive) ~
NT$30,000,000 (not inclusive) Yang, Hai-Hung Yang, Hai-Hung
NT$30,000,000 (inclusive) ~ －－
NT$50,000,000 (not inclusive)
NT$50,000,000 (inclusive) ~ －－
NT$100,000,000 (not inclusive)
NT$100,000,000 and more －－
Total 13 13
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（ 4 ） Name of the managers receiving remuneration to employees in the most recent year (2015) and the distribution implemented

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Unit: NT$1,000 / 1,000 shares
Stock Cash Ratio of total amount
Title Name amount amount Total to net income (%)
(Note 1) (Note 1) (Note 2)
Director/General Manager Yang, Hai-Hung
General Manager of Business Department Pan, Yung-Chung
General Manager of Business Department Pan, Yung-Tai
Director/Vice General Manager Tsao, Chung-Feng
Vice General Manager (Note 5) Pan, Wu-Lung
Vice General Manager Chou, Yen-Chou
Vice General Manager Liu, Chia-Lun － 0 － 0%
Senior Vice General Manager Lee, Yi-Ping
Vice General Manager Lee, Chiu-Sheng
Vice General Manager (Note 6) Chiang, Yan-Ying
Vice General Manager (Note 7) Chang, Ching-Kai
Vice General Manager (Note 8) Wei, Hao-San
Vice General Manager (Note 9) Chang, Yao-Han
Assistant General Manager Pan, Yen-Jen
Managers
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Note 1: Refers to the earnings distribution proposal in the most recent year (2015) resolved by the Board of Directors (03.24.2016) for an amount of NT$78,500 thousand to be distributed as cash dividend to employees. The employee bonus to General Manager and Vice General Manager had not yet been discussed by the Remuneration Committee as of the printing date of the annual report; therefore, the cash dividend is distributed in current year proportionally to the amount distributed last year.

Note 2: The net income of the Company in 2015 amounted to NT$1,773,122 thousand.

Note 3: Refers to the Company's employee warrant not yet executed by the recipients referred to above as of the printing date of the annual report (05.13.2016).

Note 4: Refers to the number of new restricted employee shares issued by the Company and received by the recipients as of the printing date (05.13.2016) of the annual report.

Note 5: Pan, Wu-Lung retired on 03.31.2015.

Note 6: Chiang, Yan-Ying was promoted as the Vice General Manager on 04.01.2015.

Note 7: Chang, Ching-Kai was promoted as the Vice General Manager on 04.01.2015.

Note 8: Wei, Hao-San was promoted as the Vice General Manager on 10.07.2015.

Note 9: Chang, Yao-Han was promoted as the Vice General Manager on 10.07.2015.

（ 5 ） The ratio analysis of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, supervisors, general manager, and vice general manager of the Company to the net income in the proprietary or independent financial report; in addition, the policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance and future risk.
The ratio analysis of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, supervisors, general manager, and vice general manager of the Company to the net income in the proprietary or independent financial report:

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Ratio of total remuneration to net income (loss)
Identity 2014 2015
The Company Consolidation The Company Consolidation
Director 3.63% 3.63% 4.78% 4.78%
Supervisors 0.51% 0.51% 0.19% 0.19%
General Manager / Vice General Manager 4.31% 4.24% 6.48% 6.57%
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The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance:

The Company's remuneration to Directors and Supervisors is proposed to the Board of Directors and resolved in the shareholders' meeting in accordance with the Articles of Association. The remuneration to the General Manager and Vice General Manager is defined in accordance with the job position held and the responsibilities borne, and by referring to the industry standard for the equivalent job position. In addition, it is proposed to the Remuneration Committee and the Board of Directors for resolutions; moreover, the performance bonus is based on the Company's current operating performance and individual job performance.

4. Corporate governance operation

（ 1 ） Board of Directors operation:

The attendance of the directors and supervisors for the 9 Board meetings (A) held by the Company as of the printing date of the annual report (6 meetings in 2015 and 3 meetings in 2016) as follows:

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Attendance
Title Name Attendance By Rate Remark
in Person B Proxy (%)
[B/A]
Chairman Liang, Li-Sheng 9 0 100 Re-elected on 6/29/2015
Director Yang, Hai-Hung 7 2 78 Re-elected on 6/29/2015
Director Yang, Chi-Ting 7 2 78 Re-elected on 6/29/2015
Director Pan Yung-Tai 8 1 89 Re-elected on 6/29/2015
Director Pan, Yung-Chung 8 1 89 Re-elected on 6/29/2015
Director Tsao, Chung-Feng 6 0 100 Inauguration on 6/29/2015 with 6 meetings scheduled to attend.
Independent Ku, Tai-Chao 9 0 100 Re-elected on 6/29/2015
Director
IndependentDirector Wei, Yung-Tu 6 0 100 Inauguration on 6/29/2015 with 6 meetings scheduled to attend.
IndependentDirector Cheng, Chih-Kai 6 0 100 Inauguration on 6/29/2015 with 6 meetings scheduled to attend.
IndependentDirector Liu, Jong-Shi 2 0 67 Discharged on 6/29/2015 with 3 meetings scheduled to attend.
Supervisors Tsai, You-Wei 3 0 100 Discharged on 6/29/2015 with 3 meetings scheduled to attend.
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15 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

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Attendance
Title Name Attendance By Rate Remark
in Person B Proxy (%)
[B/A]
Supervisors Hsu, Chiang-Chan 3 0 100 Discharged on 6/29/2015 with 3 meetings scheduled to attend.
Supervisors Chang, Deh-Tsai 3 0 100 Discharged on 6/29/2015 with 3 meetings scheduled to attend.
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Other mandatory notes:

I. For the items stated in Article 14.3 of the Securities Exchange Act and other matters resolved in the Board meeting with the opposition or reservation of the independent directors documented or written, the date of the Board meeting, the term, the content of the motion, the opinions of all independent directors, and the Company's handling the opinions of the independent directors should be detailed.

II. For the Directors' excusing themselves from discussing the motion with a conflict of interest, the name of the Director, the content of the motion, causes for avoiding conflicts of interest, and voting scenario should be detailed as follows: The Company's Board Directors have attended the board meeting and casting votes accordingly. Board Directors' having themselves excused from discussing the motions with conflict of interests is summarized as follows: (1) For Proposal II discussed in the Board meeting on January 28, 2015 regarding the 2014 bonus to the management and 2013 bonus to employees, Director Yang, HaiHung (represented by Liang, Li-Sheng), Pan Yung-Tai, and Pan, Yung-Chung were a party to the proposal; therefore, they had themselves excused from discussing and voting on this proposal to avoid a conflict of interest. For Proposal III discussed in the Board meeting regarding the Chairman's 2014 bonus, the Chairman had himself/herself excused from discussing and voting on the proposal to avoid a conflict of interest. (2) For Proposal II discussed in the Board meeting on March 24, 2015 regarding the salary adjustment of the management and Proposal III regarding the bonus to the management and key officers in 2015, Director Yang, Hai-Hung; Pan Yung-Tai, and Pan, Yung-Chung (represented by Liang, Li-Sheng) were a party to the proposal. Therefore, they had themselves excused from discussing and voting on this proposal to avoid a conflict of interest. For Proposal IV discussed in the Board meeting regarding the Chairman's 2015 remuneration, the Chairman had himself/herself excused from discussing and voting on the proposal to avoid a conflict of interest. (3) For Proposal II discussed in the Board meeting on May 13, 2015 regarding the nomination of the independent directors in the 2015 general shareholders' meeting, Independent Director Ku, Tai-Chao was a party to the proposal; therefore, he had himself excused from discussing and voting on this proposal to avoid a conflict of interest. (4) The Company's Board of Directors convened a meeting on November 13, 2015 to discuss Proposal III regarding the Company's "Rules Governing Remuneration to the Management" for replacing the former "Rules Governing Remuneration and Prize Money to the Management" that was passed by the Board of Directors on January 18, 2012. Director Yang, Hai-Hung; Pan, Yung-Tai; Pan, Yung-Chung, and Tsao, Chung-Feng were the stakeholders with a conflict of interest; therefore, they had themselves excused from discussing and voting on such matter; also, for Proposal IV regarding the Company's "Rules Governing Remuneration to Chairman;" the Chairman was the stakeholder with a conflict of interest who did not participate in the discussion and voting on such matter. (5) For Proposal I discussed in the Board Meeting on January 25, 2016 regarding the bonus to the management in 2015, Director Yang, Hai-Hung, Pan Yung-Tai, Pan, Yung-Chung, and Tsao, Chung-Feng were a party to the proposal; therefore, they had themselves excused from discussing and voting on this proposal to avoid a conflict of interest. For Proposal II discussed in the Board Meeting regarding the bonus to the Chairman in 2015, the Chairman was a party to the proposal. Therefore, he had himself excused from discussing or voting on the proposal to avoid a conflict of interest. (6) For Proposal V discussed in the Board meeting on March 24, 2016 regarding the amendment of "Rules Governing the Remuneration to the Chairman", the Chairman was a party to the proposal; therefore, he had himself excused from discussing and voting on the proposal to avoid a conflict of interest. For Proposal VI discussed in the Board meeting regarding the amendment of the Company's "Rules Governing the Remuneration to the Management", Director Yang, Hai-Hung, Pan Yung-Tai, Pan, Yung-Chung, , and Tsao, Chung-Feng were a party to the proposal; therefore, they had themselves excused from discussing and voting on this proposal to avoid a conflict of interest. For Proposal VII discussed in the Board meeting regarding the salary adjustment of the management in 2016 and Proposal VIII regarding the bonus to the management and key officers in 2016, Director Yang, Hai-Hung, Pan Yung-Tai, Pan, Yung-Chung, and Tsao, Chung-Feng were a party to both proposals; therefore, they had themselves excused from discussing and voting on the two proposals to avoid a conflict of interest. For Proposal IX discussed in the Board Meeting regarding the performance standard and bonus to the Chairman in 2015, the Chairman was a party to the proposal; therefore, he had himself excused from discussing or voting on the proposal to avoid a conflict of interest.

III. The objective of enhancing the functions of the Board of Directors (such as, setup an Audit Committee, enhance the transparency of information, etc.) in current year and in the most recent year, and the assessment of its implementation.）

1. The objective of enhancing the functions of the Board of Directors

(1) The Company's Board of Directors had resolved on January 12, 2011 to have the Remuneration Committee setup. The Remuneration Committee members were appointed in accordance with Article 5 of the Company's "Remuneration Committee Charter". The Remuneration Committee under the Board of Directors is aimed to strengthen the function of the Board of Directors.
(2) The Company's Board of Directors had resolved on July 7, 2015 to have the Audit Committee setup. The Audit Committee members were appointed in accordance with Article 4 of the Company's "Audit Committee Charter". The Audit Committee under the Board of Directors is aimed to strengthen the function of the Board of Directors.
(3) Substantiate corporate governance and improve information transparency: the Board of Directors is operated in accordance with the "Rules of Procedure for Board of Directors Meetings". The Company's board meeting is convened in accordance with the "Rules of Procedure for Board of Directors Meetings" adequately.
(4) Advanced study of directors and supervisors: The Company arranges advanced studies for directors and supervisors to help them obtain necessary information conveniently in order to maintain their core values and professional strengths and abilities.

2. Assessment of the execution: The Company upholds the principle of transparent operation to have important resolutions published on the MOPS after the board meeting in order to protect the interests of shareholders.

（ 2 ） The operation of the Audit Committee or the Supervisors' participating in the Board of Directors operation:

The Company's Audit Committee is with three members appointed. The tenure of the current term
is from July 7, 2015 to July 6, 2018.
There were two Audit Committee meetings (A) held in 2015 with the attendance of the Independent Directors as follows:

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Actual number of Actual
Title Name meeting attended in attendance rate Remark
person (B) (%) (B/A)
Independent Director Ku, Tai-Chao 2 100 —
Independent Director Wei, Yung-Tu 2 100 —
Independent Director Cheng, Chih-Kai 2 100 —
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Other mandatory notes:

I. Matters that are stated in Article 14.5 of the Securities Exchange Act and other matters that are not resolved in the Audit Committee but with the consent of over two thirds of the Board of Directors: None.
II. The Independent Directors' having themselves excused from participating in a proposal involving a conflict of interest: None.

III. The communication among the Independent Directors, Internal Auditor, and CPAs:

(1) The Company's Internal Auditor communicates the audit report with the members of the Audit Committee regularly; in addition, reports the implementation of internal audit in the Audit Committee meeting and reports any special events to the Audit Committee promptly. There had not any special event referred to above occurred in 2015.The Company's Audit Committee has a good communication with the Internal Auditor.
(2) The Company's contracted CPAs report financial statements auditing or audit result and other mandatory communicating matters in the Article Committee on a quarterly basis; in addition, report any special events to the Audit Committee promptly. There had not any special event referred to above occurred in 2015.The Company's Audit Committee has a good communication with the contracted CPAs.

（ 3 ） "Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies" and its root cause?

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17 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

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

How does the Company's corporate
Operation governance differ from the "Corporate
Assessment items Governance Best-Practice Principles
Yes No Summary for TWSE/GTSM Listed Companies"
and its root cause?
The Company has the "Corporate Governance
Has the Board of Directors had the Best-Practice Principles" enacted; also, the
diversification policy defined and Ｖ diversification of the board directors is stated
implemented for the sake of the in Article 20.The Company will have the
directors? election of board directors implemented in
accordance with the Principles.
Has the Company, in addition to the
Remuneration Committee and Audit The Company will have other functional
Ｖ committee setup in the future depending
Committee, voluntarily setup other
functional committee? on the needs of the actual operation.
The Company has enacted the "Rules
Has the Company enacted the
Governing the Performance Evaluation of
"Rules Governing the Performance the Board of Directors" and its assessment
Evaluation of the Board of Directors"
Ｖ methods. Also, performs at least one
and the assessment methods, and
assessment before the end of the year. The
has the performance evaluation assessment method can be downloaded
performed regularly every year?
from the Company's website or MOPS.
The Audit Committee of the Company has
the CPA's independence and performance
assessed regularly every year in accordance
with the "Corporate Governance Best-Practice No significant
Principles for TWSE/GTSM Listed Companies" difference
as follows:
(1) Review CPA's resume.
(2) He/she is not a director, supervisor,
manager, or holding a position with
other companies that may affect the job
responsibility or cause a conflict of interest.
(3) Does not have the same CPA contracted
Has the Company assessed the as the auditor for seven consecutive years.
independence of the contracted CPAs Ｖ
(4) Obtain the declaration of independence
regularly?
from the commissioned CPA annually.
(5) Review the auditing and tax service quality
and timeliness.
(6) No litigation or any disciplinary action
received from the competent authorities.
(7) Review the scale of operation and
reputation of the CPA Firm.
(8) Interaction with the management and
internal auditor
The criteria referred to above have been
reviewed and concluded to be in conformity
with the requirements.
Has the Company established a
communication channel with the
The Company's website is designed with
stakeholders and setup a stakeholder an "investor relations" section and has
section on the Company's website; in Ｖ No significant
addition, appropriately responded to the someone designated to respond to issues difference
related to the Company's stakeholders.
stakeholders regarding the important
corporate social responsibility issues?
Has the Company commissioned
a professional stock affairs agency Ｖ The Company has "SinoPac Securities No significant
Stock Affairs Agency" commissioned to
to handle the affairs related to handle the related matters. difference
shareholders' meeting?
The Company has setup the websites with
Has the Company setup website
Ｖ the "Investor" section included for having
to disclose financial operations and information disclosed by linking to the
corporate governance information? MOPS.
Does the Company have other
information disclosure methods adopted (such as, constructing an The Company has constructed an English website with a spokesperson and acting No significant
English website, designating specific spokesperson designated to be responsible difference
individuals to be responsible for the Ｖ for communicating to the public on behalf
Company's information collection of the Company; in addition, has specific
and disclosure, substantiating a individuals designated to have information
spokesperson system, the public disclosed on the MOPS in accordance with
offering conference recording uploaded the law and regulations.
to the Company's website, etc.)?
III. Composition of the Board of Directors and its duties
IV
V
VI. Information disclosure
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How does the Company's corporate
Operation governance differ from the "Corporate
Assessment items Governance Best-Practice Principles
Yes No Summary for TWSE/GTSM Listed Companies"
and its root cause?
1. The Company has committed based
on the Labor Standards Law to protect
the basic rights of employees and has
enacted the Employee Welfare Committee
in accordance with the Employee Welfare
Act. The existing welfare system includes:
a periodical health check, birthday and
three festival gifts (vouchers), weddings
and funeral subsidy, scholarships and
financial aid, domestic and overseas travel
subsidy, emergency assistance loans,
year-end party and lotteries, and other
community activities.
2. The Company attaches great importance
to the harmonious labor relations. For
safeguarding employees' rights and
benefits, employees can perform a two-
way communication for the Company's
systems and work environmental
issues through department meetings,
staff seminars, labor relation meetings,
Does the Company have any other employee suggestion boxes, etc.; also,
important information that can help regularly inspect and maintain the safety
understand the Company's corporate and health of the working environment in
governance operation (including order to ensure employees' work safety
but not limited to the interests of and health.
employees, employee care, investor 3. The Company has a smooth
relations, supplier relations, the rights of stakeholders, the advanced study of directors and supervisors, the Ｖ communication channel constructed with the employees, bankers, customers, vendors, and other stakeholders of the No significant difference
implementation of risk management Company in order to protect the legitimate
policy and risk measurement interests of both parties.
standard, the implementation of
4. The Company has established the
customer policy, the liability insurance
procedures for customer management
acquired by the Company for the
service, customer satisfaction surveys,
directors and supervisors, etc.)?
and handling customer complaint.
Regarding customer grievances,
properly identify the root cause of the
problem and accountability, and evaluate
customer satisfaction periodically to
ensure providing customers with the best
services.
5. The Company has various internal
regulations and internal control systems
enacted lawfully, a variety of risk
management and assessment performed;
in addition, the internal audit unit will
have the implementation of internal
control system audited periodically and
occasionally.
6. Advanced study of Directors: Please refer
to the Annual Report "2015 Director's
Advanced Studies" (Page 21).
7. The Company has acquired liability
insurance for directors and supervisors
every year.
Does the Company have a corporate The Company had completed the 2015
governance self-assessment self-evaluation in accordance with the
report or a corporate governance provisions of the Taiwan Stock Exchange's
assessment report issued by 2nd Corporate Governance Evaluation.
the commissioned professional institutions? (If the answer is "YES", please state the opinions of the Board Ｖ The evaluation results were published on April 8, 2016 and the Company was ranked the top 21%~35% of the listed companies. No significant difference
Directors, the self-assessment or However, in terms of enhancing information
outsourcing evaluation results, major transparency, there remained poor data
nonconformities or recommendations, disclosure in the annual report that has
and corrective actions.) been improved this year.
VII
VIII
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Primax Electronics Ltd. 2015 Annual Report

The advanced study of the board directors in 2015:

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

Advanced The total
Advanced
Title Name Organizer Course Title study advanced study
study date hours hours in 2015
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Banking and Finance – Corporate Social Responsibility (CSR)
Director Liang, Li-Sheng 6
Securities and Futures
12/09/2015 Institute Strategy and Key Performance Indicators 3
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Banking and Finance – Corporate Social Responsibility (CSR)
Director Yang, Hai-Hung 6
12/02/2015 Securities and Futures Employee remuneration and reward 3
Institute strategies and tools implementation study
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Banking and Finance – Corporate Social Responsibility (CSR)
Director Yang, Chi-Ting 08/11/2015 Governance AssociationTaiwan Corporate Corporate governance and shareholders' meeting operation 3 9
08/11/2015 Taiwan Corporate Bank Risk and Corporate Working Capital 3
Governance Association Management
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Banking and Finance – Corporate Social Responsibility (CSR)
Director Pan Yung-Tai 6
11/19/2015 Securities and Futures Norms and operation of the Audit 3
Institute Committee
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Director Pan, Yung- Banking and Finance – Corporate Social Responsibility (CSR) 6
Chung Securities and Futures
12/09/2015 Institute Strategy and Key Performance Indicators 3
Director Tsao, Chung-Feng 11/24~25/2015 Securities and Futures Institute Directors and supervisors workshop 12 12
01/28/2015 Taiwan Academy of Activate the competitiveness of the industry 3
Independent Director Ku, Tai-Chao 08/05/2015 Securities and Futures Banking and Finance – Corporate Social Responsibility (CSR)Employee remuneration and reward 3 6
Institute strategies and tools implementation study
Long-term incentive remuneration
06/17/2015 Governance AssociationTaiwan Corporate application trends and design 3
considerations
Independent Director Wei, Yung-Tu 09/11/2015 Taiwan Corporate Risk management, internal control, and 3 9
Governance Association information management practice
09/22/2015 Governance AssociationTaiwan Corporate [Group Management] 3
05/07/2015 Securities and Futures Corporate Governance and Securities 3
Institute Regulations
08/07/2015 Securities and Futures How do enterprises fulfill social 3
Institute responsibility and issue report?
Independent Director Cheng, Chih-Kai 08/11/2015 Securities and Futures Corporate governance and sustainable 3 12
Institute operation
How to exercise the function of the
Securities and Futures
11/05/2015 Institute Board of Directors and profit-seeking 3
function of the functional committees?
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（ 4 ） If the Company has a Remuneration Committee setup, the composition, mandate, and operation of the Committee should be disclosed accordingly:

Directors has three members appointed to form the Remuneration Committee in accordance with the Company's "Remuneration Committee Charter". The Remuneration Committee shall meet at least twice a year and there were four meetings convened in the most recent year

To improve corporate governance and strengthen the function of the Board of Directors, PRIMAX had established the Remuneration Committee in 2011 to assist the Board of Directors assessing and verifying the remuneration policy and system of the Chairman and managers. The Board of

1. Information of the Remuneration Committee members

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Conditions Whether with more than five years of work experience or not?And the following professional qualifications Meet the independence criteria (Note)
An instruction or higher A Judge, Public Prosecutor, With work Work as a
Identity position in a Department of Commerce, Legal Affairs, Finance, Accounting, or Professional or Technical Attorney, Certified Public Accountant, or Other Commerce, Legal experience in the areas of member of the Remuneration Committee of Remark
Other Academic Department Specialist who has passed Affairs, Finance, 1 2 3 4 5 6 7 8 a number of
Related to the Business a national examination and or Accounting, or other public
Needs of the Company in been awarded a Certificate otherwise necessary companies
Name a Public or Private Junior in a profession necessary for for the business of
College, College, or University the business of the Company the Company
Independent Director Ku, Tai-Chao －－ＶＶＶＶＶＶＶＶＶ 0
The tenure
Independent Director Liu, Jong-Shi －－ＶＶＶＶＶＶＶＶＶ 0 ended on
06.18.2015.
Independent Director Chih-KaiCheng, －－ＶＶＶＶＶＶＶＶＶ 0 Inauguration on 07.07.2015
Professional member Yao, －－ＶＶＶＶＶＶＶＶＶ 0 Inauguration on
Heng-Shan 03.27.2014
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years prior to being elected or during the term of office.

where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under someone else's name(s), in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top-10 in holdings.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
(5) Not a director, supervisor, or employee of an institutional shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings.
institution that has a financial or business relationship with the Company.
company, or institution that provides commercial, legal affairs, financial, accounting services, or consultation to the Company or to any affiliate of the Company, or a spouse thereof.

2. The operation of the Remuneration Committee

（ 1 ） The Company's Remuneration Committee is with three members appointed.

（ 2 ） The tenure of the current term is from July 7, 2015 to June 28, 2018. There were four

Remuneration Committee meetings (A) held in the most recent year with the attendance of the members as follows:

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Actual number Actual number Actual
Title Name of meeting of meeting attendance Remark
attended in attended by rate
person (B) proxies (%)(B/A)
Convener Ku, Tai-Chao 4 0 100% Re-elected on 07.07.2015
Members Liu, Jong-Shi 2 0 100% Discharged on 06.18.2015 with 2 meetings scheduled to attend.
Members Cheng, Chih-Kai 2 0 100% Newly elected on 07.07.2015 with 2 meetings scheduled to attend.
Members Yao, Heng-Shan 4 0 100% Re-elected on 07.07.2015
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Other mandatory notes:

If the Board of Directors has decided not to accept or amend the proposal of the Remuneration Committee, the date of the Board meeting, the term, the content of the motion, the resolution of the Board meeting, and the Company's handling the opinions of the Remuneration Committee should be detailed (such as, if the remuneration resolved in the Board meeting is better than the proposal of the Remuneration Committee, the difference amount and the root cause should be detailed): None.
For the matters resolved by the Remuneration Committee with the opposition or reservation of the members documented or written, the date of the Remuneration Committee meeting, the term, the content of the motion, the opinions of all members, and the handling the opinions of the members should be detailed: None.

Primax Electronics Ltd. 2015 Annual Report 22

Primax Electronics Ltd. 2015 Annual Report

（ 5 ） CSR performance: The systems and measures adopted by the Company for the tasks of environmental protection, community involvement, social contribution, social services, social welfare, consumer rights, human rights, security and health, and other social responsibility activities, and the performance.

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How does the Company's
Operation corporate social responsibility
Assessment items differ from the "Corporate Social
Responsibility Best-Practice
Yes No Summary Principles for TWSE/GTSM Listed
Companies" and its root cause?
Has the Company setup the corporate The Company's "Primax Corporate Social Responsibility Best-Practice
social responsibility (CSR) policies Ｖ Principles" were enacted and approved by the Board of Directors for
or systems, and reviewed the publication. The detailed information of the 2015 implementation effect was
effectiveness of the implementation? fully disclosed in the annual Corporate Social Responsibility Report.
Has the Company held the CSR The Company has arranged training programs periodically in accordance
education and training programs Ｖ with the CSR operational mechanism in order to enhance the relevant
regularly? knowledge.
Has the Company designated a specific
(part-time) unit to promote corporate The corporate social responsibility office was established by the
Chairman with the authorization of the Board of Directors. The designated No significant
social responsibility with the management Ｖ individuals are to be in charge of proposing and executing the policy, difference.
authorized by the Board of Director to
system, related guidelines and solid promotional plan of the corporate
handle the process and report the result
to the Board of Directors? social responsibility; also, to report it to the Board of Directors regularly.
Has the Company setup a reasonable The Company has regularly participated in external remuneration survey
remuneration policy, had the employee to ensure the competitiveness of remuneration and to be referred for the
performance evaluation system and Ｖ making of internal remuneration policies. Moreover, in addition to the
corporate social responsibility policies security of a fixed annual salary, performance bonus will be distributed
combined, and established a clear and according to the annual achievement of the Company and personal
effective reward and discipline system? performance and contribution of each employee.
Is the Company committed to The Company has the concept of environmental protection substantiated
enhance the utilization efficiency of in the green design and green management proactively while providing
resources and the use of renewable Ｖ products and services; in addition, the raw materials used in the products
materials with low environmental are in line with international environmental standards and customer
impact? requirements.
The Company has established a green procurement management system
Has the Company based on the and the control in manufacturing process and materials to ensure the
characteristics of the industry to Ｖ products in line with environmental requirements; moreover, a dedicated unit
establish an appropriate environmental is assigned to maintain the production plant environment quality in Mainland No significant
management system? China and to strengthen the implementation of energy-saving and carbon difference.
reduction measures.
Has the Company paid attention to the
impact of climate change on operating
The Company has enacted the "Greenhouse Gas Inventory and Voluntary
activities and implemented greenhouse
gas inventory, and enacted corporate Ｖ Reduction Declaration", and is committed to greenhouse gas inventory in
order to actually grasp the situation of gas emissions and initiate further
energy-saving and carbon reduction
greenhouse gas reductions voluntarily according to the inventory result.
strategies and greenhouse gases
reduction strategies?
The Company's hiring and management practices comply with all relevant
Has the Company enacted the
labor laws and internationally recognized basic labor right principles, and the
relevant management policies and
procedures in accordance with the relevant regulations and international Ｖ Company regularly reviews and revises the Company's internal personnel specifications. The Company also actively protects the legitimate rights and
interests of employees. Take on a non-discriminatory employment policy to
bill of human rights?
realize the "Best Employer" business philosophy.
The Company has the "Procedures for Ethical Management and Guidelines for Conduct" enacted with the reporting system and operations regulated No significant difference.
comprehensively. The Company has arranged four complaint channels to
Has the Company established an
improve the mutual understanding between the Company and employees,
employee grievance mechanism Ｖ including employee suggestion mailbox, employee opinion survey, General
and channel, and has employee complaints handled properly? Manager mailbox, appeal to staff representatives, and appeal to the direct
supervisor / Human Resources, and has employee complaint handled
through the established grievance procedure to value the importance of each
opinion suggested by employees.
I. Substantiating and promoting corporate governance
II. The development of sustainable environment
III.Maintaining social welfare
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How does the Company's Operation corporate social responsibility Assessment items differ from the "Corporate Social Responsibility Best-Practice Yes No Summary Principles for TWSE/GTSM Listed Companies" and its root cause? Primax factories are located in China while the R&D Office is in Taiwan Headquarters. Primax has the related management measures implemented as follows to provide employees with a safe and healthy working environment: 1. Education and Training: It includes first aid, mechanical safety, ESH risk identification, occupational health, emergency response, etc., also, the Has the Company offered employees 2. Risk Control: Fire alarm and chemical spill drills.health education seminar for health improvement. a safe and healthy working environment, and provided employees Ｖ 3. Health Check: In addition to regular health checks, provide specific physical with safety and health education on a check service to the position holders with higher risks, such as, serum ALT, regular basis? hearing tests, ECG, etc., especially those employees who are associated with the operation of X-ray; also, additional full body check service of the skin, liver, kidney, and lymph nodes. 4. Medical care: Primax has clinic/medical center setup in the factory and office area with medical staff stationed regularly to serve. Each department is also equipped with medical kits to provide staff with emergency medical treatment, disease prevention, medical information and other services. The Company provides employees with a regular communication mechanism. The CEO holds a meeting with employees every six months Has the Company established a to communicate the Company's overall business plans and outlook, regular communication mechanism with the staff, and reasonably given Ｖ achievements and corporate culture focus. The Business Director convenes a meeting on a quarterly basis to ensure that the department colleagues grasp employees a notice of operating change that may have a significant the business overview. The Labor Conference is held on a quarterly basis to communicate important corporate matters and measures. The Company also impact on the Company? encourages the executives and colleagues to conduct a one-on-one interview occasionally in order to maintain good interaction. The Company's learning and development is based on the core structure Has the Company established an of occupational function to be tightly integrated with the Company's effective career-training program for Ｖ future development strategies and objectives. The training system is employees? divided into three categories: Professional occupational function training, supervisor talent training, and general occupational function training. Has the Company enacted relevant The Company has established the procedures for customer management No significant consumer protection policy and service, customer satisfaction surveys, and handling customer complaint. difference. grievance procedure regarding R&D, Ｖ Regarding customer grievances, properly identify the root cause of procurement, production, operation, the problem and accountability, and evaluate customer satisfaction and service process? periodically to ensure providing customers with the best services. The Company has the concept of environmental protection substantiated in the green design and green management proactively while providing Has the Company handled the products and services in order to comply with laws, meet customer marketing and labeling of products requirements, and fulfill responsibilities as global citizens. In addition to and services in compliance with Ｖ meeting green product-related laws and regulations (such as, RoHS, relevant regulations and international REACH, ErP ....) and customer requirements, establish response norms? capabilities of the staff within the organization and suppliers, and conduct related training and integration with information management systems (PLM) to substantiate the green product policy. The Company before qualifying suppliers for services has gone through a rigorous evaluation process (including review, contract review, twoway communication, grievance and complaint mechanism) to evaluate Has the Company assessed whether suppliers' environmental health and safety management, including the the suppliers have a record of impacting the environment and society before conducting businesses Ｖ criteria of implementing environmental monitoring, compliance with Labor Standards Law, etc. Meanwhile, initiate on-site field evaluation; mainly evaluate the management of hazardous substances. The evaluation with such suppliers? includes: Supplier's green product management structure, staff education and training, production control, product design, incoming inspection, and hazardous substances pollution prevention. Are the contracts signed with the Company's major suppliers containing The "Supplier Declaration" to be signed by the suppliers upon the request the clause allowing the Company to have the contracts terminated of the Company contains the contents of environmental statement and Ｖ or cancelled at any time when the statement of conflict minerals. If a supplier is involved in a breach of the relevant requirements, the Company may directly have the trading suppliers violate their corporate social responsibility policy that have significant relationship cancelled or terminated. impact on the environment and society?

23 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

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V. If the Company has the corporate social responsibility best-practice principles enacted in accordance with the "Corporate Social Responsibility BestPractice Principles for TWSE/GTSM Listed Companies", please state the difference between its operations and the enacted Principles:
The Company has enacted the "Primax CSR Best-Practice Principles" for implementation in accordance with the aspects of corporate governance, cares for staff, safeguarding the community and protecting the earth, and has complied with the norms of the Principles. Please refer to the "Implementation of Corporate Governance" Chapter of the annual report regarding care for staff, safeguarding the community and protecting the earth. Please refer to the annual corporate social responsibility report.
VI. Other important information that helps understand the operation of corporate social responsibility
personnel designated to handle various matters in order to protect the interests of employees.
staff to perform job responsibility, the disaster prevention measures training, and health check in accordance with the Labor Safety and Health Act.
The Company takes responsibility for consumer protection and product safety, and actively solves the product problems raised by customers.
The Company takes responsibility for the health of employees, actively promotes employee mental and physical health measures, including sport wristband power walk activity, staff cafeteria calories labeling activity, disease prevention, stress relief, quit-smoking propaganda and other health education lectures and health promotion activities.

The Company's 2015 Corporate Social Responsibility Report will be written in accordance with GRI G4 version and will be certified by SGS in accordance with the AA1000 Class I High Assurance Verification.

（ 6 ） Substantiating ethical corporate management:

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How does the Company's ethical
Operation corporate management differ
Assessment items from the "Ethical Corporate
Management Best-Practice
Yes No Summary Principles for TWSE/GTSM Listed
Companies" and its root cause?
Has the Company assessed the The Company has the ethical corporate management evaluation
ethical conduct record of the procedure, prior to establishing a business relation, clearly defined in the
counterparty, and has the ethical Ｖ "Procedures for Ethical Management and Guidelines for Conduct". It
corporate management clauses prohibits the Company from dealing with any unethical companies and
included in the contracts signed with requires having the ethical corporate management clauses included in the
the counterparty? contracts to be signed by the Company and the counterparty.
Has the Company designated a The Company has designated the Human Resources Department to
specific (part-time) unit to promote promote the ethical corporate management and to report the execution
ethical corporate management and Ｖ status to the Board of Directors. For any unethical conduct occurred, the
to report the result to the Board of designated unit will have the process and subsequent discussion and
Directors periodically? corrective action reported to the Board of Directors.
1. The Company's "Rules of Procedure for Board of Directors Meetings" and
"Procedures for Ethical Management and Guidelines for Conduct" are with
the board director's "avoiding conflict of interest" clause included. For the
board directors or their representatives with a conflict of interest against It is in conformity with
Has the Company enacted a policy to prevent conflicts of interest, provided an appropriate communication channel, and substantiated its Ｖ the motion to be resolved in the board meeting that is detrimental to the Company's best interest, the conflicting directors or representatives may state their opinions and inquiries but may not participate in discussion and voting. In addition, they should be excused from the discussion and voting without any significant the ethical corporate management code nonconformity
implementation? in the meeting, and may not vote on behalf of other directors. identified.
2. The Company's employees that have a conflict of interest against the
business executed by them should have it reported to the direct supervisor
and the designated unit.
Has the Company established an
effective accounting system and The Company has an accounting system and internal control system
internal control system to substantiate enacted in accordance with the relevant laws and regulations. The Audit
ethical corporate management, and Ｖ Office has regularly checked the compliance of the accounting system
delegated the internal audit unit to and internal control system and has the result reported to the Board of
inspect periodically or commissioned Directors.
CPAs to perform an audit?
Has the Company held internal
The Company has regularly organized internal education and training
and external education and training Ｖ on ethical corporate management, and advocated the importance of
on ethical corporate management periodically? protecting the confidentiality of business information.
Has the Company enacted a specific The Company has the award and punishment, grievance system, and
reporting and incentive system,
established a convenient reporting Ｖ disciplinary action stipulated in the "Procedures for Ethical Management
channel, and assigned a specific and Guidelines for Conduct", and has ethical corporate management included in the Code of Conduct and human resources policies.
delegate to deal with the reported party? It is in conformity with
the ethical corporate
Has the Company enacted the The Company has dedicated a specific unit to handle the trade secrets, management code
investigation standard, operating procedure, and the related Ｖ to be responsible for the development and implementation of the Company's trade secrets management, reservation, and confidential without any significant nonconformity
confidentiality mechanism to handle operating procedures, and to regularly review the implementation results
the reported nonconformities? in order to ensure the continuing effectiveness of the operating procedure. identified.
Has the Company taken measures to The Company has the relevant norms included in the "Procedures
protect whistleblowers from improper Ｖ for Ethical Management and Guidelines for Conduct" to ensure that
treatment? whistleblowers will not be treated improperly.
It is in conformity with
Has the Company disclosed the
Please refer to the MOPS (http://newmops.twse.com.tw/) or the the ethical corporate
content of its "Ethical Corporate
Management Best Practice Ｖ Company's website (http://www.primax.com.tw/) for the ethical corporate management code
Principles" and the performance on management best-practice principles. Please also refer to the annual without any significant
CSR report for the information of activity promotion. nonconformity
the Company's website and MOPS? identified.
II. Substantiating ethical corporate management
reporting system
III. The operation of the Company's
IV. Strengthening
information disclosure
----- End of picture text -----

V. If the Company has the ethical corporate management best-practice principles enacted in accordance with the "Ethical Corporate Management Best-Practice Principles for TWSE/GTSM Listed Companies", please state the difference between its operations and the enacted Principles: No significant difference found.
The Human Resources Department is the dedicated unit to have the Ethical Corporate Management Best Practice Principles, Code of Conduct, and related approaches enacted, to clearly prohibit accepting any illegal gains; also, to advocate the importance of ethics and moral value through internal training and promotion activities, to establish a reporting system, and to ensure an effective operation.
VI. Other important information that helps understand the operation of ethical corporate management (such as, the Company's discussing and amending its Ethical Corporate Management Best Practice Principles and others).
(I) Require the Company's suppliers and subcontractors to sign the "Supplier Declaration".
explain the Company's ethical corporate management policy and the relevant regulations to the counterparty throughout the business process, and should specifically disclaim, directly or indirectly, any offer, promise, request, or accept illegal gains in any form or name, including kickbacks, commissions, facilitation payments, or any illegal gains offered or received from other channels.
(III) Strengthen advocating the importance of integrity and moral at the orientation scheduled for new recruits.

Primax Electronics Ltd. 2015 Annual Report

（ 7 ） If the Company has the corporate governance best practice principles enacted and the relevant regulations, the inquiry approaches should be disclosed:

Please visit the MOPS (http://newmops.twse.com.tw/) or the Company's website (http://www.primax. com.tw/) for the Company's corporate governance best practice principles and the relevant regulations.

（ 8 ） Other important information that helps understand the operation of corporate governance: None
（ 9 ） The following matters should be disclosed for the implementation of internal control systems

1. Internal Control Declaration

PRIMAX Electronics Limited Statement of Internal Control System

Date: March 24, 2016

The Company's 2015 internal control system is declared as follows in accordance with the results of the self-examination:

I. The Company is fully acknowledged that it is the responsibility of the Board of Directors and the management to establish, executes, and maintains the internal control system. The Company has already had established such a system. The purpose is to have the operating effect and efficiency (including profitability, performance, assets security, etc.), reported reliably, timely, transparently, and in compliance with the relevant specifications, law, and regulations, and with reasonable assurance provided.

II. Internal control system has its inherent limitations, regardless how perfect the design is. An effective internal control system can only provide a reasonable assurance for the achievement of the three objectives referred to above. Moreover, due to changes in the environment and situation, the effectiveness of the internal control system may thus vary along with it. However, the Company's internal control system is designed with a self-monitoring mechanism. Therefore, the Company will be able to take action to have nonconformities corrected upon identification.

III. The Company has based on the internal control system effectiveness criteria of the "Regulations Governing Establishment of Internal Control Systems by Public Companies" (hereinafter referred to as "Regulations") to determine whether the internal control system design and implementation is effective or not. According to the internal control system effectiveness criteria of the "Regulations Governing Establishment of Internal Control Systems by Public Companies", the internal control system is classified into five composing elements in accordance with the management and control process, including: 1. environment control, 2. risk assessment, 3. control operation, 4. information and communication, and 5. supervise operation. Each composing element contains a number of projects. Please refer to the "Regulations Governing Establishment of Internal Control Systems by Public Companies" for the projects in the preceding paragraph.

IV. The Company has adopted the internal control system criteria in the preceding paragraph to assess the effectiveness of the internal control system design and execution.
V. The Company based on the assessment result in the preceding paragraph, believes that the Company's internal control system on December 31, 2015 (including the supervision and management of subsidiaries), including understanding the operational results and effectiveness and the level of efficiency achieved, is reported reliably, timely, transparently, and in compliance with the relevant specifications, laws, and regulations, and the internal control system design and implementation is valid and can provide reasonable assurance of achieving the above objectives.
VI. This Declaration will be the focus of the Company's annual report and prospectus, and it will be published to the public. If the information disclosure in the preceding paragraph involves fraudulent, concealment, and any false presentation, the relevant legal obligation for such violation will be handled in accordance with Article 20, Article 32, Article 171, and Article 174 of the Securities Exchange Act.
VII. The Declaration was resolved in the Board meeting without any attending director opposed it and with 9 attending directors agreed to it on March 24, 2016; in addition, the contents of the Declaration were approved without any objection raised.

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PRIMAX Electronics Limited

Chairman: Signature General Manager: Signature

2. If the internal control system is commissioned to CPAs for project review, the CPA's review report should be disclosed: None

（ 10 ） lawfully; the disciplinary action had been brought against the internal staff for violating internal control system, the major nonconformities, and the corrective action in the most recent year and as of the printing date of the annual reports: None.
（ 11 ） Important resolutions reached in the shareholders' meeting and board meeting in the most recent year and as of the printing date of the annual report.

1. The content of the important resolution reached in the shareholders' meeting and its implementation.

Time Important issues 1. Passed the Company's 2014 business report and financial report. 2. Passed the retroactive recognition of the vested conditions of the new restricted employee shares issuance. 3. Passed the Company's 2014 earnings distribution proposal. Implementation: Scheduled the distribution base date on 8/5/2015 and the payment date on 8/5/2015 for a cash dividend of NT$1.8 per share.
1. Passed the amendment of the Company's "Articles of Association". Implementation: The registration was approved by the Ministry of Economic Affairs on 7/21/205 and it was published on the Company's website.
1. Passed the Company's "Procedures for Election of Directors and Supervisors". Implementation: It had been processed in accordance with the amended procedures. 6. Passed the Company's "Regulations Governing Loaning of Funds".
6.29.2015 Implementation: It had been processed in accordance with the amended procedures. 7. Passed the Company's "Regulations Governing Making of Endorsements/Guarantees". Implementation: It had been processed in accordance with the amended procedures. 8. Passed the Company's "Regulations Governing the Acquisition and Disposal of Assets". Implementation: It had been processed in accordance with the amended procedures.
Full election of directors.
The List of the elected Directors: Liang, Li-Sheng, Yang, Hai-Hung, Yang, Chi-Ting, Pan Yung-Tai, Pan, YungChung, and Tsao, Chung-Feng
The List of the elected Independent Directors: Ku, Tai-Chao, Wei, Yung-Tu, and Cheng, Chih-Kai. Implementation: The registration was approved by the Ministry of Economic Affairs on 7/21/205 and it was published on the Company's website.
Passed the proposal of lifting the non-compete clause against the newly elected directors.

2. Important resolutions of the Board of Directors

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Time Important issues
1. Passed the proposals of the Company's 2014 bonus to the management and 2013 bonus to employees.
1.22.2015 2. Passed the proposal of the Company's 2014 bonus to the Chairman.
3. Passed the List of Employees and Number of Shares for the Company's 2014 new restricted employee shares
issued for the first time.
1. Passed the plan of recognizing the vested conditions of the 2014 new restricted employee shares issuance in the
2015 general shareholders' meeting.
2. Passed the adjustment of the Company's 2015 remuneration to the management proposal.
3. Passed the Company's 2015 bonus to the management and key officer's proposal.
4. Passed the Company's 2015 remuneration to the Chairman proposal.
5. Passed the 2014 earnings distribution proposal.
6. Passed the amendment of the Company's "Articles of Association".
7. Passed the Company's "Procedures for Election of Directors and Supervisors".
3.24.2015
8. Passed the Company's "Regulations Governing Loaning of Funds".
9. Passed the Company's "Regulations Governing Making of Endorsements/Guarantees".
10. Passed the Company's "Regulations Governing the Acquisition and Disposal of Assets".
11. Passed the full election of the Board members proposal.
12. Passed the Company's 2015 general shareholders' meeting date, time, place, and the content of the motions.
13. For the Company's 2015 general shareholders' meeting convened to elect independent directors, plan for the
candidate nomination related matter for the election of independent directors.
14. Passed the proposal of lifting the non-compete clause against the newly elected directors.
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27 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 28

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Time Important issues
1. Passed the proposal of the Company's CPAs replacement.
5.13.2015 2. Passed the nomination and review of the independent directors in the Company's 2015 general
shareholders' meeting.
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Passed the new Chairman election proposal.
Passed the Company's 2014 ex-dividend date and payment date for the distribution of cash dividend.
Passed the establishment of the Audit Committee and the enactment of the "Audit Committee Charter".

7.7.2015 4. Passed the amendment of the "Procedures for Ethical Management and Guidelines for Conduct." 5. Passed the commission of the 3rd Remuneration Committee member proposal. 6. Passed the amendment of the "Remuneration Committee Charter". 7. Passed the proposal of the remuneration to independent directors.

8.13.2015 1. Passed the Company's 2014 new restricted employee shares issued for the second time.

Passed the proposal of exempting the Company from enacting the "Enhancing the Company's Ability in Preparing Financial Statements Prospectus Implementation Report" and exempting from being included in the internal control follow-up items and reporting the implementation result to the Board of Directors on a quarterly basis.
Passed the Company's "Rules Governing Remuneration to the Management" enacted for replacing the

11.13.2015 former "Rules Governing Remuneration and Prize Money to the Management" that was approved on January 18, 2012.

Passed the Company's "Rules Governing Remuneration to the Chairman" enacted.
Passed the "Procedures for Applying Trade Suspension and Trade Resumption" enacted.
Passed the Company's making of endorsements/guarantees for the subsidiary, Primax Destiny Co., Ltd.
Passed the proposal of the Company's 2015 bonus to the management.
Passed the proposal of the Company's 2015 bonus to the Chairman.

1.25.2016 3. Passed the amendment of the Company's "Articles of Association".

Passed the Company's "Corporate Governance Best Practice Principles" enacted.
Passed the Company's regular assessment of the CPA's independence.
Passed the repeal of the Company's "Rules Governing the Commissioned Manager Pension Plan".
Passed the amendment of the Company's "Rules Governing Remuneration to Chairman".
Passed the amendment of the Company's "Rules Governing Remuneration to the Management".
Passed the proposal for the adjustment of the Company's 2016 remuneration to the management.
3.24.2016 7. Passed the Company's 2016 Chairman Performance Standard and Bonus Plan. 8. Passed the proposal of issuing "New Restricted Employee Shares".
Passed the proposal of the Company's 2015 earnings distribution.
Passed the proposal of the Company's 2015 remuneration to directors and remuneration to employees.
Passed the Company's 2016 general shareholders' meeting date, time, place, and the content of the motion.
Passed the proposal of lifting the non-compete clause against the directors.
Passed the amendment of the Company's "Corporate Social Responsibility Best-Practice Principles."

5. CPAs fees

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Name of CPA firm Name of CPAs Audit period Remark
KPMG Huang, Yung-Hua、Yu, Chi-Lung 2015 —
Unit: NT$1,000
Audit fees classification Audit fees Non-audit fees Total
Range of Amount
1 Under 2,000 — — —
2 2,000 (inclusive) ~ 4,000 — — —
3 4,000 (inclusive) ~ 6,000 — — —
4 6,000 (inclusive) ~ 8,000 — — —
5 8,000 (inclusive) ~ 10,000 8,820 — 8,820
6 10,000 and more — — —
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For the CPAs fee containing any of the following circumstances, the following information should be disclosed:

（ I ） If the non-audit fee paid to auditors, the audit firm, and its affiliates accounted for more than one-fourth of total audits fees, the audit fee and non-audit fee amount and non-audit service content should disclosed.

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Non-audit fees
CPA's
CPA firmName of Name of CPAs Audit fees System design Industrial and commercial resourcesHuman [Others] [Subtotal] auditing period Remark
registration
Huang, Yung-Hua 2015
KPMG 8,820 0 0 0 0 0 The full —
Yu, Chi-Lung year
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（ II ） If the audit firm was replaced and the audit fee paid to the new audit firm was less than the payment of the previous year, the audit fee amount before and after the replacement and the reasons called for the replacement should be disclosed: None.
（ III ） If the audit fee reduced more than 15% from the year before, the decrease of the audit fee amount and ratio and the reason for such decrease should be disclosed: None.

1. Passed the Company's current dividend policy.

5.12.2016 2. Passed the Company's "Rules Governing the Performance Evaluation of the Board of Directors."
Passed the Company's long-term equity investment disposal proposal.

6. CPAs replacement

（ 12 ） For the matters resolved by the Board of Directors with the opposition or reservation of the directors or supervisors documented or written in the most recent year and as of the printing date of the annual report, please detail the content of the opposition or reservation: None.
（ 13 ） The summary of the resignation and discharge of the Company's Chairman and General Manager, Accounting Officer, Finance Officer, Internal Auditor, and R&D Director in the most recent year and as of the printing date of the annual report: None.

（ 1 ） Information of former CPAs:

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Date of replacement 05.13.2015
Reason for replacement and explanation KPMG internal work adjustment
Please indicate whether the termination or rejection of the commission is None
initiated by the consigner or the CPAs.
Please state the opinions other than an unqualified opinion were rendered in the None
Auditor's Report within the last two years and the root causes.
Whether different from the opinion of the issuer or not? None
Other disclosures (matters to be disclosed according to Article 10, Paragraph 5, None
Section 1, Clause 4 of this Rules)
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Primax Electronics Ltd. 2015 Annual Report

（ 2 ） About the successor CPAs

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Name of CPA Firm KPMG
Name of CPAs Huang, Yung-Hua and Yu, Chi-Lung
Commissioning date 05.13.2015
The advisory matters and results prior to the commission regarding the
accounting treatment or accounting principle of specific transactions and the None
possible audit opinion on the financial report.
The written opinion of the successor CPAs regarding the oppositions to the None
opinions of the former CPA's.
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（ 3 ） The written reply of the former CPAs on the matter stated in Article 10 Paragraph 5 Section 1 and Section 2 Clause 3 of this Rules: None.

7. If the Company's Chairman, General Manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its CPA or at an affiliated enterprise, their names, titles, and the service time with the accounting firms and affiliated enterprise should be disclosed: None.

==> picture [442 x 336] intentionally omitted <==

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2015 As of April 30, 2016
Title Name Number of Number of pledged Number of Number of pledged
shares increase shares increase shares increase shares increase
(decrease) (decrease) (decrease) (decrease)
Director Yang, Chi-Ting 0 0 0 0
Director and General
Manager of Business Pan, Yung-Chung 0 0 0 0
Department
Director and General
Manager of Business Pan Yung-Tai 234,612 0 0 0
Department
Director and Vice
General Manager Tsao, Chung-Feng (Note 1) 70,000 0 10,000 0
Independent Director Ku, Tai-Chao 0 0 0 0
Independent Director Wei, Yung-Tu (Note 1) 0 0 0 0
Independent Director Cheng, Chih-Kai (Note 1) 0 0 0 0
Independent Director Liu, Jong-Shi (Note 2) 0 0 0 0
Supervisors Tsai, You-Wei (Note 2) 0 0 0 0
Supervisors Hsu, Chiang-Chan (Note 2) 0 0 0 0
Supervisors Chang, Deh-Tsai (Note 2) 0 0 0 0
Senior Vice General
Manager Lee, Yi-Ping (105,000) 0 (14,000) 0
Vice General Manager Chou, Yen-Chou 60,000 0 100,000 0
Vice General Manager Liu, Chia-Lun 120,000 0 15,000 0
Vice General Manager Pan, Wu-Lung (Note 3) 586,530 0 0 0
Vice General Manager Lee, Chiu-Sheng 40,000 0 45,000 0
Vice General Manager Chiang, Yan-Ying (Note 4) 0 0 21,000 0
Vice General Manager Chang, Ching-Kai (Note 4) 10,000 0 15,000 0
Vice General Manager Chang, Yao-Han (Note 5) 0 0 15,000 0
Vice General Manager Wei, Hao-San (Note 5) 0 0 0 0
Assistant General
Manager Pan, Yen-Jen 0 0 15,000 0
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Note 1: Elected on June 29, 2015. Note 2: Discharged on June 29, 2015. Note 3: Retired on March 31, 2015. Note 4: Inauguration on April 1, 2015. Note 5: Inauguration on October 7, 2015.

（ 2 ） The counterparty of equity transfer is a related party: None

（ 3 ） The counterparty of equity pledge is a related party: None

8. The change in equity transfer and equity pledge of the directors, supervisors, managers, and shareholders with over 10% shareholding in the most recent year and as of the printing date of the annual report.

（ 1 ） Changes in equity transfer and equity pledge

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9. The Top-Ten shareholders who are related party mutually, or spouse, and relatives within the second degree of kinship

04.22.2016 / Unit: Shares

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31 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

04.22.2016 / Unit: Shares

==> picture [441 x 384] intentionally omitted <==

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Name and Relationship Between
Current Spouse and minor Shareholding by the Company's Top Ten
Shareholding Shareholding Nominee Arrangement Shareholders, or Spouses or
Name Relatives Within Two Degrees. Remark
Shares % Shares % Shares % Name Relationship
Nan Shan Life 16,254,000 3.68% 0 0 0 0 None None —
Insurance Co., Ltd.
ALPINE ASIA
CAMPBELL INVESTMENTS Kindred
TECHNOLOGY 11,204,909 2.53% 0 0 0 0 LIMITED within —
CORPORATION (Director: Liang, Li- the 2nd tier
Sheng)
Yeh, Yu-Fen 10,960,227 2.48% 0 0 0 0 None None —
Cathay Life
Insurance Company, 8,332,000 1.88% 0 0 0 0 None None —
Ltd.
Pan, Yung-Chung 8,291,046 1.88% 0 0 0 0 None None —
The new labor
pension fund 101
2nd discretionary 6,723,500 1.52% 0 0 0 0 None None —
Cathay investment
account
Public Service
Pension Fund
Management Board
2012 1st domestic 6,370,000 1.44% 0 0 0 0 None None —
discretionary Allianz
Investment Trust
investment account
HSBC entrusted with
Funds - Asian small Fulton Luxembourg 6,280,000 1.42% 0 0 0 0 None None —
capital
American JP Morgan
Chase Bank Taipei
with Central Bank Branch entrusted 5,326,476 1.20% 0 0 0 0 None None —
of Saudi Arabia
investment accounts
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10. The stock shares of one invested business held by the Company, the Company's directors, supervisors, and managers, and the business controlled by the Company directly or indirectly, and the consolidated shareholding ratio.

==> picture [441 x 97] intentionally omitted <==

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March 31, 2016 / Unit: 1,000 shares / %
Ownership by
Ownership by Directors, Managers Total
PRIMAX and Directly/ Ownership
Long-term Investment Indirectly Owned
Subsidiaries
Shares % Shares % Shares %
Telecommunication Products Co.Dongguan PRIMAX Electronic , Ltd. － (Note 1) 100.00 －－－ (Note 1) 100.00
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March 31, 2016 / Unit: 1,000 shares / %

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

Ownership by
Ownership by Directors, Managers Total
PRIMAX and Directly/ Ownership
Long-term Investment Indirectly Owned
Subsidiaries
Shares % Shares % Shares %
Primax Electronics (Kun Shan) Co., Ltd. . － (Note 1) 100.00 －－－ (Note 1) 100.00
Primax Electronics (Chongqing) Co., Ltd.. － (Note 1) 100.00 －－－ (Note 1) 100.00
Beijing Destiny Electronic Technology － (Note 1) 100.00 －－－ (Note 1) 100.00
Co., Ltd.
Destiny Technology (Japan) Corp. 0.5 100.00 －－ 0.5 100.00
Polaris Electronics Inc. 1,600 100.00 －－ 1,600 100.00
Primax Industries (Hong Kong) Ltd. 602,817 100.00 －－ 602,817 100.00
Primax Technology (Cayman Holding) Ltd. 285,067 100.00 －－ 285,067 100.00
Primax Industries (Cayman Holding) Ltd. 8,147,636 100.00 －－ 8,147,636 100.00
Destiny Technology Holding Co., Ltd 1,050 100.00 －－ 1,050 100.00
Diamond (Cayman) Holdings Ltd. 84,050 100.00 －－ 84,050 100.00
Gratus Technology Corp 300 100.00 －－ 300 100.00
Tymphany Worldwide Enterprises Ltd. (Note 2) 38,501 70.00 －－ 38,501 70.00
TYP Enterprises, Inc. (Note 2) 0.35 70.00 －－ 0.35 70.00
Tymphany HK Ltd. (Note 2) 101,077 70.00 －－ 101,077 70.00
TYMPHANY LOGISTICS, INC (Note 2) 140 70.00 －－ 140 70.00
Premium Loudspeakers (Huizhou) Co., Ltd. － (Note 1) 70.00 －－－ (Note 1) 70.00
(Note 2)
Dongguan Tymphany Acoustic Technology － (Note 1) 70.00 －－－ (Note 1) 70.00
Co., Ltd. (Note 2)
Global TEK Fabrication Co., Ltd. (Note 3) 16,530 30.00 －－ 16,530 30.00
Global TEK Co., Ltd. (Note 3) 4,980 30.00 －－ 4,980 30.00
Global Tek Fabrication Co., Ltd. (Samoa) 3,750 30.00 －－ 3,750 30.00
(Note 3)
Global Tek Co., Ltd. (Samoa) (Note 3) 2,760 30.00 －－ 2,760 30.00
Global Tek Fabrication Co., Ltd. (HK) (Note 3) 7,860 30.00 －－ 7,860 30.00
GP Tech. Inc. (Note 3) 6 30.00 －－ 6 30.00
Global Tek (WU'XI) Ltd. (Note 3) － (Note 1) 30.00 －－－ (Note 1) 30.00
WUXI Global Tek Fabrication Ltd. － (Note 1) 30.00 －－－ (Note 1) 30.00
(Note 3)
Global Tek (XI'AN) Ltd. (Note 3) － (Note 1) 30.00 －－－ (Note 1) 30.00
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Note 1: It is a company with limited liability; therefore, no stock shares issued. Note 2: Indirectly holds 70% of the company's shares through Diamond (Cayman) Holdings Ltd. Note 3: Indirectly holds 30% of the company's shares through Global TEK Fabrication Co., Ltd.

33 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 34

IV. Capital Overview

1. Capitalization

03.31.2016 Unit: Shares

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Authorized capital stock
Type of stock shares Outstanding stock Unissued stock Total Remark
shares shares
Common stock 441,793,824 58,206,176 500,000,000 Listed in TWSE
March 31, 2016 / Unit: NT$1,000; 1,000 shares
Authorized capital stock Paid-in capital Remark
Year / Issuing Capital
Month price Shares Amount Shares Amount Sources of Capital Assets other increase by Others
than cash
2006.03 10 100 1,000 100 1,000 Initial capital stock None Note 1
2007.06 10 90,000 900,000 85,400 854,000 Capital increase in cash for None Note 2
NT$853,000 thousand
2007.09 10 400,000 4,000,000 321,500 3,215,000 Capital increase in cash for None Note 3
NT$2,361,000 thousand
2007.11 10 400,000 4,000,000 379,000 3,790,000 Capital increase in cash for None Note 4
NT$575,000 thousand
2009.11 10 500,000 5,000,000 379,935 3,799,349 Conversion of employee stock None Note 5
warrant for NT$9,349 thousand
2010.04 10 500,000 5,000,000 383,079 3,830,791 Conversion of employee stock None Note 6
warrant for NT$31,442 thousand
2010.09 10 500,000 5,000,000 385,336 3,853,364 Conversion of employee stock None Note 7
warrant for NT$22,573 thousand
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----- Start of picture text -----

March 31, 2016 / Unit: NT$1,000; 1,000 shares
Authorized capital stock Paid-in capital Remark
Year / Issuing Capital
Month price Shares Amount Shares Amount Sources of Capital Assets other increase by Others
than cash
2011.01 10 500,000 5,000,000 386,397 3,863,965 Conversion of employee stock None Note 8
warrant for NT$10,601 thousand
2011.03 10 500,000 5,000,000 397,475 3,974,746 Conversion of employee stock None Note 9
warrant for NT$110,781 thousand
2011.12 10 500,000 5,000,000 398,439 3,984,399 Conversion of employee stock None Note 10
warrant for NT$9,653 thousand
2012.04 10 500,000 5,000,000 401,080 4,010,798 Conversion of employee stock None Note 11
warrant for NT$26,399 thousand
2012.05 10 500,000 5,000,000 401,458 4,014,582 Conversion of employee stock None Note 12
warrant for NT$3,785 thousand
2012.10 10 500,000 5,000,000 403,441 4,034,408 Conversion of employee stock None Note 13
warrant for NT$19,826 thousand
2012.10 10 500,000 5,000,000 426,970 4,269,698 Capital increase in cash for None Note 13
NT$235,290 thousand
2013.03 10 500,000 5,000,000 428,966 4,289,658 Conversion of employee stock None Note 14
warrant for NT$19,960 thousand
2013.05 10 500,000 5,000,000 431,346 4,313,457 Conversion of employee stock None Note 15
warrant for NT$23,799 thousand
Stock dividend – new restricted
2013.10 10 500,000 5,000,000 432,796 4,327,957 employee shares for NT$14,500 None Note 16
thousand
1. Conversion of employee stock
warrant for NT$5,916 thousand
2013.12 10 500,000 5,000,000 433,573 4,335,733 2. Stock dividend – new restricted None Note 17
employee shares for NT$1,860
thousand
1. Conversion of employee stock
warrant for NT$2,730 thousand
2014.03 10 500,000 5,000,000 433,981 4,339,813 2. Stock dividend – new restricted None Note 18
employee shares for NT$1,350
thousand
1. Conversion of employee stock
warrant for NT$750 thousand
2014.06 10 500,000 5,000,000 433,831 4,338,313 2. Cancellation of new restricted None Note 19
employee shares for NT$2,250
thousand
1. Stock dividend – new restricted
2014.08 10 500,000 5,000,000 434,051 4,340,513 employee shares for NT$2,200 None Note 20
thousand
1. Conversion of employee stock
warrant for NT$7,015 thousand
2014.12 10 500,000 5,000,000 434,658 4,346,578 2. Cancellation of new restricted None Note 21
employee shares for NT$950
thousand
1. Conversion of employee stock
warrant for NT$27,659 thousand
2015.03 10 500,000 5,000,000 438,649 4,386,487 2. Stock dividend – new restricted None Note 22
employee shares for NT$12,250
thousand
2015.06 10 500,000 5,000,000 439,529 4,395,287 1. Conversion of employee stock None Note 23
warrant for NT$8,800 thousand
1. Stock dividend – new restricted
employee shares for NT$17,750
thousand
2015.09 10 500,000 5,000,000 441,214 4,412,137 2. Cancellation of new restricted None Note 24
employee shares for NT$900
thousand
1. Conversion of employee stock
warrant for NT$1,640 thousand
2016.01 10 500,000 5,000,000 441,188 4,411,877 2. Cancellation of new restricted None Note 25
employee shares for NT$1,900
thousand
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35 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

March 31, 2016 / Unit: NT$1,000; 1,000 shares

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

Authorized capital stock Paid-in capital Remark
Year / Issuing Capital
Month price Shares Amount Shares Amount Sources of Capital Assets other increase by Others
than cash
1. Conversion of employee stock
warrant for NT$7,061 thousand
2016.03 10 500,000 5,000,000 441,794 4,417,938 2. Cancellation of new restricted None Note 26
employee shares for NT$1,000
thousand
----- End of picture text -----

Note 1: Fu-Jian-Shang-Zi No. 09574650700 Letter dated 03.20.2006. Note 2: Jing-Shou-Shang-Zi No. 09601140030 Letter dated 06.26.2007. Note 3: Jing-Shou-Shang-Zi No. 09601235870 Letter dated 09.27.2007. Note 4: Jing-Shou-Shang-Zi No. 09601273090 Letter dated 11.07.2007. Note 5: Jing-Shou-Shang-Zi No. 09801254590 Letter dated 11.04.2009. Note 6: Jing-Shou-Shang-Zi No. 09901076470 Letter dated 04.16.2010. Note 7: Jing-Shou-Shang-Zi No. 09901206110 Letter dated 09.13.2010. Note 8: Jing-Shou-Shang-Zi No. 10001005610 Letter dated 01.11.2011. Note 9: Jing-Shou-Shang-Zi No. 10001060980 Letter dated 03.31.2011. Note 10: Jing-Shou-Shang-Zi No. 10001275550 Letter dated 12.05.2011. Note 11: Jing-Shou-Shang-Zi No. 10101059950 Letter dated 04.09.2012. Note 12: Jing-Shou-Shang-Zi No. 10101091810 Letter dated 05.22.2012. Note 13: Jing-Shou-Shang-Zi No. 10101211370 Letter dated 10.12.2012. Note 14: Jing-Shou-Shang-Zi No. 10201041250 Letter dated 03.07.2013. Note 15: Jing-Shou-Shang-Zi No. 10201096770 Letter dated 05.28.2013. Note 16: Jing-Shou-Shang-Zi No. 10201214400 Letter dated 10.22.2013. Note 17: Jing-Shou-Shang-Zi No. 10201247440 Letter dated 12.11.2013. Note 18: Jing-Shou-Shang-Zi No. 10301032580 Letter dated 12.11.2013. Note 19: Jing-Shou-Shang-Zi No. 10301102920 Letter dated 06.12.2014. Note 20: Jing-Shou-Shang-Zi No. 10301160910 Letter dated 08.14.2014. Note 21: Jing-Shou-Shang-Zi No. 10301251420 Letter dated 12.12.2014. Note 22: Jing-Shou-Shang-Zi No. 10401045290 Letter dated 03.24.2015. Note 23: Jing-Shou-Shang-Zi No. 10401110510 Letter dated 06.29.2015. Note 24: Jing-Shou-Shang-Zi No. 10401190870 Letter dated 09.17.2015. Note 25: Jing-Shou-Shang-Zi No. 10401282090 Letter dated 01.04.2016. Note 26: Jing-Shou-Shang-Zi No. 10501040780 Letter dated 03.08.2016.

Note 27: Employee stock option had been exercised for an amount of NT$3,683,500, but the amendment registration is not yet completed.

2. Composition of Shareholders

Governmental Agencies

Number of Shareholders：4 person Shareholding：20,308,000

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

Foreign Institutions and
Natural Persons
4.59 %
Number of Shareholders：254 person
Shareholding：227,246,381 51.41 % April 22, 2016 7.19 %
Composition of
Shareholders 2.23 %
Shareholding Total
442 032 824
, ,
Number of Shareholders Total
12,955
person
34.58 %
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Financial Institutions

Number of Shareholders：31 person Shareholding：31,777,327

Others Juridical person

Number of Shareholders：45 person Shareholding：9,853,005

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Domestic Natural Persons
----- End of picture text -----

April 22, 2016 / Unit: person; shares

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

Shareholder Ownership (Unit: Share) Number of Shareholders Ownership Ownership (%)
1 to 999 248 37,888 0.01%
1,000 to 5,000 9,386 20,242,525 4.58%
5,001 to 10,000 1,549 12,947,554 2.93%
10,001 to 15,000 402 5,368,927 1.21%
15,001 to 20,000 365 6,888,982 1.56%
20,001 to 30,000 256 6,675,746 1.51%
30,001 to 50,000 234 9,689,888 2.19%
50,001 to 100,000 190 13,500,835 3.05%
100,001 to 200,000 90 13,120,505 2.97%
200,001 to 400,000 77 22,103,013 5.00%
400,001 to 600,000 30 14,681,289 3.32%
600,001 to 800,000 25 17,088,278 3.87%
800,001 to 1,000,000 18 16,412,621 3.71%
Over 1,000,001 85 283,274,773 64.09%
Total 12,955 442,032,824 100.00%
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4. List of Major Shareholders

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

April 22, 2016 / Unit: Shares
Shares Total Shares Ownership
Name of Major Shareholders Owned (%)
ALPINE ASIA INVESTMENTS LIMITED 28,581,062 6.47%
Nan Shan Life Insurance Co., Ltd. 16,254,000 3.68%
CAMPBELL TECHNOLOGY CORPORATION 11,204,909 2.53%
Yeh, Yu-Fen 10,960,227 2.48%
Cathay Life Insurance Company, Ltd. 8,332,000 1.88%
Pan, Yung-Chung 8,291,046 1.88%
The new labor pension fund 2012 2nd discretionary Cathay investment account 6,723,500 1.52%
Public Service Pension Fund Management Board 2012 1st domestic discretionary Allianz Investment Trust investment account 6,370,000 1.44%
HSBC entrusted with Fulton Luxembourg Funds - Asian small capital 6,280,000 1.42%
American JP Morgan Chase Bank Taipei Branch entrusted with Central Bank of Saudi Arabia investment accounts 5,326,476 1.20%
----- End of picture text -----

5. Market price, net worth, earnings, and dividends per share within two (2) years and the related information

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

Year 2014 2015 01.01.2016~03.31.2016
Item
Highest Market Price 54.2 48.5 42.30
Market price per Lowest Market Price 25.5 30.8 34.85
share
Average Market Price (Note 1) 38.72 42.27 38.98
----- End of picture text -----

Number of Shareholders：12,621 person Shareholding：152,848,111

Primax Electronics Ltd. 2015 Annual Report

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

Year 2014 2015 01.01.2016~03.31.2016
Item
Before Distribution 21.16 23.90 24.56
Net worth per
share
After Distribution 19.36 21.80 24.56
Weighted average Shares (thousand shares) 432,362 436,372 438,198
Earnings per
share
Earnings per share 3.57 4.06 0.91
Cash dividend 1.8 2.1 0
Dividend per Stock Stock dividend from earnings 0 0 0
share
dividend
(Note 2) Stock dividend from paid-in capital 0 0 0
Accumulated Undistributed Dividends 0 0 0
Return on Price/Earning (P/E) ratio 10.85 10.41 10.71
investment
Price/Dividend (P/D) ratio 21.51 20.13 Not applicable
analysis
(Note 3) Cash dividend yield rate 0.0465 0.0497 Not applicable
----- End of picture text -----

Note 1: The annual average market price is calculated according to the annual sales value and volume.
Note 2: The Company's 2015 earnings distribution proposal was resolved by the Board of Directors on March 24, 2016, but not yet presented in the shareholder's meeting for resolutions.
Note 3: P/E ratio = Current average closing price per share / Earnings per share.
P/D ratio = Current average closing price per share / Cash dividend per share.
Cash dividend yield rate = Cash dividend per share / Current average closing price per share.

6. The Company's dividend policy and its implementation

（ 1 ） Dividend policy enacted in the Company's Articles of Association:

The Company's annual net income, if any, should be distributed orderly as follows:

I. Making up losses

II. Appropriating 10% legal reserve thereafter. However, no legal reserve will be reserved further once it is equal to the total capital stock.
III. Special reserve should be appropriated or reversed in accordance with law or regulations or the instruction of the competent authorities.
IV. Appropriating an amount equivalent to 2~10% and an amount less than 2% of the net amount after deducting the amount stated in paragraph 1~3 as bonus to employees and remuneration to directors and supervisors, respectively.
V. The balance amount and the cumulative unappropriated earnings are the distributable earnings and the distribution is to be proposed by the Board of Directors and presented in the shareholders' meeting for resolutions.

The Company's dividend policy is to be determined by the Board of Directors by referring to the Company's operating conditions, capital expenditure budget, future fund needs and long-term financial planning; also, by taking the interest of shareholders and the balance of dividend into consideration. According to current dividend policy and without any specific conditions taken into consideration, it is for an amount not less than 50% of the net income. The earnings distribution is with stock dividend or cash dividend distributed. The cash dividend distribution ratio shall not be less than 10% of the total dividend, provided that the proportion of cash dividends paid may be adjusted in accordance with the overall operating conditions of the year.

（ 2 ） The distribution of dividend proposed in current year:

The Company's 2015 earnings distribution proposal was resolved by the Board of Directors on March 24, 2016 with a cash dividend of NT$927,932,930 to be distributed to shareholders. This earnings distribution proposal will be resolved in the general shareholders' meeting on June 20, 2016 and then processed accordingly.

7. The impact of the stock dividend proposed in the shareholders' meeting on the Company's business performance and the earnings per share: No dividend distribution scheduled

8. Remuneration to employees and remuneration to directors and supervisors

（ 1 ） The percentage or range of earnings as remuneration to employees and remuneration to directors and supervisors defined in the Company's Articles of Association

with less than 2% appropriated as remuneration to directors in accordance with the amendment of the Articles of Association proposed in the shareholders' meeting. If the Company is with accumulated losses, an amount for making up the losses should be reserved in advance before appropriating remuneration to employees and remuneration to directors and supervisors according to the ratio referred to above.

The remuneration to employees paid with stock or cash in the preceding paragraph is also available to the qualified employees of the subsidiaries.

remuneration to employees and remuneration to directors and supervisors.

The remuneration to employees and remuneration to directors and supervisors must be with the consent of the majority of the presenting directors in the Board meeting that is with two thirds of the directors attended; in addition, the resolution must be reported in the shareholders' meeting.

（ 2 ） The accounting treatment for the estimation basis used to estimate current remuneration to employees and remuneration to directors and supervisors, the number of shares applied for the calculation of stock dividend to employees as remuneration, and the difference between the actual distribution amount and the estimated amount.

The Company's remuneration to employees and remuneration to directors according to the Company Law and the Company's Articles of Association is in conformity with the requirements of (96) Ji-Mi-Zi No. 052 Letter of the Accounting Research and Development Foundation. While preparing interim and annual financial statements, estimate the remuneration to employees and remuneration to directors in advance that are to be booked in the respective account as operating cost or operating expense according to the nature of such remuneration paid. The difference between the earnings distribution resolved in the shareholders meeting and the estimated distribution amount in the financial statements should be treated as change in estimates and it is to be booked as profit or loss.

（ 3 ） The distribution of remuneration resolved by the Board of Directors:
The remuneration to employees and remuneration to directors and supervisors paid with cash dividend or stock dividend. If the actual expense amount differs from the estimated amount, the amount of difference, root cause, and accounting treatment should be disclosed.

39 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 40

The Company's Board of Directors resolved on March 24, 2016 to have remuneration to employees in cash and remuneration to directors and supervisors distributed for an amount of NT$78,500,000 and NT$32,000,000, respectively, which was different from the estimated amount of NT$78,268,840 and NT$$31,907,533 by an amount of (NT$231,160) and (NT$92,467) due to a change in accounting estimates. Once the actual distribution amount is resolved in the shareholders' meeting and the change in estimate is not significant enough to have the financial statements recomposed, the amount of difference will be recognized as profit or loss in the following year.

The ratio of remuneration to employees paid with stock dividend to the total of net income and remuneration to employees:

The Company has not proposed the distribution of stock dividend to employees; therefore, it is not applicable.

（ 4 ） If the actual distribution of remuneration to employees, directors, and supervisors in the previous year (including number of shares distributed, amount, and stock price) was different from the remuneration to employees, directors, and supervisors recognized, the amount of difference, root cause, and accounting treatment should be detailed.

The Company had cash dividend to employees and remuneration to directors and supervisors distributed in 2014 for an amount of NT$71,000,000 and NT$27,800,000, respectively, which was different from the estimated amount of NT$71,318,216 and NT$$28,527,286 by an amount of NT$318,216 and NT$727,286 due to a change in estimates. Also, the change in estimate was not significant enough to have the financial statements recomposed; the amount of difference would be recognized as profit or loss in the following year.

9. The Company's buying back shares: None

10. The process of corporate bonds, preferred stock, and GDR: None

11. Employee stock warrant status

（ 1 ） Outstanding employee stock warrant status and its impact on shareholders' equity

The Company merged the former Primax on 12.28.2007 and acquired its related employee stock warrant previously issued; also, it was exchanged for the employee stock warrant issued by Primax Electronics Holdings, LTD. (British Cayman Islands) as the main business entity in 2008; also, all rights and obligations were the same as those offered by the former Primax Electronics Holdings, LTD. (British Cayman Islands) had intended to propose a dissolution and liquidation plan in 2009; therefore, it was again exchanged for the employee stock warrant issued by Primax as the main business entity and with all rights and obligations same as those offered by Primax Electronics Holdings, LTD. (British Cayman Islands). The Company's Board of Directors for the issuance of stock and employee stock warrant had the 2008 1st and 2nd employee stock warrant issuance and subscription approach amended on November 12, 2009 that was approved by the Securities and Futures Bureau with SFC.Far.Zi No. 0980062637 Letter issued. In addition, the Company in

consideration of the annual expansion of the scale of operation, in order to strengthen the existing management team, has the 2011 employee stock warrant issuance and stock subscription approach enacted on September 30, 2011 that was approved by the Securities and Futures Bureau with SFC.Far.Zi No. 1000051000 Letter issued on October 26, 2011. The Company's respective issuance of employee stock warrant is shown as follows:

April 30, 2016

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

1st Tranche ESOP in 2008 ESOP issued in 2011
Type of Stock Option
(Note 1) (Note 2)
The effective date of 2009.12.1 2009.12.1 2011.10.26 2011.10.26
declaration
Issuance date (Note 3) 2008.1.2 2009.11.12 2011.11.24 2012.10.22
Duration 8 years 8 years 5 years 5 years
Number of stock warrant
6,482,700 370,440 1,500 3,500
issued (Note 4)
Ratio of number of stock
option to the total number of 1.47 0.08 0.34 0.79
outstanding shares (%)
A 43% stock option can be A 43% stock option can be
A 50% stock option can A 50% stock option can
exercised starting from the exercised starting from the be exercised at the end be exercised at the end
4th year to the end of the 4th year to the end of the
of the 2nd year; also, a of the 2nd year; also, a
6th year and the remaining 6th year and the remaining
Subscription period 100% stock option can 100% stock option can
57% stock option can be 57% stock option can be be exercised at the end be exercised at the end
exercised starting from the exercised starting from the
of the 3rd year till the of the 3rd year till the
6th year to the end of the 6th year to the end of the
8th year. 8th year. expiry date. expiry date.
Mode of exercise Exchange for new Exchange for new Exchange for new Exchange for new
shares shares shares shares
Period and ratio restricted for
Note 1 Note 1 Note 2 Note 2
subscription (%)
Quantity of shares acquired
through exercise of ESOP 6,174,000 159,289 675,000 1,233,000
Amount of stock option
exercised 70,507,084 1,819,081 12,040,000 33,344,700
Quantity of shares not being
subscribed under ESOP 308,700 211,151 825,000 2,267,000
(Note 5)
Subscription price per share 11.42 11.42 17.10 26.50
for the unexercised options
Quantity of shares not being
subscription under the exercise 0.07 0.05 0.19 0.51
of options in proportion to total
outstanding shares (%)
The stock warrant will The stock warrant will
The stock warrant will be The stock warrant will be
be executed annually be executed annually
executed annually after executed annually after
three years and five years three years and five years after two years and three years from the after two years and three years from the
The impact on shareholders' from the issuing date; also, from the issuing date; also,
issuing date; also, the issuing date; also, the
equity the former shareholding's the former shareholding's
former shareholding's former shareholding's
equity will be diluted year equity will be diluted year
equity will be diluted equity will be diluted
after year with a limited after year with a limited
dilution effect. dilution effect. year after year with a year after year with a
limited dilution effect. limited dilution effect.
----- End of picture text -----

Note 1: The employee stock warrant issued currently is for 8 years starting from the issuing date of the former Primax Electronics Holdings, Ltd. employee stock warrant and it is executed in accordance with the following schedule in a lump sum. The stock option that was not exercised on the expiry date will be deemed as a waiver and the stock option holders may not assert their stock option rights.

Schedule:

A 43% stock option can be exercised starting from the 4th year to the end of the 6th year.

A 57% stock option can be exercised starting from the 6th year to the end of the 8th year.

If the employees with the stock warrant had left the employment for any reason or had committed severe negligence of violating labor contracts or work rules, or poor job performance, the Company is entitled to have the outstanding stock warrant withdrawn and then have it reissued. The stock warrant recovered and then reissued is effective starting from the re-issuing date. However, if the employees after the Company's public offering had left the employment for reasons or had committed severe negligence of violating labor contracts or work rules, or poor job performance, the Company is entitled to have the outstanding stock warrant withdrawn and then have it cancelled.

It was issued on 01.02.2008 and had expired.

41 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 42

"employee stock warrant" issued for two years starting from the issuing date and a 100% stock option can be exercised after three years from the issuing date. If the employees after receiving the stock warrant had left the employment for any reason or had committed severe negligence of violating labor contracts or work rules, or poor job performance, the Company is entitled to have the outstanding stock warrant withdrawn and then have it cancelled. The stock option that is not exercised on the expiry date will be deemed as a waiver and the stock option holders may not assert their stock option rights.
Note 3: Except for the stock warrant issued on 11.12.2009, 11.24.2011, and 10.22.2012, the issuing date of the remaining stock warrants by Primax Electronics Holdings, LTD (British Cayman Islands) and former Primax as the main business entities referred to the employee stock warrant issued on 12.30.2008 by the Company as the business entity.
Note 4: That was the units issued on 12.01.2009 and 10.26.2011 with the approval of the Financial Supervisory Commission, respectively. In addition, except for the 2011 employee stock warrant subject to the subscription of 1,000 shares per unit while the remaining respective employee stock warrant is subject to 1 share per unit.
Note 5: It is the balance of the issued unit net of the unit executed and invalid and cancelled unit.

（ 2 ） The managers received employee stock warrant and the name, acquisition, and subscription of the employees on the top-ten stock warrant subscribers list for an amount over NT$30 million:

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April 30, 2016 / Unit: NT$1,000 ; 1,000 shares / %
Exercised Unexercised
The
quantity of
Number subscription % of Shares % of Shares
Title Name GrantedOptions of proportion to the total units in ExerciseShares Price Per Exercise Share ExercisedValue of Shares Outstanding Exercised to Common UnexercisedShares Unexercised Price Per Share UnexercisedValue of Shares Unexercised Outstanding to
subscription Shares Common
quantity Shares
Director/ Yang, Hai-
General Manager Hung
General Manager
of Business Pan Yung-Tai
Department
Vice General Tsao, Chung-
Manager Feng
Vice General Chou, Yen-
Manager Chou
Vice General 4,969 11.42 56,749
Manager Liu, Chia-Lun 5,830 1.32 5050 18.2017.90 910895 1.18 211425 11.4226.50 13,673 0.14
Vice General Lee, Chiu- 125 26.50 3,312
Manager Sheng
Vice General Chiang, Yan-
Manager Ying
Vice General Chang,
Manager Ching-Kai
Vice General Wei, Hao-
Manager San
Vice General Chang, Yao-
Manager Han
Not Applicable — — — — — — — — — — —
(Note: 1)
Managers
Employees
----- End of picture text -----

Note 1: The top-ten employee stock warrant subscribers refer to the employees other than the managers.

（ 3 ） The private placement of employee stock warrant in the last three years: None

12. The process of new restricted employee shares

（ 1 ） The process of new restricted employee shares without fulfilling the vested conditions completely and its impact on shareholders:

April 30, 2016

==> picture [440 x 540] intentionally omitted <==

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

Type of new restricted The first issue in The fourth issue in The first issue in The second issue
employee shares 2013 2013 2014 in 2014
The effective date of 7/31/2013 7/31/2013 10/6/2014 10/6/2014
declaration
Issuing date 10/01/2013 7/17/2014 02/24/2015 8/18/2015
Number of new restricted
employee shares issued 1,450,000 220,000 1,225,000 1,775,000
(shares)
Issuing price 0 0 0 0
Ratio of the number of new
restricted employee shares 0.33 0.05 0.28 0.40
issued to total outstanding
shares (%)
Vested conditions of the new Shall comply with the Company's Shall comply with the Company's
operating results and individual operating results and individual
restricted employee shares performance as defined in the Rules. performance as defined in the Rules.
1. Employees may not have the new 1. Employees may not have the new
restricted employee shares sold, restricted employee shares sold,
mortgaged, transferred, gifted, pledged, mortgaged, transferred, gifted, pledged,
or disposed in any form before fulfilling or disposed in any form before fulfilling
the vested conditions. the vested conditions.
2. The attendance, motion, speech, and 2. The attendance, motion, speech, and
voting right of the shareholders' meeting voting right of the shareholders' meeting
should be implemented in accordance should be implemented in accordance
with the trust and depository contracts. with the trust and depository contracts.
The limitation of rights of
the new restricted employee 3. Except for the limitations in the preceding 3. Except for the limitations in the preceding
shares paragraph, the other rights of the new paragraph, the other rights of the new
restricted employee shares received restricted employee shares received
according to the Rules, including but according to the Rules, including but not
not limited to stock dividends, bonuses limited to stock dividends, bonuses and
and rights to additional paid-in capital, rights to additional paid-in capital, stock
stock subscription from cash capital subscription from cash capital increase,
increase, voting right, etc., before fulfilling voting right, etc., before fulfilling the
the vested conditions, are without any vested conditions, are without any
limitation same as the Company's limitation same as the Company's
common stock issued. common stock issued.
The custody of new restricted It is handled in accordance with the trust It is handled in accordance with the trust
employee shares depository method. depository method.
The new restricted employee shares The new restricted employee shares
subscribed before fulfilling the The process of new restricted employee shares received or vested conditions received but not yet fulfilling the vested conditions will be called back without compensation by the Company and it will received but not yet fulfilling the vested conditions will be called back without compensation by the Company and it will
then be cancelled. then be cancelled.
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43 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

April 30, 2016

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

April 30, 2016
Type of new restricted The first issue in The fourth issue in The first issue in The second issue
employee shares 2013 2013 2014 in 2014
Number of new restricted
employee shares called or 450,000 20,000 205,000 120,000
buyback (shares)
Number of new restricted
employee shares derestricted 680,000 100,000 344,000 0
(shares)
Number of new restricted
320,000 100,000 676,000 1,655,000
employee shares (shares)
Ratio of the number of new
restricted employee shares to 0.07 0.02 0.15 0.37
the total outstanding shares (%)
The impact on shareholders' No significant No significant No significant No significant
equity impact. impact. impact. impact.
----- End of picture text -----

Note: A total of 442,032,824 shares were issued on 04.30.2016.

（ 2 ） The name of the managers received new restricted employee shares and the top-ten employees and the number of shares obtained by each of the employees:

April 30, 2016

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

Ratio of the Released Unreleased
number
Number of new
Released Unreleased
of new restricted
Restricted Restricted
Title Name restricted employee Number of Issued Amount Shares as a Number of Issued Amount Shares as
employee shares shares to the total shares price issuanceof Percentage of Shares shares price issuanceof Percentage of Shares
outstanding Issued Issued
shares
General Manager
of Business Pan Yung-
Tai
Department
Senior Vice
General Manager [Lee, Yi-Ping]
Vice General Chou, Yen-
Manager Chou
Vice General Tsao,
Chung-
Manager
Feng
Vice General Liu, Chia-
Manager Lun
Vice General Lee, Chiu- 1,880,000 0.43% 636,000 0 0 0.14% 1,244,000 0 0 0.28%
Manager Sheng
Vice General Chiang,
Manager Yan-Ying
Vice General Chang,
Manager Ching-Kai
Vice General Chang,
Manager Yao-Han
Vice General Wei, Hao-
Manager San
Assistant General Pan, Yan-
Manager Jen
Managers
----- End of picture text -----

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

Ratio of the Released Unreleased
number
of new
Number of Released Unreleased
restricted
new restricted Restricted Restricted
Title Name employee employee shares to Number of Issued Amount of Shares as a Number of Issued Amount of Shares as
shares the total shares price issuance Percentage of Shares shares price issuance Percentage of Shares
outstanding Issued Issued
shares
Senior Assistant Chang,
General Manager Chen-Deh
Senior Assistant Luo, Ming-
General Manager Deh
Assistant General Ying,
Chung-
Manager Wen
Assistant General Liu, Yung-
Manager Mu
Assistant General Chen, Ying-
Manager Shou
1,190,000 0.27% 441,000 0 0 0.10% 749,000 0 0 0.17%
Assistant General Chiang,
Chao-
Manager Chung
Assistant General
Ho, Cheng
Manager
Assistant General Wu, Ta-
Manager Chuan
Assistant General Hu, Ching-
Manager Yuan
Assistant General Shan, Yi-
Manager Kuang
Employees
----- End of picture text -----

Note: A total of 442,032,824 shares were issued on 04.30.2016.

13. Stock acquisition or transfer from other companies with new shares issued

（ 1 ） Stock acquisition or transfer from other companies with new shares issued in the most recent year or as of the printing date of the annual report: None.
（ 2 ） Stock acquisition or transfer from other companies with new shares issued resolved in the Board meeting in the most recent year or as of the printing date of the annual report: None.

14. Fund plan and its execution

（ 1 ） Project content:

The prior issuance or private placement of marketable securities that was not yet completed or it was completed within the last three years without significant effect up to the last quarter prior to the printing date of the annual report: Not Applicable.

（ 2 ） Project execution:

Analyze the intended use of each project in the preceding paragraph up to the prior quarter of the printing date of the annual report, the execution, and comparison with the expected effect: Not Applicable.

45 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

3. The Company's current products (services)

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V. Operation overview

1. Business content:

（ 1 ） Business Scope

1. The main business operations of the Company

．� CB01020 Business equipment manufacturing industry ．� CC01030 Electrical appliances and audio-video electronic products manufacturing industry ．� CC01060 Wired communication machinery equipment manufacturing industry ．� CC01070 Wireless communication machinery equipment manufacturing industry ．� CC01080 Electronic components manufacturing industry
．� CC01101 Controlled telecommunications radio frequency equipment manufacturing industry
．� CC01110 Computer and peripheral equipment manufacturing industry ．� CE01030 Optical instrument manufacturing industry
．� F401021 Controlled telecommunications radio frequency equipment importing industry
．� I301010 Information software services industry
．� F113050 Computer and multifunction products wholesale industry
．� F118010 Information software wholesale industry
．� F213030 Computers and multifunction product retail industry
．� F218010 Information software retail industry
．� C805050 Industrial plastic products manufacturing industry ．� CA02010 Metal structures and architectural components manufacturing industry ．� CA02090 Metal wire products manufacturing industry
．� F401010 International trade industry
．� ZZ99999 In addition to the chartered business, the business not-prohibited or non-restricted by law is also permitted for operation.

2. Business ratio

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2. Business ratio Unit: NT$1,000
2015
Year
Item
Total Sales (%) of Total Sales
PC peripherals 30,586,105 46.63%
Non-PC peripherals 35,003,188 53.37%
Total 65,589,293 100.00%
----- End of picture text -----

PC peripheral products	Non-PC peripheral products
① Computer input device Basic roller mouse	① Mobile device components products Mobile phone built-in camera and fngerprint identifcation module ．24-megapixel optical anti-shake camera module
Traditional optical mouse Advanced Laser mouse	．13-megapixel + 13-megapixel dual-camera module ．14-megapixel web camera module ．Capacitive fngerprint identifcation module ．Ultrasonic fngerprint identifcation module
Wireless radio frequency	Communications peripheral equipment
optical and laser mouse	．Bluetooth headphones / Bluetooth stereo headphones / Bluetooth
	stereo module / Bluetooth desktop / car handsfree device /
Bluetooth mouse	Bluetooth USB audio frequency signal receiver
	．Bluetooth GPS receiver / Bluetooth USB data transmission receiver
Wireless Bluetooth dual-mode	．Desktop charging cradle / car charger / USB charging cable /
mouse	Portable power supply unit / wireless charger / wireless charging module
Wireless presenter	．MP3 charging dock / radio wired control device / remote ．Phone data transmission lines / USB Card Receiver
Mini Mouse	②Business equipment products ③Digital home products
Wired keyboard Wireless keyboard	Image Scanner ．Flatbed scanner ．Automatic document feeder (ADF) ．Automatic reversing document Portable wireless network storage device
Bluetooth keyboard Mechanical keyboard Game mouse and keyboard	feeder (ARDF) ．Double-sided automatic document feeder (DADF) ．Ofce scanner module ．Scanner module software and frmware development Bluetooth portable speaker One-piece soundbar (2.1, 5.1 sound track)
Backlit keyboard	Printer
	．Black and white and color laser Computers / audio
Notebook computer	printer control panel development speakers
keyboards Ultra-thin tablet PC keyboard	．Black and white and color laser printer software and frmware development Speaker driver
Keyboard module	．Dot matrix business printer ．Thermal printer

① Computer input device Basic roller mouse Traditional optical mouse Advanced Laser mouse Wireless radio frequency optical and laser mouse Bluetooth mouse Wireless Bluetooth dual-mode mouse Wireless presenter Mini Mouse Wired keyboard Wireless keyboard Bluetooth keyboard Mechanical keyboard Game mouse and keyboard Backlit keyboard Notebook computer keyboards Ultra-thin tablet PC keyboard Keyboard module ① Mobile device components products Mobile phone built-in camera and fngerprint identifcation module ．24-megapixel optical anti-shake camera module ．13-megapixel + 13-megapixel dual-camera module ．14-megapixel web camera module ．Capacitive fngerprint identifcation module ．Ultrasonic fngerprint identifcation module Communications peripheral equipment ．Bluetooth headphones / Bluetooth stereo headphones / Bluetooth stereo module / Bluetooth desktop / car handsfree device / Bluetooth USB audio frequency signal receiver ．Bluetooth GPS receiver / Bluetooth USB data transmission receiver ．Desktop charging cradle / car charger / USB charging cable / Portable power supply unit / wireless charger / wireless charging module ．MP3 charging dock / radio wired control device / remote ．Phone data transmission lines / USB Card Receiver PC peripheral products Non-PC peripheral products ②Business equipment products Image Scanner ．Flatbed scanner ．Automatic document feeder (ADF) ．Automatic reversing document feeder (ARDF) ．Double-sided automatic document feeder (DADF) ．Ofce scanner module ．Scanner module software and frmware development Printer ．Black and white and color laser printer control panel development ．Black and white and color laser printer software and frmware development ．Dot matrix business printer ．Thermal printer ③Digital home products Portable wireless network storage device Bluetooth portable speaker One-piece soundbar (2.1, 5.1 sound track) Computers / audio speakers Speaker driver	① Computer input device Basic roller mouse Traditional optical mouse Advanced Laser mouse Wireless radio frequency optical and laser mouse Bluetooth mouse Wireless Bluetooth dual-mode mouse Wireless presenter Mini Mouse Wired keyboard Wireless keyboard Bluetooth keyboard Mechanical keyboard Game mouse and keyboard Backlit keyboard Notebook computer keyboards Ultra-thin tablet PC keyboard Keyboard module ① Mobile device components products Mobile phone built-in camera and fngerprint identifcation module ．24-megapixel optical anti-shake camera module ．13-megapixel + 13-megapixel dual-camera module ．14-megapixel web camera module ．Capacitive fngerprint identifcation module ．Ultrasonic fngerprint identifcation module Communications peripheral equipment ．Bluetooth headphones / Bluetooth stereo headphones / Bluetooth stereo module / Bluetooth desktop / car handsfree device / Bluetooth USB audio frequency signal receiver ．Bluetooth GPS receiver / Bluetooth USB data transmission receiver ．Desktop charging cradle / car charger / USB charging cable / Portable power supply unit / wireless charger / wireless charging module ．MP3 charging dock / radio wired control device / remote ．Phone data transmission lines / USB Card Receiver PC peripheral products Non-PC peripheral products ②Business equipment products Image Scanner ．Flatbed scanner ．Automatic document feeder (ADF) ．Automatic reversing document feeder (ARDF) ．Double-sided automatic document feeder (DADF) ．Ofce scanner module ．Scanner module software and frmware development Printer ．Black and white and color laser printer control panel development ．Black and white and color laser printer software and frmware development ．Dot matrix business printer ．Thermal printer ③Digital home products Portable wireless network storage device Bluetooth portable speaker One-piece soundbar (2.1, 5.1 sound track) Computers / audio speakers Speaker driver	① Computer input device Basic roller mouse Traditional optical mouse Advanced Laser mouse Wireless radio frequency optical and laser mouse Bluetooth mouse Wireless Bluetooth dual-mode mouse Wireless presenter Mini Mouse Wired keyboard Wireless keyboard Bluetooth keyboard Mechanical keyboard Game mouse and keyboard Backlit keyboard Notebook computer keyboards Ultra-thin tablet PC keyboard Keyboard module ① Mobile device components products Mobile phone built-in camera and fngerprint identifcation module ．24-megapixel optical anti-shake camera module ．13-megapixel + 13-megapixel dual-camera module ．14-megapixel web camera module ．Capacitive fngerprint identifcation module ．Ultrasonic fngerprint identifcation module Communications peripheral equipment ．Bluetooth headphones / Bluetooth stereo headphones / Bluetooth stereo module / Bluetooth desktop / car handsfree device / Bluetooth USB audio frequency signal receiver ．Bluetooth GPS receiver / Bluetooth USB data transmission receiver ．Desktop charging cradle / car charger / USB charging cable / Portable power supply unit / wireless charger / wireless charging module ．MP3 charging dock / radio wired control device / remote ．Phone data transmission lines / USB Card Receiver PC peripheral products Non-PC peripheral products ②Business equipment products Image Scanner ．Flatbed scanner ．Automatic document feeder (ADF) ．Automatic reversing document feeder (ARDF) ．Double-sided automatic document feeder (DADF) ．Ofce scanner module ．Scanner module software and frmware development Printer ．Black and white and color laser printer control panel development ．Black and white and color laser printer software and frmware development ．Dot matrix business printer ．Thermal printer ③Digital home products Portable wireless network storage device Bluetooth portable speaker One-piece soundbar (2.1, 5.1 sound track) Computers / audio speakers Speaker driver
		Mini Mouse Wired keyboard Wireless keyboard Bluetooth keyboard Mechanical keyboard Game mouse and keyboard Backlit keyboard Notebook computer keyboards Ultra-thin tablet PC keyboard Keyboard module ②Business equipment products Image Scanner ．Flatbed scanner ．Automatic document feeder (ADF) ．Automatic reversing document feeder (ARDF) ．Double-sided automatic document feeder (DADF) ．Ofce scanner module ．Scanner module software and frmware development Printer ．Black and white and color laser printer control panel development ．Black and white and color laser printer software and frmware development ．Dot matrix business printer ．Thermal printer ③Digital home products Portable wireless network storage device Bluetooth portable speaker One-piece soundbar (2.1, 5.1 sound track) Computers / audio speakers Speaker driver
	Smart TV remote control Living room input device MFi (Made for iPod, Made for iPhone) Wired Keyboard Bluetooth wireless game joystick Games peripherals Capacitive stylus pen ②Notebook computer touch panel ③Digital Writing Tablet ④Network camera module 300,000 pixel – 2-megapixel camera 2-megapixel autofocus web camera ．Portable thermal photograph printer Multifunction Printers ．Black and white and color laser Multifunction Printers ．Multifunction Printers control panel development ．Multifunction Printers software and frmware development Fax machine ．Black and white fax machine Information processing device ．Computer terminals ．Mobile Internet devices ．Point of sales (POS) ．Cash register (CR) ．Lottery Machines Ofce automation products ．Shredder ．Laminator ．Binding machine ．Paper cutter Smart Network Camera ．Surveillance camera ．Conference camera ④Wearable device products: Smart Band Smart Watch ⑤Precision metal processing products Automotive airbag systems spare parts Automotive fuel-saving systems spare parts Industrial instrumentation systems spare parts Aerospace industry- related metal spare parts Other metal precision processing

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Primax Electronics Ltd. 2015 Annual Report 48

4. New products (service) development plan

PC peripheral products Non-PC peripheral products ．� Computer input device ① Mobile device components ② Business equipment mouse and keyboard products products Commercial double-sided ．� Backlit keyboard Full HD thin NB camera automatic document feeder module (DADF) scanner ．� Keyboard module 8-megapixel fixed-focus Commercial network scanner

camera module (front lens)

．� Bluetooth and wireless controller and presenter

．� Game mouse and keyboard

High-speed multifunction printer scanner module High-speed color laser printer control panel development

8-megapixel front look optical zoom lens camera module

13-megapixel closed-loop Barcode label black and fast autofocus camera module white / color printer

．� Game console peripherals

．� Multi-point touch panel

High-speed B & W / Color Laser multifunction product control panel development Mobile Internet devices

13-megapixel dual-lens zoom camera module

．� Digital Writing Tablet

．� Smart TV remote control

23.8-megapixel optical antishake + Auto-Focus camera module

Point of Sales (POS) service machine control board development

．� Ultra-thin tablet PC keyboard and leather keyboard

Portable photo printer and Internet of Things (IoT) interface development

camera module

．� Capacitive stylus pen

13-megapixel +13-megapixel dual-lens camera module

．� Bluetooth stylus pen

③ Digital home products Home Network Attached Storage (NAS) device

．� Tablet phone game controller

13-megapixel +8-megapixel dual-lens zoom lens module

Portable Wireless Network Attached Storage hard drive

．� Living room input device

Car panorama camera module

．� Thin mechanical keyboard

Digital home entertainment media server

360°panorama / Sports camera

．�

Digital home wireless audio system

．� Tablet PC high-speed Surveillance camera transmission expansion port

．� Audio conference keyboard Phone fingerprint identification module Digital home-related applied softwareapplied software

④ Automotive

．� High wattage wireless electronics-related Credit card fingerprint charging device products

Portable Wireless Speaker Digital home-related applied softwareapplied software

（ 2 ） Industry Overview

1. Industry current status and development

（ 1 ） PC peripheral products

The Group's PC peripheral products are mainly the keyboard and mouse of desktop and notebook computer; also, the market change of such product line is closely related to the development of personal computers. In recent years, the global market and Taiwan desktops and notebook computer sales had experienced negative growth due to the impact of the Tablet PC and Microsoft windows 10 failed to boost up demand for computers. However, the demand for tablet PC was also declining in the last year due to a saturated market; however, overall, desktop and notebook computer sales are mostly generated by the top-three brands moving towards the trend of "the

bigger, the better." The Group had adopted the keycustomer strategy to minimize the impact of a weak computer market. According to IDC, a well-known market research firm, the sale of Tablet PC had shown a negative growth for the first time in 2015, mainly due to a slowing demand of consumers in the market and the small tablet PC market was affected by the large inexpensive smartphones. However, compared to the slowdown in the consumer market, the commercial, educational and large-sized tablet computer market will gradually warm up. In terms of consumer demand and technology upgrade, detachable tablet PC has began to grow and the

demand for input devices is also increasing. The Group has achieved preliminary results in the consumer tablet keyboard and will follow the trend of the commercial, educational, large-size tablet and detachable tablet PC to actively expand the market with stable growth. In addition, the cyber game market is growing in recent years. The upgrade of online game quality and network speed has generated the demand for advanced cyber game peripheral products. Under these circumstances, the Group has worked hard quietly from the early stages of the booming cyber game market and is now with five major cyber game brands in the market obtained as customers and the sales growth is expected to be even more significant in 2016.

（ 2 ） Non-PC peripheral products

① Mobile device components products

The global sales of smart phones had reached the mark of one billion units for the first time in 2014 and it has become the personal information and control center. The global smartphone market in 2016 will start slowly and then grow stronger. The global consumer market will drop rapidly in the first quarter and then start to climb back up in the second quarter. The growth of the Chinese market will temporarily stall and the emerging market will then become the growing power of the global smartphones. A total of 1.4 billion or more smartphones are expected to be sold in 2016.The continuing APP innovation has fueled the integrated application of the ecological chain, including mobile pay, Internet of All Things..., that gives us a great imagination for improving future human lifestyle, so the demand for the relevant mobile device components, such as, lens camera module, fingerprint identification, wireless charging and even a variety of sensing devices will grow gradually. In terms of lens camera module, the demand for high-end lens camera in 2016 will continue to grow, in addition to optical anti-shake, fast focusing and the trend of getting smaller and thinner, the application of dual-lens has been proposed gradually. In 2016, the 8-megapixel front camera lens and 13-megapixel rear camera lens will become the new mainstream. In addition, several new multi-camera lens applications will appear (mostly dual-lens) that challenge the camera vendor's packaging technology and the flexibility of production planning.

==> picture [209 x 269] intentionally omitted <==

② Business equipment products

The Group's business equipment include image scanners, printers, multi-function printers (multifunction products), fax machine, information processing devices (such as: computer terminals and cash registers), and office automation products (such as: shredders and Laminator), etc., a wide range of products, among which, the scanners and multifunction products are the most important of all.

The technology of scanners, printers, and multifunction product is mature; therefore, even though each product is developed towards highresolution and network-based, prices are still falling. The downturn of the global economy and slow growth of the emerging markets have caused the sales of printer and multi-function product hardware to decline continuously. According to the report of IDC, a market research firm, the global sales in 2014 has declined by 4.3% over the previous year, mainly due to the inkjet models (decreased by 3.6%) and slightly decreased (0.7%) in laser models. In addition, the prevailing mobile devices (smartphones and tablet PC) and digitization process had also impacted the printer market, causing the number of printers to decline continuously. According to the report of IDC, the global number of printed paper has continued to decline since the year of 2014.

49 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 50

The global printing management and document service in 2014 was with the printing peripheral supplier evaluation setup - to focus on managing the workflow service assessment report, so that people will once again focus on the management of the printing services market. In addition, along with the rapid growth of smartphones and tablet PC market, the manufacturers have massively developed innovative uses, such as, Cloud Printing and Cloud scanner. The users may have documents printed with Wi-Fi through the mobile device, or directly access the document image file. The application of these new functions has become essential features of multifunction printers. The demand for such new features and the expansion of the emerging markets has given the black and white and color printer a new growth momentum.

③ Digital home products

The home network environment is maturing along with the increasing popularity of the broadband network and transmission speed, added to the increasing Wi-Fi products, smartphone, tablet PC and related commodities, the network / computer / mobile device (smartphone / tablet computer) and TV / electrical appliances interface and operating system has a blurred boundary. Different platforms and devices can

==> picture [210 x 280] intentionally omitted <==

be all connected and become a seamless audio and video entertainment environment. The user interface is also more intuitive and user-friendly. Digital homerelated products and applications have become an inevitable trend and it becomes the highlight of current consumer electronics and the favorite of major electronics exhibitions, such as, CES, CeBIT, IFA, etc. The use of digital home audio/video streaming along with the upgrade of wireless network broadband (IEEE802.11n MIMO, ac MU-MIMO) has better met consumer's expectations and led to the development of related products and services.

Each leading brand will continue to introduce more high-end related products recently, from UHD 4k LCD TV, all kinds of set-top boxes (such as, Apple TV, Roku, Google Chromecast, and Amazon Fire TV), Internet storage devices (eg NAS, DLNA wireless storage, etc.), audio and video entertainment servers (such as, Xbox One and PS4), wireless audio systems (e.g. Soundbar) ... etc. Both hardware manufacturers and Internet service providers had striven to upgrade product specifications and to improve sales in the last year. Although the product line and technology of each company may be different, from the perspective of market applications, audio/video streaming and cloud computing concepts related hardware and software applications have become the focus of the digital home product growth in the next few years.

The four screens and one cloud (TV screen, computer screen, mobile phone screen, tablet PC screen, and home private cloud) environment based on making the living room as a home entertainment center have met the consumer demands for video data storage (Personal Cloud) and convergence and sharing needs between devices. No matter if it is for hardware or software, the consumer demand for digital video, photos, music, file storage and management, and sharing and streaming is real and has helped create many new business opportunities.

For smart audio, after the outbreak of digital home, international companies have entered the market. The smart audio manufacturers strive to understand user needs and make innovation and improvements in order to enhance the competitiveness of their products. The feature of easy-to-carry is essential as the mobile smart hardware in the mobile Internet era.

However, some smart audios are big in size with the battery installed for a long standby mode while striving to maintain high-quality sound and use a number of speakers. Without the consideration of sound quality, the size of the smart audio can be smaller with the use of a standard battery so that smart audio can be operated with the power cord unplugged.

The sound quality of Smart audio had been criticized severely throughout the course of development in 2015. The Company aims to provide a high-quality sound experience, to invest sufficiently in R&D and the simulation of user aspect for stable sound quality, experience, and product. The over-emphasizing on smart audio products will have the essence of audio lost, because sound is closely interacting with human lives; therefore, the long-term use of smart audio should be for the pursuit of "good sound." Therefore, in 2016, the smart audio manufacturers will gradually return to basics to create high-quality sound first before addressing the concern of being smart. At the same time, if smart audio is to become an important tool to the control digital home; it must be able to bring convenience to users, rather than complicated operation or cumbersome and impractical features. For product developers in an era of the Internet, it must be able to expand the user base, for example, to obtain the support of partners by opening the connection port in order to enhance the control over the digital home.

④ Wearable device products:

The wearable device market had rapidly grown in the last two years and has attracted new companies, PC brands, and mobile device providers to invest resources and enter the industry. According to the report of the Business Insider, a well-known market research firm, the compound annual growth rate of the wearable device is estimated to reach 35% in 2015~2019; also, a total of 148 million units are expected to be shipped in 2019.Wearable devices include smart band, smart watch, Google glasses, etc., of which, the smart watch is ahead of the others with a 41% compound annual growth rate generated; also, it will take up 70% (59% currently) market share of the total wearable device in 2019.

Newly established companies, such as, Fitbit and Pebble had entered the wearable device market the earliest, followed by mobile device manufacturers, such

as, Samsung, LG, Sony, etc. that had a smart watch with a higher price and more functions launched to meet the demands of more consumers. Wearable devices market is not yet mature; also, product applications, user interface, and operating system platform are still in rapid evolution. However, the continuing expectations of consumers in mobile computing and the participation of leading manufacturers, added to the smart watch launched by Apple with the attention of consumers gathered, wearable devices in the coming years will be one of the focuses for the growth of consumer electronics products.

⑤ Precision metal processing products According to the report of LMC Automotive, global car sales are with an compound annual growth rate of 4.1% in 2011~2020; also, it will be increased from 89 million vehicles in 2015 to 111 million vehicles in 2020, with the strict regulations on automotive safety, energy efficiency, and emission in each country, there is enough room for the growth of airbags and fuel energy-saving systems. In addition, the global recall of Takata will cause the demand for airbags to grow substantially in the next 2 years. Therefore, in summary, the automobile-related products will continue to grow in 2016.

In terms of industrial instrumentation products, due to the continuing downturn of oil prices and reduced demands for oil-producing equipment, Emerson, a major manufacturer of industrial instrumentation products, estimates that in 2016~2017 the overall market demand will drop by 8-10%; therefore, the key to maintaining competitiveness is to increase the complexity of the casting and special materials products and to enhance added value.

According to the forecast of Boeing and Airbus on the purchase orders for commercial aircraft, the annual number of airplanes delivered will be increased from 1,397 units in 2015 to 2,162 units in 2034, representing a compound annual growth rate of 4%. However, the market demand exceeds supply substantially; therefore, taking 2013-2015 as an example, the average ordering quantity in three years was over 2,000 units; therefore, aircraft manufacturers will expand the supply chain to increase production capacity in the long-run in order to build up the industry with a stable growth.

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Primax Electronics Ltd. 2015 Annual Report 52

2. The correlation of the upstream, midstream and downstream industries

（ 1 ） PC peripheral products:

==> picture [441 x 381] intentionally omitted <==

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

Consumer electronics
System
Components Peripheral assembly
Network card
Output device:
CPU Printer and drawing machine
DRAM Motherboard
Graphics card
SHIP SET Control card
SRAM
The display device:
Monitoring products, terminals, Personal Computer
P C LAN sales
and liquid-crystal display computer
industry
Printed circuit
board industry Storage devices:
Other HDD, RAID, DISK Array, FDD and DISK, COMBO, and CD/DVD ROM stationWork Computer server maintenance Repair and service
components
CRT
CCD & CIS Input device:
⋯⋯⋯⋯ Keyboard, mouse, video Minicomputer
scanners, and tablet and pen
Iron material
Copper box Power supply unit:
industry Power supply, UPS Software Communication
Chemical (uninterruptible power system) industry products
materials
Dry molding
Others:
Computer chassis, heat tubes,
and related components
----- End of picture text -----

（ 2 ） Non-PC peripheral products

① Mobile device components products:

==> picture [441 x 180] intentionally omitted <==

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

Upstream Midstream Downstream
Photonics Industry
CMOS, Lens
Product manufacturing
plant
Cell phone system
Electronic materials Module manufacturing
plant
PCB, Flex-P CB
Passive components, Connector Camera module
Product manufacturing
plant
Notebook computer
IC industry
ISP, Memory, USB
----- End of picture text -----

② Business Equipment products:

==> picture [440 x 319] intentionally omitted <==

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

Multifunctional printers (office machine) industry supply chain
Upstream Midstream Downstream
Photonics Industry
CCD, lens
Electronic materials
PCB, POWER
System integrators
（ SI / ODM ）
IC industry
Image input / output
SOC, DRAM
Module manufacturers Hardware Manufacturers
CIS, Inkjet Bead, Laser （ OEM / EMS ）
Plastic materials engine, Controller
Chassis, gear
Brand manufacturers
（ Brand ）
Metal material
Screws, washers
Software design
Operating system, drivers,
image processing
----- End of picture text -----

Multi-function printers (multi-function products, MFP) are composed of several important modules, namely, document scanners, printers (head), control panels, operating panels, automatic document feeders (ADF), and paper trays. An image sensor is the key component of the Document Scanner, including CCD and CMOS techniques that are mostly controlled by Japanese manufacturers, mainly supplied by Sony and Toshiba. Midstream suppliers provide scan modules, including a sensors, mirrors, and lamps. Downstream system suppliers provide a complete scanner, including image scanning module, motor control, image capture control circuit, data transfer control circuit, chassis and software. System suppliers also offer automatic a document feeder (ADF) that is combined with the scanner to perform continuous scanning function.

never encountered any raw materials supply shortages, interruption or delay, and the risk of the Group's facing the impact of changes in upstream operation is very low. The Group has striven to reduce production costs and improve product quality by actively developing high-speed multifunction printer module and enhancing firmware and software applied programs and system integration technology. In addition, in response to customer's product strategy in the emerging markets, the Group has also developed a number of mid-end and low-end black and white laser printers and multifunction printers with very competitive quality and cost.

③ Digital home products:

In terms of digital home products, the Company offers a variety of audio-video related product design and production, such as, wireless speakers, wireless headphones, TV Soundbar, camera-based video devices, etc. In addition, there are personal storage devices, such as, Wireless Flash Drive, Wi-Fi Hard Drive, etc.

The Group's upstream suppliers are all worldrenowned companies with a long-term and stable cooperative relationship established; therefore, the product quality and delivery have

53 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 54

==> picture [441 x 265] intentionally omitted <==

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

Wireless Speaker System Product Supply Chain
Upstream Midstream Downstream
Special paper industry
Speaker vibration membrane
Electronic materials
PCB, POWER
System integrators
IC industry （ SI / ODM ）
MCU, DSP, Bluetooth Sound output
Hardware Manufacturers
Module manufacturers
Plastic materials
（ OEM / EMS ）
Acoustic transducer
Chassis, keypad
Brand manufacturers
Metal material
（ Brand ）
Copper wire, magnet
Software design
Sound processing, driver,
network protoco
----- End of picture text -----

④ Wearable device products:

Wearable devices contain sensors, display interface, wireless communication module, battery, and waterproof chassis. The Group is currently focusing on the mainstream products of wearable devices, including smart band and smart watch with product design and manufacturing services provided.

⑤ Precision metal processing products:

==> picture [441 x 283] intentionally omitted <==

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

Automobile manufacturing process
Other accessories
Steel Heat
material Fo rging treatment Electrical
equipment, glass
Interior decoration,
tires
Cast iron
material Engine Engine
Transmission Transmission
Alumi num Casting Finished
system system vehicle
Accessories Tires Tires
Asse mbly Inspection
Frame Frame Frame
Stamping cross- cross- cross-
Steel board and member member member
Pressing
Vehicle body Vehicle body Vehicle body
Machining Assembly
Welding Painting
Assembly
----- End of picture text -----

Data Source: Automotive Industry Research Report: ITRI IEK (06/2003)

3. Product development trends

（ 1 ） PC peripheral products

The Group's PC peripherals are mainly used with desktop computers, notebook computers and personal digital information products. The PC peripherals market competition will be more severe due to the PC market shrinking and brand concentration effect. In response to the development trend of downstream product applications, keyboard and mouse manufacturers will respond to the future smart home, mobile device peripherals, IA (information home appliance) products, Internet of Things (IoT), wearable products, and current consumer's personal and human needs, and continue to research and develop the peripheral input devices for network television, entertainment computers, game consoles, handheld computers, mobile devices, etc. in order to improve the added value of products and increase the technology gap from competitors; therefore, working towards high value-added products R&D is the future trend of the industry.

（ 2 ） Non-PC peripheral products

① Mobile device components products

The Group's camera and fingerprint identification module are mainly used for notebook computers, tablet computers and smartphones. In terms of notebook computers, there are several trends: (1) thin, the panel and camera lens must be evolved to the same thickness. Therefore, the corresponding packaging technology must be more evolved. In addition to CSP and COB technology that can be provided by general camera lens suppliers, the Group has experience in the mass production of Chip on Flex (CoF), Chip on Stiffener (CoS), and Flip-chip that is beyond the reach of domestic competitors; (2) high-resolution video from VGA to HD(720P) and FHD (1080P), HD has become the mainstream of business notebook computers currently, and consumer computers will start to become the mainstream this year; (3) dual-lens module, the Group was the first company to utilize the double AA manufacturing process to create the dual-lens module with the best alignment effect in 2015 worldwide. In terms of smartphones or other mobile devices, there are several trends: (1) large pixel: 16-megapixel ~ 24-megapixel models will be launched this year; (2) high sensitivity: large aperture is the most frequently used. The larger the aperture the more shallow the depth of field, and more difficult the focusing will be. Therefore, the corresponding focusing technology must

==> picture [209 x 162] intentionally omitted <==

be more evolved. The Group's packaging precision has always been on the highest level in the industry, added to the active alignment AA technology introduced in 2011 that could help realize effective mass production ahead of the domestic competitors in 2103; (3) fast focus: to accelerate the focusing speed and to capture the camera moment, the closed-loop motor was aimed to enhance the conventional speed and accuracy and had become the new technology mainstream in 2014, in addition, the center motor was another alternative to help improve performance; (4) optical anti-shake: This is the basic accessory of a digital camera. The camera size, maturity and cost had failed to meet the demand for mobile phones in the past; Nokia had made the first breakthrough; also, there were many leading brands planning to launch this product. For camera module plant, active alignment process (AA) will be the key to win purchase orders over; (5) low and short: continued thinning is the must trend of all handheld equipment, which is a greater challenge to materials control and packaging technology, as described above, the Group's low and short sealing technology is unmatched in the industry; and (6) other new functions: Phase Detection Auto-Focus (PDAF), dual-camera module or a camera with a special light source that can obtain in depth of field information, and Camera Module equipped with the effect of optical zoom lens etc. ... are the differentiation trends promoted by several brand customers currently. In addition, the Group has actively engaged in smart TV and smart wearable camera that is expected to be the future product trends.

In terms of fingerprint identification module, the Group is the world's main supplier for capacitive and ultrasonic fingerprint identification module simultaneously. The capacitive fingerprint identification module is with two selections available at the same time, a spray-on and Porcelain Veneer.

② Business equipment products With the rapidly growing sales of smartphones and tablet PC, consumers through Wi-Fi connection can have a photo shot and printed at the same time, and

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55 Primax Electronics Ltd. 2015 Annual Report

can have a document printed directly from the mobile device (ex: Apple AirPrint®) or store the scanned document images directly into the smartphones or tablets PC. The new functions of cloud printing (such as HP ePrint and Google Cloud Print) and scanto-cloud are derived and met the needs of family life, entertainment and work at the same time. In order to meet the printing needs (convenience, easy operations, compatibility, consistent print quality, etc.) of mobile device users in various brands and platforms, the multifunction printer leaders, such as, Hewlett-Packard, Canon, Xerox, and Samsung, had set up the Mopria Alliance, jointly in September 2013 and enacted mobile printing standards, established a unified printing protocol, and initially focused on Android platform mobile devices. Currently, Mopria Alliance has 20 company members, including the multifunction printer brands, control panel chip design companies and application software development companies in the USA and Japan.

It is undeniable that smartphones and tablet PC have caused quite an impact on the printer industry, especially on the inkjet printer. In order to increase revenues and profitability, brand manufacturers have proposed "Managed Print Solution" to help companies reduce hardware equipment expenditures and printing costs. The leading manufacturers have proposed a comprehensive office document digitization process solution towards the development of a "Service-lead" business model and a customized system solution and service according to the characteristics of each industry. The most obvious example among them is Xerox, followed by other leading brands, such as HP, Canon, Lexmark, Ricoh, etc. Focus on the middle- and low-end laser A4 MFP development and mobile devices support that will need hardware significantly in the future.

③ Digital home products

Along with the popularity of broadband network and increasing transmission speed, added to the increasing wireless network products, smartphones, tablet PC and related applications of commodities, the consumer demand for digital information storage management and sharing, and the synchronized interaction between digital products is growing rapidly that has also activated the demand for personal Cloud or family Cloud technologies and products. In addition, the digital home-related products and functions have been further extended

to individual mobile devices, such as Apple AirPlay and iTune and cloud digital program services such as Apple TV, Google chromecast, Roku, Amazon Fire TV and other set-top box providing digital content services, such as Netflix, Hulu, HBO, cable television, sports channels and so on. The constant upgrade of wireless network bandwidth (5G WiFi, IEEE802.11ac) will accelerate the development of digital home related industries. Product range includes network storage devices, portable wireless hard drive, digital home audio and video multimedia server, home control and security monitoring, and digital home wireless audio system and so on.

④ Wearable device products:

The global wearable consumer electronics sales have been growing steadily since the year of 2012 for two reasons, first of all, the industry's major manufacturers have entered the wearable device market, and consumer trust in the brand name is expected to drive a wave of buying power. Furthermore, due to the increase in product sales channels, the wearable products that were only sold on the Internet before were sold in general channels now; therefore, the high visibility helps stimulate consumer's desire to buy and the actual sales.

The wearable device penetration rate is low currently and it is with room to grow. New companies and international companies actively engaged in the market. IDC, a market research institute, reported the sales of wearable devices to over 78 million units in 2015 (39% annual growth rate) and a doubledigit growth rate is expected in the next five years. However, wearable devices will not be able to replace smartphones in the next five years, but an auxiliary tool to the existing devices.

⑤ Precision metal processing products:

Regarding the spare parts of automotive systems, in addition to the existing airbag systems continuing to grow due to the impact of material, design changes and recalls, the spare parts of fuel energy-saving systems, new anti-shake system, combined cam shaft and metal injection molding parts are the focus of development recently. Industrial instrumentation products are with a focus on the casting process in the past and the operations will now move towards developing instrument parts that will be the next wave of growth for instrumentation products in 2016. In terms of the aerospace industry related spare parts,

the current main products are control system and landing gear system parts. The spare parts of the engine system will be shipped massively starting in 2017 with the sales revenues of engine system spare parts equivalent to the sales revenues of other systems in 2018. In addition, the high-end antivibration system parts used for bikes and special dune buggies will be shipped starting in 2016, which is one of targeted products for development in the future.

4. Product competition

（ 1 ） PC peripheral products

Keyboard and mouse are the input devices of personal computers. Although currently there are voice inputs, sensing inputs and other input methods available for choice; they are in no position to replace the leading role of keyboard inputs in the sense of input recognition, input efficiency and end-use scenarios. However, current information and electronic products are moving towards lightweight, small and easy to carry. In order to allow consumers to easily receive or transmit information, the application of the touch panel is emerging. The current application of the touch panel is for portable electronic products. The Desktop computers and Notebook computers are both still with the keyboard input used currently. According to market survey and feedback, prolonged use of the touch panel has caused considerable inconvenience, for example, typing sensitivity and user's prolonged use resulting in sore hands. Therefore, currently, the touch panel input is only used for portable electronic products. For desktop and notebook computers, there is no solution for an absolute replacement available currently.

（ 2 ） Non-PC peripheral products

① Mobile device components products

The mobile phone industry is operated with a monetary unit of billions of dollars; naturally, there are many competitors in market. There are 70 camera module suppliers worldwide; however, less than 25 suppliers of them are able to supply over one million cameras on a monthly basis and a full line of camera products. The big market has attracted new competitors to enter the market constantly, especially the severe competition from the related industries with a vertical integration and a horizontal integration with other product lines of the handheld device industry. By 2015, this industry's gross profit had dropped rapidly, added to the massive investments in high-end models production; therefore, the trend

of "the bigger, the better" is formed in the module industry. However, the competition in production explanation has resulted in production surplus. An irrational price bargaining for purchase orders had started to surface in 2015Q4; therefore, a market reshuffling is expected to happen in 2016 with small module plants exiting the market or moving towards emerging markets or niche markets.

② Business equipment products

The sale of the inkjet model is with the biggest market share (around 60%). The low-price black and white laser printers and multifunction printers are growing rapidly in the emerging markets and facing severe competition. By product categories, the future growth rate of multifunction printers will be greater than printers. In summary, laser multifunction printer is with great market potential. Taking advantage of the fast, automatic scanning and double-sided copying to continuously meet consumer demands for

wireless network function and continuously upgrade product digitalization applications. The substitution of the product is without significant risks; also, price, environmental protection, energy saving, printing costs, wireless network printing and localized design are the keys to triumphing in the fierce competition.

③ Digital home products

PRIMAX, in addition to securing a stable development of the existing product line, actively strives to plan and develop new product lines with high market potential. Currently, the development is centered on the digital home-related applications for the products of network attached storage devices (NAS), portable wireless Hard Drive, home digital video and audio multimedia server, digital home wireless audio systems, personal mobile wireless speakers, etc.

The market for home-network storage device remains in a preliminary stage with a low household penetration rate, mainly due to consumer's being unfamiliar with the product functions. Therefore, manufacturers must be more focused on advertising and communications with consumers and continue to focus on innovation, research and development and in improving the user operation interface. In addition to traditional homenetwork storage devices, wireless portable hard drive is another business opportunity. Due to the explosive growth in smartphones and tablet PC that are with limited storage capacity and standby battery life, the wireless portable hard drive is not only helpful in

Primax Electronics Ltd. 2015 Annual Report 58

Primax Electronics Ltd. 2015 Annual Report

development of wireless audio equipment in order to expand the overall strategic energy.

expanding data storage capacity, but also in being the backup power source when the mobile device is out of power, a very user-friendly and practical design.

The function and design of digital home wireless audio system is currently in the preliminary stage in market, an emerging product line. All major audio brands, including TV manufacturers have introduced new products and related applications, such as, multi-speaker wireless streaming system, network station application services, digital audio receivers, converters, etc.

On the other hand, consumer market for technology products is booming along with the introduction of smartphones, resulting in many personal wireless multi-media entertainment needs. The Company has engaged in the field of image processing, wireless Bluetooth communication technology for a long time; also, has invested in wireless video and audio data transmission sharing research since 2012, focusing on two product line:(I) wireless storage device, (II) digital wireless audio equipment; mainly due to the fact that a smartphone is with a high-resolution screen and powerful processor to play high-resolution films; however, the biggest problem of smartphones is the limited and expensive internal storage capacity that is not as convenient as a computer with an external hard drive attached; therefore, the wireless storage device is the best solution under the circumstances. At the same time, we have observed that a headphone is used to enjoy music with smartphones that cannot be connected through the audio at home. The Company was the supplier of Bluetooth headphone and was involved and had invested in wireless transmission and acoustics; therefore, it is a reasonable action to participate in the

④ Wearable device products:

Currently, low-end wearable devices, such as smart bands, are with a low market barrier; therefore, there will be many manufacturers entering the wearable device market with low market barriers in a shortrun, resulting in market saturation and the launch of homogeneous products will cause a serious redocean market crisis. For high-end wearable devices, such as smart watch, the hardware specifications, process requirements and software compatibility are facing considerable difficulties. Currently, few notable products are mainly launched by Apple, Samsung, LG and other international companies; also, in conjunction with a communications network services, medical services, etc. It is necessary to explore the business models that can really promote the wearable devices successfully in the market.

（ 3 ） Technology and R&D Overview

1. R&D Expenses overview

==> picture [441 x 49] intentionally omitted <==

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

Unit: NT$1,000
Year R&D expense Percentage of operating income
2015 2,104,487 3.21%
2016Q1 478,917 3.42%
----- End of picture text -----

Note: The Group has applied International Financial Reporting Standards since the year of 2013.

2. The technologies and products successfully developed in the most recent year and as of the printing date of the annual report.

==> picture [441 x 127] intentionally omitted <==

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

Year R&D achievements
．�Designed and developed Bluetooth wireless keyboard for Tablet PC.
．�Designed and developed 3-megapixel optical anti-shake autofocus camera module.
2010 ．�
Designed and developed high-efficiency multifunction wireless charging platform.
．�Designed and developed Bluetooth low energy-consumption equipment.
．�Designed and developed Thermal Printer and color management technology.
．�Designed and developed 8-megapixel optical anti-shake autofocus camera module.
．Design and developed touch screen multimedia PC peripherals.
2011 ．Design and developed backlit keyboard.
．Designed and developed Wi-Fi mouse.
．
Designed and developed Wifi Keyboard.
----- End of picture text -----

==> picture [440 x 621] intentionally omitted <==

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

Year R&D achievements
．�Designed and developed 13-megapixel optical anti-shake autofocus camera module
．�Designed and developed Smart TV remote control
．�Designed and developed multi-point touch panel and automatic stylus pen.
2012 ．�Designed and developed NFC (Near Field Communication technology) paired with Bluetooth Keyboard
Mouse
．�Designed and developed network multimedia storage device.
．�Designed and developed compound real document scanner.
．�Designed and developed tablet PC thin keyboard
．�Designed and developed new generation low power-consumption Bluetooth 4.0 input device.
．�Designed and developed dual-mode (low power-consumption Bluetooth, 2.4G) wireless mouse.
．�Designed and developed low power-consumption Bluetooth 4.0 stylus pen.
．�
Designed and developed hand-gesture identification keyboard.
．�Designed and developed Smart TV remote control with voice input.
．�Designed and developed 13-megapixel optical anti-shake + autofocus camera module.
2013 ．�Designed and developed multi-lens suspension control (hand gesture recognition) camera module.
．�Designed and developed new generation high-capacity network multimedia wireless storage device.
．�Designed and developed wireless network printer control panel.
．�Designed and developed full-function multifunction printer single-chip control panel.
．�Designed and developed new generation color multifunction printer control panel.
．�Designed and developed high-speed high-quality color scanner module.
．�Designed and developed high-speed ultra-thin double-sided color scanner module.
．�
Designed and developed eyeball identification dual-lens camera module.
．�Designed and developed new style thin multicolor backlit keyboard.
．�Designed and developed new generation wearable devices.
．�Designed and developed mobile device game peripherals.
．�Designed and developed integrated keyboard protection set.
．�Designed and developed mechanical game keyboard.
2014 ．�Designed and developed Smart TV remote control with voice commands.
．�Designed and developed 16-megapixel, 20-megapixel and 26-megapixel optical anti-shake + Fast-
focus camera module.
．�Designed and developed 24-megapixel optical anti-shake autofocus camera module.
．�Designed and developed global minimum 13-megapixel autofocus camera module.
．�Designed and developed ultra-thin speakers.
．�Designed and developed new structural reverse push-pull speaker units.
．�Designed and developed IoT device platform, gateways, and terminal device.
．�Designed and developed automatic noise-cancelling headphones.
．�Designed and developed headphone and wearable device containing bio-sensing function.
．�
Designed and developed array microphone with voice identification feature.
．�Designed and developed wireless audio and headphone that can play network streaming music
synchronously.
．�Designed and developed new generation wireless storage and access device with high-speed
communications capabilities.
．�Designed and developed 21-megapixel + 5-megapixel double-lens camera module, the highest
2015 standard of the industry.
．�Designed and developed 3-megapixel vehicle dual-lens camera module.
．�
Designed and developed multilayer thin film multicolor backlit module for keyboard.
．�Designed and developed ultra-thin membrane keyboard.
．�Designed and developed new generation folding Bluetooth low power-consumption keyboard.
．�Designed and developed keyboard with multi-operating system switching function.
．�Designed and developed USB Type-C keyboard and mouse.
．�Designed and developed high-power wireless charging module.
．�
Designed and developed low-profile loudspeaker transducer.
．�Designed and developed battery modules positioning structure and battery module.
．�Designed and developed 13-megapixel +13-megapixel double lens module, the highest standard of
the industry.
．�Designed and developed 24-megapixel optical anti-shake camera module.
．�Designed and developed 3-megapixel vehicle dual-lens camera module.
2016 ．�Designed and developed capacitive fingerprint identification module (spray-on and Porcelain
Veneer).
．�
Designed and developed ultrasonic fingerprint identification module.
．�Designed and developed thin mechanical game keyboard.
．�Designed and developed a keyboard with voice input.
----- End of picture text -----

Note: PRIMAX's successfully developed technologies and products are included in the aforementioned statement.

59 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 60

（ 4 ） Long-term and short-term business development plan

1. Short-term business development plan

the growing purchase orders, the production capacity expansion for high-end products is the continuing effort of the company in 2016.

（ 1 ） PC peripheral products

a. Grasped the technological development trend of mouse, keyboard, tablet keyboard, stylus pen, and smart remote control, and continue to research and develop new products in order to facilitate business promotion.

② Business equipment products

The Group actively developed a high-speed lowcost scanner module with mass production initiated successfully. Advanced commercial scanner and module products will soon be ready for mass production with the global business expanded actively. In terms of the design and production of laser printers and multifunction products, in addition to securing the existing customers, the mission is to develop a more competitive platform continuously and actively compete for the new product development projects of American and Japanese customers. A number of projects are currently in progress and will gradually be ready for mass production this year. Barcode label printer is another new product line. The first generation products are already under mass production and with good market feedback. The new generation product will soon be ready for mass production. The image module and MFP OEM business is growing stably and the mission is to actively compete for new customers and new products business. In terms of office automation products, along with the continuous improvement of in-house technologies, a number of important patents have been obtained and new customers have been solicited successfully. Also, the Group has transformed into an ODM business operation successfully and worked with customers to actively develop new products.

b. Established a key components supply chain and establish the VMI / JIT system to effectively reduce inventory stock and to resolve material shortage problems.
c. Improved plant productivity, reduce costs, and continue to strengthen OEM/EMS business in order to increase turnover stably and improve gross profit rate. Grasped mobile application and related technology development trend.

（ 2 ） Non-PC peripheral products

① Mobile device components products

The main short-term strategy is based on the existing leading cutting-edge technologies to have the flagship models introduced for market penetration and then increase the market share of mid- and highend markets. In terms of products, the Company's leading auto-focus technology (center motor and closed loop motor), low and short packaging (flip-chip packaging and Cavity substrate bonding), optical anti-shake related technologies, etc. are the best product weapons to help develop new customers. In addition, for the Tempo strategy of new technologies and new materials, obtain new resources from upstream suppliers as early as possible and work with the main core chip partners in advance to help the existing customers acquire the new products in the shortest time possible that will help secure the strategic partnership with the customers.

③ Digital home products

The Group, in addition to continuing the in-depth development of the existing product line, will actively develop new product lines in order to secure a leading position on the next wave of digitalization in the sense of product design and key technology. The digital home-related pr ~~oducts that are currently under~~ active development are expected to create new profit momentum and generate profits. Currently, in addition to mastering the network storage device and digital home multimedia streaming related technology trends, we will continue to develop new platforms and software to facilitate business promotion and to actively establish a supply chain of key components. In terms of internal R&D programs, continue to strengthen software development ability and establish

In terms of customer relationship, existing customer's market share and higher gross profit rates are the two indicators. In addition to emerging markets, our strategy is to lock on the strategic customers for in-depth and expanding operations. In addition to expanding the market share of the existing products, the mission is to introduce the Group's new mobile phone product line.

In terms of production, the focus of this year is on advancing to the full autonomy automation production, ultra high-speed high-end process and higher standards of cleanliness management. In addition, in response to

a long-term relationship with the software solutions providers in order to grasp the development trends of the related technologies. In terms of customer base, expand the Company's existing customer base and target on the market leading brands.

Along with the introduction of technologies and the development of products, the Group had successfully launched multiple sets of digital wireless audio equipment in the 2016 Consumer Electronics Show (CES).The system device includes portable devices, integrated devices, home theater-type devices and music server. The Digital Home Division has become one of the important businesses of the Group.

④ Precision metal processing products

In response to the increasing demand for automotive systems spare parts, it is necessary to enhance the supply chain and expand production capacity in order to meet market demand. In terms of industrial instrumentation products, we will strengthen the complex casting billet manufacturing and bar processing technologies in order to reduce the impact of low oil prices. In terms of aerospace products, the recent focus is on the composite materials processing and engine parts. In addition, the development of new industries, such as, bicycles and medical industries will also be introduced shortly.

2. Long-term business development plan

（ 1 ） PC peripheral products

a. Continue to upgrade automation capabilities, reduce labor costs and labor shortage, and enhance lean productivity and technology strength.
b. Develop new product lines (such as wearable devices, mobile device game peripherals, etc.) in order to develop new businesses and increase turnover.

（ 2 ） Non-PC peripheral products

① Mobile device components products In terms of long-term strategies, based on the large customer base as a bargaining power and target on the camera upstream key components suppliers (such as image chip, optical lenses, motors, infrared-free glass...) to achieve an effective strategic cooperation. The idea is to secure cost competitiveness, technology advantage and guaranteed supply

source with a closer partnership. In addition, for existing customers, (1) develop a full product line of camera lenses in-depth; comprehensively provide strategic customers with lenses and derived similar technologies modules needed in accordance with the physical platform defined by customers, including TV, wearable devices, tablets, mobile phones, as well as automotive equipment, (2) develop other product lines for customers in-breadth (such as fingerprints identification modules), using package bargaining power to ensure a sustainable competitive advantage.

In terms of client management, gradually invest in and manage the customers in emerging markets that will soon flourish with remarkable results expected next year.

② Business equipment products

The Group will continue to expand the technology and business of scanners and multi-function products, becoming the World No. 1 ODM Company. On the other hand, in response to the huge market demand for wireless broadband and mobile multimedia devices, the Group has actively supported the development, integration and application upgrade of the mobile device scanning and printing related technologies. The Group has accumulated profound ability and experience in the high-end scanner, automatic document feeder, automatic binding machine, and control panel design. The Group will be able to expand such products businesses successfully with over two decades of experience in developing and producing image products and embedded devices. In terms of office automation products, continue to invest in technology development to lead the market in energy-saving, system integration and excellent user-friendly design and to grow together with the target key customers.

③ Digital home products

In terms of long-term business development plans regarding new product development, the Group, in addition to developing and expanding the technology and business of wireless network storage devices and digital home related products continuously, it will work closely with key customers to jointly develop new products to meet market demand and to create a win-win situation. In terms of customer base, we will expand the Company's existing customer base and target the leading brands in the market, including cooperating with the consumer electronics

Primax Electronics Ltd. 2015 Annual Report 62

Primax Electronics Ltd. 2015 Annual Report

manufacturers in Europe, USA and Japan, leading the market in energy-saving, system integration, and excellent user-friendly design and growing together with the target key customers. In addition to the development of hardware products, on the other hand, in response to the emerging cloud computing applications, the Group will continue to upgrade the development, integration and application capabilities upgrade of the related software technologies. The Group will be able to expand the business of such products and services with the profound design, R&D, management and execution capacity.

aerospace and industrial instrumentation products will be enhanced, from billet, machining, grinding, postprocessing, etc., in order to improve added value and competitiveness.

The demand for enhanced vehicle safety, lightweight, and energy-saving and emission reduction will remain unchanged, together with the world's largest auto market, China, beginning to increase the percentage of Made-in-China spare parts; therefore, the localized production of spare parts in China will be increased substantially and the business growth is thus expected. The demand for industrial instrumentation product is linked to oil prices; therefore, the subsequent changes in oil prices should be observed closely. Aerospace products will continue to grow in the future with a continuing "demand greater than supply".

④ Precision metal processing products In terms of vehicle system spare parts, the Group will introduce new molding techniques, such as MIM and deep drawing applications to reduce processing costs and to expand product lines. The one-stop service of

2. Market and production and sales overview

（ 1 ） Market analysis

1. Sales area of major commodities

==> picture [441 x 86] intentionally omitted <==

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

Year 2014 2015
By area Amount (NT$1,000) % Amount (NT$1,000) %
Mainland China 31,083,837 59.50 39,090,793 59.60
USA 7,847,174 15.02 11,897,187 18.14
Others 13,308,766 25.48 14,601,313 22.26
Total 52,239,777 100.00 65,589,293 100.00
----- End of picture text -----

with computers and tablet PC products of which the keyboard and mouse are the main sales items.

2. Market share

The Group is a professional manufacturer for PC peripheral products, the components of mobile devices, business equipment, and related products of digital home with a good reputation earned in the industry. Due to the Group's wide product range that can be used on the mouse, keyboards, touch panel, notebook computers, mobile phones, headphones, charging cradles, printers, scanners and electro-acoustic products, the Group has started entering the automotive electronics market since 2015. The final products in use are quite different; therefore, there is no complete and objective market share statistics available for reference.

The overall PC market in 2015 was decreased by 10.6%. According to IDC data (3.2016), the global PC sales in 2016 are expected to drop by 5.4%. In addition, according to IDC data (3.2016), Tablet PC (including detachable 2-in-1 tablet PC) sales in 2016 are estimated to be 195 million units. In the long term, tablet computers will maintain a positive growth; however, the growth momentum of driver tablet PCs is not like the iPad but with the detachable tablet PC. 。 Of these, the sale of large-screen computer, Windows tablet PCs and detachable tablet PCs is growing rapidly. Especially, its business-oriented application helps increase the demand for tablet PC input devices. Therefore, the Group's tablet PC keyboard and its peripheral products are expected to grow.

3. Future market supply and demand and growth

（ 1 ） PC peripheral products

The Group's peripheral products include keyboards, mouse, mobile device peripherals, etc., mainly used

（ 2 ） Non-PC peripheral products

2-1. Mobile device components

The Group's mobile devices components include camera modules, fingerprint recognition modules, Bluetooth headphone of communication peripherals, charging cradles, wireless charging, etc., of which, the sale of the camera module is the most prominent. Mainly used in notebook computers, smart phones, tablet PCs and other information, communications and consumer electronics products; therefore, the future The consumer inkjet models sales will continue changes in consumer demands will be closely related to decline due to the sluggish global economic to notebook computers, smart phones and tablet PCs. growth. However, the Group's focus of laser models will continue to grow slightly; also, the demand by In terms of notebook computers, since the sale of emerging markets for MFP will continue to grow. notebook computers will exceed the 200 million units Mature markets like Europe, USA and Japan will mark in 2010, the sale of notebook computers stalled continue to demand more color MFP, mainly due in 2011~2014 with only around 250 million units to the switch from black and white to color MFP. sold every year. Since the notebook computer with The demand for printers and MFPs will continue the built-in camera module has become a standard to grow due to the impact of mobile devices and specification, the sale of notebook computer with builtthe digitalization trend; also, it is expected to have in camera module will also become stable with the sale another wave of growth momentum created by of notebook computers. Tablet PCs had its moment of relying on the upgrading performance, combined with glory in 2012~2013; however, the sales had declined digital workflow management capabilities, deepening (except for Apple's stable growth) in 2014. The expected vertical industrial custom-made practice, integrating trend of large-screen PCs in 2016 and the wider and the innovative applications of cloud services and cheaper bandwidth, plus the support of Microsoft, tablet focusing on the application of A4 low-end laser MFP PCs have a second chance to come back big. In terms and communication products.

In terms of notebook computers, since the sale of notebook computers will exceed the 200 million units mark in 2010, the sale of notebook computers stalled in 2011~2014 with only around 250 million units sold every year. Since the notebook computer with the built-in camera module has become a standard specification, the sale of notebook computer with builtin camera module will also become stable with the sale of notebook computers. Tablet PCs had its moment of glory in 2012~2013; however, the sales had declined (except for Apple's stable growth) in 2014. The expected trend of large-screen PCs in 2016 and the wider and cheaper bandwidth, plus the support of Microsoft, tablet PCs have a second chance to come back big. In terms of Smartphone's, along with the growth of the global mobile phone sales, as well as mobile phone camera modules and video camera mounted rate increase, the annual mobile phone camera module sales is growing year by year. In addition, due to the prevalence of the 3G and 4G (and incoming 5G) mobile networks, the ratio of mobile phones built-in sub-camera modules (video camera lens) are increasing year by year. The global sales of smart phones will exceed 1.4 billion units in 2016, of which, close to 10% of those units will be with at least two main cameras plus one front camera; more than 70% of those units will be with one front and one rear camera. In terms of branding, global ranking in 2015 continued to shuffle with six Chinese brands included in the Top-Ten list, also, one Indian brand included in the list in 2015. In addition, a few Indian companies were hovering over the Top-Ten list frequently; therefore, the high growth momentum in the emerging markets should be well noticed.

2-3. Digital home products

Digital home products present a rich and diversified aspect; also, a variety of innovative devices, applications, and services have been launched, so that the future growth is certain along with the continuing price cut of FHD, the continuing growth of UHD 4K, mobile device, multi-media games and video/audio streaming box, a wired network bandwidth constant upgrades (10/100Gb), continuous improvement of wireless broadband technology (IEEE802.11ac, 4G), popularization and diversification of cloud video/audio streaming services, and diversified high-quality multi-media contents.

4. Competitive niches

of scale.

The consumer electronics product life cycle is shortening. All manufacturers strive to contribute by investing resources in new product development and cost reduction; therefore, Original Equipment Manufacturing (OEM) has become the mainstream practice in markets under the consideration of reducing costs and speeding up production. In this trend, the

2-2. Business equipment products

Due to intense market competition, multi-function products (MFP) terminal prices continue to fall, with inkjet and black and white laser models, in particular.

Primax Electronics Ltd. 2015 Annual Report

manufacturers with experience in the related products and sufficient production capacity are preferred by international corporations for the OEM business. The Group has decades of experience in the development, design and production of image products and embedded devices; also, it has strong and experienced R&D teams and strict manufacturing and quality control processes. The Group with the support of its strong R&D teams can immediately adjust the production process upon the customers' request and help customers optimize existing products; also, it can immediately respond to customer demands. The Group has four production sites setup in Mainland China, including Dongguan, Kunshan, Chongqing and Huizhou, and continues to expand production capacity, possessed production capacity with "economies of scale" effect and flexible production planning. Such economies of scale, flexible production planning, and professional process technology have prevented competitors from entering the market easily. Moreover, such rich production resources have provided the Group with advantages in competition for international companies OEM businesses.

B. Global Logistics Production

The Group provides services to clients with global logistics, in addition to providing quality products to customers. The Group also provides logistics services to customers. The Group is with excellent process management capability, flexible production, comprehensive production and sales network from Dongguan, Kunshan, Chongqing, and Huizhou, and for the purpose of staying close to its customers with services provided, delivery is made through the global instant supply warehouse (such as, USA, the Netherlands, China, etc. ) in order to shorten product delivery time, provide customers with the a stable and fast supply, and enable customers to establish a minimum inventory and reduce the backlog of funds; therefore, logistics service is one of the competitive niches of the Group.

C. Maintain strong partnerships with international companies

The Group since its incorporation has continued to focus on the R&D of PC peripheral products, components for mobile devices, business equipment and related products of digital home. The Group's product quality and stability are appreciated by customers with purchase orders issued to the Group. The Group's main customers are all well-known international companies. While developing product

specifications and technological innovations with customers for product certification, the Group will take advantage of the customer relations to get the latest market information and to grasp market movement. The Group has established good cooperative relations with upstream and downstream industries for years and the Group will remain an important partner to those industries while developing new products in the future.

D. People-machine interface integration technology and software development capacity

The Group has experienced and qualified software development team with hardware, software, and people-machine interface R&D capabilities that will not only take the initiative to help customers improve product operation interface, but also actively develop highly user-friendly software and have it converted into consumer electronics products that are well accepted by the general public, such as, personal network server, wireless hard drive, and other emerging new technology products. Such effort of developing new applications by having the existing technologies integrated is beneficial to future development.

5. Advantages and disadvantages of future development and the responsive strategies Advantages:

A. International manufacturers continue to

outsource OEM businesses to reduce costs

International brand manufacturers for operating branding business continuously, maintaining R&D technology and reducing production costs have the production operations commissioned to professional OEM fact ~~ories~~ in order to concentrate on the design, marketing and R&D to simplify management complexity, to improve operational efficiency, to streamline the organizational structure at the same time, to pool resources, to reduce production costs, to enhance brand value and to increase market share. In the electronics industry, the global division of labor is becoming obvious, and this operating mode has become necessary for all international brands; therefore, a large OEM business opportunity is in the making.

The Group has setup production bases in Dongguan, Kunshan, Chongqing, and Huizhou of China for staying close to its customers in order to compete for OEM business and to reduce production costs. The Group's product development and technical capability have been appreciated by customers in recent years with sufficient production resources offered as the customer's

production support; also, provided customers with timely and most comprehensive services; therefore, international companies in the USA and Japan have granted their OEM businesses to the Group. Apply the Group's professional technology development ability and excellent production management model to effectively reduce product production costs and to explore more business opportunities in a competitive OEM market.

B. End-user market is with much room for growt

※ PC peripheral products

The Group's PC peripheral products include mouse, keyboards, tablet PC keyboards, etc. Although future computer market scale and growth trends will slow down due to the current computer brand busin ~~ess~~ philosophy "the bigger, the better," however, the Group's adequate customer strategy will help the Group remain in a favorable position in competition. The introduction of Microsoft Windows 10 in 2015 has derived other applications for the tablet PC. The business-oriented tablet PC's continuing growth has caused the demand for tablet PCs to grow. The Group has deployed to the tablet PC keyboard in the market early; therefore, the Group's business has benefited from it.

※ Non-PC peripheral products

※ ① Mobile device components products

The Group's mobile device components include notebook computers, smartphones, tablet PCs built-in camera module, fingerprint identification modules and communications peripheral equipment Bluetooth headphones, charging cradles, etc. Consumers like to use mobile phone cameras to take pictures or shoot video for sharing with friends and family. Therefore, the manufacturers of smartphone and tablet PCs continue to introduce high-pixel smartphone and tablet PCs with built-in camera modules. In addition, along with the prevailing network and increased bandwidth, notebook computers' built-in camera module has become a standard accessory. Apparently, the built-in camera module has a great room for market growth. In addition, the mobile pay market is in full swing of development and the demand for fingerprint identification is huge and sudden; therefore, such demand has been the highest within two years. The increasing functions of mobile phones obviously consume more power. The mobile phone was able to be in a standby mode for over one week but not anymore. Instead, the demand

for various mobile power supplies, USB charging cable and vehicle charging cable is growing substantially. In addition, the demand for Bluetooth headphones will continue to rise along with the development of network phones and portable device industry; therefore, the Group's revenue growth will be activated as well.

※ ② Business equipment products

The Group's business equipment products include laser printers, multifunction products, scanner, etc. The use of wireless technology for the printing and transmission of printers and MFPs is increasing along with the prevalence of wireless network technology. Along with the sales increase of smartphone and tablet PCs, and the upgraded functionality, consumers need the printing function of smartphone and tablet PCs more and more. The introduction of wireless MFP and printers in the market will be able to meet the printing needs of smartphone and tablet PCs; also, help improve the Group's product sales indirectly. In addition, the demand for black and white laser MFP in emerging markets remain growing that will have a direct contribution to the Group's sales growth.

※ ③ Digital Home Products

The broadband network environment is becoming mature and home Wi-Fi wireless network prevailing rate is growing year by year; therefore, the wireless transmission related applications are flourishing. Consumers' demands for home entertainment audio and video streaming will drive the sales of home network storage devices and home entertainment server to go up. The explosive growth of mobile devices, such as the prevailing smartphones and tablet PCs, has caused the market demand for wireless audio and video storage devices to increase and it will drive consumers to buy portable wireless hard drives as the capacity expansion of mobile devices. The Group's design team's excellent technical capabilities and manufacturing technical quality are well appreciated by customers. Future product portfolio planning is aimed to meet market demand. The demand for a wireless speaker system has also grown rapidly in recent years. The Group has had the related technologies and platforms available with the appreciation of customers. The sale of mobile wireless speakers and home wireless multi-speaker system products

Primax Electronics Ltd. 2015 Annual Report 66

Primax Electronics Ltd. 2015 Annual Report

is expected to grow continuously along with the strong market demand.

※ ④ Precision metal processing products

For aerospace and automotive components, due to the trend of the Chinese government's request for a high ratio of Made-in-China and important components to be manufactured by an internal and external joint venture, international manufacturers in Mainland China will increase the existing suppliers' production to meet the essential requirements. The delivery of airplanes in the Asian aviation market has forced Boeing and Airbus to increase the supply chain in Asia in order to satisfy the growing market.

Disadvantages:

A. Shorter product life cycles

Information, communications, and consumer electronics products rotate quickly with shorter product life cycles, resulting in high management risk, In addition to the inability to consume inventory stock and reduce financial pressures, product development, design and production time is shortened that creates a challenge to the Group's professional technology and management ability.

※ Responsive measures:

The Group actively develops new technologies to enhance research and development capabilities, continue to cultivate R&D talents and improve production efficiency and yield rate in order to shorten the product development cycle. In addition, the Group has established a long-term good cooperative relationship with many wellknown national and international manufacturers. At the time of developing products, cooperate and communicate with customers to fully understand the customer's needs and market trends in order to rapidly develop and produce products that meet market demand. In addition, place raw materials with special specifications under strict control, actively reduce inventory and minimize the obsolescent product loss in order to effectively reduce costs and enhance market competitiveness.

margin

In recent years, the rapid development of 3C products have driven market demand for components

of PC peripheral products, mobile devices, and, business equipment, resulting in severe market competition, increasing price competition pressure, and causing the low price trend of electronic products that is detrimental to profitability.

※ Responsive measures:

The Group focuses on enhancing its core competence and improving R&D technology and the production capacity for products. Continue to improve product manufacturing process through product design in order to reduce materials consumption; also, utilize advanced manufacturing equipment to improve production efficiency, while continuing to expand advanced products with higher gross profits in order to seek product differentiation, increase value-added products, and separate from competitors by creating market segment, while maintaining close relations of cooperation with existing customers in order to secure existing markets.

C. Labor shortage and rising labor costs in the Chinese market

In recent years, the provincial labor departments of China have wages increased for the protection of labor's interests, added with the rapid domestic economic development of China, annual economic growth is at a double-digit rate, resulting in the working population in the coastal areas of China unwilling to stay on their jobs; therefore, labor shortage and rising wages have resulted in high operating costs to the enterprises.

※ Responsive measures:

For the sake of solving labor problems fundamentally and reducing labor costs, the Group actively introduces modular automated production equipment and processes to improve production efficiency and reduce labor costs. At the same time, strive to improve the production procedures, simplify manufacturing processes and conduct automated testing; also, designate a specific unit to be responsible for the design and preparation of precision tooling and automated assembling equipment, and its utilization in mass production in order to master the production procedures and to control product quality. In addition, in recent years, continue to develop highly automated production and production line testing equipment in order to improve production efficiency and reduce production costs.

（ 2 ） Intended use and production process of main products

1. The intended use of main products

==> picture [441 x 322] intentionally omitted <==

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

Main products and Intended use or function
services
Mouse Control computer cursor and scroll to provide easy operations in the Windows operating
system.
Keyboard Provide input characters as well as other convenient control keys
Touch panel Control computer cursor, scroll and other convenient controls by the touch panel.
Control computer cursors and graphics by a stylus pen. The pressure sensing device
Digital Writing Tablet
of a stylus pen can communicate with the capacitive touch panel to transmit the actual
and stylus pen
strokes interactively.
Wireless charging It is applicable to mobile phones, tablet PCs and notebook computers for power supply
device and charging function.
Micro-camera module It is applicable to mobile phones, tablet PCs, commercial and home monitoring, smart TV, game consoles, traffic recorders and GPS built-in camera modules.
Network camera It is applicable to notebook computers, LCD monitors, built-in network camera modules
module and externally attached network cameras.
Fingerprint
identification module It is applicable to mobile phones and tablet PCs.
Communications It is applicable to mobile phones or MP3 players, built-in images, externally attached
peripheral equipment voice, data transmission, power supply, and other devices.
Image Scanner It is applicable to personal computers, printers, file servers, flash drives and photo/
document digitization and preservation.
Multifunction Printers It is applicable to individuals, homes, offices, shops, hotels, digital data center, photo/
document scanning, photocopying, electronic documents printing and faxing documents.
Office automation It is applicable to individuals, homes, offices, shops, hotels, digital data centers, photo/
products document destruction, lamination and other processes.
Wireless storage It is applicable to personal and home audio/video entertainment and data storage, and
devices office data storage.
----- End of picture text -----

2. Production process

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

Outsourced
processing
Materials Automatic Loading process Finished goods Loading process Packaging Warehousing Warehousing Dispatching Shipments
plug-in inspection inspection
inspection assembly inspection
Artificial
plug-in
----- End of picture text -----

（ 3 ） Supply of main raw materials

The Group's products are mainly divided into two product lines of PC peripheral products and nonPC peripheral products. The Group's products are mainly purchased through Primax HK (by triangular trade to buy from the sub-subsidiary, Dongguan Primax), Kunshan Primax and Chongqing Primax. Since they are 100% owned subsidiaries and sub-subsidiaries of the Group, the delivery leadtime and sources of supply can be fully controlled

without the possibility of a supply shortage. For the main raw materials of the subsidiaries and subsubsidiaries, the Group has acquired through longterm cooperating suppliers for stabilizing supply source and quality; also, there are at least two suppliers of main raw materials retained for service; therefore, there should be no risk of a supply shortage or supply interruption that is detrimental to the Company's operations.

Primax Electronics Ltd. 2015 Annual Report 68

Primax Electronics Ltd. 2015 Annual Report

（ 4 ） more than 10% of the total purchase (sale) amount in one of the last two years, the purchase (sale) amount and percentage, and the reasons for the amount increase and decrease.
The information of the suppliers that were identified accounted for more than 10% of the total purchase amount in any of the last two years
There was no supplier that accounted for more than 10% of the total purchase amount in any of the last two years.
The information on the customers that accounted for more than 10% of the total sales amount in any of the last two years

Unit: NT$ million

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

Year 2014 2015 2016Q1
Proportion Proportion Proportion
to total Relationship to total Relationship to total Relationship
Item Name Amount with the Name Amount with the Name Amount with the
sales sales sales
issuer issuer issuer
(%) (%) (%)
1 CompanyA 8,995 17.22 None Company A 13,605 20.74 None Company A 2,228 15.90 None
－ Others 43,245 82.78 － Others 51,984 79.26 － Others 11,785 84.10 －
－ Net sales amount 52,240 100.00 － Net sales amount 65,589 100.00 － Net sales amount 14,013 100.00 －
----- End of picture text -----

years, average age and academic degree of staffs in the last two years and as of the printing date of the annual report.

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

Year 2014 2015 01.01.2016~04.30.2016
Technician (Engineering) 768 816 804
Management and business personnel 2,075 2,209 2,160
Total 2,843 3,025 2,964
Average age 38 38 34
Average years of service (Note 1) 5 5 5.5
Ph.D. 0.3 0.3 0.3
Master's 8.7 9.2 9.5
Bachelor's 66.6 66 64.7
Senior Higher School Education 16.0 15.9 16.4
Below Senior Higher School Education 8.4 8.5 9.1
employees Number of
Educational
distribution ratio (%)
----- End of picture text -----

Note 1: It is shown according to the years of service of employees with PRIMAX.

The Group's top-ten customers in the last two years were all international well-known companies, a diversified and stable customer base. The Group's top-ten customers accounted for 49.10% and 51.70% of the net annual sales in 2014 and 2015, respectively. Among the top-ten customers, the percentage of sales from one single client and one single group did not exceed 30% of the total sales;

therefore, as for the concern over the Group's sales target, there is no risk of sales centralization. The Group, in addition to maintaining good relations with the existing customers, is actively developing new products in order to expand the market and customers for other products for dispersing customers of sales and for minimizing the risk of sales centralization.

（ 5 ） The production volume and value statement of the last two-year:

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

Unit: NT$1,000 / 1,000pcs
Production Year 2014 2015
Main
products Capacity Output Amount Capacity Output Amount
(by department)
PC peripheral products 210,058 98,634 18,251,817 200,872 92,758 26,386,263
Non-PC peripheral products 643,196 339,500 28,512,216 766,138 412,523 33,362,839
Total 853,254 438,134 46,764,033 967,010 505,281 59,749,102
----- End of picture text -----

（ 6 ） The sales volume and value statement of the last two-year:

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

Unit: NT$1,000 / 1,000pcs
2014 2015
Year
Major Domestic sales Exporting sales Domestic sales Exporting sales
Products Quantity Amount Quantity Amount Quantity Amount Quantity Amount
PC peripheral products 1,608 216,301 99,510 23,700,228 6,404 2,124,479 135,153 27,950,138
Non-PC peripheral products 13,461 2,844,664 91,723 24,224,048 21,179 3,704,236 205,828 29,866,137
Service income 0 0 0 1,254,536 0 0 0 1,944,303
Total 15,069 3,060,965 191,233 49,178,812 27,583 5,828,715 340,981 59,760,578
----- End of picture text -----

4. Environmental protection expenses information

The Company's losses (including compensation) resulted from environmental pollution, the total amount of disposition and the disclosure of the response measures (including improvement measures) and possible expenses (including the possible losses due to not taking countermeasures, the estimated amount of compensation and fine, and the fact that the potential losses cannot be reasonably estimated) in the most recent year and as of the printing date of the annual report: None

The Group's 2015 environmental protection expenditure for each plant statistics

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

Unit: NT$
Classification Description Expense
1. Direct Costs for Reducing Environmental Impact
(1) Pollution control cost Fees for air pollution control, water pollution control, and others 29,812,850
(2) Resource Conservation Cost Costs for resource (e.g. water) conservation 7,830,910
(3) Waste Disposal and Costs for waste treatment (including recycling, incineration and
1,885,431
Recycling landfill)
2. Indirect Cost for Reducing (1) Cost of training (2) Environmental management system and
Environmental Impact certification expenditures (3) Environmental impact measurement 22,890,934
(Environmental Managerial and monitoring fees (4) Environmental protection product costs (5)
Cost) Environmental protection organization fees
(1) Costs for decontamination and remediation (2) Environmental
3. Other Environmental Costs damage insurance fees and environmental taxes and expenses 0
(3) Costs related to environmental settlement, compensations,
penalties and lawsuits
Total 62,420,125
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69 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 70

5. Labor relations

（ 1 ） retirement system and its implementation, as well as agreement between the employers and employees and the employees' interest protection measures

．� Online Learning and Knowledge Community platforms: The digital LMS learning system provides general education, basic professional knowledge and English language courses to allow learning without time limits and space restrictions; colleagues can also conduct a knowledge exchange, sharing and discussions through the community forum on the platform and blog.

implementation

The Company has an Employee Welfare Committee set-up in accordance with the Employee Welfare Act to handle the appropriation and distribution of pension. The current welfare system includes: labor insurance and national health insurance, group insurance, annual health checks, birthday gift certificates, Labor Day / Dragon Boat Festival / Mid-Autumn Festival gift money, employees and dependents weddings and funeral subsidy, staff and their families scholarships and financial aid, employee hospitalization condolence money, staff recreational activities, domestic and international travel allowance, emergency assistance loans to employees, year-end party and lotteries, and other community activities.

．� Self-learning: Promote lifelong learning of job-related knowledge and skills; also, may apply for flexible working hours in order to initiate on-the-job training; in addition, in order to cope with the Company's international business model, English course subsidies are also available to colleagues to encourage them to strengthen their language skills. The Company has occasionally updated the list of books recommended to read and provided books subsidies to encourage colleagues to develop a reading habit.

2. Education, training, and its implementation

development channels for the staff's synergistic effect of learning in order to enhance the Company's competitiveness continuously and develop important technical and management personnel.

3. Retirement system and its implementation

The Group (formerly known as "Hung Chuan Investment Co., Ltd.") was established on March 20, 2006 and had merged PRIMAX with general rights and benefits of employees assumed unconditionally on December 28, 2007; also, the pension system of PRIMAX remained intact. The payment requirements and standards of labor pension are processed in accordance with the Labor Standards Law (hereinafter referred to as "the old system") and the Labor Pension Act (hereinafter referred to as "the new system").

．� On-the-job training: On-the-job learning and development is to help the staff enhance job experience by attending work meetings, project (mission) assignments, job rotation, etc.
．� Internal Training: Internal training is divided into three categories of supervisor training, professional training, and general training, including new recruit's basic courses, supervisor courses at all levels, professional and technical courses, the course of quality, general education lectures, English courses, etc.

For employees who have chosen the old system or the new system but with seniority under the old system reserved, the Group has a retirement plan enacted in accordance with the Labor Standards Law and has a labor pension reserve appropriated on a monthly basis and deposited in the special account with the Bank of Taiwan for the use of future pension payment. In addition, for employees that are entitled to the new system, the Group has an amount equivalent to 6% of the monthly salary appropriated as a labor pension reserve in accordance with the Labor Pension Act and has the amount deposited in the personal account with the Bureau of Labor Insurance.

．� External professional training: In order to encourage colleagues to continue their selfenhancement of professional capacity or to learn a second professional skill for career plans, the Company has the professional external training cost fully subsidized.

．� Overseas training: Select colleagues who perform outstandingly at work and with a good potential for development to participate in short-term overseas professional training or meetings in order to enrich their international vision.

（ 3 ） Establish labor-management meeting, organize labor-management meetings for communication and consultation regularly, and promote harmonious labor relations.

4. Agreement between employer and employees and the measures to safeguard employees' interests

The Group has maintained harmonious labor relations. Employees can communicate with the Company regarding the Company's systems and work environment through the departmental meeting in order to maintain a good interaction between the employer and employees. In addition, the Group's employee welfare committee is responsible for handling employee welfare matters and has various activities arranged occasionally to enhance a harmonious working atmosphere and the loyalty between the employer and employees. The practice is illustrated as follows:

（ 4 ） Establish the employee welfare committee to organize group recreational activities and handle welfare matters regularly.
（ 5 ） Set-up flexible working hour system so that employees can manage to balance work and personal life.
（ 6 ） Education and training plan and subsidy, provide staff with occupational training and encourage employees to develop a second skill.
（ 1 ） Hold departmental meetings regularly, communicate the Company's and departmental business plans, business overview and market conditions to colleagues.
- （ 7 ） In addition to the basic security of labor and health insurance, a group insurance is also available for a greater protection of employee's life safety, healthcare, and family.
（ 2 ） Enact sexual harassment prevention measures
and a grievance and disciplinary approach （ 8 ） Organize employee physical check-ups and to maintain a good working relationship and health and safety checks regularly to ensure interaction principles between genders in order to employee's physical and mental health and prevent sex discrimination or harassment. safety of the working environment.
（ 2 ） Any losses resulting from labor disputes in the most recent year and as of the printing date of the annual report: None
（ 3 ） The estimated loss amount and the response measures for current and future periods, if such amount cannot be reasonably estimated, please indicate the fact that it cannot be reasonably estimated.

The Group since the date of incorporation has upheld integrity and responsible attitude to provide welfare to its employees, to create a harmonious relationship between employer and employees, and work together with the employees for the business growth of the Company and the business operations. Therefore, a harmonious labor relation is established and no incidents of labor disputes are expected to take place.

6. Material Contracts

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

Nature of
contract Contracting Party Term of Agreement Main contents Restrictions
OEM product Customer E 08/01/2014~ project ended OEM camera modules and mouse Classified
OEM Parts Customer F 12/17/2013~12/17/2016 OEM camera module Classified
OEM product Customer G 02/20/2006~ project ended OEM consumer electronic products Classified
OEM product Customer B 05/22/2007~ project ended OEM MFP Classified
OEM product Customer V 06/30/2008~6/30/2018 OEM consumer electronic products Classified
OEM product Customer U 08/2007~Project ended OEM mouse Classified
OEM product Customer T 02/20/2008~ project ended OEM consumer electronic products Classified
OEM product Customer H 06/01/2008~ project ended OEM MFP Classified
OEM product Customer A 11/20/2014~ project ended OEM consumer electronic products Classified
OEM product Customer O 01/2006~Project ended OEM consumer electronic products Classified
Licensing W 12/1/2012~11/30/2017 Technology Transfer Licensing Classified
Trade and lease Shin Kong Life Insurance 12/2008~12/2023 Sale and lease of Primax building None
Loan Agreement Industrial Bank of Taiwan 11/07/2013~11/06/2016 Bank mid-term and long - term loan None
Loan Agreement CTBC Bank 01/05/2015~01/05/2018 Bank mid-term and long - term loan None
Loan Agreement Export-Import Bank of the ROC 2/12/2015~2/12/2020 Bank mid-term and long - term loan None
----- End of picture text -----

Primax Electronics Ltd. 2015 Annual Report

==> picture [37 x 38] intentionally omitted <==

											Unit: NT$1,000
								Financial Summary for The Last Five Years(Note 1) As of March 31, 2016 (Note 3) 2011 2012 (Note 2) 2013 (Note 2) 2014 (Note 2) 2015 (Note 2) Year Item
								Capital stock － 4,292,492		4,339,529	4,385,481 4,427,051 4,421,622
								Capital Surplus － 607,334		648,747	673,543 777,368 787,085
								Retained Before Distribution － 2,462,943		2,485,712	3,686,641 4,660,556 5,061,271
								earnings After Distribution － 1,815,924		2,138,607	2,895,534 3,732,623 4,133,338
								Other equity － (137,902)		67,579	404,848 565,406 492,815
								Treasury stock －－		－	－－－
								Non-controlling Interests － 771		－	1,158,234 2,486,204 2,518,071
								Total shareholders' equity Before Distribution － 7,225,638 After Distribution － 6,578,619		7,541,567 7,194,462	10,308,747 12,916,585 13,280,864 9,517,640 11,988,652 12,352,931
								Note 1: The Company's fnancial data has been handled in accordance with the International Financial Reporting Standards (IFRSs) for less than fve years; therefore, there are also fnancial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the
								following statements (V)~(VIII).
								Note 2: The 2012-2015 fnancial data had been audited by Note 3: The fnancial data had been reviewed by the CPAs.		the CPAs.
								（2）Condensed Proprietary Balance Sheet - International Financial
								Reporting Standards			Unit: NT$1,000
VI.Financial review								Financial Summary for The Last Five Years(Note 1) As of March 31, 2016 2011 2012 (Note 2) 2013 (Note 2) 2014 (Note 2) 2015 (Note 2) Current assets － 9,913,021 10,459,628 13,197,595 16,329,746 － Year Item
								Investments accounted for using equitymethod － 3,778,057		4,745,311	8,596,698 10,088,961 －
1. （1	The condensed balance sheet and consolidated income statement of the last fve years ）Condensed Consolidated Balance Sheet - International Financial Reporting Standards Financial Summary for The Last Five Years(Note 1) As of March 31, 2016 (Note 3) 2011 2012 (Note 2) 2013 (Note 2) 2014 (Note 2) 2015 (Note 2) Year Item Unit: NT$1,000							Property, plant and equipment － 57,728 Intangible assets － 54,961 Other assets － 432,405 Total assets － 14,236,172 Current liabilities Before Distribution － 6,893,386 After Distribution － 7,540,405 Non-current liabilities － 117,919 Total liabilities Before Distribution － 7,011,305 After Distribution － 7,658,324 Shareholders' equity － 7,224,867	63,517 46,479 429,204 15,744,139 8,002,029 8,349,134 200,543 8,202,572 8,549,677 7,541,567		61,287 65,554 － 37,997 29,514 － 659,461 1,182,141 － 22,553,038 27,695,916 － 12,157,266 15,204,972 － 12,948,373 16,132,905 － 1,245,259 2,060,563 － 13,402,525 17,265,535 － 14,193,632 18,193,468 － 9,150,513 10,430,381 －
	Current assets	－	15,384,183	17,385,420	23,078,336	30,413,161	23,823,542	Capital stock － 4,292,492		4,339,529	4,385,481 4,427,051 －
Property, plant and equipment		－	3,822,324	3,389,048	3,935,145	6,284,023	6,399,999	Capital Surplus － 607,334		648,747	673,543 777,368 －
	Intangible assets	－	54,961	46,479	2,916,644	3,322,191	3,285,257	Retained Before Distribution － 2,462,943		2,485,712	3,686,641 4,660,556 －
	Other assets	－	757,256	769,975	1,093,648	1,712,358	1,549,793	earnings After Distribution － 1,815,924		2,138,607	2,895,534 3,732,623 －
	Total assets	－	20,018,724	21,590,922	31,023,773	41,731,733	35,058,591	Other equities － (137,902)		67,579	404,848 565,406 －
Current Before Distribution		－	12,648,580	13,828,775	19,254,757	26,154,964	19,321,795	Treasury stock －－		－	－－－
liabilities After Distribution Non-current liabilities		－－	13,295,599 144,506	14,175,880 220,580	20,045,864 1,460,269	27,082,897 2,660,184	20,249,728 2,455,932	Total shareholders' equity Before Distribution － 7,224,867 After Distribution － 6,577,848		7,541,567 7,194,462	9,150,513 10,430,381 － 8,359,406 9,502,448 －
Total liabilities Before Distribution After Distribution		－－	12,793,086 13,440,105	14,049,355 14,396,460	20,715,026 21,506,133	28,815,148 29,743,081	21,777,727 22,705,660	Note 1: The Company's fnancial data has been handled in accordance with the International Financial Reporting Standards (IFRSs) for less than fve years; therefore, there are also fnancial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the
Equity attributable to Shareholders of the Parent		－	7,224,867	7,541,567	9,150,513	10,430,381	10,762,293	following statements (V)~(VIII). Note 2: The 2012-2015 fnancial data had been audited by		the CPAs.
73	Primax Electronics Ltd.2015 Annual Report										Primax Electronics Ltd.2015 Annual Report 74

（ 1 ） Condensed Consolidated Balance Sheet - International Financial Reporting Standards

（ 3 ） Condensed Consolidated Income Statement - International Financial Reporting Standards

Unit: NT$1,000

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

Financial Summary for The Last Five Years (Note 1) As of March
Item Year 2011 2012 2013 2014 2015 31, 2016 (Note 3)
(Note 2) (Note 2) (Note 2) (Note 2)
Operating revenue － 43,132,771 42,319,988 52,239,777 65,589,293 14,012,563
Gross profit － 4,497,277 3,752,695 6,218,799 7,140,338 1,567,166
Net operating income － 1,404,096 694,444 1,829,742 2,168,182 462,543
Non-operating income and expenses － 172,794 216,308 217,839 304,771 196,670
Income before income taxes － 1,576,890 910,752 2,047,581 2,472,953 659,213
Net income of the continued operations － 1,183,698 668,554 1,608,967 1,816,935 440,074
Loss from discontinued operations －－－－－－
Net income － 1,183,698 668,554 1,608,967 1,816,935 440,074
－
Other comprehensive income (after tax) (137,661) 239,067 342,273 225,310 (97,125)
Total comprehensive income － 1,046,037 907,621 1,951,240 2,042,245 342,949
Net income attributable to stockholders of parent － 1,183,461 668,548 1,544,690 1,773,122 400,715
Net income attributable to non-controlling interests － 237 6 64,277 43,813 39,359
Total comprehensive income attributable to －
stockholders of parent 1,045,995 907,589 1,871,224 1,987,738 311,342
Total comprehensive income attributable to non-controlling interests － 42 32 80,016 54,507 31,607
Earnings per share (Note 4) － 2.91 1.55 3.57 4.06 0.91
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Standards (IFRSs) for less than five years; therefore, there are also financial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the following statements (V)~(VIII).

Note 4: Basic earnings per share.

（ 5 ） Condensed Consolidated Balance Sheet - Statement of Financial Accounting Standards (SFAS) of the Republic of China

Unit: NT$1,000

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Financial Summary for The Last Five Years (Note)
Year
Item
2011 2012 2013 2014 2015
Current assets 13,647,514 15,412,672 －－－
Fund and investments 78,236 54,313 －－－
Fixed assets 3,858,327 3,822,324 －－－
Intangible assets 197,017 178,068 －－－
Other assets 564,766 522,500 －－－
Total assets 18,345,860 19,989,877 －－－
Before Distribution 12,400,406 12,635,791 －－－
Current liabilities
After Distribution 12,601,135 13,282,810 －－－
Long-term liabilities 1,052,907 917,667 －－－
Other liabilities －－－－－
Before Distribution 13,453,313 13,553,458 －－－
Total liabilities
After Distribution 13,654,042 14,200,477 －－－
Equity attributable to Shareholders of the Parent 4,891,818 6,435,648 －－－
Capital stock 3,991,932 4,292,492 －－－
Before Distribution 328,178 620,143 －－－
Capital Surplus After Distribution 288,032 620,143 －－－
Before Distribution 474,408 1,563,905 －－－
Retained earnings After Distribution 313,825 916,886 －－－
Unrealized gain or loss on financial instruments －－－－－
Cumulative translation adjustment 97,300 (40,892) －－－
Net loss unrecognized as pension cost －－－－－
Minority shareholders'' equity 729 771 －－－
Before Distribution 4,892,547 6,436,419 －－－
Total shareholders' equity After Distribution 4,691,818 5,789,400 －－－
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（ 4 ） Condensed Proprietary Comprehensive Income Statement - International Financial Reporting Standards

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Unit: NT$1,000
Financial Summary for The Last Five Years (Note 1)
Year As of March
Item 2011 2012 2013 2014 2015 31, 2016
(Note 2) (Note 2) (Note 2) (Note 2)
Operating revenue － 39,129,275 37,257,934 42,356,385 51,638,181 －
Gross profit － 3,200,641 2,471,611 2,665,779 2,934,548 －
Net operating income － 1,323,770 737,781 753,349 926,670 －
Non-operating income and expenses － 100,150 121,510 879,985 1,007,253 －
Income before income taxes － 1,423,920 859,291 1,633,334 1,933,923 －
Net income of the continued operations － 1,183,461 668,548 1,544,690 1,773,122 －
Loss from discontinued operations －－－－－－
Net income － 1,183,461 668,548 1,544,690 1,773,122 －
Other comprehensive income (after tax) － (137,466) 239,041 326,534 214,616 －
Total comprehensive income － 1,045,995 907,589 1,871,224 1,987,738 －
Earnings per share (Note 3) － 2.91 1.55 3.57 4.06 －
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Standards (IFRSs) for less than five years; therefore, there are also financial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the following statements (V)~(VIII).

Note 3: Basic earnings per share.

（ 6 ） Condensed Proprietary balance sheet - Statement of Financial Accounting Standards (SFAS) of the Republic of China

Unit: NT$1,000

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Financial Summary for The Last Five Years (Note)
Year
Item
2011 2012 2013 2014 2015
Current assets 8,981,542 9,935,168 －－－
Fund and investments 3,649,465 3,820,278 －－－
Fixed assets 61,031 57,728 －－－
Intangible assets 66,002 54,961 －－－
Other assets 371,177 347,493 －－－
Total assets 13,129,217 14,215,628 －－－
Before Distribution 7,211,137 6,888,900 －－－
Current liabilities
After Distribution 7,411,866 7,535,919 －－－
Long-term liabilities 1,026,262 891,080 －－－
Other liabilities －－－－－
Before Distribution 8,237,399 7,779,980 －－－
Total liabilities
After Distribution 8,438,128 8,426,999 －－－
Capital stock 3,991,932 4,292,492 －－－
Capital Surplus 328,178 620,143 －－－
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Primax Electronics Ltd. 2015 Annual Report 76

75 Primax Electronics Ltd. 2015 Annual Report

Unit: NT$1,000

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Financial Summary for The Last Five Years (Note)
Year
Item
2011 2012 2013 2014 2015
Before Distribution 474,408 1,563,905 －－－
Retained earnings After Distribution 313,825 916,886 －－－
－－－－－
Unrealized gain or loss on financial instruments
Cumulative translation adjustment 97,300 (40,892) －－－
Net loss unrecognized as pension cost －－－－－
Before Distribution 4,891,818 6,435,648 －－－
Total shareholders' equity After Distribution 4,691,089 5,788,629 －－－
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（ 9 項目） Auditors' Opinions from 2011 to 2015 年度

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Year Accounting Firm CPA Audit opinion
2011 KPMG Wu, Mei-Pin and Chen, Cheng-Chien Unqualified opinion
2012 KPMG Wu, Mei-Pin and Chen, Cheng-Chien Unqualified opinion
2013 KPMG Wu, Mei-Pin and Chen, Cheng-Chien Unqualified opinion
2014 KPMG Wu, Mei-Pin and Chen, Cheng-Chien Modified unqualified opinions
2015 KPMG Huang, Yung-Hua and Yu, Chi-Lung Modified unqualified opinions
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（ 7 ） Condensed Consolidated Income Statement - Statement of Financial Accounting Standards (SFAS) of the Republic of China

Unit: NT$1,000

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Financial Summary for The Last Five Years (Note 1)
Year
Item
2011 2012 2013 2014 2015
Operating revenue 47,342,606 43,132,771 －－－
Gross profit 4,189,546 4,500,866 －－－
Net operating income 1,147,835 1,470,715 －－－
Non-operating income and profit 386,376 342,628 －－－
Non-operating expense and loss 184,500 169,834 －－－
Pre-tax income of continued operations 1,349,711 1,643,509 －－－
Incomes of continued operations 1,040,100 1,250,317 －－－
Profit and loss of the discontinued operations －－－－－
Extraordinary income －－－－－
Cumulative effect from changes of accounting principles －－－－－
Consolidated net income 1,040,854 1,250,080 －－－
Net loss of minority shareholders' equity (754) 237 －－－
Earnings per share (Note 2) 2.63 3.07 －－－
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Note 2: Basic earnings per share.

（ 8 ） Condensed Proprietary Income Statement - Statement of Financial Accounting Standards (SFAS) of the Republic of China

Unit: NT$1,000

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Financial Summary for The Last Five Years (Note 1)
Item Year
2011 2012 2013 2014 2015
Operating revenue 43,053,109 39,129,275 －－－
Gross profit 2,820,525 3,204,800 －－－
Net operating income 935,282 1,398,317 －－－
Non-operating income and profit 429,169 221,302 －－－
Non-operating expense and loss 133,859 129,080 －－－
Pre-tax income of continued operations 1,230,592 1,490,539 －－－
Incomes of continued operations 1,040,854 1,250,080 －－－
Profit and loss of the discontinued operations －－－－－
Extraordinary income －－－－－
Cumulative effect from changes of accounting principles －－－－－
Net income 1,040,854 1,250,080 －－－
Earnings per share (Note 2) 2.63 3.07 －－－
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Note 2: Basic earnings per share.

（ 1 ） Financial Analysis - International Financial Reporting Standards - Consolidated

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The financial analysis of the last five years As of
Year (Note) March 31,
Analysis items 2016
2011 2012 2013 2014 2015 (Note 2)
Debit ratio － 63.91 65.07 66.77 69.05 62.12
Ratio of long-term fund to property, plant and － 192.82 229.04 299.07 247.88 245.89
equipment
Current ratio － 121.63 125.72 119.86 116.28 123.30
Quick ratio － 79.45 93.98 92.42 86.61 90.02
Times Interest Earned (times) － 35.43 53.34 31.76 16.43 46.66
Account Receivable Turnover (times) － 7.18 5.65 5.72 5.27 4.39
Days sales outstanding － 50.84 64.60 63.81 69.26 83.14
Inventory turnover days － 7.13 8.39 10.26 9.61 7.46
Account payable turnover (times) － 3.96 3.86 3.99 3.73 3.31
Average day in sales － 51.19 43.52 35.58 37.97 48.92
Property, plant and equipment turnover (times) － 11.23 11.74 14.26 12.84 8.84
Total assets turnover (times) － 2.25 2.03 1.99 1.80 0.36
Return on total assets (%) － 6.36 3.28 6.33 5.36 1.18
Return on shareholders' equity (%) － 18.25 9.06 18.03 15.65 3.36
Pre-tax income to paid-in capital (%) － 36.93 21.00 47.11 56.05 14.92
Net Margin (%) － 2.74 1.58 3.08 2.77 3.14
Earnings per share (NT$) － 2.91 1.55 3.57 4.06 0.91
Financial
structure (%)
Solvency (%)
Operating performance
Profitability
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77 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

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The financial analysis of the last five years As of
Year (Note) March 31,
Analysis items 2016
2011 2012 2013 2014 2015 (Note 2)
－ 11.02 21.63 17.42 19.20 －
Cash flow ratio (%)
－ 114.18 159.46 179.72 132.27 130.24
Cash flow adequacy ratio (%)
Cash reinvestment ratio (%) － 11.51 19.76 21.34 23.31 －
Operating leverage － 1.75 2.60 1.65 1.68 1.91
Financial leverage － 1.03 1.03 1.04 1.08 1.03
Cash flow
Leverage
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(It is not necessary to analyze the changes for less than 20%)

Times interest earned (times) : It was mainly due to the increase of interest expense in 2015, so the times interest decreased.
adequacy ratio decreased.
Operating leverage: It was mainly due to the increase of the Company's net sales in 2015, causing the operating leverage to go up.
Standards (IFRSs) for less than five years; therefore, there are also financial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the following statements (II).
（ 1 ） Financial Analysis - International Financial Reporting Standards - Proprietary

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The financial analysis of the last five years As of
Year (Note) March
Analysis items
2011 2012 2013 2014 2015 31, 2016
Debit ratio － 49.25 52.10 59.43 62.34 －
Ratio of long-term fund to property, plant and －－
12,719.63 12,189.04 16,962.44 19,054.43
equipment
Current ratio － 143.80 130.71 108.56 107.40 －
Quick ratio － 115.09 108.15 96.38 90.46 －
Times Interest Earned Ratio (times) － 40.61 52.96 27.92 37.23 －
Account Receivable Turnover (times) － 8.18 5.82 5.52 6.11 －
Days sales outstanding － 44.62 62.71 66.12 59.74 －
Inventory turnover days － 14.50 18.68 24.45 24.29 －
Account payable turnover (times) － 6.27 6.11 5.63 5.03 －
Average day in sales － 25.17 19.54 14.93 15.03 －
Property, plant and equipment turnover (times) － 658.97 614.59 678.77 814.22 －
Total assets turnover (times) － 2.86 2.49 2.21 2.06 －
Return on total assets (%) － 8.86 4.55 8.33 7.23 －
Return on shareholders' equity (%) － 18.25 9.05 18.51 18.11 －
Pre-tax income to paid-in capital (%) 33.35 19.82 37.58 43.83 －
Net Margin (%) － 3.02 1.79 3.65 3.43 －
Earnings per share (NT$) － 2.91 1.55 3.57 4.06 －
Financial
structure (%)
Solvency (%)
Operating performance
Profitability
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The financial analysis of the last five years As of
Year (Note) March
Analysis items
2011 2012 2013 2014 2015 31, 2016
－ 0.81 12.33 12.46 6.82 －
Cash flow ratio (%)
－ 24.91 103.17 192.99 103.65 －
Cash flow adequacy ratio (%)
Cash reinvestment ratio (%) － 3.43 4.31 11.06 2.03 －
Operating leverage － 1.04 1.06 1.05 1.04 －
Financial leverage － 1.03 1.02 1.09 1.06 －
Cash flow
Leverage
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(It is not necessary to analyze the changes for less than 20%)

Times interest earned (times) : It was mainly due to the decrease of the interest expense in 2015, so the times interest has increased.
Property, plant and equipment turnover (times) : It was mainly due to the increase of the Company's net sales in
Cash flow ratio: It was mainly due to the increase of the Company's current liabilities in 2015, causing a

the decreased cash flow adequacy ratio.

Cash reinvestment ratio: It was mainly due to the increase of the Company's cash dividend to shareholders in 2015 and the increase of long-term investments, other assets, and working capital, caused the decline in cash reinvestment ratio.
Standards (IFRSs) for less than five years; therefore, there are also financial data prepared in accordance with the Statement of Financial Accounting Standards (SFAS) of the Republic of China, so, please refer to the following statements (II).

（ 2 ） Financial analysis - Statement of Financial Accounting Standards (SFAS) of the Republic of China - Consolidated

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Year The financial analysis of the last five years (Note)
Analysis items 2011 2012 2013 2014 2015
Debit ratio 73.33 67.80 －－－
154.09 192.40 －－－
Ratio of long-term funds to fixed assets
Current ratio 110.06 121.98 －－－
Quick ratio 59.50 79.62 －－－
Times Interest Earned Ratio(times) 29.55 36.88 －－－
Account Receivable Turnover (times) 9.66 7.18 －－－
Days sales outstanding 38 51 －－－
Inventory turnover days 8.40 7.13 －－－
Account payable turnover (times) 4.66 3.96 －－－
Financial
structure (%)
Solvency (%)
Operating performance
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79 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report

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Year The financial analysis of the last five years (Note)
Analysis items 2011 2012 2013 2014 2015
Average day in sales 43 51 －－－
Fixed assets turnover (times) 14.09 11.23 －－－
Total assets turnover (times) 2.78 2.25 －－－
Return on total assets (%) 6.33 6.72 －－－
Return on shareholders' equity (%) 23.89 22.07 －－－
Operating income 28.81 34.45 －－－
Ratio to issued capital
stock (%)
Pre-tax income 33.87 38.49 －－－
Net Margin (%) 2.20 2.90 －－－
Earnings per share (NT$) 2.63 3.07 －－－
19.09 11.03 －－－
Cash flow ratio (%)
74.94 79.34 －－－
Cash flow adequacy ratio (%)
Cash reinvestment ratio (%) 24.29 11.67 －－－
Operating leverage 1.75 1.71 －－－
Financial leverage 1.04 1.03 －－－
Note 1: The financial report of the 2011-2012 data had been audited by the CPAs.
2 ） Financial analysis - Statement of Financial Accounting Standards
(SFAS) of the Republic of China - ProprietaryProprietary
Year The financial analysis of the last five years (Note)
Analysis items 2011 2012 2013 2014 2015
Debit ratio 62.74 54.73 －－－
Ratio of long-term funds to fixed assets 9,696.84 12,691.81 －－－
Current ratio 124.55 144.22 －－－
Quick ratio 81.86 115.48 －－－
Times Interest Earned Ratio(times) 29.35 40.47 －－－
performanceOperating
Profitability
Cash flow
Leverage
Financial
structure (%)
Solvency (%)
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（ 2 ） Financial analysis - Statement of Financial Accounting Standards (SFAS) of the Republic of China - ProprietaryProprietary

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Year The financial analysis of the last five years (Note)
Analysis items 2011 2012 2013 2014 2015
Account Receivable Turnover (times) 10.54 7.35 －－－
Days sales outstanding 35 50 －－－
Inventory turnover days 16.35 14.50 －－－
Account payable turnover (times) 7.38 6.27 －－－
Average day in sales 22 25 －－－
Fixed assets turnover (times) 630.69 658.97 －－－
Total assets turnover (times) 3.60 2.86 －－－
Return on total assets (%) 9.01 9.36 －－－
Return on shareholders' equity (%) 23.91 22.07 －－－
Operating income 23.47 32.75 －－－
Ratio to issued capital
stock (%) Pre-tax income 30.89 34.91 －－－
Net Margin (%) 2.42 3.19 －－－
Earnings per share (NT$) 2.63 3.07 －－－
Cash flow ratio (%) 9.07 (0.81) －－－
140.77 128.23 －－－
Cash flow adequacy ratio (%)
Cash reinvestment ratio (%) 4.26 (3.44) －－－
Operating leverage 1.85 1.62 －－－
Financial leverage 1.05 1.03 －－－
Operating performance
Profitability
Cash flow
Leverage
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1. Financial structure

（ 1 ） Debit ratio ＝ Total liabilities / Total assets
（ 2 ） Ratio of Long-term fund to fixed assets ＝ (Shareholders' equity, net + long-term liabilities) / Net fixed assets

2. Solvency

（ 1 ） Current ratio ＝ Current assets / Current liabilities
（ 2 ） Quick ratio ＝ (Current assets - Inventories - Prepaid expenses) / Current liabilities
（ 3 ） Times Interest Earned ＝ Earnings before Interest and Taxes / Interest Expenses

3. Operating Performance

（ 1 ） Receivables (including accounts receivable and notes receivable resulting from business operations) Turnover ＝ Net sales / Average receivable (including accounts receivable and notes receivable resulting from business operation) balance
（ 2 ） Days sales outstanding ＝ 365 / Receivables turnover.
（ 3 ） Inventory turnover ＝ Cost of goods sold / Average inventory
（ 4 ） Payables (including accounts payable and notes payable resulting from business operations) turnover ＝ Cost of goods sold / Average payable (including accounts payable and notes payable resulting from business operations) balance.
（ 5 ） Average days in sales ＝ Average Inventory turnover.
（ 6 ） Property, plant and equipment turnover ＝ Net sales / Average net property, plant and equipment
（ 7 ） Total asset turnover ＝ Net sales / Average total assets.

81 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 82

（ 1 ） Return on total Assets ＝ [Net income + Interest expense × (1- tax rate)] / Average total assets
（ 2 ） Return on shareholders' equity ＝ Net Income attributable to shareholders of the parent / Average equity attributable to shareholders of the parent
（ 3 ） Net Margin ＝ Net income / Net sales
（ 4 ） Earnings per share ＝ (Net income attributable to shareholders of the parent - preferred stock dividend) / Weighted average number of shares outstanding

（ 1 ）＝
（ 2 ） Net cash flow adequacy Ratio ＝ Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash Dividend
（ 3 ） Cash reinvestment ratio ＝ (Net cash flow from operating activities - cash dividends) / (Gross property, plant and equipment + long-term investments + other noncurrent assets + working capital)

6. Leverage:

（ 1 ） Operating leverage ＝ (Net sales – variable costs) / Income from operations
（ 2 ） Financial leverage ＝ Income from operations / (Income from operations - interest expenses)

3. The Audit Committee's review report on

The Audit Committee's review report

The Board of Directors has prepared the Company's 2015 Business Report, Financial Statements, and proposal for allocation of profits. The CPA firm of KPMG was retained to audit Primax's Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and profit allocation proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of PRIMAX Electronics Limited. According to Article 219 of the Company Law, we hereby submit this report.

PRIMAX Electronics Limited – Shareholders' Meeting

statements and notes had been audited by the CPAs

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Independent Auditors' Report

The Board of Directors Primax Electronics Ltd.:

We have audited the accompanying consolidated balance sheets of Primax Electronics Ltd. and its subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of certain subsidiaries. Those financial statements were audited by other auditors, and our opinion, insofar as it relates to those subsidiaries, is based solely on the reports of the other auditors. As of December 31, 2015 and 2014, the assets of these subsidiaries amounted to NT$7,046,529 and NT$3,256,659 thousand, respectively, constituting 17% and 10%, respectively, of the consolidated total assets. For the years ended December 31, 2015 and 2014, the operating revenue of these subsidiaries amounted to NT$8,734,357 and NT$6,277,916 thousand, respectively, constituting 13% and 12%, respectively, of the consolidated operating revenue.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the accompanying consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Primax Electronics Ltd. and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the Financial Supervisory Commission in the Republic of China.

Primax Electronics Ltd. has prepared annual individual financial reports as of and for the years ended December 31, 2015 and 2014, on which we have issued a modified unqualified opinion.

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March 24, 2016

Chairman of the Audit Committee: Wei, Yong Du March 24, 2016

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The accompanying consolidated financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the International Financial Reporting Standards and interpretations endorsed by the Financial Supervisory Commission in the Republic of China. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

The auditors' report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors' report and financial statements, the Chinese version shall prevail.

Primax Electronics Ltd. 2015 Annual Report 84

Primax Electronics Ltd. 2015 Annual Report

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Consolidated Balance Sheets

December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

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December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Assets Amount % Amount % Liabilities and equity Amount % Amount %
Current assets: Current liabilities:
Cash and cash Short-term
equivalents borrowings (note 6(k)) $ 1,350,569 3 2,148,800 7
(note 6(a)) $ 7,623,380 18 6,814,023 22
Notes and
Financial assets accounts payable 18,723,930 45 12,613,211 41
at fair value
through profit or loss – current Financial liabilities at fair value through
－－
(note 6(b)) 88,717 96,285 profit or loss – －－
current (note 6(b)) 60,105 80,590
Notes and
Other payables
accounts (note 7) 3,891,786 9 2,628,533 9
receivable, net
(note 6(d)) 14,424,622 35 10,453,148 34 Salary payable
(note 6(q)) 1,227,107 3 1,055,208 3
Accounts
receivable – related parties, Other current liabilities 279,120 1 128,415 －
net (notes 6(d) and 7) 54,995 － 60,581 － Current portion of long-term borrowings
Other receivables (note 6(l)) 622,347 2 600,000 2
(note 6(d)) 462,242 1 370,254 1 26,154,964 63 19,254,757 62
Inventories, net Non-current
(note 6(e)) 7,350,609 18 4,810,978 15 liabilities:
Other current Long-term
assets (note 8) 408,596 1 473,067 2 borrowings (note 6(l)) 1,055,140 2 900,000 3
30,413,161 73 23,078,336 74 Long-term
deferred revenue
(note 6(h)) 1,084,133 3 130,840 －
Non-current
Other non-current
assets:
liabilities (notes
Available-for-sale 6(n) and (o)) 520,911 1 429,429 2
financial assets – non-current 2,660,184 6 1,460,269 5
(note 6(c)) 584,430 1 292,916 1 Total liabilities 28,815,148 69 20,715,026 67
Property, plant and
equipment (notes Equity attributable
6(h) and 8) 6,284,023 15 3,935,145 13 to stockholders of
Investment parent:
property, net (note Common stock
6(i)) 258,709 1 262,269 1 (note 6(p)) 4,411,877 11 4,346,578 14
Intangible assets (note 6(j)) 3,322,191 8 2,916,644 10 Capital collected in advance (note 6(p)) 15,174 － 38,903 －
Deferred tax assets Capital surplus
(note 6(o)) 390,414 1 154,691 － (note 6(p)) 777,368 2 673,543 2
Legal reserve
Long-term prepaid (note 6(p)) 611,322 1 456,853 2
rent (note 8) 306,125 1 198,151 1
Special reserve
Other non-current (note 6(p)) 97,300 － 97,300 －
assets (note 8) 172,680 － 185,621 － Unappropriated
11,318,572 27 7,945,437 26 retained earnings (note 6(p)) 3,951,934 10 3,132,488 10
Other equity 565,406 1 404,848 1
Non-controlling
interests 2,486,204 6 1,158,234 4
Total equity 12,916,585 31 10,308,747 33
Total liabilities and
Total assets $ 41,731,733 100 31,023,773 100 equity $ 41,731,733 100 31,023,773 100
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See accompanying notes to consolidated financial statements.

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars, except earnings per share)

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2015 2014
Amount % Amount %
Operating revenue (notes 6(s)and 7) $ 65,589,293 100 52,239,777 100
Operating cost (notes 6(e),(n),(p),(q) and (t) and 12) 58,448,955 89 46,020,978 88
Gross profit 7,140,338 11 6,218,799 12
Operating expenses (notes 6(f),(n),(p),(q)and(t), 7 and 12):
Selling expenses 1,589,527 2 1,423,129 3
Administrative expenses 1,278,142 2 1,072,677 2
Research and development expenses 2,104,487 3 1,893,251 3
4,972,156 7 4,389,057 8
Net operating income 2,168,182 4 1,829,742 4
Non-operating income and expenses:
Other income (note 6(u)) 178,824 - 290,465 -
Other gains and losses (notes 6(c) and (v)) 282,395 - 150,323 -
Share of profit of subsidiaries accounted for using equity method 3,772 - - -
Finance costs (note 6(w)) (160,220) - (222,949) -
304,771 - 217,839 -
Income before income taxes 2,472,953 4 2,047,581 4
Income tax expense (note 6(o)) 656,018 1 438,614 1
Net income 1,816,935 3 1,608,967 3
Other comprehensive income (loss):
Items that may not be reclassified subsequently to profit or loss:
Actuarial gains on defined benefit plans (8,540) - 3,344 -
(8,540) - 3,344 -
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operation's financial
statements (60,203) - 337,984 1
Unrealized gains and losses on available-for-sale financial assets
(note 6(c)) 294,053 - 945 -
233,850 - 338,929 1
Other comprehensive income (after tax) 225,310 - 342,273 1
Comprehensive income $ 2,042,245 3 1,951,240 4
Net income attributable to:
Stockholders of parent $ 1,773,122 3 1,544,690 3
Non-controlling interests 43,813 - 64,277 -
$ 1,816,935 3 1,608,967 3
Comprehensive income attributable to:
Stockholders of parent $ 1,987,738 3 1,871,224 4
Non-controlling interests 54,507 - 80,016 -
$ 2,042,245 3 1,951,240 4
Earnings per share (note 6(r)):
Basic earnings per share (NT dollars) $ 4.06 3.57
Diluted earnings per share (NT dollars) $ 4.01 3.52
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See accompanying notes to consolidated financial statements.

85 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 86

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

				Equity attributable to stockholders ofparent	Equity attributable to stockholders ofparent	Equity attributable to stockholders ofparent	Equity attributable to stockholders ofparent	Equity attributable to stockholders ofparent	Equity attributable to stockholders ofparent
Capital Common stock Capital collected in advance $ 4,335,733 3,796 - - - - - - - - - - - - 3,550 - (3,200) - - - - - - 48,589 10,495 (13,482) - - 4,346,578 38,903 - - - - - - - - - - 30,000 - (2,800) - - - - - - 32,673 38,099 (56,402) - - $ 4,411,877 15,174			Capital surplus	Retained earnings			Exchange diferences on translation of foreign operation's fnancial statements	Unrealized gains (losses) on available- for-sale fnancial assets	Unearned employee compensation	Total	Non- controlling interests	Total equity
Common stock		Capital collected in advance		Legal reserve	Special reserve	Unappropriated retained earnings
$ 4,335,733 - - - - - - 3,550 (3,200) - - - 10,495 - 4,346,578 - - - - - 30,000 (2,800) - - - 38,099 - $ 4,411,877		3,796 - -	648,747 - -	389,998 - -	138,192 - -	1,957,522 1,544,690 3,344	100,137 - 322,245	(238) - 945	(32,320) - -	7,541,567 1,544,690 326,534	- 64,277 15,739	7,541,567 1,608,967 342,273
	-	-	-	-	-	1,548,034	322,245	945	-	1,871,224	80,016	1,951,240
	- - - 3,550 (3,200) - - - 10,495 -	- - - - - - - 48,589 (13,482) -	- - - 11,576 (4,254) - 14,487 - 2,987 -	66,855 - - - - - - - - -	- (40,892) - - - - - - - -	(66,855) 40,892 (347,105) - - - - - - -	- - - - - - - - - -	- - - - - - - - - -	- - - (15,126) 7,454 21,751 - - - -	- - (347,105) - - 21,751 14,487 48,589 - -	- - - - - - 18 - - 1,078,200	- - (347,105) - - 21,751 14,505 48,589 - 1,078,200
	4,346,578 - -	38,903 - -	673,543 - -	456,853 - -	97,300 - -	3,132,488 1,773,122 (8,100)	422,382 - (71,337)	707 - 294,053	(18,241) - -	9,150,513 1,773,122 214,616	1,158,234 43,813 10,694	10,308,747 1,816,935 225,310
	-	-	-	-	-	1,765,022	(71,337)	294,053	-	1,987,738	54,507	2,042,245
	- - 30,000 (2,800) - - - 38,099 -	- - - - - - 32,673 (56,402) -	- - 91,693 (10,258) - 4,087 - 18,303 -	154,469 - - - - - - - -	- - - - - - - - -	(154,469) (791,107) - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - (121,693) 13,058 46,477 - - - -	- (791,107) - - 46,477 4,087 32,673 - -	- - - - - 653 - - 1,272,810	- (791,107) - - 46,477 4,740 32,673 - 1,272,810
		15,174	777,368	611,322	97,300	3,951,934	351,045	294,760	(80,399)	10,430,381	2,486,204	12,916,585

See accompanying notes to consolidated financial statements.

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

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2015 2014
Cash flows from operating activities:
Income before income taxes $ 2,472,953 2,047,581
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation and amortization 1,473,215 1,192,885
Losses (gains) related to inventories 427,434 (26,788)
Provision (reversal of provision) for bad debt allowance and sales returns and allowances (409) 25,956
Impairment losses on property, plant and equipment - 33,178
Interest expenses 160,220 66,560
Interest income (161,713) (275,451)
Compensation cost of share-based payment 51,217 30,974
Other 30,339 (11,974)
1,980,303 1,035,340
Changes in operating assets and liabilities:
Financial assets at fair value through profit or loss – current 8,771 -
Notes and accounts receivable (3,355,531) (1,400,687)
Accounts receivable – related parties 5,586 (60,581)
Other receivables – current and non-current (80,280) 159,723
Inventories (2,536,143) 111,714
Other current assets 162,065 (94,880)
Deferred tax assets (222,248) 38,348
Other 47,455 (70,809)
Changes in operating assets (5,970,325) (1,317,172)
Notes and accounts payable 5,698,649 953,446
Salary payable 174,267 400,939
Other payables 1,121,644 262,102
Other current liabilities 122,026 (60,316)
Other (1,732) 202,578
Changes in operating liabilities 7,114,854 1,758,749
Changes in operating assets and liabilities 1,144,529 441,577
Adjustments 3,124,832 1,476,917
Cash flows from operations 5,597,785 3,524,498
Interest received 161,713 275,451
Interest paid (160,105) (66,497)
Income taxes paid (577,042) (379,257)
Net cash flows provided by operating activities 5,022,351 3,354,195
Cash flows from investing activities:
Acquisition of available-for-sale financial assets - (245,600)
Acquisition of subsidiary (minus cash acquired) (39,041) (2,329,526)
Acquisition of property, plant and equipment (1,964,248) (1,131,498)
Proceeds from disposal of property, plant and equipment 66,055 36,818
Acquisition of other deferred assets (50,646) (77,700)
Other 13,276 (9,273)
Net cash flows used in investing activities (1,974,604) (3,756,779)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings (1,100,639) 1,083,965
Increase (decrease) in long-term borrowings (261,402) 1,419,722
Increase (decrease) in guarantee deposits (46,069) 74,431
Increase in other payables – related parties (61,350) -
Cash dividends (791,107) (347,105)
Exercise of employee stock options 32,673 48,589
Net cash flows provided by (used in) financing activities (2,227,894) 2,279,602
Effect of foreign currency exchange translation (10,496) 150,140
Net increase in cash and cash equivalents 809,357 2,027,158
Cash and cash equivalents at beginning of year 6,814,023 4,786,865
Cash and cash equivalents at end of year $ 7,623,380 6,814,023
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See accompanying notes to consolidated financial statements.

Primax Electronics Ltd. 2015 Annual Report

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars unless otherwise specified)

（ 1 ） Organization

Primax Electronics Ltd. ("the Company"), formerly known as Hong Chuan Investments Ltd., was incorporated on March 20, 2006, and registered under the Ministry of Economic Affairs, ROC. The Company changed its name to Hong Chuan Electronics Ltd. and Primax Electronics Ltd. in October 2007 and February 2008, respectively. The address of the Company's registered office is No. 669, Ruey Kuang Road, Neihu, Taipei.

resolved to acquire and merge with Primax Electronics Ltd. ("Primax", a listed company) on December 28, 2007. The Company is the surviving company, and Primax was dissolved upon completion of the merger.

as at and for the years ended December 31, 2015, comprised the Company and subsidiaries (together referred to as "the Group"). The major business activities of the Group were the manufacture and sale of multi-function printers, scanners, digital camera modules, computer mice, keyboards, track pads, mobile phone accessories, consumer electronics products, shredders, amplifiers, speakers, audio systems and industrial automation parts. Please refer to note 13 for further information.

Primax Electronics Holdings, Ltd. (Primax Holdings, formerly known as Apple Holdings Ltd.) acquired all shares of the Company from YWAN PANG Management Limited on April 2, 2007. The investment was approved by the Investment Commission, Ministry of Economic Affairs. However, all shares of the Company were sold by Primax Holdings to its stockholders in October 2009.

The Company's common shares were registered with the Financial Supervisory Commission, ROC ("FSC") on June 22, 2012, and listed on the Taiwan Stock Exchange ("TWSE") on October 5, 2012.

Based on the resolution approved by the Company's board of directors on November 5, 2007, the Company

（ 2 ） Financial Statements Authorization Date and Authorization Process

The consolidated financial statements were authorized for issuance by the board of directors on March 24, 2016.

（ 3 ） New Standards and Interpretations Not Yet Adopted

（ a ） Impact of the 2013 version of the International Financial Reporting Standards ("2013 Version of IFRSs") endorsed by the FSC

The Group has adopted the 2013 Version of IFRSs (excluding IFRS 9 "Financial Instruments") endorsed by the FSC in preparing the consolidated financial statements. The new standards, amendments and interpretations issued by the International Accounting Standards Board ("IASB") are as follows:

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New standards, amendments and interpretations Effective date per IASB
Amended IFRS 1 "Limited Exemption from Comparative IFRS 7 Disclosures
July 1, 2010
for First-time Adopters"
Amended IFRS 1 "Severe Hyperinflation and Removal of Fixed Dates for July 1, 2011
First-time Adopters"
Amended IFRS 1 "Government Loans" January 1, 2013
Amended IFRS 7 "Disclosure – Transfers of Financial Assets" July 1, 2011
Amended IFRS 7 "Disclosure – Offsetting Financial Assets and Financial Liabilities" January 1, 2013
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New standards, amendments and interpretations Effective date per IASB
January 1, 2013
IFRS 10 "Consolidated Financial Statements" (with January 1, 2014, as the effective
date for investment entities)
IFRS 11 "Joint Arrangements" January 1, 2013
IFRS 12 "Disclosure of Interests in Other Entities" January 1, 2013
IFRS 13 "Fair Value Measurement" January 1, 2013
Amended IAS 1 "Presentation of Items of Other Comprehensive Income" July 1, 2012
Amended IAS 12 "Deferred Tax: Recovery of Underlying Assets" January 1, 2012
Amended IAS 19 "Employee Benefits" January 1, 2013
Amended IAS 27 "Separate Financial Statements" January 1, 2013
Amended IAS 32 "Offsetting Financial Assets and Financial Liabilities" January 1, 2014
IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" January 1, 2013
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The Group assessed that the 2013 Version of IFRSs may not have any significant impact on the consolidated financial statements except for the following:

1. IAS 1 "Presentation of Financial Statements"

The amendment requires entities to separate the items presented in other comprehensive income into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax, then the tax related to each of the two groups of other comprehensive income items (those that might be reclassified and those that will not be reclassified) must be shown separately. The Group has changed the presentation of the statements of comprehensive income to conform with the amendment, and the information for 2014 has been restated accordingly.

4. IFRS 10 "Consolidated Financial Statements"

2. IFRS 13 "Fair Value Measurement"

The standard is a replacement for the requirements for consolidated financial statements in IAS 27 "Consolidated and Separate Financial Statements", which was renamed "Separate Financial Statements". In addition, SIC 12 "Consolidation – Special Purpose Entities" was repealed. The definition of control was revised so that the Group has control over an investee if and only if it has i) power over the investee, ii) exposure, or rights, to variable returns from its involvement with the investee, and iii) the ability to use its power over the investee to affect the amount of its returns.

The standard changes the definition of fair value, provides a framework for measuring fair value, and requires disclosures on fair value measurement. The Group increases the disclosures relating to fair value measurement in accordance with the standard. According to the transitional provisions of the standard, the Group has applied the fair value measurement of the new standard since 2015. The Group has not increased the disclosures for 2014. Although the Group has applied the fair value measurement of the new standard since 2015, the Group assessed that the adoption of IFRS 13 did not have significant impact on its financial position and results of operation.

（ b ） New standards, amendments and interpretations not yet endorsed by the FSC

3. IFRS 12 "Disclosure of Interests in Other Entities" The Group will disclose any additional information about its interests in subsidiaries accordingly.

A summary of the 2013 Version of IFRSs issued by the IASB but not yet endorsed by the FSC is as follows:

Primax Electronics Ltd. 2015 Annual Report 90

Primax Electronics Ltd. 2015 Annual Report

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New standards, amendments and interpretations Effective date per IASB
IFRS 9 " Financial Instruments" January 1, 2018
Amended IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and Its
Associate or Joint Venture" Not yet approved by IASB
Amended IFRS 10, IFRS 12 and IFRS 28 "The application of the investment entities
January 1, 2016
exceptions"
Amended IFRS 11 "Accounting for acquisition of interests in joint operations" January 1, 2016
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016
IFRS 15 "Revenue from contracts with customers'" January 1, 2018
IFRS 16 "Leases'" January 1, 2019
Amended IAS 1"Disclosure Initiative" January 1, 2016
Amended IAS 7 "Disclosure Initiative" January 1, 2017
Amended IAS 12 "Deferred Tax Assets for Unrealized Losses" January 1, 2017
Amended IAS 16 and IAS 38 "Clarification of acceptable methods of depreciation and amortization" January 1, 2016
Amended IAS 16 and IAS 41 "Agriculture: bearer plants" January 1, 2016
Amended IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014
Amended IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016
Amended IAS 36 "Recoverable Amount Disclosures for Non-Financial Assets" January 1, 2014
Amended IAS 39 "Novation of Derivatives and Continuation of Hedge Accounting" January 1, 2014
Annual Improvements: 2010-2012 and 2011-2013 cycles July 1, 2014
Annual Improvements to IFRS: 2012-2014 cycles January 1, 2016
Amended IFRIC 21 "Levies" January 1, 2014
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related impact will be disclosed following the completion of its assessments.

（ 4 ）

The significant accounting policies presented in the consolidated financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

consolidated financial statements have been prepared on a historical cost basis:

（ 1 ） Derivative financial instruments at fair value through profit or loss are measured at fair value;
（ 2 ） Available-for-sale financial assets are measured at fair value;
（ 3 ） Liabilities for cash-settled share-based payment are measured at fair value; and

（ a ） Statement of compliance

（ 4 ） The defined benefit liabilities are recognized as plan assets less the present value of the defined benefit obligation.

These consolidated annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations") and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC ("the IFRSs endorsed by the FSC").

2. Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan dollars, which is the Company's functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

（ b ） Basis of preparation

1. Basis of measurement

Except for the following significant accounts, the

（ c ） Basis of consolidation

controlling interests even if doing so causes the noncontrolling interests to have a deficit balance.

1. Principles of preparation of the consolidated

The consolidated financial statements comprise the Company and its subsidiaries. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity.

Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group.

Changes in the Group's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group's share of net assets before and after the change and any consideration received or paid are adjusted to equity attributable to stockholders of the Company.

The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-

2. List of subsidiaries in the consolidated

The details of the subsidiaries included in the

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Percentage of
Name of shareholding
investor Name of subsidiary Principal activities December December Description
31, 2015 31, 2014
Primax Industries
The (Cayman Holding) Ltd. Holding company 100.00% 100.00% —
Company (Primax Cayman)
The (Cayman Holding) Ltd. Primax Technology Holding company 100.00% 100.00% —
Company (Primax Tech.)
The Holding Co., Ltd. (Destiny Destiny Technology Holding company 100.00% 100.00% —
Company BVI.)
The Primax Destiny Co., Ltd. Market development and customer 100.00% 100.00% —
Company (Destiny Japan) service
The Primax Electronics Korea Market development and customer 100.00% 100.00% —
Company Co., Ltd. (Primax Korea) service
Diamond was
The Diamond (Cayman) Holding company 100.00% 100.00% incorporated in
Company Holdings Ltd. (Diamond) January 2014
Gratus
The Gratus Technology Corp. Market development and customer 100.00% — Tech. was
Company (Gratus Tech.) service incorporated in
March 2015
Manufacture and sale of sophisticated
The Global TEK Co., Ltd. machinery components, automotive parts, industrial automation parts, 30.00% — (note 2)
Company (Global TEK)
communication parts and aerospace
components
Primax Primax Industries (Hong Export and import trading 100.00% 100.00% —
Cayman Kong) Ltd. (Primax HK)
Diamond Tymphany Worldwide Holding company 70.00% 70.00% (note 1)
Enterprises Ltd. (TWEL)
Manufacture of sophisticated
Global TEK Global TEK Co., Ltd. (GT) machinery components and 100.00% — (note 2)
automotive parts
Global TEK Co., Ltd. (Samoa) (GTF-S)Global TEK Fabrication [Holding company] 100.00% — (note 2)
Primax HK Dongguan Primax Manufacture of multifunctional
and Primax Electronic & peripherals, computer mice, mobile 100.00% 100.00% —
Tech. Telecommunication phone accessories, consumer
Products Ltd. (PCH2) electronics products, and shredders
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91 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 92

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Percentage of
Name of shareholding
investor Name of subsidiary Principal activities December December Description
31, 2015 31, 2014
Primax HK Primax Electronics (KS) Manufacture of computer, 100.00% 100.00% —
Corp., Ltd. (PKS1) peripherals and keyboards
Primax Electronics
Primax HK (Chongqing) Corp., Ltd. Manufacture of computer 100.00% 100.00% —
peripherals and keyboards
(PCQ1)
Primax Polaris Electronics Inc. Sale of multi-function printers and 100.00% 100.00% —
Tech. (Polaris) computer peripheral devices
Research and development of
Destiny BVI. Destiny Electronic Corp. computer peripheral devices and 100.00% 100.00% —
(Destiny Beijing) software
TWEL Tymphany HK Ltd. (TYM Sale of audio accessories, amplifiers 100.00% 100.00% (note 1)
HK) and their components
Market development and customer
TWEL TYP Enterprises, Inc. (TYP) service of amplifiers and their 100.00% 100.00% (note 1)
components
Manufacture, research and
Premium Loudspeakers
TYM HK (Premium Hui Zhou)(Hui Zhou) Co., Ltd. development, design, and sale of audio accessories, amplifiers and their components 100.00% 100.00% (note 1)
TYM Australia
was closed
Research and development, design,
TYM HK Tymphany Australia Pty and sale of audio accessories, — 100.00% and finished
Ltd. (TYM Australia) amplifiers and their components the liquidation process in
August 2015
TYMPHANY TYML was
TYM HK LOGISITCS, INC. Sale of audio accessories, amplifiers 100.00% — incorporated in
and their components
(TYML) May 2015
Tymphany
Dongguan Tymphany Manufacture, research and
Dongguan was
TYM HK Acoustic Technology development, design, and sale of 100.00% — incorporated
Co., (Tymphany audio accessories, amplifiers and in September
Dongguan) their components 2015
Sale of automotive parts, industrial
GT GP Tech, Inc. (GP) automation parts, communication 100.00% — (note 2)
parts and aerospace components
GTF-S Global TEK Fabrication Holding company 100.00% — (note 2)
Co., Ltd. (HK) (GTF-HK)
GTF-S Global TEK Co., Ltd. Holding company 100.00% — (note 2)
(Samoa) (GTS)
WUXI GLOBAL TEK
GTF-HK FABRICATION CO., LTD. Manufacture of sophisticated 100.00% — (note 2)
machinery components
(WUXI GLOBAL TEK)
GLOBAL TEK (XI' AN) Manufacture of industrial
GTS CO., LTD. (GLOBAL TEK automation parts, communication 100.00% — (note 2)
XI' AN) parts and aerospace components
GTS and
GLOBAL WUXI (WUXI), LTD. (GLOBAL GLOBAL TEK CO. Manufacture of sophisticated machinery components and 100.00% — (note 2)
TEK TEK WUXI) automotive parts
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Note 1: TWEL was incorporated in October 2013, acquiring all shares of TYM HK by issuing new common stock. The Company acquired 70% of the shares of TWEL by cash through its subsidiary Diamond on January 10, 2014. Therefore, the Company indirectly acquired all shares of TWEL's subsidiaries, and included them in the

Note 2: The Company acquired 30% of the shares of Global TEK by cash on January 5, 2015. Therefore, the Company indirectly acquired all shares of Global TEK's subsidiaries. The Company has control over its relevant activities by acquiring more than 50% of the board of directors' voting rights based on the resolution of its interim meeting of shareholders held on February 13, 2015. The Company included all Global TEK's subsidiaries in the consolidated financial statements from the same date. Before the Company has control, investments in subsidiaries are accounted for using the equity method.

（ d ） Foreign currencies

1. Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the dates of the transactions. Monetary items denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in the foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Nonmonetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

Exchange differences arising on the translation of nonmonetary items are recognized in profit or loss except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

2. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group's functional currency at the exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group's functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve in equity.

part of the gain or loss on disposal. When the Group disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of its investment in an associate or joint venture including a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

（ e ） Classification of current and non-current assets and liabilities

An entity shall classify an asset as current when:

It expects to realize the asset or intends to sell or consume it in its normal operating cycle;
It holds the asset primarily for the purpose of trading;
It expects to realize the asset within twelve months after the reporting period; or
The asset is cash or a cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period, or there are other restrictions.

An entity shall classify all other assets as noncurrent.

An entity shall classify a liability as current when:

It expects to settle the liability in its normal operating cycle;
It holds the liability primarily for the purpose of trading;
The liability is due to be settled within twelve months after the reporting period; or
It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its

An entity shall classify all other liabilities as noncurrent.

（ f ） Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits that are subject to an insignificant risk

93 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 94

of changes in their fair value and are used by the Group in the management of its short-term commitments.

Time deposits with maturities within three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used for the purpose of meeting short-term commitments are reclassified as cash equivalents.

（ g ） Financial instruments

Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.

1. Financial assets

The Group classifies financial assets into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

（ 1 ）

loss

is classified as held for trading or is designated as such on initial recognition. Financial assets are classified as held for trading if they are acquired principally for the purpose of selling in the short term.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss, and are included in non-operating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

（ 2 ）

presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other gains and losses under non-operating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting.

on the date that the Group's right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is included in other income under non-operating income and expenses.

（ 3 ） Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. Such assets are recognized initially at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses other than insignificant interest on shortterm receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

（ 4 ）

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value

below its cost is considered objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than those suggested by historical trends.

measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate.

is deducted from the carrying amount except for trade receivables, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of a receivable written off is recorded in the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial asset measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date. Impairment losses recognized on an available-forsale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity.

Recovery and loss on doubtful debts of account receivables are included in operating expense; others are included in other gains and losses under non-operating income and expenses. （ 5 ） Derecognition of financial assets The Group derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss, and it is included in other gains and losses under nonoperating income and expenses.

The Group separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income shall be recognized in profit or loss, and it is included in other gains and losses under nonoperating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts.

2. Financial liabilities and equity instruments

（ 1 ）

Debt or equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

（ 2 ）

Financial liabilities not classified as held for trading or designated as at fair value

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through profit or loss, which comprise loans and borrowings, salary payable, and trade and other payables, are measured at fair value, plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in finance costs under non-operating income and expenses.

（ 3 ）

its contractual obligation has been discharged or cancelled, or has expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any noncash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in other gains and losses under non-operating income and expenses.

（ 4 ）

on a net basis when the Group has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

its foreign currency exposure. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss, and are included in other gains and losses under nonoperating income and expenses. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

（ h ） Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-costing principle, and it includes the expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share

of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

（ i ） Investment property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, for use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently. The depreciation is computed along with the depreciable amount. The method, the useful life, and the residual amount are the same as those of property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

When the use of a property changes such that it is reclassified as property, plant and equipment, the carrying amount at the date of reclassification becomes its cost for subsequent accounting.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in non-operating income and expenses and it is included in other gains and losses.

（ j ） Property, plant and equipment

1. Recognition and measurement

Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds and the carrying amount of the item, and it

shall be recogni ~~zed as other gains and losses under~~ non-operating income and expense.

Property is reclassified to investment property at its carrying amount when the use of the property changes from private to investment use.

3. Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure which can be reliably measured will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

4. Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

Land has an unlimited useful life, and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

（ 1 ） Buildings, leasehold improvement, and additional equipment: 1 ~ 51 years
（ 2 ） Machinery and equipment: 1 ~10 years

（ 3 ） Office and other equipment: 1 ~5 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If the expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

（ k ） Lease

1. Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term.

2. Lessee

Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

Contingent rent is recognized as expense in the periods in which it is incurred.

（ l ） Intangible assets

1. Goodwill

（ 1 ） Recognition Goodwill arising from a business combination is recognized as intangible assets. Goodwill is measured as the aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and the amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value).

（ 2 ） Subsequent measurement Goodwill is measured at cost, less accumulated impairment losses.

2. Other intangible assets

Other intangible assets that are acquired by the Group are measured at cost, less accumulated amortization and any accumulated impairment losses.

3. Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

4. Amortization

The amortizable amount is the cost of an asset, less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

Customer relationships 10 years 2. Technology 10 years 3. Trademarks 10 years
2.5~10 years
Patents
Copyrights 15 years

The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as a change in accounting estimate.

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（ m ）

Non-financial assets, except for inventories and deferred tax assets, are assessed for impairment, and the recoverable amounts for any impaired assets are estimated at the end of each reporting period. If it is not possible to determine the recoverable amount for an individual asset, then the Group will have to determine the recoverable amount for the asset's cash-generating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, or its value in use. If the recoverable amount of an individual asset or a cashgenerating unit is less than its carrying amount, the carrying amount of the individual asset or cashgenerating unit shall be reduced to its recoverable amount; and that reduction is accounted for as an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset may no longer exist or may have decreased. An impairment loss recognized in prior periods for an individual asset or a cash-generating unit shall be reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount but should not exceed the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

Notwithstanding whether indicators exist, goodwill is required to be tested for impairment annually.

For the purpose of impairment testing, goodwill acquired in a business combination shall be allocated to each of the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. If the carrying amount of a cash-generating unit exceeds the recoverable amount of the unit, the Group shall recognize the impairment loss, and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

（ n ） Revenue

1. Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue is recognized when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that a discount will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. Transfer usually occurs when the product is received at the customer's warehouse.

2. Services

The Group provides services, such as model research, development, and design, to customers. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction, agreed by both sides, at the reporting date.

（ o ） Deferred grant revenue

Deferred grant revenue with additional conditions shall be recognized if the Group fulfills the conditions and the grant revenue becomes receivable.

or loss on a systematic basis in the periods in which the expenses it is to compensate are recognized. Grant revenue with conditions to compensate for the acquisition cost of an asset shall be deffered and recognized in profit or loss on a systematic basis over the useful life of the asset.

If the deferred grant revenue is to compensate for the Group's expenses that have been incurred or to supply immediate financial support to the Group and there is no related cost in the future, it shall be recognized in profit or loss when the grant revenue becomes receivable.

（ p ）

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest), and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income and recognized in retained earnings in a subsequent period.

on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

（ q ） Share-based payment

The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose related service and nonmarket performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between the expected and the actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities over the period that the employees become unconditionally entitled to payment. The liability is re-measured at each reporting date and settlement date. Any changes in the fair value of the liability are recognized as personnel expenses in profit or loss.

（ r ） Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities

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bases. Deferred taxes shall not be recognized for the following exceptions:

1. Assets and liabilities that are initially recognized but are not related to a business combination and have no effect on net income or taxable gains (losses) at the time of the transaction.

2. Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.

3. Initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

1. The entity has the legal right to settle tax assets and liabilities on a net basis; and

2. The taxing of deferred tax assets and liabilities

（ 1 ） levied by the same taxing authority; or
（ 2 ） levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and they shall be adjusted based on the probability that future taxable profit that will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

（ s ） Business combination

Goodwill is measured as the aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and the amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value).

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Group's financial statements. During the measurement period, the provisional amounts recognized are retrospectively adjusted at the acquisition date, or additional assets or liabilities are recognized to reflect the new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

All the transaction costs incurred for the business combination are recognized immediately as the Group's expenses when incurred, except for the issuance of debt or equity instruments.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of noncontrolling interests are measured at fair value or other basis endorsed by the FSC.

（ t ） Earnings per share

The Group discloses the basic and diluted earnings per share attributable to ordinary stockholders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary stockholders of the Company divided by the weighted-average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary stockholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise employee stock options,

employee bonuses not yet resolved by the stockholders, and restricted stock.

expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group's chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of

（ u ） Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and

（ 5 ） Sources of Estimation Uncertainty

in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

unobservable inputs and valuation adjustments. If thirdparty information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRSs, including the level in the fair value hierarchy in which such valuations should be

Management continues to monitor the accounting assumptions, estimates and judgments. Management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Information about critical judgments in applying accounting policies that have significant effect on the amounts recognized in the consolidated financial statements is included in note 4(c) "Basis of consolidation."

Level 1: quoted prices (unadjusted) in active

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in note 6(j) "Intangible assets."

Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has established an internal control framework with respect to the measurement of fair values, and regularly reviews significant

If there is any movement of financial instruments measured at fair value between Level 1, Level 2, and Level 3, the Group recognizes the movement at the reporting date. Please refer to note 6(x) for further information on measurement of fair values.

（ 6 ）

（ a ） Cash and cash equivalents

Cash on hand Checking accounts and demand deposits Time deposits	December 31,2015	December 31, 2014 2,081 2,594,229 4,217,713 6,814,023
	$ 4,097 2,939,622 4,679,661
	$ 7,623,380

Please refer to note 6(x) for the currency risk and the interest rate risk of the Group's cash and cash equivalents.

101 Primax Electronics Ltd. 2015 Annual Report

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Primax Electronics Ltd. 2015 Annual Report

（ b ）

Financial assets at fair value through proft or loss – current: Non-derivative fnancial assets: Mutual funds Derivative fnancial assets: Forward exchange contracts Foreign exchange swap contracts	December 31, 2015	December 31, 2014 - 95,848 437 96,285
	$ 969
	$ 87,748 -
	$ 87,748


Financial liabilities at fair value through proft or loss – current: Derivative fnancial liabilities: Forward exchange contracts Foreign exchange swap contracts	December 31, 2015	December 31, 2014 (77,753) (2,837) (80,590)
	$ (60,105) -
	$ (60,105)

presented as held-for-trading financial assets as of December 31, 2015 and 2014:

==> picture [441 x 308] intentionally omitted <==

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

December 31, 2015
Derivative financial instruments Nominal amount Maturity date Predetermined rate
Forward exchange contracts － USD 205,000 thousand January 7, 2016~ 32.754~32.892
buy USD / sell TWD February 26, 2016
Forward exchange contracts － USD 205,000 thousand January 7, 2016~ 32.802~33.010
buy TWD / sell USD February 26, 2016
Forward exchange contracts － USD 63,500 thousand January 4, 2016~ 6.4115~6.5934
buy USD / sell CNY January 19, 2016
Forward exchange contracts － USD 40,000 thousand January 19, 2016 6.6380
buy CNY / sell USD
Foreign exchange contracts － USD 516 thousand January 25, 2016 120.75~122.40
buy JPY / sell USD
December 31, 2014
Derivative financial instruments Nominal amount Maturity date Predetermined rate
Forward exchange contracts － USD 35,000 thousand January 6, 2015~ 30.304~31.252
buy USD / sell TWD March 4, 2015
Forward exchange contracts － USD 35,000 thousand January 6, 2015~ 30.336~31.289
buy TWD / sell USD March 4, 2015
Forward exchange contracts － USD 161,600 thousand January 5, 2015~ 6.1555~6.2426
buy USD / sell CNY March 18, 2015
Forward exchange contracts － USD 184,600 thousand January 5, 2015~ 6.1625~6.2546
buy CNY / sell USD March 18, 2015
Foreign exchange swap contracts － USD 11,170 thousand January 5, 2015~ 30.989~31.749
swap in TWD / swap out USD January 9, 2015
----- End of picture text -----

loss – current as collateral.

（ c ） current

Stocks listed in domestic markets Stocks unlisted in domestic markets Stocks unlisted in foreign markets	December 31, 2015	December 31, 2014 - 275,536 17,380 292,916
	$ 551,600 16,297 16,533
	$ 584,430

In December 2014, the Group acquired 2,272 thousand shares of Nien Made Enterprise Co., Ltd. at NT$108 (dollars) per share for consideration of $245,600, and the shares were recognized as available-for-sale financial assets – non-current. The stock of Nien Made Enterprise Co. has been listed in the domestic market since December 22, 2015.
In the second quarter of 2014, Titan 1 Venture Capital Co., Ltd. refunded $4,616 to the Group due to capital reduction. The difference between the refund and the book value amounting to $482 was recorded by the Group as other gains and losses.
In July 2015, WK Technology Fund IV Ltd. refunded $1,600 to the Group due to capital reduction.
Titan 1 Venture Capital Co., Ltd. and Neosonica Technologies Inc. were closed and finished the liquidation process in August and March 2015, respectively. The Group received $175 due to the liquidation and recorded it as other gains and losses.
The impairment loss was $939 and $8,030 for the years ended December 31, 2015 and 2014, respectively, and was recognized as other gains and losses.
The unrealized gains were $294,053 and $945 for the years ended December 31, 2015 and 2014, respectively, and were recognized as unrealized gains on available-for-sale financial assets.
The Group did not provide any of the aforementioned available-for-sale financial assets as collateral.

（ d ） Notes and accounts receivable, and other receivables (including related parties)

Notes receivable Accounts receivable Accounts receivable – related parties Other receivables Less: allowance for doubtful accounts allowance for sales returns and discounts	December 31, 2015	December 31, 2014 6,565 10,512,147 60,581 370,254 (26,034) (39,530) 10,883,983
	$ 134,860 14,353,936 54,995 462,242 (29,247) (34,927)
	$ 14,941,859

The Group did not provide any of the aforementioned notes and accounts receivable, and other receivables (including related parties) as collateral.
Please refer to note 6(x) for changes in the allowance for doubtful accounts and the credit risk and currency risk for the years ended December 31, 2015 and 2014.
Please refer to note 9 for guarantee notes provided by the Company to sell its accounts receivable.

（ e ） Inventories

Raw materials Semi-fnished goods and work in process Finished goods and merchandise	December 31, 2015	December 31, 2014 1,407,480 991,541 2,411,957 4,810,978
	$ 1,465,472 1,488,325 4,396,812
	$ 7,350,609

The Group did not provide any of the aforementioned inventories as collateral.

For the years ended December 31, 2015 and 2014, the Group recognized the following items as cost of goods sold:

Additional gains (losses) on inventory valuation Unallocated manufacturing overhead resulting from the actual production being lower than the normal capacity Loss on disposal of inventories Loss on physical inventories	2015	2014 158,184 (67,179) (63,140) (1,077) 26,788
	$ (149,068) (92,214) (185,421) (731)
	$ (427,434)

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Primax Electronics Ltd. 2015 Annual Report 104

（ f ） Subsidiaries and non-controlling interest

（ 2 ） Obtaining control

1. Global TEK Group

The Company holds only 30% of Global TEK's shares. However, the Company has control power over its relevant activities by acquiring more than 50% of the board of directors' voting rights based on the resolution of its interim meeting of stockholders held on February 13, 2015. The Company will include the Global TEK Group in the consolidated financial statements from the same date in accordance with IFRS 10.

Based on the resolution approved by the board of directors' meeting held on October 15, 2014, the Company signed a share subscription agreement and a share purchase agreement with Global TEK and its primary stockholders, respectively, and acquired 30% of Global TEK's shares.

Global TEK is a manufacturer of sophisticated machinery components. By obtaining control of Global TEK and its subsidiaries, the Company will integrate Global TEK's experience in sophisticated machinery components with the Company's own technology related to audio systems and camera modules to provide the ultimate vehicle digital system to consumers. The acquisition will allow the Group to take part in the vehicle component supply chain, driving the growth of its revenue and profit in the foreseeable future.

TEK and its subsidiaries, the Company will integrate （ 3 ） According to IFRSs, the fair value of net Global TEK's experience in sophisticated machinery assets acquired should be measured on the components with the Company's own technology acquisition date. Therefore, the Company related to audio systems and camera modules to evaluated the fair value and useful lives of provide the ultimate vehicle digital system to consumers. intangible assets at the time of acquisition. The acquisition will allow the Group to take part in the The Company engaged experts to evaluate vehicle component supply chain, driving the growth of its identifiable net assets. According to the its revenue and profit in the foreseeable future. result, identifiable intangible assets comprised Consideration transferred customer relationships amounting to $109,000, According to the share subscription agreement technology amounting to $100,000, and and share purchase agreement, the consideration goodwill amounting to $340,999. transferred was $545,490 without contingent cost （ 4 ） Details of consideration transferred, assets or other equity instruments. The settlement date acquired, and liabilities assumed at the date of was January 5, 2015. acquisition were as follows:
（ 1 ） Consideration transferred

	Items Cash Fair value of non-controlling interest Fair value Fair value of identifable assets acquired and liabilities assumed: Cash and cash equivalents Financial assets at fair value through proft or loss – current Notes and accounts receivable Other receivables Inventories Other current assets Property, plant and equipment Deferred tax assets Long-term prepaid rent Other non-current assets Short-term and long-term borrowings Notes and accounts payable Salary payable and other payables Other current liabilities Deferred tax liabilities Other non-current liabilities Intangible assets recognized from purchase price allocation: Customer relationships Techniques Goodwill		Amount 545,490 1,272,810 1,818,300 506,449 1,203 615,534 11,703 430,922 67,166 1,095,093 13,475 102,359 25,724 (741,297) (412,070) (309,387) (28,679) (103,855) (6,039) 1,268,301 109,000 100,000 340,999 549,999 1,818,300
		$ $ $

（ 5 ） Intangible assets

2. Tymphany Group

A. Goodwill

Based on the resolution approved by the board of directors' meeting held on October 25, 2013, the Company signed a share purchase agreement with Tymphany, a manufacturer of amplifiers. The Company obtained control of Tymphany Worldwide Enterprises Ltd. (TWEL) and its subsidiaries by acquiring 70% of the shares through its subsidiary Diamond (Cayman) Holdings Ltd. The aforementioned acquisition was approved by the Investment Commission, Ministry of Economic Affairs, on December 26, 2013, and the shares were transferred and registered on January 10, 2014, which was also the acquisition date.

G o o d w i l l m a i n l y c a m e f r o m t h e reputation, profitability, and value of employees which have been established by Global TEK and its subsidiaries in the automotive, instrument, aerospace and sophisticated machinery components market. There was no tax effect attributable to goodwill recognized from the acquisition.

B. Customer relationships
Customer relationships mainly came from continuous cooperation with clients for which the relationships are expected to

speakers and audio systems. By obtaining control of TWEL and its subsidiaries, the Group will integrate Tymphany's experience in amplifiers and audio systems with the Group's own technology related to consumer electronics and wireless communication to provide the ultimate digital family systems to consumers. The acquisition will allow the Group to rapidly expand its digital-family product line and its relationships with this internationally famous brand, driving the growth of its revenue and profit in the foreseeable future.

C. Technology

Global TEK owned the manufacturing t e c h n o l o g y f o r t h e a u t o m o t i v e parts, industrial automation parts, communication parts, aerospace components, medical equipment and sophisticated machinery components. The technology is expected to be

（ 6 ） The cost of acquisition
（ 1 ） Consideration transferred
The valuation fees and on-site examination According to the share purchase agreement, the expenses of $824 due to the acquisition consideration transferred was $2,515,800 (USD transaction were recognized as administrative 84,000) without contingent cost or other equity expenses in the statement of comprehensive instruments. income in the fourth quarter of 2014 and the （ 2 ） According to IFRSs, the fair value of net assets year 2015. acquired should be measured on the acquisition Simulated operating results date. Therefore, the Company evaluated the Operating results of Global TEK and fair value and useful lives of intangible assets at its subsidiaries were merged into the the time of acquisition. The Company engaged Company's consolidated comprehensive experts to evaluate its identifiable net assets. income statement since the date of obtaining According to the result, identifiable intangible control, contributing operating revenue of assets comprised customer relationships $2,051,106 and net income of $30,042. If the amounting to $718,800, technology amounting to acquisition had occurred on January 1, 2015, $419,300, and goodwill amounting to $1,850,383. the simulated operating revenue and net （ 3 ） Details of consideration transferred, assets income would have been $65,746,063 and acquired, and liabilities assumed at the date of $1,825,736, respectively acquisition were as follows:

According to the share purchase agreement, the consideration transferred was $2,515,800 (USD 84,000) without contingent cost or other equity instruments.

（ 7 ） Simulated operating results
（ 3 ） Details of consideration transferred, assets acquired, and liabilities assumed at the date of acquisition were as follows:

	Items Cash Fair value of non-controlling interest Fair value	Amount $ 2,515,800 1,078,200 $ 3,594,000

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Primax Electronics Ltd. 2015 Annual Report 106

	Items		Amount 186,274 1,434,395 734,797 155,776 155,833 40,107 22,550 (486,213) (1,213,138) (221,561) (94,733) (107,219) (1,351) 605,517 718,800 419,300 1,850,383 2,988,483 3,594,000
	Fair value of identifable assets acquired and liabilities assumed: Cash and cash equivalents Notes and accounts receivable and other receivables Inventories Other current assets Property, plant and equipment Deferred tax assets Other non-current assets Short-term and long-term borrowings Accounts payable Salary payable and other payables Other current liabilities Deferred tax liabilities Other non-current liabilities Intangible assets recognized from purchase price allocation: Customer relationships Technology Goodwill	$ $

（ 4 ） Intangible assets （ 5 ） The cost of acquisition

A. Goodwill

The legal fees and on-site examination expenses of $8,260 and $1,712 due to the acquisition transaction were recognized as administrative expenses in the statement of comprehensive income in the fourth quarter of 2013 and the first quarter of 2014, respectively.
Goodwill mainly came from the reputation, profitability, and value of employees which have been established by TWEL and its subsidiaries in the amplifier and audio system market. There was no tax effect attributable to goodwill recognized from the acquisition.
B. Technology （ 6 ） Simulated operating results TWEL and its subsidiaries owned designs for Operating results of TWEL and its digital electronics, audio frequency, acoustics, subsidiaries were merged into the user interface, and hardware and software Company's consolidated comprehensive systems, combined with wireless technology income statement since the acquisition like Bluetooth and WiFi, to design and date, contributing operating revenue of manufacture professional amplifier and audio $6,465,621 and net income of $398,587. If system products. The useful lives of technology the acquisition had occurred on January 1, acquired were estimated to be 10 years. 2014, the simulated operating revenue and
C. Customer relationships net income would have been $52,421,302 Customer relationships mainly came from and $1,627,337, respectively.
C. Customer relationships net income would have been $52,421,302 Customer relationships mainly came from and $1,627,337, respectively. continuous cooperation with clients for which the relationships are expected to be beneficial （ g ） Details of subsidiaries that have in the future. The useful lives of customer material non-controlling interests relationships acquired were estimated to be Details of subsidiaries that have material non10 years. controlling interests were as follows:

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Proportion of Ownership and Voting Rights
Name of subsidiary Principal Place of Business/ Held by Non-controlling Interests
Registered Country
December 31, 2015 December 31, 2014
TWEL and its subsidiaries Hong Kong and China/Cayman Is. 30% 30%
Global TEK and its subsidiaries Taiwan and China/Taiwan 70% -%
----- End of picture text -----

interests is set out below. The summarized financial information prepared in accordance with the IFRSs endorsed by the FSC reflects the adjustments of fair value and differences in accounting policies. It represents amounts before intragroup eliminations.

1. TWEL and its subsidiaries:

Current assets Non-current assets Current liabilities Non-current liabilities Net assets Non-controlling interests		December 31, 2015 4,380,696 3,126,982 (3,440,368) (97,340) 3,969,970 1,190,991	December 31, 2014 3,089,793 3,192,799 (2,323,839) (97,970) 3,860,783 1,158,234
	$ $ $
Operating revenue Net income Other comprehensive income Comprehensive income Net income attributable to non-controlling interests Comprehensive income attributable to non-controlling interests		2015 6,683,250 75,945 31,069 107,014 22,784 32,104	2014 6,443,274 214,258 52,462 266,720 64,277 80,016
	$ $ $ $ $

Cash fows from operating activities Cash fows from investing activities Cash fows from fnancing activities Efect of foreign currency exchange translation Net increase in cash and cash equivalents Dividends paid to non-controlling interests		2015 499,900 (129,569) 9,852 32,610 412,793 -	2014 1,225,924 (119,246) (482,196) (13,855) 610,627 -
	$ $ $

2. Global TEK and its subsidiaries

2.時碩工業及其子公司彙總性財務資訊： Current assets Non-current assets Current liabilities Non-current liabilities Net assets Non-controlling interests			December 31, 2015 $ 1,447,425 1,805,801 (994,338) (408,586) $ 1,850,302 $ 1,295,213
			$ $ $

Operating revenue Net income Other comprehensive income Comprehensive income Net income attributable to non-controlling interests Comprehensive income attributable to non-controlling interests		February	to December, 2015 2,051,106 30,042 1,961 32,003 21,029 22,403
	$ $ $ $ $






Cash fows from operating activities Cash fows from investing activities Cash fows from fnancing activities Efect of foreign currency exchange translation Net increase in cash and cash equivalents Dividends paid to non-controlling interests		February	to December, 2015 184,499 (194,508) (211,459) (6,419) (227,887) -
	$ $ $

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（ h ） Property, plant and equipment

The cost, depreciation, and impairment loss of the property, plant and equipment of the Group for the years ended December 31, 2015 and 2014, were as follows:

	Land	Buildings, leasehold improvement, and additional equipment	Machinery and equipment	Ofce and other equipment	Construction in progress and testing equipment	Government grants
$ $ $ $ $ $ $ $ $ $ $	22,879 - - 262,094 - -	3,062,153 22,316 (146,771) 305,927 935,689 （33,749)	4,741,057 740,599 (392,772) 328,301 1,218,445 (57,223)	578,964 58,719 (42,442) 74,644 19,211 (8,885)	779,029 1,910,503 （263) 124,127 (2,293,135) (17,019)	(12,911) - - - - 180
	284,973	4,145,565	6,578,407	680,211	503,242	(12,731)
	22,879 - - - - -	2,864,105 50,195 (47,493) 2,299 49,332 143,715	4,043,775 271,668 (167,306) 89,292 267,034 236,594	463,430 50,784 (27,908) 64,242 587 27,829	151,353 912,684 - - (319,375) 34,367	(12,281) - - - - (630)
	22,879	3,062,153	4,741,057	578,964	779,029	(12,911)
	- - - - -	1,643,871 250,280 (140,657) 5,146 (21,263)	3,214,184 927,402 (306,801) (72,971) (43,339)	384,695 97,889 (37,535) 10,459 (6,137)	- - - - -	(6,724) (2,929) - - 74
	-	1,737,377	3,718,475	449,371	-	(9,579)
	- - - - - -	1,341,204 261,816 - (43,418) - 84,269	2,508,045 668,954 33,178 (150,543) (554) 155,104	298,515 86,721 - (27,798) - 27,257	- - - - - -	(3,551) (2,837) - - - (336)
	-	1,643,871	3,214,184	384,695	-	(6,724)
	284,973	2,408,188	2,859,932	230,840	503,242	(3,152)
	22,879	1,418,282	1,526,873	194,269	779,029	(6,187)
	22,879	1,522,901	1,535,730	164,915	151,353	(8,730)

1. The unamortized deferred revenue of equipment subsidy amounted to $1,018,732 and $63,143 for the years ended December 31, 2015 and 2014, respectively.

2. Please refer to note 8 for further information on property, plant and equipment provided as collateral.

（ i ） Investment property

Cost or deemed cost: Balance on January 1, 2015 Additions Balance on December 31, 2015 Balance on January 1, 2014 Additions Balance on December 31, 2014 Depreciation and impairment losses: Balance on January 1, 2015 Depreciation Balance on December 31, 2015 Balance on January 1, 2014 Depreciation Balance on December 31, 2014 Carrying amounts: Balance on December 31, 2015 Balance on December 31, 2014 Balance on January 1, 2014 Fair value: Balance on December 31, 2015 Balance on December 31, 2014 Balance on January 1, 2014		Land 162,012 - 162,012 162,012 - 162,012 33,941 - 33,941 33,941 - 33,941 128,071 128,071 128,071	Buildings and other equipment 172,167 - 172,167 172,167 - 172,167 37,969 3,560 41,529 34,409 3,560 37,969 130,638 134,198 137,758		Total 334,179 - 334,179 334,179 - 334,179 71,910 3,560 75,470 68,350 3,560 71,910 258,709 262,269 265,829 592,092 561,338 622,009
	$ $ $ $ $ $ $ $ $ $ $










				$ $ $

The fair value of investment property is based on the market value.
Investment property comprises a number of commercial properties which are leased to third parties. Each of the leases contains an initial non-cancellable period between 1 and 2 years. Subsequent renewals are negotiated with the lessee, and no contingent rents are charged. Please refer to note 6(m) for further information.
The Group did not provide any of the aforementioned investment property as collateral.

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〃

（ j ） Intangible assets

The cost and amortization of the intangible assets of the Group for the years ended December 31, 2015 and 2014, were as follows:

	Goodwill	Customer Relationships	Technology	Trademarks, Patents and Copyrights
$ $ $ $ $ $ $ $ $ $ $	1,850,383 - 340,999 -	718,800 - 109,000 -	419,300 - 100,000 -	122,079 17 - 32
	2,191,382	827,800	519,300	122,128
	- - 1,850,383 -	- - 718,800 -	- - 419,300 -	120,687 1,306 - 86
	1,850,383	718,800	419,300	122,079
	- - -	70,141 81,418 -	40,916 54,430 -	82,861 8,642 11
	-	151,559	95,346	91,514
	- - -	- 70,141 -	- 40,916 -	74,208 8,628 25
	-	70,141	40,916	82,861
	2,191,382	676,241	423,954	30,614
	1,850,383	648,659	378,384	39,218
	-	-	-	46,479

Intangible assets included customer relationships, technology, and goodwill from obtaining control of Global TEK and its subsidiaries on January 5, 2015; please refer to note 6(f).
Intangible assets included customer relationships, technology, and goodwill from obtaining control of TWEL and its subsidiaries on January 10, 2014; please refer to note 6(f).
The Group did not provide any of the aforementioned intangible assets as collateral.

（ k ） Short-term borrowings

The details were as follows:

Unsecured bank loans Secured bank loans Short-term borrowings Unused credit lines Annual interest rates	$ $ $	December 31, 2015 1,130,518 220,051 1,350,569 10,729,002 0.85%~5.89%	December 31, 2014 2,148,800 - 2,148,800 6,374,139 0.80%~1.60%

Please refer to note 8 for further information on assets provided as collateral.

（ l ） Long-term borrowings

The details were as follows:

Unsecured bank loans 〞 Secured bank loans 〞 Less: current portion Total Unused credit lines		December 31, 2015	December 31, 2015		Amount 1,374,282 41,037 215,963 46,205 (622,347) 1,055,140 228,086
	Currency	Annual interest rate	Maturity year
	TWD USD TWD USD	0.95~2.78% 2.66% 1.73%~2.13% 3.2404%~3.3%	2016~2020 2018 2016~2026 2018~2030	$ $ $

Unsecured bank loans Less: current portion Total Unused credit lines		December 31, 2014			Amount 1,500,000 (600,000) 900,000 1,789,600
	Currency	Annual interest rate	Maturity year
	TWD	1.05%~1.48%	2017	$ $ $

Pursuant to the loan agreements with Industrial Bank of Taiwan, The Export-Import Bank of the ROC and CTBC Bank, the Company has to maintain the following financial ratios calculated based on the Company's semi-annual audited (reviewed) consolidated financial statements. As of December 31, 2015, the Company had not violated the financial covenants. The financial covenants include (1) a current ratio of not less than 100%; (2) a financial debt ratio of not greater than 75%; (3) an interest coverage ratio of not less than 400%; and (4) stockholders' equity of not less than $4,000,000. If the Company violates the financial covenants, the banks have the right to charge a default penalty or to require the Company to improve its financial ratios.
Please refer to note 9 for the details of the outstanding guarantee notes.
Please refer to note 8 for further information on assets provided as collateral.

（ m ） Operating lease

1. Lessee

Non-cancellable operating lease rentals are payable as follows:

Less than one year Between one and fve years More than fve years		December 31, 2015 251,403 508,595 7,203 767,201	December 31, 2014 256,375 656,982 41,545 954,902
	$ $

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112

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lease terms are between 1 and 15 years.

2. Lessor

The Group leases out its investment property under operating leases. Please refer to note 6(i) for further information. Non-cancellable operating leases are receivable as follows:

Less than one year $	December 31, 2015 1,060	December 31, 2014 5,584

（ 3 ）

The movements in the fair value of the defined benefit plan assets for the Group for the years ended December 31, 2015 and 2014, were as follows:

Fair value of plan assets at January 1 Business combinations Remeasurement of net defned liability Contributions made Expected return on plan assets Benefts paid by plan assets Fair value of plan assets at December 31		2015 104,919 15,299 748 5,432 2,428 (15,239) 113,587	2014 108,207 - 258 2,942 2,207 (8,695) 104,919
	$ $

（ n ）

Group were as follows:

Present value of defned beneft obligations Fair value of plan assets Defcit in the plan Asset ceiling Net defned beneft liability		December 31, 2015 180,297 113,587 66,710 - 66,710	December 31, 2014 162,598 104,919 57,679 - 57,679
	$ $

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

（ 1 ） Composition of plan assets

The Group contributes pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks. The Group's Bank of Taiwan labor pension reserve account balance amounted to $113,587 at the end of the reporting period. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor. （ 2 ） Movements in present value of defined benefit obligations

The movements in present value of defined benefit obligations for the Group for the years ended December 31, 2015 and 2014, were as follows:

Defned beneft obligation at January 1 Business combinations Benefts paid by plan assets Current service costs and interest Remeasurement of net defned liability Defned beneft obligation at December 31		2015 162,598 18,522 (15,239) 5,000 9,416 180,297	2014 169,353 - (8,695) 5,025 (3,085) 162,598
	$ $

（ 4 ）

were as follows:

Service cost Interest cost Expenses		2015 1,322 1,250 2,572	2014 1,638 1,180 2,818
	$ $

（ 5 ） Actuarial assumptions

The following are the Group's principal actuarial assumptions:

Discount rate Future salary increase rate	December 31, 2015 1.375%~1.750% 2%~3.250%	December 31, 2014 2.125% 3.250%

after the reporting date was $4,200. The weighted-average duration of the defined benefit obligation is 10~13.2 years.

（ 6 ） Sensitivity analysis

When computing the present value of the defined benefit obligations, the Group uses judgments and estimations to determine the actuarial assumptions, including discount rates and future salary changes, as of the financial statement date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligations.

would have been as follows:

Discount rate Future salary increase rate	Increased 0.25% $ (4,354) $ 4,342	Decreased 0.25% 4,513 (4,213)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. Many assumption changes may affect each other in practice. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There were no changes in the method and assumptions used in the preparation of the sensitivity analysis for 2015 and 2014.

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The Company, Global TEK and GT contribute 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company, Global TEK and GT contribute a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The Company's, Global TEK's and GT's foreign subsidiaries have defined contribution plans. These plans are funded in accordance with the regulations of their respective countries. Contributions to these plans are expensed as incurred without additional legal or constructive obligation.

The Group recognized pension costs under the defined contribution method amounting to $411,144 and $271,335 for the years ended December 31, 2015 and 2014, respectively, recorded as operating expenses and operating cost in the statement of comprehensive income.

（ o ） Income taxes

1. The amounts of income tax expenses for 2015 and 2014 were as follows:

Current tax expense Deferred tax expense (beneft) Income tax expense		2015 851,551 (195,533) 656,018	2014 370,738 67,876 438,614
	$ $

Income tax calculated based on tax rates Overseas investment losses (gains) recognized under the equity method Non-taxable income Investment tax credits accrued Prior year's income tax adjustment 10% surtax on unappropriated earnings Other		2015 764,216 (105,331) (106,166) (83,224) (4,882) 60,246 131,159 656,018	2014 705,435 (119,243) (148,161) (42,794) 7,561 29,548 6,268 438,614
	$ $

3. Deferred tax assets and liabilities

（ 1 ） Unrecognized deferred tax liabilities

The Company is able to control the timing of the reversal of the temporary differences associated with subsidiaries' earnings. Also, the management considered it probable that the temporary differences will not be reversed in the foreseeable future. Hence, such temporary differences were not recognized under deferred tax liabilities. Details were as follows:

Aggregate amount of temporary diferences related to investments in subsidiaries		December 31, 2015 475,399	December 31, 2014 388,595
	$

（ 2 ） Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

Deductible temporary diferences Tax losses		December 31, 2015 73,829 73,004 146,833	December 31, 2014 76,900 - 76,900
	$ $

profit to utilize after the Group's evaluation. Therefore, they were not recognized as deferred tax assets.

（ 3 ） Recognized deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as follows:

Investment income recognized under the equity method (overseas)	Investment income recognized under the equity method (overseas)	Unrealized foreign exchange gains	Amortization of appraised value adjustment of intangible assets	Others
$ $ $	89,222 23,824 42,440 -	3,500 - (3,500) -	94,596 73,246 (15,833) -	1,351 6,785 3,479 (2,049)
	155,486	-	152,009	9,566
	47,102 - 42,120	3,418 - 82	- 104,825 (10,229)	1,396 2,394 (2,439)
	89,222	3,500	94,596	1,351

Bad debt in excess of tax limit	Bad debt in excess of tax limit	Loss carryforword	Unfunded pension fund contribution	Unrealized sales returns and allowances	Loss on inventory valuation	Deferred granted revenue	Unrealized exchange losses	Others
$ $ $	11,653 - 21,913 -	38,914 - (16,586) -	14,875 463 (994) 129	29,977 - 14,264 -	19,860 2,842 (13,256) -	15,595 - 173,628 -	- 2,581 17,072 -	23,817 7,589 26,078 -
	33,566	22,328	14,473	44,241	9,446	189,223	19,653	57,484
	12,172 - (519)	86,805 - (47,891)	15,153 - (278)	15,789 - 14,188	2,969 26,545 (9,654)	- - 15,595	- - -	20,044 13,562 (9,789)
	11,653	38,914	14,875	29,977	19,860	15,595	-	23,817

4. The Company's, Global TEK's and GT's income tax returns have been examined by the tax authority through the years up to 2013. However, the Company disagreed with the examination of the income tax return for 2008 and requested an administrative remedy. The tax effect of the administrative remedy has been recognized by the Company.

5. Information related to the unappropriated earnings and tax deduction ratio is summarized below:

Unappropriated earnings in 1998 and after Balance of imputation credit account		December 31, 2015 3,951,934 420,838	December 31, 2014 3,132,488 385,069
	$ $

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Creditable ratio for earnings distribution to ROC residents stockholders	2015 (estimated) 18.12%	2014(actual) 15.12%

The above information was prepared in accordance with information letter No. 10204562810 issued by the Ministry of Finance, ROC, on October 17, 2013.

（ p ） Capital and other equity

As of December 31, 2015 and 2014, the nominal common stock amounted to $5,000,000. Face value of each share is $10 (dollars), which means in total there were 500,000 thousand authorized common shares, of which 441,188 and 434,658 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

Reconciliation of shares outstanding for 2015 and 2014 was as follows:

(in thousands of shares) Balance on January 1 Exercise of employee stock options Issued for restricted stock Retirement of restricted stock Balance on December 31	Ordinary shares 2015 2014 434,658 433,573 3,810 1,050 3,000 355 (280) (320) 441,188 434,658
	2015 434,658 3,810 3,000 (280) 441,188

or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10 percent of the actual share capital amount.

3. Retained earnings

any, is to be set aside as legal reserve until it is equal to authorized capital. Also, a special reserve should be retained or reversed under related regulations. After the recognition or reversal of special reserve, 2% to 10% is to be appropriated as employee bonuses, and a maximum of 2% as directors' and supervisors' remuneration. The remainder, if any, is to be distributed as dividends as determined by the board of directors and approved by the stockholders.

The Company is at the growth stage and considers its future cash demand, long-term financial plans, benefits to stockholders, and balanced dividends. Earnings distribution is made by stock dividend and cash dividend. The cash dividend shall not be less than 10 percent of the total dividends and could be adjusted depending on the Company's operating condition.

According to the Company Act as amended in May 2015, employee bonuses and directors' and supervisors' remuneration are no longer subject to earnings distribution, and the Company will make all the necessary changes to its articles of association before the deadline specified by the authorities.

（ 1 ） Legal reserve

1. Common stock

（ 1 ） The Company issued 3,810 thousand and 1,050 thousand new shares of common stock for the exercise of employee stock options in 2015 and 2014, respectively. The related registration procedures were also completed.
（ 2 ） Employee stock options exercised without registration procedures were recorded as capital collected in advance. The exercise price and units as of December 31, 2015 and 2014, were as follows:

Exercise price per share: $11.42 Exercise price per share: $26.50	December 31,2015 Exercised shares (in thousands) Exercise price 235 $ 2,679 472 12,495 707 $ 15,174	December 31,2015 Exercised shares (in thousands) Exercise price 235 $ 2,679 472 12,495 707 $ 15,174
	Exercised shares (in thousands) 235 472 707
		$ $

Exercise price per share: $11.42 Exercise price per share: $17.90 Exercise price per share: $27.70	December 31,2014 Exercised shares (in thousands) Exercise price 2,151 $ 24,563 275 4,922 340 9,418 2,766 $ 38,903
	Exercised shares (in thousands) 2,151 275 340 2,766
		$ $

2. Capital surplus

The balances of capital surplus as of December 31, 2015 and 2014, were as follows:

Additional paid-in capital Employee stock options Restricted employee stock options		December 31, 2015 447,630 236,277 93,461 777,368	December 31, 2014 392,739 256,985 23,819 673,543
	$ $

In accordance with the Company Act, 10 percent of the net income after tax should be set aside as legal reserve, until it is equal to share capital. If the Company experiences profit for the year, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders' meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.

（ 2 ） Special reserve

By choosing to apply exemptions granted under IFRS 1 "First-time Adoption of International Financial Reporting Standards" during the Company's first-time adoption of the International Financial Reporting Standards endorsed by the FSC, retained earnings increased by $97,300 by recognizing the cumulative translation adjustments (gains) on the adoption date as deemed cost. In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, the increase in retained earnings due to the first-time adoption of IFRSs shall be reclassified as special reserve, and when the relevant asset is used, disposed of, or reclassified, this special reserve, shall be reversed as distributable earnings proportionately. The carrying amount of special reserve amounted to $97,300 on December 31, 2015.

In accordance with the guidelines of the above Ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of special earnings reserve resulting from the first-time adoption of IFRSs and the carrying amount of other stockholders' equity as stated above. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other stockholders' equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other stockholders' equity shall qualify for additional distributions.

（ 3 ） Earnings distribution

Employee bonuses amounted to $71,318 for 2014. Directors' and supervisors' remuneration amounted to $28,527 for 2014. These amounts were calculated based on the Company's net profit for 2014 by using the earnings allocation method as stated under the Company's articles. These benefits were expensed under operating costs or operating expenses during 2014.

117 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 118

On June 29, 2015, and June 24, 2014, the stockholders' meeting resolved the distribution of earnings for 2014 and 2013, respectively. The distribution was NT$1.8 and 0.8 (dollars) per share, which amounted to $791,107 thousand and $347,105 thousand, respectively. The differences between the amounts approved in the stockholders' meeting and those recognized in the financial statements for employee bonuses and remuneration for directors and supervisors were as follows:

Employee bonuses Stock Cash Directors' and supervisors' remuneration		2014	Diference - 318 727
	Actual earnings distributed $ - 71,000 27,800	Accrued in the fnancial statements - 71,318 28,527
Employee bonuses Stock Cash Directors' and supervisors' remuneration		2013	Diference - (34) 787
	Actual earnings distributed $ - 32,000 12,000	Accrued in the fnancial statements - 31,966 12,787

Differences between the amounts approved in the stockholders' meeting and those recognized in the financial statements for the distributions of earnings for 2014 and 2013 were accounted for as changes in accounting estimates and recognized as profit or loss in the years 2015 and 2014, respectively.

The information about the employee bonuses and the directors' and supervisors' remuneration approved in the board of directors' and stockholders' meetings can be accessed in the Market Observation Post System.

（ q ） Share-based payment

1. Employee stock options and share-based payment

（ 1 ） On December 28, 2007, the Company merged with Primax and assumed the outstanding employee stock options of Primax. Based on the swap ratio approved by Primax Holdings' board of directors, Primax Holdings issued 1,795,879 units of employee stock options in exchange for all of the employee stock options issued by Primax. According to the option plan, each unit could be converted into 1 common share of Primax Holdings. The primary terms and conditions of the employee stock options were as follows:

A. Exercise period:

From the grant dates in May 2005, June and December 2006, and February and March 2007, the options are exercisable at the following rates two years after the grant date. The term of the employee stock options is 5 years. The employee stock options and any right thereof shall not be transferred, pledged, donated, or disposed of in any way, with the exception of inherited options.

	Period following thegrant of options 2 years 3 years	Exercisable percentage (cumulative) 50％ 100％

（ 2 ） Based on the resolution approved in the board of directors' meeting of Primax Holdings held on December 31, 2007, Primax Holdings declared an incentive plan to grant the right to some employees of the Company to participate in the subscription of the non-voting ordinary shares of Primax Holdings. The transaction is a kind of equity-settled share-based payment agreement, and the equity instruments under this agreement were vested at the date of grant. Primax Holdings recognized the compensation cost by using the fair value method. The difference in value between the net value per share of Primax Holdings determined at the grant date and the exercise price per share was recognized as cost of longterm investment in the Company by Primax Holdings in 2007, and was recognized as compensation cost and capital surplus by the Company. Based on the resolution approved in the board of directors' meeting of Primax Holdings held in April 2008, Primax Holdings amended the share-based payment agreement mentioned above, and consequently, the non-voting ordinary shares were replaced by options to purchase them. The amendment had no impact on the accompanying consolidated financial statements.
（ 3 ） In addition, Primax Holdings declared an incentive plan to grant stock options to employees of the Company in January, May and November 2008 to participate in the subscription of the non-voting ordinary shares of Primax Holdings. Some of the options are vested at the grant date; the others are vested from two years to five years after the grant date. Primax Holdings recognized the compensation cost by using the fair value method as cost of long-term investment in the Company, and the Company correspondingly recognized it as compensation cost and capital surplus.
（ 4 ） Based on the resolution approved in the board of directors' meetings of Primax Holdings and the Company held in December 2008, the Company issued employee stock options in exchange for part of the unvested or unexercised employee stock options issued by Primax Holdings. Specifically, 2.94 units of employee stock options were issued by the Company in exchange for 1 unit of the employee stock options issued by Primax Holdings. Each unit of the Company's options could be converted into 1 common share of the Company. The exercise price of Primax Holdings' options is USD0.2 per unit; the exercise price of the Company's options is NT$11.42 (dollars) per unit after the modification. Meanwhile, the Company granted a certain amount of retention bonus to employees at the modification date, and the Company shall pay the retention bonus when the Company's stock options are exercised. The other terms and conditions of the employee stock options are not changed. According to the modification, the Company decreased the capital surplus by $118,089, and recognized a corresponding increase in retention bonus payable (recorded as accrued expense and other liabilities) on December 30, 2008. The incremental fair value of $55,308 resulting from the modification will be recognized as compensation cost over the remainder of the vesting period.
（ 5 ） In accordance with the revised employee stock option plan mentioned above, the Company issued 9,545,248 units of employee stock options in November 2009. Each unit could be converted into 1 common share of the Company.
（ 6 ） In September 2011, the Company's board of directors resolved to issue employee stock options (Plan 3). The plan was approved by the SFB in October 2011, and the maximum number of options authorized to be granted was 5,000 units with each unit eligible to be converted into 1,000 common shares of the Company when exercised. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries in which the Company owns, directly or indirectly, more than fifty percent (50%) of the subsidiary's voting rights. The Company actually issued 1,500 units and 3,500 units in November 2011 and October 2012, respectively, which were evaluated at fair value. In accordance with the employee stock option plan mentioned above, the Company recognized the investment and capital surplus amounting to $1,523 and $265 in 2015 and 2014, respectively.
（ 7 ） As of December 31, 2015, outstanding employee stock options of the Company for equity-settled sharebased payment were as follows:

119 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 120

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

Plan 3 (note 3)
Plan 1 Plan 2
(note 1) (note 2) Issued in Issued in
November 2011 October 2012
Modification and grant date December 30, 2008/November 12, 2009 December 30, 2008/November 12, 2009 November 24, 2011 October 22, 2012
Exercise price $11.42 $11.42 $17.10 $26.50
Granted units (thousand) 30,828 7,224 1,500 3,500
Service period
5 years 6~8 years 5 years 5 years
(from the grant date
(May 23, 2005~ (January 2, 2008~ (November 24, 2011~ (October 22, 2012~
of the original stock
options) November 11, 2014) November11, 2017) November 23, 2016) October 21, 2017)
Vesting period
(from the grant date
2 ~ 3 years 3 ~ 5 years 2 ~ 3 years 2 ~ 3 years
of the original stock
options)
----- End of picture text -----

Note 1: Stock options under Plan 1 included those granted by Primax in May 2005, June and December 2006, and February and March 2007; those granted by Primax Holdings in January, May and November 2008; and those granted by the Company in November 2009.
Note 2: Stock options under Plan 2 included those granted by Primax Holdings in January and May 2008, and those granted by the Company in November 2009.
Note 3: Stock options under Plan 3 included those granted by the Company in November 2011 and October 2012.

The information on the outstanding employee stock options of Primax Holdings using the Black-Scholes option pricing model to measure the fair value at the grant date was as follows:

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

Period of stock options Plan 1 Plan 2
Exercise price of Primax Holdings' stock options (USD) 0.20 0.20
Expected time until expiration (years) 2.37~5 6~8
Stock price per share of Primax Holdings (USD) 0.91677~1 0.91677~0.92827
Expected volatility of stock price 34.78%~44.59% 38.98%~48.44%
- -
Expected cash dividend rate
Risk-free interest rate 2.439%~2.665 2.509%~2.538%
----- End of picture text -----

The Company applied the Black-Scholes option pricing model to measure the fair value of employee stock options granted in November 2009, 2011 and 2012. The information on share-based payment was as follows:

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

Plan 3
Period of stock options Plan 1 Plan 2 Issued in Issued in
November 2011 October 2012
Exercise price of stock options (NT dollars) $11.42 $11.42 $18.2 $28.25
Expected time until expiration (years) 5 8 5 5
Stock price per share (NT dollars) $16.50 $16.50 $26.02 $28.25
Expected volatility of stock price 45.18% 45.18% 29.12% 32.38%~34.61%
Expected cash dividend rate - - 6% 3.77%
Risk-free interest rate 2.26% 2.26% 1.81% 1.425%
----- End of picture text -----

（ 8 ） The incremental fair value resulting from the modification described in section (iv) above amounted to $55,308 (including the accrued retention bonus of $261,721). The measurement basis of share-based payment as of December 30, 2008 (the modification date) was as follows:

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

Plan 1 Plan 2
Before the After the Before the After the
modification modification modification modification
Granted units of Primax Holdings the Company Primax Holdings the Company
options 7,365 21,654 2,331 6,853
----- End of picture text -----

The information on the stock options using the Black-Scholes option pricing model to measure the

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

Plan 1 Plan 2
Before the After the Before the After the
modification modification modification modification
Exercise price USD0.20 NT$11.42 (dollars) USD0.20 NT$11.42 (dollars)
Expected time until expiration (years) 0.39~3.89 0.39~3.89 3.51~5.85 3.51~5.85
Stock price per share USD1.12 NT$11.42 (dollars) USD1.12 NT$11.42 (dollars)
Expected volatility of stock price 33.56%~45.36% 33.56%~45.36% 39.30%~45.36% 39.30%~45.36%
Expected dividend rate - - - -
Risk-free interest rate 1.005%~1.5% 1.005%~1.5% 1.50%~1.95% 1.50%~1.95%
----- End of picture text -----

（ 9 ） The related information on compensatory employee stock option plans was as follows:

2015	2015	2014 Weighted- average exercise price Stock options (in thousands) 18.74 7,552 - - 16.40 (65) 13.72 (3,543) 25.47 (220) 22.66 3,724 19.57 2,308
Weighted- average exercise price	Stock options (in thousands)	Weighted- average exercise price
22.66 - 25.66 18.67 27.70 24.66 24.66	3,724 - (169) (1,750) (77)	18.74 - 16.40 13.72 25.47 22.66 19.57
	1,728
	1,728

As of December 31, 2015 and 2014, the information on the employee stock option plans outstanding was as follows:

Employee stock option plan 1 Employee stock option plan 2 Employee stock option plan 3–Issued in November 2011 Employee stock option plan 3–Issued in October 2012 Outstanding at end of year Weighted-average expected time remaining until expiration (years)	December 31, 2015 - 211 - 1,517 1,728 1.82	December 31, 2014 - 1,032 200 2,492 3,724 2.37

（ 10 ） PCH2 issued stock appreciation rights of 915,810 units and 294,720 units to its employees in September and November 2009, respectively. The stock appreciation rights were measured by fair value and are a form of cash-settled share-based payment. The exercise price of each unit is NT$2.2 (dollars), and the holder will receive a bonus equal to the unit stock price, minus the exercise price, on the fourth day after the exercise day. The expected time until expiration is 4 and 5 years, respectively. The vesting period is 1~3 years, and a certain percentage of the stock appreciation rights can be exercised each year.
The outstanding stock appreciation rights of the PCH2 used the Black-Scholes option pricing model to measure the fair value. All the stock appreciation rights were vested in 2014. The related information on the stock appreciation rights plan of PCH2 was as follows:

Outstanding at January 1 Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at December 31 Exercisable at December 31	2014	Stock options (in thousands) 45 - - （45） - - -
	Weighted-average exercise price 2.20 - - 2.20 - - -

121 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 122

（ 11 ） TWEL issued employee stock options to its employees. As of December 31, 2015, the outstanding employee stock options of TWEL for equity-settled share-based payment were as follows:

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

November 2014 July 2015
Grant date November 18, 2014 July 1, 2015
Exercise price $15.74 $18.82
Granted units (thousand) 700 2,750
Service period 5 years 5 years
Vesting period 3 ~4 years 3 ~5 years
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The information on the outstanding stock appreciation rights of TWEL using the Black-Scholes option pricing model to measure the fair value was as follows:

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

December 2014 July 2015
Exercise price $ 15.74 $ 18.82
Expected time until expiration(years) 4~4.5 4~5
Stock price per share $14.81 $18.23
Expected volatility of stock price 29.49%~30.14% 30.06%~30.45%
Expected dividend rate - -
Risk-free interest rate 1.09%~1.17% 0.96%~1.08%
----- End of picture text -----

The related information on the stock appreciation rights plan of TWEL was as follows:

2015	2015	2014 Weighted-average exercise price Stock options (in thousands) - - 15.74 700 - - - - - - 15.74 700 - -
Weighted-average exercise price	Stock options (in thousands)	Weighted-average exercise price
15.74 18.82 - - - 18.20 -	700 2,750 - - -	- 15.74 - - - 15.74 -
	3,450
	-

2. Restricted stock

（ 1 ） As of December 31, 2015, the outstanding restricted stock of the Company was as follows:

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

Plan 1 (note 1) Plan 2 (note 1)
Grant date October 1, 2013 November 20, 2013 February 10, 2014 July 17, 2014 February 24, 2015 August 18, 2015
Fair value on
grant date 22.8 25.15 27.30 52.00 43.70 38.40
(per share)
Exercise price Free grants Free grants Free grants Free grants Free grants Free grants
Granted units
(thousand 1,450 186 135 220 1,225 1,775
shares)
1~3 years 1~2 years 1~2 years 1~2 years 1~3years 1~3 years
Vesting period
(notes 2 and 3) (notes 3 and 4) (notes 3 and 4) (note 3) (note 2 and 3) (note 2)
----- End of picture text -----

Note 1: Plan 1 – After the stockholders' meeting on June 25, 2013, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company's requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors' meeting resolved to issue 1,450 thousand shares, 186 thousand shares, 135 thousand shares, and 220 thousand shares on August 13 and November 12, 2013, and January 22 and June 27, 2014, respectively.
Plan 2 – After the stockholders' meeting on June 24, 2014, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company's requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors' meeting resolved to issue 1,225 thousand shares and 1,775 thousand shares on January 28 and August 13, 2015, respectively.
Note 2: If the employees continue to provide service to the Company and meet the prior year's performance indicator, 30% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 30% and 40% shall be vested in year 2 and year 3, respectively, after the grant date.
Note 3: If the employees continue to provide service to the Company and meet the prior year's performance indicator, 50% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 50% shall be vested in year 2 after the grant date.
Note 4: If the employees continue to provide service to the Company and meet the prior year's performance indicator, the restricted stock shall be vested in year 1 after the grant date.

The restricted stock is kept by a trust, which is appointed by the Company, before it is vested. These shares shall not be sold, pledged, transferred, gifted, or, by any other means, disposed of to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian will act based on law and regulations. If the shares remain unvested after the vesting period, the Company will cancel the unvested shares thereafter.

（ 2 ） The related information on restricted stock of the Company for 2015 and 2014 was as follows:

(Thousand shares) Outstanding at January 1 Granted during the year Forfeited during the year Vesting during the year Expired during the year Outstanding at December 31	2015 1,310 3,000 - (660) (380) 3,270	2014 1,636 355 - (361) (320) 1,310

3. Expenses and liabilities attributable to share-based payment for 2015 and 2014 were as follows:

Expenses attributable to employee stock options Restricted stock Total Salary payable: Current	2015 $ 4,740 46,477 $ 51,217 $ 4,092	2014 9,223 21,751 30,974 11,844

（ r ） Earnings per share

1. Basic earnings per share

ordinary stockholders of the Company and the weighted-average number of common shares outstanding was as follows:

Proft attributable to common stockholders Weighted-average number of common shares (thousand shares) Basic earnings per share (NT dollars)	2015 $ 1,773,122 436,372 $ 4.06	2014 1,544,690 432,362 3.57
Weighted-average number of common shares (thousand shares)
Ordinary shares at January 1 Exercise of employee stock options Vesting of restricted stock Ordinary shares at December 31	2015 433,348 2,818 206 436,372	2014 431,937 353 72 432,362

123 Primax Electronics Ltd. 2015 Annual Report

124

Primax Electronics Ltd. 2015 Annual Report

2. Diluted earnings per share

The calculation of diluted earnings per share of years 2015 and 2014, based on the profit attributable to common stockholders of the Company and the weighted-average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares was as follows:


Weighted-average number of ordinary shares at December 31 (basic) Efect of employee stock options Efect of employee stock bonuses Efect of restricted stock Weighted-average number of ordinary shares at December 31 (diluted)	2015 436,372 1,707 2,769 962 441,810	2014 432,362 3,621 2,199 808 438,990

（ s ） Operating revenue

The operating revenue in the years ended December 31, 2015 and 2014, was as follows:

Goods sold Services rendered	2015 $ 63,644,990 1,944,303 $ 65,589,293	2014 50,985,241 1,254,536 52,239,777

（ t ） Employee bonuses, and directors' and supervisors remuneration

Employee bonuses amounted to $78,269 for 2015. Directors' and supervisors' remuneration amounted to $31,907 for 2015. These amounts were calculated based on the Company's income before income taxes excluding employee bonuses and directors' and supervisors' remuneration by using the earnings allocation method as stated under the Company's articles. These benefits were expensed under operating costs or operating expenses during 2015. The differences between the amounts approved in the stockholders' meeting and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the distribution year.

（ u ） Other income

The other income in the years ended December 31, 2015 and 2014, were as follows:

Interest revenue of cash in banks Rent revenue Other	2015 $ 161,713 14,116 2,995 $ 178,824	2014 275,451 11,939 3,075 290,465

（ v ） Other gains and losses

The other gains and losses in the years ended December 31, 2015 and 2014, were as follows:

Impairment losses on property, plant and equipment Net gains (losses) on disposal of property, plant and equipment Net gains on fnancial assets/liabilities measured at fair value through proft or loss Foreign currency exchange gains, net Other	2015 $ - (31,757) 27,749 354,082 (67,679) $ 282,395	2014 (33,178) 15,870 15,695 56,143 95,793 150,323

（ w ） Finance costs

2015 Interest expense and fnance costs of derivative fnancial instruments $ 160,220	2014 222,949

（ x ） Financial instruments

1. Credit risk

The aging analysis of notes, accounts, and other receivables (including related parties) that were past due but not impaired was as follows:

Past due 0-30 days Past due 31-90 days Past due 91-180 days Past due 181-360 days Past due over a year	December 31, 2015 $ 1,215,010 122,456 14,149 26,023 - $ 1,377,638	December 31, 2014 925,204 267,594 46,069 - - 1,238,867

The Group assesses the uncollectible amount of notes, accounts, and other receivables (including related parties) based on the aging analysis, the collection history, and the customers' current financial status, and recognizes an allowance for doubtful debts accordingly. After the Group's assessment, there is no significant change in the customers' credit quality and the collectability of related receivables.

The changes in the allowance for 2015 and 2014 were as follows:

Balance on January 1, 2015 Impairment loss recognized Acqusition from business combination Amounts written of Exchange diferences on translation of foreign currency Balance on December 31, 2015	Individually assessed impairment $ - - - - - $ -	Individually assessed impairment $ - - - - - $ -	Collectively assessed impairment 26,034 4,194 469 (2,217) 767 29,247	Total 26,034 4,194 469 (2,217) 767 29,247

Balance on January 1, 2014 Impairment loss recognized Acqusition from business combination Amounts written of Exchange diferences on translation of foreign currency Balance on December 31, 2014	Individually assessed impairment $ - - - - - $ -		Collectively assessed impairment 20,059 2,835 1,156 - 1,984 26,034	Total 20,059 2,835 1,156 - 1,984 26,034

125 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 126

2. Liquidity risk

	Carrying amount	Contractual cash fows	Within 6 months	6~12 months	1~2 years	2~5 years
$ $ $ $	1,350,569 18,723,930 2,737,288 1,677,487 118,641 60,105 - -	1,350,569 18,723,930 2,737,288 1,735,887 118,641 - 1,217,415 (1,157,310)	1,350,569 18,723,930 2,737,288 338,378 - - 1,217,415 (1,157,310)	- - - 332,881 - - - -	- - - 641,587 - - - -	- - - 326,777 - - - -
	24,668,020	24,726,420	23,210,270	332,881	641,587	326,777
	2,148,800 12,613,211 1,758,516 1,500,000 161,894 80,590 - -	2,148,800 12,613,211 1,758,516 1,528,286 161,894 - 6,376,549 (6,295,665)	2,148,800 12,613,211 1,758,516 309,315 - - 6,376,549 (6,295,665)	- - - 307,576 - - - -	- - - 611,302 - - - -	- - - 300,093 - - - -
	18,263,011	18,291,591	16,910,726	307,576	611,302	300,093

or at significantly different amounts.

3. Currency risk

（ 1 ） Exposure to foreign currency risk

Financial assets Monetary items USD:CNY USD:HKD USD:TWD Financial liabilities Monetary items USD:CNY USD:HKD USD:TWD	December 31, 2015	December 31, 2015	December 31, 2015	December 31, 2014 Foreign currency Exchange rate TWD 352,238 6.119 11,130,719 254,680 7.7567 8,047,888 384,829 31.6 12,160,595 317,923 6.119 10,046,373 243,177 7.7567 7,684,400 345,688 31.6 10,923,734	December 31, 2014 Foreign currency Exchange rate TWD 352,238 6.119 11,130,719 254,680 7.7567 8,047,888 384,829 31.6 12,160,595 317,923 6.119 10,046,373 243,177 7.7567 7,684,400 345,688 31.6 10,923,734
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate
	$ 472,140 403,487 430,293 434,501 395,385 397,940	6.4936 7.751 33.066 6.4936 7.751 33.066	15,611,768 13,341,701 14,228,077 14,367,209 13,073,812 13,158,292	352,238 254,680 384,829 317,923 243,177 345,688	6.119 7.7567 31.6 6.119 7.7567 31.6

（ 2 ） Sensitivity analysis

The Group's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, notes and accounts receivable, derivative financial instruments, loans and borrowings, notes and accounts payable, and other payables that are denominated in foreign currency.

A weakening (strengthening) of 5% of the TWD, CNY and HKD against the USD as of December 31, 2015 and 2014, would have increased or decreased the net profit after tax by $107,163 and $134,561, respectively. The analysis is performed on the same basis for both periods.

As the Group deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. In 2015 and 2014, the foreign exchange gain or loss, including both realized and unrealized, amounted to $354,082 and $56,143, respectively.

4. Interest rate analysis

instruments on the reporting date. The analysis is based on the assumption that the assets and liabilities with floating interest rates outstanding at the reporting date were outstanding throughout the year. The rate of change is an interest rate increase or decrease of 0.25% when reporting to management internally, which also represents the assessment of the Group's management for the reasonably possible changes in interest rates.

increased by $3,427 and increased or decreased by $1,180 for the years ended December 31, 2015 and 2014, respectively, mainly as a result of bank savings and borrowings with variable interest rates.

5. Fair value

（ 1 ）

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information on financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value and on investments in equity instruments which do not have any quoted price in an active market.

		December 31, 2015	December 31, 2015	December 31, 2015
	Carrying amounts		Fair Value
		Level 1	Level 2	Level 3
$ $ $ $ $ $ $	88,717	969	-	87,748
	584,430	551,600	-	32,830
	7,623,380 14,479,617 462,242	-	-	60,105
	22,565,239
	60,105
	3,028,056 18,723,930 1,227,107 3,891,786 118,641
	26,989,520

127 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 128

		December 31, 2014	December 31, 2014	December 31, 2014
	Carrying amounts		Fair Value
		Level 1	Level 2	Level 3
$ $ $ $ $ $ $	96,285	-	-	96,285
	292,916	-	-	292,916
	6,814,023 10,513,729 370,254	-	-	80,590
	17,698,006
	80,590
	3,648,800 12,613,211 1,055,208 2,628,533 161894
	, 20,107,646

（ 2 ）

price of a financial instrument obtained from major exchanges and over-the counter markets are the basis used to determine the fair value of a listed company's stock and the quoted prices in an active market.

available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's-length basis. If these conditions can not be reached, then the market is non-active. In general, a market with low trading volume or high bid-ask spreads is an indication of a non-active market.

price in an active market:

※ A. The fair value of derivative instruments is based on quoted prices. When quoted prices are unavailable, the fair value is estimated on the basis of the contract's spot exchange rate and swap point.
※ fair value is based on a valuation technique. For stocks in the emerging market, the estimated fair value is adjusted for the lack of liquidity. When prices listed in the emerging market are unavailable, the fair value is estimated on the basis of unadjusted prior trade prices.

（ 3 ） Tranfers between Level 1 and 3

The fair value of shares of Nien Made Enterprise Co., Ltd. amounted to $551,600 and $245,600 as of December 31, 2015 and 2014, respectively. On December 31, 2014, the shares of Nien Made Enterprise Co., Ltd. were classified to Level 3 because there was no quoted price for the shares and the fair value of the shares was estimated on the basis of significant unobservable inputs. The shares of Nien Made Enterprise Co., Ltd. have been listed on the TWSE since December 2015 and have quoted prices. Thus, the fair value measurement transferred from Level 3 to Level 1 on December 31, 2015.

（ 4 ） Changes in Level 3

		2015			2014
Fair value through proft or loss		Available for sale	Total	Fair value through proftor loss	Available for sale
$	15,695 27,643 - - (15,695)	292,916 (939) 294,053 (551,600) (1,600)	308,611 26,704 294,053 (551,600) (17,295)	(3,126) 15,695 - - 3,126	54,883 (3,896) 945 - 240,984
	27,643	32,830	60,473	15,695	292,916

（ 5 ）

assets and liabilities at fair value through profit or loss – derivative financial instruments and available-forsale financial assets – equity securities. The quantitative information about significant unobservable inputs was as follows:

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

Valuation Inter-relationships between
Item Significant
technique unobservable inputs significant unobservable inputs and fair value
Available-for-sale financial assets –
equity securities not listed on emerging (note 1) (note 1) (note 1)
stock market
Financial assets and liabilities at fair
value through profit or loss (note 2) (note 2) (note 2)
----- End of picture text -----

note 1: The fair value is based on unadjusted prior trade prices, therefore there is no need to show the sensitivity analysis of unobservable inputs.

note 2: The fair value is based on the quotation of a third party, therefore there is no need to show the sensitivity analysis of unobservable inputs.

（ y ） Financial risk management

（ 1 ） Credit risk

（ 2 ） Liquidity risk

（ 3 ） Market risk

This note presents information on exposure to each of the above risks and on the objectives, policies, and processes for measuring and managing risk. For detailed information, please refer to the related notes on each risk.

2. Structure of risk management

The Group's risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company's board of directors oversees the management's monitoring of the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the board of directors.

129 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 130

3. Credit risk

to meet its contractual obligations and arises principally from the Group's cash and cash equivalents; notes, accounts, and other receivables; and derivative instruments.

（ 1 ） Cash and cash equivalents

The Group had deposited $7,104,404 (including restricted deposits) in the Postal Savings Bank of China and 8 other financial institutions, and $6,409,008 (including restricted deposits) in Huaxia Bank and 8 other financial institutions, representing 17% and 21% of total assets, as of December 31, 2015 and 2014, respectively. The Group believes that there is no significant credit risk from the above-mentioned financial institutions.

to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained earnings, other equity, and non-controlling interests.

The Group sets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return to stockholders, to safeguard the interest of related parties, and to maintain an optimal capital structure to reduce the cost of capital.

The Group's debt ratio as of December 31, 2015 and 2014, was 69% and 67%, respectively.

（ 2 ） Notes and accounts receivable

Sales to individual customers constituting over 10% of total revenue for the years ended December 31, 2015 and 2014, totaled 21% and 17%, respectively. As of December 31, 2015 and 2014, 12% and 13%, respectively, of the ending balance of notes and accounts receivable were accounted for by those customers. In order to reduce credit risk, the Group assesses the financial status of the customers and the possibility of collection of receivables on a regular basis. The above-mentioned customers are profitable and have a good credit record, and the Group did not suffer any significant credit loss from those customers during the financial reporting period. （ 3 ） Derivative instruments

Group believes that the risk that these financial institutions may default on these contracts is relatively low and anticipates no significant credit loss.

4. Liquidity risk

liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

fluctuations in cash flows. The Group had unused bank facilities of $10,957,088 and $8,163,739 as of December 31, 2015 and 2014, respectively.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

（ 1 ） Currency risk

The Group is exposed to currency risk on sales, purchases, and borrowings that are denominated in a currency other than the respective functional currencies of the Group's entities, primarily the New Taiwan Dollar (TWD), US Dollar (USD), HK Dollar (HKD), and Chinese Yuan (CNY). These transactions are denominated in USD. The Group uses forward exchange contracts and foreign exchange swap contracts to hedge its currency risk. The Group makes performance reports and reviews operating strategy regularly, and believes that there is no significant risk because the gains or losses from exchange rate fluctuation will mostly be offset by the hedged item. （ 2 ） Interest rate risk

believes that cash flow risk arising from interest rate fluctuation is insignificant.

（ z ） Capital management

（ 7 ） Related-party Transactions

（ a ） Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Group and its subsidiaries.

（ b ） Other related-party transactions

1. Sale of goods to related parties

	Sales	Sales	Notes and accounts receivable December 31, 2015 December 31, 2014 54,995 60,581
$	2015	2014	December 31, 2015
	153,394	151,524	54,995

other customers.

2. Purchase of service

The amounts of purchase of service by the Group from its related parties and the outstanding balances were as follows:

	Purchase of	service	Other payables December 31, 2015 December 31, 2014 - -
$	2015	2014	December 31, 2015
	-	20,165	-

terms of such purchase transactions between related parties and other vendors.

3. Loans from related parties

The outstanding balance of loans to the Group from its related parties was as follows:

Key management personnel of Global TEK $	December 30, 2015 63,994

The highest outstanding balance amounted to $125,344 in 2015.

（ c ） Key management personnel compensation

Short-term employee benefts Post-employment benefts Termination benefts Other long-term benefts Share-based payments	2015 $ 174,528 1,233 - - 15,124 $ 190,885	2014 134,030 755 3,748 - 7,690 146,223

For information related to share-based payments, please refer to note 6(q).

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132

Primax Electronics Ltd. 2015 Annual Report

（ 8 ） Pledged Assets

（ 10 ） Loss Due to Major Disasters: None

As of December 31, 2015 and 2014, assets pledged as collateral were as follows:

Pledged tosecure	Book value of pledged assets December 31, 2015 December 31, 2014 $ 4,502 - $ 4,667 36,568 $ 699,107 - $ 99,832 -	Book value of pledged assets December 31, 2015 December 31, 2014 $ 4,502 - $ 4,667 36,568 $ 699,107 - $ 99,832 -
	December 31 2015
Guarantee letters issued by bank Loan collateral and guarantee letters issued by bank Loan collateral Loan collateral	$ $ $ $	, 4,502
		4,667
		699,107
		99,832

（ 11 ） Subsequent Events: None.

（ 12 ） Others

The following is a summary statement of current-period employee benefit, depreciation, and amortization expenses by function:

（ 9 ） Commitments and Contingencies

（ a ） The Group's unused letters of credit were as follows:

	December 31, 2015 $ -	December 31, 2014 12,562
	$

（ b ） The amounts of guarantee were as follows:

	Guarantor	Guarantee	December 31, 2015 $ 384,227 - 231,462 99,198 30,000 50,000 49,599 $ 844,486	December 31, 2014 51,192 1,106,000 221,200 94,800 - - - 1,473,192
	The Company The Company PCH2 PCH2 Global TEK GT GT	PCH2 TYM HK PCQ1 PKS1 GT Global TEK GLOBAL TEK CO (WUXI)., LTD

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2015 2014
By function
By item Operating Operating Total Operating Operating Total
cost expenses cost expenses
Employee benefit expenses
Salaries 4,423,628 2,566,212 6,989,840 3,353,137 2,069,059 5,422,196
Labor and health insurance 124,309 109,451 233,760 76,168 90,391 166,559
Pension 306,572 107,144 413,716 196,231 77,922 274,153
Others 93,819 156,395 250,214 77,710 114,637 192,347
Depreciation 1,133,208 139,434 1,272,642 890,526 124,128 1,014,654
Amortization 14,167 182,846 197,013 18,602 156,069 174,671
----- End of picture text -----

（ 13 ） Segment Information

（ a ） General information

（ c ） The following are savings accounts provided by the Group to the bank in order for the bank to issue a guarantee letter to customs as guarantee deposits. Please refer to note 8.

Guarantee letters		December 31, 2015 39,912	December 31, 2014 101,632
	$

（ d ） Guarantee notes provided as part of agreements with banks to sell accounts receivables, to acquire long-term borrowings, and to purchase materials were as follows:

Sales of accounts receivable Long-term borrowings Purchase of material	December 31, 2015 $ 2,874,690 2,598,906 $ 39,732	December 31, 2014 2,891,000 5,404,000 -

（ e ） The aggregate unpaid amounts of contracts pertaining to the purchase of equipment were as follows:

Property, plant and equipment		December 31, 2015 66,482	December 31, 2014 26,086
	$

（ f ） TWEL Group entered into patent license agreements with several companies in July 2015. According to the agreements, TWEL Group shall pay $69,670 in the future.

The Group's reported segments are the divisions for computer peripherals and non-computer peripherals. The division for computer peripherals specializes in the manufacture and sale of computer mice, keyboards, track pads, etc. The division for non-computer peripherals specializes in the manufacture and sale of digital camera modules, mobile phone accessories, multi-function printers, scanners, shredders, amplifiers, speakers, audio systems, automotive parts, industrial automation parts, aerospace components, etc.

The Group's reported segments consist of strategic business units which provide essentially different products and services. These units have to be separately managed as a result of the different technology and marketing strategies. Most of the business units were acquired, and the original management teams are still operating.

（ b ） and reconciliation

amounts for the reported segments are identical with those in the report used by the chief operating decision maker.

The Group assessed the performance of the segments based on the segments' income before income taxes (excluding extraordinary profit and loss), and the accounting policies of the operating segments are the same as those described in note 4. Sales and transfers between segments are deemed to be transactions with third parties and are measured by using the market price.

133 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 134

External revenue Intra-group revenue Total segment revenue Segment proft
		Computer Peripherals	Non-computer Peripherals
	$ 30,586,105 - $ 30,586,105 $ 1,691,877		35,003,188 -
			35,003,188
			781,076


External revenue Intra-group revenue Total segment revenue Segment proft
		Computer Peripherals	Non-computer Peripherals
	$ 24,160,676 - $ 24,160,676 $ 1,324,122		28,079,101 -
			28,079,101
			723,459

（ c ） Geographic information

In presenting information on the basis of geography, revenue is based on the geographical location of customers, and non-current assets are based on the geographical location of the assets. Details were as follows:

	Geographic Information	2015 $ 39,090,793 11,897,187 14,601,313 $ 65,589,293 $ 5,825,906 1,624,591 2,806,056 $ 10,256,553	2014 31,083,837 7,847,174 13,308,766 52,239,777 4,100,625 370,797 2,934,953 7,406,375
	Revenues from external customers: China Americas Other Non-current assets: China Taiwan Other

（ d ） Major customer information

The information on major customers that accounted for more than 10% of revenue in the consolidated statements of comprehensive income in 2015 and 2014 is as follows:

2015	2015	2014
Net sales	Percentage of net sales	Net sales
	21%	8,995,458

and notes had been audited by the CPAs.

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Independent Auditors' Report

The Board of Directors Primax Electronics Ltd. :

We have audited the accompanying balance sheets of Primax Electronics Ltd. as of December 31, 2015 and 2014, and the related statements of comprehensive income, changes in stockholders' equity, and cash flows for the years ended December 31, 2015 and 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain investees accounted for under the equity method. Those financial statements were audited by other auditors, and our opinion, insofar as it relates to that investment, is based solely on the reports of the other auditors. The Company's investment in these companies amounted to $1,216,301 and $2,702,548 thousand, constituting 4% and 12% of the total assets, as of December 31, 2015 and 2014, respectively. The related share of profit of associates accounted for using the equity method amounted to $166,222 and $149,981 thousand, constituting 9% of the net profit before tax, for the years ended December 31, 2015 and 2014, respectively.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the accompanying financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Primax Electronics Ltd. as of December 31, 2015 and 2014, and the results of its operations and cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

==> picture [78 x 37] intentionally omitted <==

March 24, 2016

The accompanying financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China. The auditors' report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors' report and financial statements, the Chinese version shall prevail.

135 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 136

PRIMAX ELECTRONICS LTD. Balance Sheets

December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

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

December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Assets Amount % Amount % Liabilities and equity Amount % Amount %
Current assets: Current liabilities:
Cash and cash Short-term
equivalents borrowings (note 6(j)) $ 1,120,518 4 2,148,800 9
(note 6(a)) $ 2,267,560 8 3,001,879 13
Notes and
Financial assets accounts payable 264 - 7,493 -
at fair value
through profit Accounts payable –
or loss – current related parties
(note 6(b)) 79,052 - 21,165 - (note 7) 11,340,202 41 8,026,918 36
Accounts Financial liabilities
receivable at fair value
(note 6(d)) 9,321,764 34 7,580,133 34 through profit
or loss – current
Accounts (note 6(b)) 52,765 - 22,902 -
receivable –
related parties Other payables
(notes 6(d) and 7) 2,052,505 8 1,102,500 5 (note 7) 1,583,478 6 902,386 4
Other receivables Salary payable
- - (note 6(p)) 411,680 1 387,912 2
(notes 6(d) and 7) 28,841 9,664
Other current
Inventories, net liabilities 147,176 1 60,855 -
(note 6(e)) 2,551,571 9 1,458,489 7
Current portion of
Other current long-term borrowings
assets 28,453 - 23,765 - (note 6(k)) 548,889 2 600,000 3
16,329,746 59 13,197,595 59 15,204,972 55 12,157,266 54
Non-current
liabilities:
Non-current
assets: Long-term
borrowings
Available-for-sale (note 6(k)) 767,778 3 900,000 4
financial assets – non-current Long-term
deferred revenue
(note 6(c)) 567,897 2 275,536 2 (note 6(g)) 1,018,732 3 63,143 -
Investments Other non-current
accounted for using liabilities (notes
equity method 6(m) and (n)) 274,053 1 282,116 1
(note 6(f)) 10,088,961 37 8,596,698 38
2,060,563 7 1,245,259 5
Property, plant and
equipment Total liabilities 17,265,535 62 13,402,525 59
- -
(note 6(g)) 65,554 61,287
Common stock
Investment (note 6(o)) 4,411,877 16 4,346,578 19
property, net Capital collected in
(note 6(h)) 258,709 1 262,269 1 advance (note 6(o)) 15,174 - 38,903 -
Intangible assets Capital surplus
(note 6(i)) 29,514 - 37,997 - (note 6(o)) 777,368 3 673,543 3
Deferred tax assets Legal reserve
(note 6(n)) 293,519 1 64,021 - (note 6(o)) 611,322 2 456,853 2
Special reserve
Other non-current (note 6(o)) 97,300 - 97,300 1
assets 62,016 - 57,635 - Unappropriated
11,366,170 41 9,355,443 41 retained earnings
(note 6(o)) 3,951,934 15 3,132,488 14
Other equity 565,406 2 404,848 2
Total equity 10,430,381 38 9,150,513 41
Total liabilities and
Total assets $ 27,695,916 100 22,553,038 100 equity 27,695,916 100 22,553,038 100
----- End of picture text -----

See accompanying notes to financial statements.

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PRIMAX ELECTRONICS LTD.
Statements of Comprehensive Income
For the years ended December 31, 2015 and 2014
(expressed in thousands of New Taiwan dollars, except earnings per share)
2015 2014
Amount % Amount %
Operating revenue (notes 6(r) and 7) $ 51,638,181 100 42,356,385 100
Operating cost (notes 6(e), (m), (o), (p), and (s), 7 and 12) 48,703,633 94 39,690,606 94
Gross profit 2,934,548 6 2,665,779 6
Operating expenses (notes 6(m), (o), (p), and (s), 7 and 12):
Selling expenses 610,013 1 643,337 1
Administrative expenses 414,570 1 388,961 1
Research and development expenses 983,295 2 880,132 2
2,007,878 4 1,912,430 4
Net operating income 926,670 2 753,349 2
Non-operating income and expenses:
- -
Other income (note 6(t)) 22,053 27,467
- -
Other gains and losses (notes 6(c) and (u)) 283,488 120,397
Share of profit of subsidiaries accounted for using equity method 755,092 1 949,194 2
Finance costs (note 6(v)) (53,380) - (217,073) -
1,007,253 1 879,985 2
Income before income taxes 1,933,923 3 1,633,334 4
Income tax expense (note 6(n)) 160,801 - 88,644 -
Net income 1,773,122 3 1,544,690 4
Other comprehensive income (loss):
Items that may not be reclassified subsequently to profit or loss:
Actuarial gains on defined benefit plans (8,100) - 3,344 -
(8,100) - 3,344 -
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operation's financial
statements (71,337) - 322,245 -
Unrealized gains and (losses) on available-for-sale financial assets
(note 6(c)) 294,053 - 945 -
222,716 - 323,190 -
Other comprehensive income (after tax) 214,616 - 326,534 -
Comprehensive income 1,987,738 3 1,871,224 4
Earnings per share (note 6(q)):
Basic earnings per share (NT dollars) $ 4.06 3.57
Diluted earnings per share (NT dollars) $ 4.01 3.52
See accompanying notes to financial statements.
VI. Financial review
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PRIMAX ELECTRONICS LTD. Statements of Changes in Equity For the years ended December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

Capital Common stock Capital collected in advance $ 4,335,733 3,796 - - - - - - - - - - - - 3,550 - (3,200) - - - - - - 48,589 10,495 (13,482) 4,346,578 38,903 - - - - - - - - - - 30,000 - (2,800) - - - - - - 32,673 38,099 (56,402) $ 4,411,877 15,174	Capital Common stock Capital collected in advance $ 4,335,733 3,796 - - - - - - - - - - - - 3,550 - (3,200) - - - - - - 48,589 10,495 (13,482) 4,346,578 38,903 - - - - - - - - - - 30,000 - (2,800) - - - - - - 32,673 38,099 (56,402) $ 4,411,877 15,174	Capital Common stock Capital collected in advance $ 4,335,733 3,796 - - - - - - - - - - - - 3,550 - (3,200) - - - - - - 48,589 10,495 (13,482) 4,346,578 38,903 - - - - - - - - - - 30,000 - (2,800) - - - - - - 32,673 38,099 (56,402) $ 4,411,877 15,174	Capital surplus		Retained earnings	Retained earnings	Exchange diferences on translation of foreign operation's fnancial statements	Unrealized gains (losses) on available- for-sale fnancial assets	Unearned employee compensation	Total equity
Common stock		Capital collected in advance		Legal reserve	Special reserve	Unappropriated retained earnings
$ 4,335,733 - - - - - - 3,550 (3,200) - - - 10,495 4,346,578 - - - - - 30,000 (2,800) - - - 38,099 $ 4,411,877		3,796 - -	648,747 - -	389,998 - -	138,192 - -	1,957,522 1,544,690 3,344	100,137 - 322,245	(238) - 945	(32,320) - -	7,541,567 1,544,690 326,534
	-	-	-	-	-	1,548,034	322,245	945	-	1,871,224
	- - - 3,550 (3,200) - - - 10,495	- - - - - - - 48,589 (13,482)	- - - 11,576 (4,254) - 14,487 - 2,987	66,855 - - - - - - - -	- (40,892) - - - - - - -	(66,855) 40,892 (347,105) - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - (15,126) 7,454 21,751 - - -	- - (347,105) - - 21,751 14,487 48,589 -
	4,346,578 - -	38,903 - -	673,543 - -	456,853 - -	97,300 - -	3,132,488 1,773,122 (8,100)	422,382 - (71,337)	707 - 294,053	(18,241) - -	9,150,513 1,773,122 214,616
	-	-	-	-	-	1,765,022	(71,337)	294,053	-	1,987,738
	- - 30,000 (2,800) - - - 38,099	- - - - - - 32,673 (56,402)	- - 91,693 (10,258) - 4,087 - 18,303	154,469 - - - - - - -	- - - - - - - -	(154,469) (791,107) - - - - - -	- - - - - - - -	- - - - - - - -	- - (121,693) 13,058 46,477 - - -	- (791,107) - - 46,477 4,087 32,673 -
		15,174	777,368	611,322	97,300	3,951,934	351,045	294,760	(80,399)	10,430,381

Note 1: Directors' and supervisors' remuneration of $12,000 and employee bonuses of $32,000 have been deducted from the statement of comprehensive income for 2014.

Note 2: Directors' and supervisors' remuneration of $27,800 and employee bonuses of $71,000 have been deducted from the statement of comprehensive income for 2015.

PRIMAX ELECTRONICS LTD. Statements of Cash Flows For the years ended December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

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

2015 2014
Cash flows from operating activities:
Income before income taxes $ 1,933,923 1,633,334
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation and amortization 36,999 41,404
Losses related to inventories 175,361 63,376
Amortization of deferred granted revenue (121,262) -
Provision (reversal of provision) for bad debt allowance and sales returns and allowances (4,603) 23,746
Interest expenses 53,380 60,684
Interest income (13,235) (17,500)
Compensation cost of share-based payment 49,041 30,274
Share of profit of subsidiaries accounted for using equity method (755,092) (949,194)
Loss (gain) on disposal of property, plant and equipment 269 (921)
Gain on disposal of financial assets - (4,134)
Impairment loss on financial assets 939 3,500
(578,203) (748,765)
Changes in operating assets and liabilities:
Accounts receivable (including related parties) (2,686,191) (1,746,140)
Other receivables (19,177) 40,551
Inventories (1,268,443) 265,840
Other current assets (4,688) 17,019
Deferred tax assets (229,498) (4,071)
Other (58,729) 12,849
Changes in operating assets (4,266,726) (1,413,952)
Notes and accounts payable (including related parties) 3,306,055 1,978,977
Salary payable 23,768 175,018
Other payables 679,328 101,680
Other current liabilities 86,321 2,084
Other 51,366 29,720
Changes in operating liabilities 4,146,838 2,287,479
Changes in operating assets and liabilities (119,888) 873,527
Adjustments (698,091) 124,762
Cash flows from operations 1,235,832 1,758,096
Interest received 13,235 17,500
Interest paid (53,265) (60,621)
Income taxes paid (159,152) (263,049)
Net cash flows provided by operating activities 1,036,650 1,451,926
Cash flows from investing activities:
Acquisition of available-for-sale financial assets - (245,600)
Refund from capital reduction of available-for-sale financial assets 1,600 4,616
Acquisition of investments accounted for using equity method (808,020) (2,578,698)
Acquisition of property, plant and equipment (23,292) (12,623)
Proceeds from disposal of property, plant and equipment - 2,126
Acquisition of long-term deferred revenue 1,076,851 63,143
Acquisition of other deferred assets (9,862) (5,337)
Decrease (increase) in refundable deposits (684) 1,531
Other (35) (35)
Net cash flows provided by (used in) investing activities 236,558 (2,770,877)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings (1,028,282) 1,489,900
Increase (decrease) in long-term borrowings (183,333) 1,500,000
Increase (decrease) in guarantee deposits (37,478) 42,775
Cash dividends (791,107) (347,105)
Exercise of employee stock options 32,673 48,589
Net cash flows provided by (used in) financing activities (2,007,527) 2,734,159
Net increase (decrease) in cash and cash equivalents (734,319) 1,415,208
Cash and cash equivalents at beginning of year 3,001,879 1,586,671
Cash and cash equivalents at end of year $ 2,267,560 3,001,879
----- End of picture text -----

See accompanying notes to financial statements.

139

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Primax Electronics Ltd. 2015 Annual Report

PRIMAX ELECTRONICS LTD. Notes to Financial Statements December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars unless otherwise specified)

（ 1 ） Organization

Based on the resolution approved by the Company's board of directors on November 5, 2007, the Company resolved to acquire and merge with Primax Electronics Ltd. ("Primax", a listed company) on December 28, 2007. The Company is the surviving company, and Primax was dissolved upon completion of the merger.

The major business activities of the Company were the manufacture and sale of multi-function printers, scanners, digital camera modules, computer mice, keyboards, track pads, mobile phone accessories, consumer electronics products and shredders.

The Company's common shares were registered with the Financial Supervisory Commission, ROC ("FSC") on June 22, 2012, and listed on the Taiwan Stock Exchange ("TWSE") on October 5, 2012.

（ 2 ） Financial Statements Authorization Date and Authorization Process

（ 3 ） New Standards and Interpretations Not Yet Adopted

（ a ） Impact of the 2013 version of the International Financial Reporting Standards ("2013 Version of

IFRSs") endorsed by the FSC

The Company has adopted the 2013 Version of IFRSs (excluding IFRS 9 "Financial Instruments") endorsed by the FSC in preparing the financial statements. The new standards, amendments and interpretations issued by the International Accounting Standards Board ("IASB") are as follows:

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New standards, amendments and interpretations Effective date per IASB
IFRS 12 "Disclosure of Interests in Other Entities" January 1, 2013
IFRS 13 "Fair Value Measurement" January 1, 2013
Amended IAS 1 "Presentation of Items of Other Comprehensive Income" July 1, 2012
Amended IAS 12 "Deferred Tax: Recovery of Underlying Assets" January 1, 2012
Amended IAS 19 "Employee Benefits" January 1, 2013
Amended IAS 27 "Separate Financial Statements" January 1, 2013
Amended IAS 32 "Offsetting Financial Assets and Financial Liabilities" January 1, 2014
IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" January 1, 2013
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2. IFRS 13 "Fair Value Measurement"

The Company assessed that the 2013 Version of IFRSs may not have any significant impact on the financial statements except for the following:

The standard changes the definition of fair value, provides a framework for measuring fair value, and requires disclosures on fair value measurement. The Company increases the disclosures relating to fair value measurement in accordance with the standard. According to the transitional provisions of the standard, the Company has applied the fair value measurement of the new standard since 2015. The Company has not increased the disclosures for 2014. Although the Company has applied the fair value measurement of the new standard since 2015, the Company assessed that the adoption of IFRS 13 did not have significant impact on its financial position and results of operation.

1. IAS 1 "Presentation of Financial Statements"

The amendment requires entities to separate the items presented in other comprehensive income into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax, then the tax related to each of the two groups of other comprehensive income items (those that might be reclassified and those that will not be reclassified) must be shown separately. The Company has changed the presentation of the statements of comprehensive income to conform with the amendment, and the information for 2014 has been restated accordingly.

（ b ） New standards, amendments and interpretations not yet endorsed by the FSC

A summary of the 2013 Version of IFRSs issued by the IASB but not yet endorsed by the FSC is as follows:

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New standards, amendments and interpretations Effective date per IASB
Annual Improvements: 2010-2012 and 2011-2013 cycles July 1, 2014
Annual Improvements to IFRS: 2012-2014 cycles January 1, 2016
Amended IFRIC 21 "Levies" January 1, 2014
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The related impact will be disclosed following the completion of its assessments.

（ 4 ）

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

rates at the dates of the transactions. Monetary items denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in the foreign currency translated at the exchange rate at the end of the year.

（ a ） Statement of compliance

These annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations").

（ b ） Basis of preparation

1. Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on a historical cost basis:

（ 1 ） Derivative financial instruments at fair value through profit or loss are measured at fair value;

Exchange differences arising on the translation of non-monetary items are recognized in profit or loss except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

（ 2 ） Available-for-sale financial assets are measured at fair value; and
（ 3 ） The defined benefit liabilities are recognized as plan assets less the present value of the defined benefit obligation.

2. Functional and presentation currency

The functional currency is determined based on the primary economic environment in which the Company operates. The Company's financial statements are presented in New Taiwan dollars, which is the Company's functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

2. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company's functional currency at the exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company's functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve in equity.

（ c ） Foreign currencies

1. Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Company at the exchange

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of its investment in an associate or joint venture, including a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

（ d ） Classification of current and non-current assets and liabilities

The Company shall classify an asset as current

when:

It expects to realize the asset or intends to sell or consume it in its normal operating cycle;
It holds the asset primarily for the purpose of trading;
It expects to realize the asset within twelve months after the reporting period; or
The asset is cash or a cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period, or there are other restrictions.

The Company shall classify all other assets as noncurrent.

The Company shall classify a liability as current when:

It expects to settle the liability in its normal operating cycle;
It holds the liability primarily for the purpose of trading;
The liability is due to be settled within twelve months after the reporting period; or
It does not have an unconditional right to defer
settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do

The Company shall classify all other liabilities as non-current.

（ e ） Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits that are subject to an insignificant risk of changes in their fair value and are used by the Company in the management of its short-term commitments.

（ f ） Financial instruments

Financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instruments.

1. Financial assets

The Company classifies financial assets into the following categories: available-for-sale financial assets, and loans and receivables.

（ 1 ）

Available-for-sale financial assets are nonderivative financial assets that are designated as available for sale or are not classified in any of the other categories of financial assets. Availablefor-sale financial assets are recognized initially at fair value, plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value, and changes therein, other than impairment losses and dividend income, are recognized in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other gains and losses under non-operating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting. Dividend income is recognized in profit or loss on the date that the Company's right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is included in other income under non-operating income and expenses.

（ 2 ） Loans and receivables

Loans and receivables are financial assets

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with fixed or determinable payments that are

not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. Such assets are recognized initially at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses other than insignificant interest on shortterm receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

（ 3 ）

A financial asset not valued through profit or loss is impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event (or events) causes a loss on the estimated future cash flows of the financial asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is considered objective evidence of impairment.

for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than those suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original

effective interest rate.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

Recovery and loss on doubtful debts of account receivables are included in operating expense; others are included in other gains and losses under non-operating income and expenses.

（ 4 ）

The Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

The Company separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts

on the date of the transfer. The difference liabilities on a net basis when the Company has between the carrying amount allocated to the part the legally enforceable right to offset and intends derecognized and the sum of the consideration to settle such financial assets and liabilities on a received for the part derecognized and any net basis or to realize the assets and settle the cumulative gain or loss allocated to it that had liabilities simultaneously. been recognized in other comprehensive income shall be recognized in profit or loss, and it is 3. Derivative financial instruments included in other gains and losses under nonThe Company holds derivative financial instruments to operating income and expenses. A cumulative hedge its foreign currency exposure. Derivatives are gain or loss that had been recognized in other recognized initially at fair value, and transaction costs comprehensive income is allocated between the are recognized in profit or loss as incurred. Subsequent part that continues to be recognized and the part to initial recognition, derivatives are measured at fair that is derecognized, based on the relative fair value, and changes therein are recognized in profit or values of those parts. loss, and are included in other gains and losses under

hedge its foreign currency exposure. Derivatives are recognized initially at fair value, and transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss, and are included in other gains and losses under non-operating income and expenses. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

2. Financial liabilities and equity instruments

（ 1 ）

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

（ g ） Inventories

（ 2 ）

or designated as at fair value through profit or loss, which comprise loans and borrowings, salary payable, and trade and other payables, are measured at fair value, plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in finance costs under nonoperating income and expenses.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

（ h ） Investments in subsidiaries

Investments in subsidiaries are accounted for using the equity method. There is no difference between net income and comprehensive income in the Company's financial statements and net income and comprehensive income attributable to stockholders of the parent. The equity in the Company's financial statements and the equity attributable to stockholders of the parent in the Company's consolidated financial statements are also the same. Changes in the Company's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

（ 3 ）
The Company derecognizes a financial liability when its contractual obligation has been discharged or cancelled, or has expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in other gains and losses under non-operating income and expenses.

（ i ） Investment property

（ 4 ） Offsetting of financial assets and liabilities The Company presents financial assets and

Investment property is the property held either to earn rental income or for capital appreciation or for both,

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but not for sale in the ordinary course of business, for use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently. The depreciation is computed along with the depreciable amount. The method, the useful life, and the residual amount are the same as those of property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

When the use of a property changes such that it is reclassified as property, plant and equipment, the carrying amount at the date of reclassification becomes its cost for subsequent accounting.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss, and it is included in other gains and losses.

（ j ） Property, plant and equipment

1. Recognition and measurement

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

Property is reclassified to investment property at its carrying amount when the use of the property changes from private to investment use.

3. Subsequent cost

Subsequent expenditure is capitalized only when it is

with the expenditure which can be reliably measured will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

4. Depreciation

Land has an unlimited useful life, and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

（ 1 ） Buildings, leasehold improvement, and additional equipment: 1 ~ 51 years
（ 2 ） Machinery and equipment: 1 ~4 years
（ 3 ） Other equipment: 1 ~5 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If the expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

（ k ） Lease

1. Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term.

2. Lessee

Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

Contingent rent is recognized as expense in the periods in which it is incurred.

（ l ） Intangible assets

Intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses.

Subsequent expenditure is capitalized only when it

specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

The amortizable amount is the cost of an asset, less its residual value.

line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

Trademarks 10 years
Patents 2.5~10 years 3. Copyrights 15 years

（ m ）

Non-financial assets, except for inventories and deferred tax assets, are assessed for impairment, and the recoverable amounts for any impaired assets are estimated at the end of each reporting period. If it is not possible to determine the recoverable amount for an individual asset, then the Company will have to determine the recoverable amount for the asset's cashgenerating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, or its value in use. If the recoverable amount of an individual asset or a cashgenerating unit is less than its carrying amount, the carrying amount of the individual asset or cashgenerating unit shall be reduced to its recoverable amount, and that reduction is accounted for as an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset may no longer exist or may have decreased. An impairment loss recognized in prior periods for an individual asset or a cash-generating unit shall be reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was

recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount but should not exceed the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

（ n ） Revenue

1. Goods sold

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. Transfer usually occurs when the product is received at the customer's warehouse.

2. Services

The Company provides services, such as model research, development, and design, to customers. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction, agreed by both sides, at the reporting date.

（ o ）

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine

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its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Company's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

of the increased benefit relating to past service by employees is recognized in profit or loss.

on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

（ p ） Share-based payment

recognized as an expense is adjusted to reflect the number of awards whose related service and nonmarket performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

（ q ） Income taxes

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions:

1. Assets and liabilities that are initially recognized but are not related to a business combination and have no effect on net income or taxable gains (losses) at the time of the transaction.

2. Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.

3. Initial recognition of goodwill.

1. The entity has the legal right to settle tax assets and liabilities on a net basis; and

which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

2. The taxing of deferred tax assets and liabilities

（ r ） Earnings per share

（ 1 ） levied by the same taxing authority; or

The Company discloses the basic and diluted earnings per share attributable to ordinary stockholders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary stockholders of the Company divided by the weighted-average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary stockholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise employee stock options, employee bonuses not yet resolved by the stockholders, and restricted stock.

（ 2 ） levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be reevaluated every year on the financial reporting date, and they shall be adjusted based on the probability that future taxable profit that will be available against

（ s ） Operating segments

Please refer to the Company's consolidated financial statements for the years ended December 31, 2015 and 2014, for further details.

（ 5 ） Significant Accounting Assumptions and Judgments, and Major Sources of Estimation Uncertainty

with the Regulations requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The Company has established an internal control framework with respect to the measurement of fair value and regularly reviews significant unobservable inputs and valuation adjustments. If third-party information, such as broker quotes or pricing services, is used to measure fair value, then the Company assessed the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRSs, including the level in the fair value hierarchy in which such

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

There are no critical judgments in applying accounting policies.

There are no assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year.

． Level 1: quoted prices (unadjusted) in active

． Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as

A number of the Company's policies and disclosures requires the measurement of fair values, for both financial and non-financial assets and liabilities.

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prices) or indirectly (i.e. derived from prices).

If there is any movement of financial instruments measured at fair value between Level 1, Level 2, and Level 3, the Company recognizes the movement at the reporting date. Please refer to note 6(w) for further information on measurement of fair values.

． Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

（ 6 ）

（ a ） Cash and cash equivalents

Cash on hand Checking accounts and demand deposits Time deposits		December 31, 2015 625 1,075,455 1,191,480 2,267,560	December 31, 2014 300 1,222,594 1,778,985 3,001,879
	$ $

Please refer to note 6(w) for the currency risk and the interest rate risk of the Company's cash and cash equivalents.

（ c ） Available-for-sale financial assets – noncurrent

Stocks listed in domestic markets Stocks unlisted in domestic markets	December 31, 2015	December 31, 2014 - 275,536 275,536
	$ 551,600 16,297
	$ 567,897

In December 2014, the Company acquired 2,272 thousand shares of Nien Made Enterprise Co., Ltd. at NT$108 (dollars) per share for consideration of $245,600, and the shares were recognized as available-for-sale financial assets – non-current. The stock of Nien Made Enterprise Co. has been listed in the domestic market since December 22, 2015.

（ d ） Accounts receivable and other receivables (including related parties)

Accounts receivable Accounts receivable – related parties Other receivables Less: allowance for doubtful accounts allowance for sales returns and discounts		December 31, 2015	December 31, 2014 7,639,093 1,102,500 9,664 (19,430) (39,530) 8,692,297
	$ $ $	9,376,338 2,052,505 28,841 (19,647) (34,927)
		11,403,110

The Company did not provide any of the aforementioned accounts receivable and other receivables (including related parties) as collateral.

（ b ）

Financial assets at fair value through proft or loss – current: Forward exchange contracts Foreign exchange swap contracts Financial liabilities at fair value through proft or loss – current: Forward exchange contracts Foreign exchange swap contracts		December 31, 2015 79,052 - 79,052 (52,765) - (52,765)	December 31, 2014 20,728 437 21,165 (20,065) (2,837) (22,902)
	$ $ $ $

2. The Company held the following derivative financial instruments not designated as hedging instruments presented as held-for-trading financial assets as of December 31, 2015 and 2014:

==> picture [441 x 183] intentionally omitted <==

In the second quarter of 2014, Titan 1 Venture Capital Co., Ltd. refunded $4,616 to the Company due to capital reduction. The difference between the refund and the book value amounting to $482 was recorded by the Company as other gains and losses.
In July, 2015, WK Technology Fund IV Ltd. refunded $1,600 to the Company due to capital reduction.
Titan 1 Venture Capital Co., Ltd. and Neosonica Technologies Inc. were closed and finished the liquidation process in August and March 2015, respectively. The Company received $175 due to the liquidation and recorded it as other gains and losses.
The impairment loss was $939 and $3,500 for the years ended December 31, 2015 and 2014, respectively, and was recognized as other gains and losses.
The unrealized gains were $294,900 and $0 for the years ended December 31, 2015 and 2014, respectively, and were recognized as unrealized gains on available-for-sale financial assets.
The Company did not provide any of the aforementioned available-for-sale financial assets as collateral.
Please refer to note 6(w) for changes in the allowance for doubtful accounts and the credit risk and currency risk for the years ended December 31, 2015 and 2014.
Please refer to note 9 for guarantee notes provided by the Company to sell its accounts receivable.

（ e ） Inventories

Raw materials Finished goods and merchandise	December 31, 2015	December 31, 2014 - 1,458,489 1,458,489
	$ 1,188 2,550,383
	$ 2,551,571

The Company did not provide any of the aforementioned inventories as collateral.

For the years ended December 31, 2015 and 2014, the Company recognized the following items as cost of goods sold:

Additional gains (losses) on inventory valuation Loss on disposal of inventories Gain (loss) on physical inventories	2015	2014 (2,000) (63,140) 1,764 (63,376)
	$ 9,500 (184,276) (585)
	$ (175,361)

or loss as collateral.

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（ f ） Investments accounted for using equity method

The Company's investments accounted for using the equity method at the reporting dates comprise:

Subsidiaries	December 31, 2015	December 31, 2014 8,596,698
	$ 10,088,961

Please refer to the Company's consolidated financial statements for the year ended December 31, 2015, for details of subsidiaries.
The Company did not provide investments accounted for using the equity method as collateral.

（ g ） Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company for the years ended December 31, 2015 and 2014, were as follows:

	Land	Buildings and additional equipment	Machinery and equipment	Other equipment	Testing equipment
$ $ $ $ $ $ $ $ $ $ $	22,879 - - -	141,789 - - -	49,896 15,268 (513) 2,704	44,152 2,756 (2,469) 304	889 5,268 - (5,953)
	22,879	141,789	67,355	44,743	204
	22,879 - - -	143,024 - (1,235) -	44,716 6,786 (2,624) 1,018	48,567 2,722 (7,137) -	- 3,115 - (2,226)
	22,879	141,789	49,896	44,152	889
	- - -	131,218 359 -	34,829 10,078 (513)	32,271 5,374 (2,200)	- - -
	-	131,577	44,394	35,445	-
	- - -	131,893 560 (1,235)	30,472 5,776 (1,419)	33,304 6,104 (7,137)	- - -
	-	131,218	34,829	32,271	-
	22,879	10,212	22,961	9,298	204
	22,879	10,571	15,067	11,881	889
	22,879	11,131	14,244	15,263	-

The unamortized deferred revenue of equipment subsidy amounted to $1,018,732 and $63,143 for the years ended December 31, 2015 and 2014, respectively.
The Company did not provide property, plant and equipment as collateral.

（ h ） Investment property

Cost or deemed cost: Balance on January 1, 2015 Additions Balance on December 31, 2015 Balance on January 1, 2014 Additions Balance on December 31, 2014 Depreciation and impairment losses: Balance on January 1, 2015 Depreciation Balance on December 31, 2015 Balance on January 1, 2014 Depreciation Balance on December 31, 2014 Carrying amounts: Balance on December 31, 2015 Balance on December 31, 2014 Balance on January 1, 2014 Fair value: Balance on December 31, 2015 Balance on December 31, 2014 Balance on January 1, 2014		Land 162,012 - 162,012 162,012 - 162,012 33,941 - 33,941 33,941 - 33,941 128,071 128,071 128,071	Buildings and other equipment 172,167 - 172,167 172,167 - 172,167 37,969 3,560 41,529 34,409 3,560 37,969 130,638 134,198 137,758		Total 334,179 - 334,179 334,179 - 334,179 71,910 3,560 75,470 68,350 3,560 71,910 258,709 262,269 265,829 592,092 561,338 622,009
	$ $ $ $ $ $ $ $ $ $ $










				$ $ $

The fair value of investment property is based on the market value.
Investment property comprises a number of commercial properties which are leased to third parties. Each of the leases contains an initial non-cancellable period between 1 and 2 years. Subsequent renewals are negotiated with the lessee, and no contingent rents are charged. Please refer to note 6(l) for further information.
The Company did not provide any of the aforementioned investment property as collateral.

153 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 154

（ i ） Intangible assets

The cost and amortization of the intangible assets of the Company for the years ended December 31, 2015 and 2014, were as follows:

Cost: Balance at January 1, 2015 Acquisition Balance at December 31, 2015 Balance at January 1, 2014 Acquisition Balance at December 31, 2014 Amortization: Balance at January 1, 2015 Amortization Balance at December 31, 2015 Balance at January 1, 2014 Amortization Balance at December 31, 2014 Carrying amount: Balance at December 31, 2015 Balance at December 31, 2014 Balance at January 1, 2014	$ $ $ $ $ $ $ $ $ $ $	25,584 - 25,584 25,584 - 25,584 13,431 2,559 15,990 10,873 2,558 13,431 9,594 12,153 14,711	64,271 - 64,271 64,271 - 64,271 58,468 3,869 62,337 54,599 3,869 58,468 1,934 5,803 9,672	30,832 - 30,832 30,832 - 30,832 10,791 2,055 12,846 8,736 2,055 10,791 17,986 20,041 22,096	120,687 -
					120,687
					120,687 -
					120,687
					82,690 8,483
					91,173
					74,208 8,482
					82,690
					29,514
					37,997
					46,479

The Company did not provide any of the aforementioned intangible assets as collateral.

（ j ） Short-term borrowings

Pursuant to the loan agreements with Industrial Bank of Taiwan, The Export-Import Bank of the ROC and CTBC Bank, the Company has to maintain the following financial ratios calculated based on the Company's semi-annual audited (reviewed) consolidated financial statements. As of December 31, 2015, the Company had not violated the financial covenants. The financial covenants include (1) a current ratio of not less than 100%; (2) a financial debt ratio of not greater than 75%; (3) an interest coverage ratio of not less than 400%; and (4) stockholders' equity of not less than $4,000,000. If the Company violates the financial covenants, the banks have the right to charge a default penalty or to require the Company to improve its financial ratios.

2. Please refer to note 9 for the details of the outstanding guarantee notes.

（ l ） Operating lease

1. Lessee

Non-cancellable operating lease rentals are payable as follows:

Less than one year Between one and fve years		December 31, 2015 90,708 184,138 274,846	December 31, 2014 88,066 274,847 362,913
	$ $

2. Lessor

The Company leases out its investment property under operating leases. Please refer to note 6(h) for further information. Non-cancellable operating leases are receivable as follows:

Less than one year $	December 31, 2015 1,060	December 31, 2014 5,584

The details were as follows:

Unsecured bank loans $ Unused credit lines $ Annual interest rates	December 31, 2015 1,120,518 6,960,042 0.85%~1.38%	December 31, 2014 2,148,800 4,469,600 0.80%~1.60%

（ k ） Long-term borrowings

The details were as follows:

Unsecured bank loans Less: current portion Unused credit lines		December 31, 2015	December 31, 2015		Amount 1,316,667 (548,889) 767,778 150,000
	Currency	Annual interest rate	Maturity year
	TWD	0.95%~1.56%	2017~2020	$ $ $
Unsecured bank loans Less: current portion Unused credit lines		December 31, 2014			Amount 1,500,000 (600,000) 900,000 1,789,600
	Currency	Annual interest rate	Maturity year
	TWD	1.05%~1.48%	2017	$ $ $

（ m ）

Company were as follows:

Present value of defned beneft obligations $ Fair value of plan assets Defcit in the plan $ Asset ceiling Net defned beneft liability $	December 31, 2015 160,913 97,683 63,230 - 63,230	December 31, 2014 162,598 104,919 57,679 - 57,679

provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

（ 1 ） Composition of plan assets

The Company contributes pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

155 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 156

The Company's Bank of Taiwan labor pension reserve account balance amounted to $97,683 at the end of the reporting period. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

（ 2 ）

The movements in present value of the defined benefit obligations for the Company for the years ended December 31, 2015 and 2014, were as follows:

Defned beneft obligation at January 1 Benefts paid by plan assets Current service costs and interest Remeasurement of net defned liability Defned beneft obligation at December 31		2015 162,598 (14,885) 4,685 8,515 160,913	2014 169,353 (98,695) 5,025 (3,085) 162,598
	$ $

（ 3 ）

The movements in the fair value of the defined benefit plan assets for the Company for the years ended December 31, 2015 and 2014, were as follows:

Fair value of plan assets at January 1 Expected return on plan assets Remeasurement of net defned liability Contributions made Benefts paid plan assets Fair value of plan assets at December 31		2015 104,919 2,167 603 4,879 (14,885) 97,683	2014 108,207 2,207 258 2,942 (8,695) 104,919
	$ $

（ 4 ）

were as follows:

Service cost Interest cost Expenses		2015 1,322 1,196 2,518	2014 1,638 1,180 2,818
	$ $

（ 5 ）

the years ended December 31, 2015 and 2014, was as follows:

Cumulative amount at January 1 Recognized during the period Cumulative amount at December 31		December 31, 2015 (5,020) 7,912 $2,892	December 31, 2014 (1,676) (3,344) (5,020)
	$ $

（ 6 ） Actuarial assumptions

The following are the Company's principal actuarial assumptions:

Discount rate Future salary increase rate	2015 1.750% 3.250%	2014 2.125% 3.250%

the reporting date was $3,667. The weighted-average duration of the defined benefit obligation is 13 years.

（ 7 ） Sensitivity analysis

to determine the actuarial assumptions, including discount rates and future salary changes, as of the financial statement date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligations.

been as follows:

Discount rate Future salary increase rate	Increased 0.25% $ (3,835) $ 3,811	Decreased 0.25% 3,971 (3,701)

There were no change in the method and assumptions used in the preparation of the sensitivity analysis for 2015 and 2014.

The Company contributes 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company contributes a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The Company recognized pension costs under the defined contribution method amounting to $39,743 and $36,465 for the years ended December 31, 2015 and 2014, respectively, recorded as operating expenses and operating cost in the statement of comprehensive income.

（ n ） Income taxes

1. The amounts of income tax expenses for 2015 and 2014 were as follows:

Current tax expense Deferred tax expense (beneft) Income tax expense		2015 366,500 (205,699) 160,801	2014 50,513 38,131 88,644
	$ $

2. The Company had no income tax recognized directly in equity or other comprehensive income for the years ended December 31, 2015 and 2014.

Proft before tax Income tax calculated based on the Company's domestic tax rate Overseas investment gains recognized under the equity method Investment tax credits accrued Prior year's income tax adjustment 10% surtax on unappropriated earnings Other		2015 1,933,923 328,767 (105,331) (83,224) 157 60,246 (39,814) 160,801	2014 1,633,334 277,667 (119,243) (42,794) (599) 29,548 (55,935) 88,644
	$ $

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Primax Electronics Ltd. 2015 Annual Report 158

4. Deferred tax assets and liabilities

（ 1 ） Unrecognized deferred tax liabilities

Aggregate amount of temporary diferences related to investments in subsidiaries $	Aggregate amount of temporary diferences related to investments in subsidiaries $	December 31, 2015 475,399	December 31, 2014 388,595
（2）Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following items:
Deductible temporary diferences $		December 31, 2015 60,300	December 31, 2014 76,900

The deductible temporary differences cannot be realized. Therefore, they were not recognized as deferred tax assets.

（ 3 ） Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as follows:

Deferred tax liabilities: Balance on January 1, 2015 Recognized in proft or loss Balance on December 31, 2015 Balance on January 1, 2014 Recognized in proft or loss Balance on December 31, 2014	Investment income recognized under the equity method (overseas) $ 89,222 22,832 $ 112,054 $ 47,102 42,120 $ 89,222	Unrealized foreign exchange gains 3,500 (3,500) - 3,418 82 3,500	Others 1,061 4,467 5,528 1,061 - 1,061	Total 93,783 23,799 117,582 51,581 42,202 93,783
	$ $ $ $

Unrealized

				Unrealized
Deferred tax assets: Balance on January 1, 2015 Recognized in proft or loss Balance on December 31, 2015 Balance on January 1, 2014 Recognized in proft or loss Balance on December 31, 2014	Bad debt in excess of tax limit		Unfunded pension fund contribution	sales returns and allowances	Loss on inventory valuation	Deferred granted revenue	Unrealized exchange losses	Others	Total
	$ 11,521 9,418 $ 20,939 $ 12,114 (593) $ 11,521	11,521 9,418	14,875 (402)	29,977 14,264	4,382 (1,115)	- 173,185	- 17,339	3,266 16,809	64,201 229,498
		20,939	14,473	44,241	3,267	173,185	17,339	20,075	293,519
			15,153 (278)	15,789 14,188	2,943 1,439	- -	- -	13,951 (10,685)	59,950 4,071
		11,521	14,875	29,977	4,382	-	-	3,266	64,021

5. The Company's income tax returns have been examined by the tax authority through the years up to 2013. However, the Company disagreed with the examination of the income tax returns for 2008 and requested an administrative remedy. The tax effect of the administrative remedy has been recognized by the Company.

6. Information related to the unappropriated earnings and tax deduction ratio is summarized below:

Unappropriated earnings in 1998 and after Balance of imputation credit account		December 31, 2015 3,951,934 420,838	December 31, 2014 3,132,488 385,069
	$ $

Creditable ratio for earnings distribution to ROC resident stockholders	$	2015 (estimated) 18.12%	2014(actual) 15.12%

The above information was prepared in accordance with information letter No. 10204562810 issued by the Ministry of Finance, ROC, on October 17, 2013.

（ o ） Capital and other equity

Reconciliation of shares outstanding for 2015 and 2014 was as follows:

(in thousands of shares) Balance on January 1 Exercise of employee stock options Issued for restricted stock Retirement of restricted stock Balance on December 31	Ordinary shares 2015 2014 434,658 433,573 3,810 1,050 3,000 355 (280) (320) 441,188 434,658
	2015 434,658 3,810 3,000 (280) 441,188

1. Common stock

（ 1 ） The Company issued 3,810 thousand and 1,050 thousand new shares of common stock for the exercise of employee stock options in 2015 and 2014, respectively. The related registration procedures were also completed.
（ 2 ） Employee stock options exercised without registration procedures were recorded as capital collected in advance. The exercise price and units as of December 31, 2015 and 2014, were as follows:

Exercise price per share: $11.42 Exercise price per share: $26.50	December 31,2015 Exercised shares (in thousands) Exercise price 235 $ 2,679 472 12,495 707 $ 15,174	December 31,2015 Exercised shares (in thousands) Exercise price 235 $ 2,679 472 12,495 707 $ 15,174
	Exercised shares (in thousands) 235 472 707
		$ $

Exercise price per share: $11.42 Exercise price per share: $17.90 Exercise price per share: $27.70	December 31,2014 Exercised shares (in thousands) Exercise price 2,151 $ 24,563 275 4,922 340 9,418 2,766 $ 38,903
	Exercised shares (in thousands) 2,151 275 340 2,766
		$ $

159 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 160

2. Capital surplus

The balances of capital surplus as of December 31, 2015 and 2014, were as follows:

Additional paid-in capital Employee stock options Restricted employee stock options		December 31, 2015 447,630 236,277 93,461 777,368	December 31, 2014 392,739 256,985 23,819 673,543
	$ $

In accordance with the ROC Company Act, realized capital reserves can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10 percent of the actual share capital amount.

3. Retained earnings

set aside as legal reserve until it is equal to authorized capital. Also, a special reserve should be retained or reversed under related regulations. After the recognition or reversal of special reserve, 2% to 10% is to be appropriated as employee bonuses, and a maximum of 2% as directors' and supervisors' remuneration. The remainder, if any, is to be distributed as dividends as determined by the board of directors and approved by the stockholders.

stockholders, and balanced dividends. Earnings distribution is made by stock dividend and cash dividend. The cash dividend shall not be less than 10 percent of the total dividends and could be adjusted depending on the Company's operating condition.

（ 1 ） Legal reserve

（ 2 ） Special reserve

By choosing to apply exemptions granted under IFRS 1 "First-time Adoption of International Financial Reporting Standards" during the Company's first-time adoption of the International Financial Reporting Standards endorsed by the FSC, retained earnings increased by $97,300 by recognizing the cumulative translation adjustments (gains) on the adoption date as deemed cost. In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, the increase in retained earnings due to the first-time adoption of IFRSs shall be reclassified as special reserve, and when the relevant asset is used, disposed of, or reclassified, this special reserve shall be reversed as distributable earnings proportionately. The carrying amount of special reserve amounted to $97,300 on December 31, 2015.

earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other stockholders' equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other stockholders' equity shall qualify for additional distributions.

（ 3 ） Earnings distribution

Employee bonuses Stock Cash Directors' and supervisors' remuneration		2014	Diference - 318 727
	Actual earnings distributed $ - 71,000 27,800	Accrued in the fnancial statements - 71,318 28,527
Employee bonuses Stock Cash Directors' and supervisors' remuneration		2013	Diference - (34) 787
	Actual earnings distributed $ - 32,000 12,000	Accrued in the fnancial statements - 31,966 12,787

statements for the distributions of earnings for 2014 and 2013 were accounted for as changes in accounting estimates and recognized as profit or loss in the years 2015 and 2014, respectively.

（ p ） Share-based payment

1. Employee stock options and share-based payment

（ 1 ） On December 28, 2007, the Company merged with Primax and assumed the outstanding employee stock options of Primax. Based on the swap ratio approved by Primax Holdings' board of directors, Primax Holdings issued 1,795,879 units of employee stock options in exchange for all of the employee stock options issued by Primax. According to the option plan, each unit could be converted into 1 common share of Primax Holdings. The primary terms and conditions of the employee stock options were as follows:

A. Exercise period:

From the grant dates in May 2005, June and December 2006, and February and March 2007, the options are exercisable at the following rates two years after the grant date. The term of the employee stock options is 5 years. The employee stock options and any right thereof shall not be transferred, pledged, donated, or disposed of in any way, with the exception of inherited options.

	Period following the grantof options 2 years 3 years	Exercisable percentage (cumulative) 50％ 100％

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Primax Electronics Ltd. 2015 Annual Report

（ 2 ） Based on the resolution approved in the board of directors' meeting of Primax Holdings held on December 31, 2007, Primax Holdings declared an incentive plan to grant the right to some employees of the Company to participate in the subscription of the non-voting ordinary shares of Primax Holdings. The transaction is a kind of equity-settled share-based payment agreement, and the equity instruments under this agreement were vested at the date of grant. Primax Holdings recognized the compensation cost by using the fair value method. The difference in value between the net value per share of Primax Holdings determined at the grant date and the exercise price per share was recognized as cost of longterm investment in the Company by Primax Holdings in 2007, and was recognized as compensation cost and capital surplus by the Company. Based on the resolution approved in the board of directors' meeting of Primax Holdings held in April 2008, Primax Holdings amended the share-based payment agreement mentioned above, and consequently, the non-voting ordinary shares were replaced by options to purchase them. The amendment had no impact on the accompanying financial statements.
（ 3 ） In addition, Primax Holdings declared an incentive plan to grant stock options to employees of the Company in January, May and November 2008 to participate in the subscription of the non-voting ordinary shares of Primax Holdings. Some of the options are vested at the grant date; the others are vested from two years to five years after the grant date. Primax Holdings recognized the compensation cost by using the fair value method as cost of long-term investment in the Company, and the Company correspondingly recognized it as compensation cost and capital surplus.
（ 4 ） Based on the resolution approved in the board of directors' meetings of Primax Holdings and the Company held in December 2008, the Company issued employee stock options in exchange for part of the unvested or unexercised employee stock options issued by Primax Holdings. Specifically, 2.94 units of employee stock options were issued by the Company in exchange for 1 unit of the employee stock options issued by Primax Holdings. Each unit of the Company's options could be converted into 1 common share of the Company. The exercise price of Primax Holdings' options is USD0.2 per unit; the exercise price of the Company's options is NT$11.42 (dollars) per unit after the modification. Meanwhile, the Company granted a certain amount of retention bonus to employees at the modification date, and the Company shall pay the retention bonus when the Company's stock options are exercised. The other terms and conditions of the employee stock options are not changed. According to the modification, the Company decreased the capital surplus by $118,089, and recognized a corresponding increase in retention bonus payable (recorded as accrued expense and other liabilities) on December 30, 2008. The incremental fair value of $55,308 resulting from the modification will be recognized as compensation cost over the remainder of the vesting period.
（ 5 ） In accordance with the revised employee stock option plan mentioned above, the Company issued 9,545,248 units of employee stock options in November 2009. Each unit could be converted into 1 common share of the Company.
（ 6 ） In September 2011, the Company's board of directors resolved to issue employee stock options (Plan 3). The plan was approved by the SFB in October 2011, and the maximum number of options authorized to be granted was 5,000 units with each unit eligible to be converted into 1,000 common shares of the Company when exercised. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries in which the Company owns, directly or indirectly, more than fifty percent (50%) of the subsidiary's voting rights. The Company actually issued 1,500 units and 3,500 units in November 2011 and October 2012, respectively, which were evaluated at fair value. In accordance with the employee stock option plan mentioned above, the Company recognized the investment and capital surplus amounting to $1,523 and $265 in 2015 and 2014, respectively.
（ 7 ） As of December 31, 2015, outstanding employee stock options of the Company for equity-settled sharebased payment were as follows:

==> picture [441 x 152] intentionally omitted <==

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

Plan 3 (note 3)
Plan 1 Plan 2
(note 1) (note 2) Issued in Issued in
November 2011 October 2012
Modification and grant December 30, 2008/ December 30, 2008/ November 24, 2011 October 22, 2012
date November 12, 2009 November 12, 2009
Exercise price $11.42 $11.42 $17.10 $26.50
Granted units (thousand) 30,828 7,224 1,500 3,500
Service period (from the 5 years 6~8 years 5 years 5 years
grant date of the original (May 23, 2005~ (January 2, 2008~ (November 24, 2011~ (October 22, 2012~
stock options) November 11, 2014) November11, 2017) November 23, 2016) October 21, 2017)
Vesting period
(from the grant date of 2~3 years 3~5 years 2~3 years 2~3 years
the original stock options)
----- End of picture text -----

Note 1: Stock options under Plan 1 included those granted by Primax in May 2005, June and December 2006, and February and March 2007; those granted by Primax Holdings in January, May and November 2008; and those granted by the Company in November 2009.

Note 2: Stock options under Plan 2 included those granted by Primax Holdings in January and May 2008, and those granted by the Company in November 2009.

Note 3: Stock options under Plan 3 included those granted by the Company in November 2011 and October 2012.

The information on the outstanding employee stock options of Primax Holdings using the Black-Scholes option pricing model to measure the fair value at the grant date was as follows:

==> picture [441 x 101] intentionally omitted <==

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

Plan 1 Plan 2
Exercise price of Primax Holdings' stock options (USD) 0.20 0.20
Expected time until expiration (years) 2.37~5 6~8
Stock price per share of Primax Holdings (USD) 0.91677~1 0.91677~0.92827
Expected volatility of stock price 34.78%~44.59% 38.98%~48.44%
- -
Expected cash dividend rate
Risk-free interest rate 2.439%~2.665% 2.509%~2.538%
----- End of picture text -----

==> picture [442 x 118] intentionally omitted <==

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

Plan 3
Period of stock options Plan 1 Plan 2 Issued in Issued in
November 2011 October 2012
Exercise price of stock options (NT dollars) $ 11.42 $ 11.42 $ 18.2 $ 28.25
Expected time until expiration (years) 5 8 5 5
Stock price per share (NT dollars) $ 16.50 $ 16.50 $ 26.02 $ 28.25
Expected volatility of stock price 45.18% 45.18% 29.12% 32.38%~34.61%
Expected cash dividend rate - - 6% 3.77%
Risk-free interest rate 2.26% 2.26% 1.81% 1.425%
----- End of picture text -----

（ 8 ） The incremental fair value resulting from the modification described in section (iv) above amounted to $55,308 (including the accrued retention bonus of $261,721). The measurement basis of share-based payment as of December 30, 2008 (the modification date) was as follows:

==> picture [440 x 58] intentionally omitted <==

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The information on the stock options using the Black-Scholes option pricing model to measure the incremental

==> picture [441 x 100] intentionally omitted <==

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

Plan 1 Plan 2
Before the After the Before the After the
modification modification modification modification
Exercise price USD 0.20 NT$11.42 (dollars) USD 0.20 NT$11.42 (dollars)
Expected time until expiration (years) 0.39~3.89 0.39~3.89 3.51~5.85 3.51~5.85
Stock price per share USD 1.12 NT$11.42 (dollars) USD 1.12 NT$11.42 (dollars)
Expected volatility of stock price 33.56%~45.36% 33.56%~45.36% 39.30%~45.36% 39.30%~45.36%
Expected dividend rate - - - -
Risk-free interest rate 1.005%~1.5% 1.005%~1.5% 1.50%~1.95% 1.50%~1.95%
----- End of picture text -----

（ 9 ） The related information on compensatory employee stock option plans was as follows:

2015	2015	2014 Weighted- average exercise price Stock options (in thousands) 18.74 7,552 - - 16.40 (65) 13.72 (3,543) 25.47 (220) 22.66 3,724 19.57 2,308
Weighted- average exercise price	Stock options (in thousands)	Weighted- average exercise price
22.66 - 25.66 18.67 27.70 24.66 24.66	3,724 - (169) (1,750) (77)	18.74 - 16.40 13.72 25.47 22.66 19.57
	1,728
	1,728

As of December 31, 2015 and 2014, the information on the employee stock option plans outstanding was

（ 2 ） The related information on restricted stock of the Company for 2015 and 2014 was as follows:

(Thousand shares) Outstanding at January 1 Granted during the year Forfeited during the year Vesting during the year Expired during the year Outstanding at December 31	2015 1,310 3,000 - (660) (380) 3,270	2014 1,636 355 - (361) (320) 1,310

3. Expenses and liabilities attributable to share-based payment for 2015 and 2014 were as follows:

Expenses attributable to employee stock options Restricted stock Total Salary payable: Current	2015 $ 2,564 46,477 $ 49,041 $ 4,092	2014 8,523 21,751 30,274 9,476

as follows:

Employee stock option plan 1 Employee stock option plan 2 Employee stock option plan 3–Issued in November 2011 Employee stock option plan 3–Issued in October 2012 Outstanding at end of year Weighted-average expected time remaining until expiration (year)	December 31, 2015 - 211 - 1,517 1,728 1.82	December 31, 2014 - 1,032 200 2,492 3,724 2.37

2. Restricted stock

（ 1 ） As of December 31, 2015, the outstanding restricted stock of the Company was as follows:

==> picture [441 x 112] intentionally omitted <==

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

Plan 1 (note 1) Plan 2 (note 1)
Grant date October 1, 2013 November 20, 2013 February 10, 2014 July 17, 2014 February 24, 2015 August 18, 2015
Fair value on grant 22.8 25.15 27.30 52.00 43.70 38.40
date (per share)
Exercise price Free grants Free grants Free grants Free grants Free grants Free grants
Granted units
1,450 186 135 220 1,225 1,775
(thousand shares)
1~3 years 1~2 years 1~2 years 1~2 years 1~3years 1~3 years
Vesting period
(notes 2 and 3) (notes 3 and 4) (notes 3 and 4) (note 3) (note 2 and 3) (note 2)
----- End of picture text -----

Note 1: Plan 1 – After the stockholders' meeting on June 25, 2013, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company's requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors' meeting resolved to issue 1,450 thousand shares, 186 thousand shares, 135 thousand shares, and 220 thousand shares on August 13 and November 12, 2013, and January 22 and June 27, 2014, respectively.

Plan 2 – After the stockholders' meeting on June 24, 2014, the Company decided to issue shares of restricted stock to those full-time employees who meet the Company's requirements. The restricted stock has been registered with and approved by the Securities and Futures Bureau of the FSC. The board of directors' meeting resolved to issue 1,225 thousand shares and 1,775 thousand shares on January 28 and August 13, 2015, respectively.

Note 2: If the employees continue to provide service to the Company and meet the prior year's performance indicator, 30% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 30% and 40% shall be vested in year 2 and year 3, respectively, after the grant date.

Note 3: If the employees continue to provide service to the Company and meet the prior year's performance indicator, 50% of the restricted stock shall be vested in year 1 after the grant date, and the remaining 50% shall be vested in year 2 after the grant date.

（ q ） Earnings per share

1. Basic earnings per share

The calculation of basic earnings per share of years 2015 and 2014, based on the net income and the weightedaverage number of common shares outstanding was as follows:

Net income Weighted-average number of common shares (thousand shares) Basic earnings per share (NT dollars)	2015 $ 1,773,122 436,372 $ 4.06	2014 1,544,690 432,362 3.57

Weighted-average number of common shares (thousand shares)

Ordinary shares at January 1 Exercise of employee stock options Vesting of restricted stock Ordinary shares at December 31	2015 433,348 2,818 206 436,372	2014 431,937 353 72 432,362

2. Diluted earnings per share

The calculation of diluted earnings per share of years 2015 and 2014, based on the net income and the weighted-average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares was as follows:

Net income Weighted-average number of common shares (diluted / thousand shares) Diluted earnings per share (NT dollars)	2015 $ 1,773,122 441,810 $ 4.01	2014 1,544,690 438,990 3.52

Note 4: If the employees continue to provide service to the Company and meet the prior year's performance indicator, the restricted stock shall be vested in year 1 after the grant date.

165

166

Primax Electronics Ltd. 2015 Annual Report

Weighted-average number of ordinary shares at December 31 (basic) Efect of employee stock options Efect of employee stock bonuses Efect of restricted stock Weighted-average number of ordinary shares at December 31 (diluted)	2015 436,372 1,707 2,769 962 441,810	2014 432,362 3,621 2,199 808 438,990

（ v ） Finance costs

Interest expense Expense of prematurely terminated contract for derivative fnancial instruments	2015 $ 53,380 - $ 53,380	2014 60,684 156,389 217,073

（ r ） Operating revenue

The operating revenue in the years ended December 31, 2015 and 2014, was as follows:

Goods sold Services rendered	2015 $ 50,323,410 1,314,771 $ 51,638,181	2014 41,177,774 1,178,611 42,356,385

（ s ） Employee bonuses, and directors' and supervisors remuneration

（ w ） Financial instruments

1. Credit risk

The aging analysis of accounts and other receivables (including related parties) that were past due but not impaired was as follows:

Past due 0-30 days Past due 31-90 days Past due 91-180 days Past due 181-365 days	December 31, 2015 $ 989,857 8,870 7,107 855 $ 1,006,689	December 31, 2014 635,451 154,618 3,108 - 793,177

The Company assesses the uncollectible amount of accounts and other receivables (including related parties) based on the aging analysis, the collection history, and the customers' current financial status, and recognizes an allowance for doubtful debts accordingly. After the Company's assessment, there is no significant change in the customers' credit quality and the collectability of related receivables.

The changes in the allowance for 2015 and 2014 were as follows:

（ t ） Other income

The other income in the years ended December 31, 2015 and 2014, was as follows:

Interest revenue of cash in banks Rent revenue Cash dividends	2015 $ 13,235 8,555 263 $ 22,053	2014 17,500 9,704 263 27,467

（ u ） Other gains and losses

The other gains and losses in the years ended December 31, 2015 and 2014, was as follows:

Net gains (losses) on fnancial assets/liabilities measured at fair value through proft or loss Foreign currency exchange gains, net Impairment loss on available-for-sale fnancial assets Gain on disposal of fnancial assets Other	2015 $ 26,287 263,893 (939) 175 (5,928) $ 283,488	2014 (1,737) 70,102 (3,500) 4,134 51,398 120,397

Balance on January 1, 2015 Impairment loss recognized Amounts written of Exchange diferences on translation of foreign currency Balance on December 31, 2015 Balance on January 1, 2014 Impairment loss recognized Amounts written of Exchange diferences on translation of foreign currency Balance on December 31, 2014	Individually assessed impairment $ - - - - $ - $ - - - - $ -	Collectively assessed impairment 19,430 - (625) 842 19,647 17,796 625 - 1,009 19,430	Total 19,430 - (625) 842 19,647 17,796 625 - 1,009 19,430

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Primax Electronics Ltd. 2015 Annual Report 168

2. Liquidity risk

Carrying amount	Contractual cash fows	Within 6 months	6~12 months	1~2 years	2~5 years	Over 5years
$ 1,120,518 264 11,340,202 1,025,313 1,316,667 90,726 52,765 - - $ 14,946,455 $ 2,148,800 7,493 8,026,918 596,881 1,500,000 128,204 22,902 - - $ 12,431,198	1,120,518 264 11,340,202 1,025,313 1,342,525 90,726 - 52,765 -	1,120,518 264 11,340,202 1,025,313 282,503 - - 52,765 -	- - - - 280,977 - - - -	- - - - 555,552 - - - -	- - - - 223,493 - - - -	- - - - - 90,725 - - -
	14,972,313	13,821,565	280,977	555,552	223,493	90,725
	2,148,800 7,493 8,026,918 596,881 1,528,286 128,204 - 1,212,301 (1,189,105)	2,148,800 7,493 8,026,918 596,881 309,315 - - 1,212,301 (1,189,105)	- - - - 307,576 - - - -	- - - - 611,302 - - - -	- - - - 300,093 - - - -	- - - - - 128,204 - - -
	12,459,778	11,112,603	307,576	611,302	300,093	128,204

earlier or at significantly different amounts.

3. Currency risk

（ 1 ） Exposure to foreign currency risk

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December 31, 2015 December 31, 2014
Foreign Foreign Exchange
currency Exchange rate TWD currency rate TWD
Financial assets
Monetary items
USD $ 411,446 33.066 13,604,883 369,084 31.60 11,663,048
Financial liabilities
Monetary items
USD 392,674 33.066 12,984,166 336,307 31.60 10,627,314
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（ 2 ） Sensitivity analysis

The Company's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade and other receivables, loans and borrowings, notes and accounts payable, and other payables that are denominated in foreign currency.

A weakening (strengthening) of 5% of the TWD against the USD as of December 31, 2015 and 2014, would have increased or decreased the net profit after tax by $25,760 and $42,983, respectively. The analysis is performed on the same basis for both periods.

（ 3 ） Exchange gains and losses on monetary items

The Company's exchange gains and losses on monetary items (including realized and unrealized) translated to the Company's functional currency were as follows:

TWD	2015	2015	2014 Exchange gains and losses Average exchange rate 70,102 1
	Exchange gains and losses	Average exchange rate 1	Exchange gains and losses 70,102
	263,893

4. Interest rate analysis

The following sensitivity analysis is based on the exposure to interest rate risk of the non-derivative financial instruments on the reporting date. The analysis is based on the assumption that the liabilities with floating interest rates outstanding at the reporting date were outstanding throughout the year. The rate of change is an interest rate increase or decrease of 0.25% when reporting to management internally, which also represents the assessment of the Company's management for the reasonably possible changes in interest rates.

by $2,585 and $3,880 for the years ended December 31, 2015 and 2014, respectively, mainly as a result of bank savings and borrowings with variable interest rates.

5. Fair value

（ 1 ）

		December 31, 2015	December 31, 2015	December 31, 2015
	Carrying amounts		Fair Value
		Level 1	Level 2	Level 3
$ $ $ $ $ $ $	79,052	-	-	79,052
	567,897	551,600	-	16,297
	2,267,560 11,374,269 28,841	-	-	52,765
	13,670,670
	52,765
	2,437,185 11,340,466 1,583,478 411,680
	15,772,809

169 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 170

		December 31, 2014	December 31, 2014	December 31, 2014
	Carrying amounts		Fair Value
		Level 1	Level 2	Level 3
$ $ $ $ $ $ $	21,165	-	-	21,165
	275,536	-	-	275,536
	3,001,879 8,682,633 9,664	-	-	22,902
	11,694,176
	22,902
	3,648,800 8,034,411 902,386 387,912
	12,973,509

（ 2 ）

quoted price of a financial instrument obtained from major stock exchanges and over-the counter markets are the basis used to determine the fair value of a listed company's stock and the quoted prices in an active market.

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's-length basis. If these conditions can not be reached, then the market is non-active. In general, a market with low trading volume or high bid-ask spreads is an indication of a non-active market.

quoted price in an active market:

※ A. The fair value of derivative instruments is based on quoted prices. When quoted prices are unavailable, the fair value is estimated on the basis of the contract's spot exchange rate and swap point.
※ stocks. The fair value is based on a valuation technique in the emerging market of stocks, the estimated fair value is adjusted for the lack of liquidity. When prices listed in the emerging market are unavailable, the fair value is estimated on the basis of unadjusted prior trade prices.
（ 3 ） Tranfers between Level 1 and 3

The fair value of shares of Nien Made Enterprise Co., Ltd. amounted to $551,600 and $245,600 as of December 31, 2015 and 2014, respectively. On December 31, 2014, the shares of Nien Made Enterprise Co., Ltd. were classified to Level 3 because there was no quoted price for the shares, and the fair value of the shares was estimated on the basis of significant unobservable inputs. The shares of Nien Made Enterprise Co., Ltd. have been listed on the TWSE since December 2015 and have quoted prices. Thus, the fair value measurement transferred from Level 3 to Level 1 on December 31, 2015.

（ 4 ） Changes in Level 3

		2015			2014
Fair value through proft or loss		Available for sale	Total	Fair value through proft or loss	Available for sale
$ $	(1,737) 26,287 - - 1,737	275,536 (939) 294,900 (551,600) (1,600)	273,799 25,348 294,900 (551,600) 137	(1,310) (1,737) - - 1,310	33,918 634 - - 240,984
	26,287	16,297	42,584	(1,737)	275,536

（ 5 ）
financial assets and liabilities at fair value through profit or loss – derivative financial instruments and available-for-sale financial assets – equity securities. The quantitative information about significant unobservable inputs was as follows:

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Valuation Significant Inter-relationships between
Item unobservable
technique significant unobservable
inputs inputs and fair value
Available-for-sale financial assets – equity securities (note 1) (note 1) (note 1)
not listed on emerging stock market
Financial assets and liabilities at fair value through
profit or loss (note 2) (note 2) (note 2)
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note 1: The fair value is based on unadjusted prior trade prices, and therefore there is no need to show the sensitivity analysis of unobservable inputs.

note 2: The fair value is based on the quotation of a third party, and therefore there is no need to show the sensitivity analysis of unobservable inputs.

（ x ） Financial risk management

（ 1 ） Credit risk

（ 2 ） Liquidity risk
（ 3 ） Market risk

2. Structure of risk management

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The board of directors oversees the management's monitoring of the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the board of directors.

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3. Credit risk

meet its contractual obligations and arises principally from the Company's cash and cash equivalents, accounts and other receivables (including related parties), and derivative instruments.

（ y ） Capital management

to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained earnings, other equity, and non-controlling interests.

（ 1 ） Cash and cash equivalents

The Company had deposited $1,909,353 (including restricted deposits) in CTBC Bank and 3 other financial institutions, and $2,814,705 (including restricted deposits) in Industrial Bank of Taiwan and 4 other financial institutions, representing 7% and 12% of total assets, as of December 31, 2015 and 2014, respectively. The Company believes that there is no significant credit risk from the above-mentioned

The Company sets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return to stockholders, to safeguard the interest of related parties, and to maintain an optimal capital structure to reduce the cost of capital.

The Company's debt ratio as of December 31, 2015 and 2014, was 62% and 59%, respectively.

（ 2 ） Accounts receivable

Sales to individual customers (including related parties) constituting over 10% of total revenue for the years ended December 31, 2015 and 2014, totaled 26% and 21%, respectively. As of December 31, 2015 and 2014, 15% and 16%, respectively, of the ending balance of accounts receivable (including accounts receivable – related parties) was accounted for by those customers. In order to reduce credit risk, the Company assesses the financial status of the customers and the possibility of collection of receivables on a regular basis. The above-mentioned customers are profitable and have a good credit record, and the Company did not suffer any significant credit loss from those customers during the financial reporting period.

（ 3 ） Derivative instruments

The Company entered into derivative instrument contracts with reputable and creditworthy financial institutions. The Company believes that the risk that these financial institutions may default on these contracts is relatively low and anticipates no significant credit loss.

4. Liquidity risk

liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

of fluctuations in cash flows. The Company had unused short-term bank facilities of $7,110,042 and $6,259,200 as of December 31, 2015 and 2014, respectively.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

（ 1 ） Currency risk

The Company is exposed to currency risk on sales, purchases, and borrowings that are denominated in a currency other than the functional currency. These transactions are denominated in USD.

The Company uses forward exchange contracts and foreign exchange swap contracts to hedge its currency risk. The Company makes performance reports and reviews operating strategy regularly, and believes that there is no significant risk because the gains or losses from exchange rate fluctuation will mostly be offset by the hedged item.

（ 2 ） Interest rate risk

The Company believes that cash flow risk arising from interest rate fluctuation is insignificant.

（ 7 ） Related-party Transactions

（ a ） The Company and its subsidiaries

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Percentage of
Name of Name of Principal shareholding
investor subsidiary activities December December Description
31,2015 31,2014
Primax Industries
The
(Cayman Holding) Ltd. Holding company 100.00% 100.00%
Company
(Primax Cayman)
The Primax Technology
(Cayman Holding) Ltd. Holding company 100.00% 100.00%
Company
(Primax Tech.)
The Destiny Technology Holding Co., Holding company 100.00% 100.00%
Company Ltd. (Destiny BVI.)
The Primax Destiny Co., Ltd. Market development and 100.00% 100.00%
Company (Destiny Japan) customer service
The Primax Electronics Korea Co., Ltd. Market development and 100.00% 100.00%
Company (Primax Korea) customer service
The Diamond (Cayman) Holdings Ltd. Holding company 100.00% 100.00%
Company (Diamond)
Gratus Tech. was
CompanyThe Gratus Technology Corp. (Gratus Tech.) Market development and customer service 100.00% -% incorporated in March 2015.
Manufacture and sale of
sophisticated machinery
The Global TEK Co., Ltd. components, automotive parts, 30.00% -% (note 2)
Company (Global TEK) industrial automation parts,
communication parts and
aerospace components
Primax Primax Industries (Hong Kong) Ltd. Export and import trading 100.00% 100.00%
Cayman (Primax HK)
Diamond Tymphany Worldwide Enterprises Holding company 70.00% 70.00% (note 1)
Ltd. (TWEL)
Manufacture of sophisticated
Global TEK Fabrication Co., Ltd.
Global TEK machinery components and 100.00% -% (note 2)
(GT)
automotive parts
Global TEK Fabrication Co., Ltd.
Global TEK Holding company 100.00% -% (note 2)
(Samoa) (GTF-S)
Manufacture of multifunctional
Primax HK Dongguan Primax Electronic & peripherals, computer mice,
and Primax Telecommunication Products Ltd. mobile phone accessories, 100.00% 100.00%
Tech. (PCH2) consumer electronics products,
and shredders
Primax HK Primax Electronics (KS) Corp., Ltd. Manufacture of computer 100.00% 100.00%
(PKS1) peripherals and keyboards
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173 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 174

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Percentage of
Name of Name of Principal shareholding
investor subsidiary activities December December Description
31,2015 31,2014
Primax HK Primax Electronics (Chongqing) Manufacture of computer 100.00% 100.00%
Corp., Ltd. (PCQ1) peripherals and keyboards
Primax Tech. Polaris Electronics Inc. Sale of multi-function printers and 100.00% 100.00%
(Polaris) computer peripheral devices
Research and development of
Destiny BVI. Destiny Electronic Corp. computer peripheral devices and 100.00% 100.00%
(Destiny Beijing) software
Sale of audio accessories,
TWEL Tymphany HK Ltd. (TYM HK) amplifiers and their components 100.00% 100.00% (note 1)
Market development and customer
TWEL TYP Enterprises, Inc. (TYP) service of amplifiers and their 100.00% 100.00% (note 1)
components
Premium Loudspeakers Manufacture, research and
TYM HK (Hui Zhou) development, design, and sale of 100.00% 100.00% (note 1)
Co., Ltd. audio accessories, amplifiers and
(Premium Hui Zhou) their components
TYM Australia
Research and development, was closed and
TYM HK Tymphany Australia Pty Ltd.(TYM Australia) design, and sale of audio accessories, amplifiers and their -% 100.00% finished the liquidation process
components
in August 2015.
TYML was
TYMPHANY LOGISITCS, INC. Sale of audio accessories,
TYM HK 100.00% -% incorporated in
(TYML) amplifiers and their components May 2015.
Manufacture, research and Tymphany
Dongguan Tymphany Acoustic
TYM HK Technology Co., development, design, and sale of 100.00% -% Dongguan was
(Tymphany Dongguan) audio accessories, amplifiers and incorporated in
their components September 2015
Sale of automotive parts, industrial
GP Tech, Inc.
GT automation parts, communication 100.00% -% (note 2)
(GP)
parts and aerospace components
Global TEK Fabrication Co., Ltd.
GTF-S Holding company 100.00% -% (note 2)
(HK) (GTF-HK)
Global TEK Co., Ltd.
GTF-S Holding company 100.00% -% (note 2)
(Samoa) (GTS)
WUXI GLOBAL TEK
GTF-HK FABRICATION CO., LTD. Manufacture of sophisticated 100.00% -% (note 2)
machinery components
(WUXI GLOBAL TEK)
Manufacture of industrial
GTS GLOBAL TEK (XI' AN) CO., LTD. automation parts, communication 100.00% -% (note 2)
(GLOBAL TEK XI' AN)
parts and aerospace components
GTS and
GLOBAL WUXI GLOBAL TEK CO. (WUXI), LTD. (GLOBAL TEK WUXI) Manufacture of sophisticated machinery components and 100.00% -% (note 2)
TEK automotive parts
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Note 1: TWEL was incorporated in October 2013, acquiring all shares of TYM HK by issuing new common stock. The Company acquired 70% of the shares of TWEL by cash through its subsidiary Diamond on January 10, 2014. Therefore, the Company indirectly acquired all shares of TWEL's subsidiaries, and included them in the consolidated

（ b ） Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Company and its subsidiaries.

（ c ） Related-party transactions

1. Sales

	Sales	Sales
	2015	2014
$	6,264,761	4,552,898

other customers are within 90 days, but they can be lengthened for related parties.

The Company's sales of products to subsidiaries' customers on behalf of its subsidiaries amounted to $1,209,503 and $2,203,836 for the years ended December 31, 2015 and 2014, respectively. Related sales and purchases were eliminated and recorded on a net basis.

2. Purchases

as follows:

	Purchases	Purchases
	2015	2014
$	49,233,250	38,664,339

terms of related parties and other vendors are 60 days and 45 to 90 days, respectively.

3. Purchase of service

The amounts of purchase of service by the Company from related parties and the outstanding balances were as follows:

	Purchase of service	Purchase of service
	2015	2014
$	45,293	67,377

4. Receivable and payable on behalf of related parties

The other payables arising from receiving the equipment subsidy on behalf of subsidiaries amounted to $60,958 as of December 31, 2015.

The other receivables arising from the materials purchase on behalf of the subsidiaries amounted to $17,018 as of December 31, 2015.

5. Guarantees and endorsements

The amounts of guarantee the Company provided to related parties were as follows:

Purchasing of raw materials Bank loans	December 31, 2015 $ 384,227 - $ 384,227	December 31, 2014 51,192 1,106,000 1,157,192

（ d ） Key management personnel compensation

Short-term employee benefts Post-employment benefts Termination benefts Other long-term benefts Share-based payments	2015 $ 123,092 721 - - 15,124 $ 138,937	2014 63,291 755 - - 7,690 71,736

Please refer to note 6(p) for information related to share-based payments.

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（ 8 ） Pledged Assets: None

（ 9 ） Commitments and Contingencies

（ a ） Please refer to notes 7 and 13 for guarantees and endorsements provided to related parties.
（ b ） Guarantee notes provided as part of agreements with banks to sell its accounts receivable and to acquire long-term borrowings were as follows:

December 31, 2015 Sales of accounts receivable $ 2,874,690 Long-term borrowings $ 2,160,000	December 31, 2014 2,891,000 5,404,000

（ 10 ） Loss Due to Major Disasters: None

（ 11 ） Subsequent Events: None

（ 12 ） Others

The following is a summary statement of current-period employee benefit, depreciation, and amortization expenses by function:

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2015 2014
Operating Operating Total Operating Operating Total
cost expenses cost expenses
Employee benefit expenses
Salaries 121,905 1,209,513 1,331,418 113,803 1,106,082 1,219,885
Labor and health insurance 6,190 66,821 73,011 4,935 59,249 64,184
Pension 3,415 38,846 42,261 3,100 36,183 39,283
Others 4,040 57,451 61,491 3,658 44,276 47,934
Depreciation 10 15,801 15,811 10 12,430 12,440
Amortization - 17,628 17,628 - 25,404 25,404
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The average number of the Company's employees for the years ended December 31, 2015 and 2014, was 752 and 701, respectively.

（ 13 ） Segment Information

2014, for details.

Company and the affiliated companies, if any, on the Company's financial position in the most recent year and as of the printing date of the annual report: None

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VII. Review and analysis of the financial status and financial performance, and risk management

1. Financial status

Unit: NT$1,000

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Year Difference
Item 2015 2014
Amount %
Current assets 30,413,161 23,078,336 7,334,825 31.78
Investment - - - -
Fixed assets 6,284,023 3,935,145 2,348,878 59.69
Intangible assets 3,322,191 2,916,644 405,547 13.90
Other assets 1,712,358 1,093,648 618,710 56.57
Total assets 41,731,733 31,023,773 10,707,960 34.52
Current liabilities 26,154,964 19,254,757 6,900,207 35.84
Long-term liabilities 2,660,184 1,460,269 1,199,915 82.17
Total liabilities 28,815,148 20,715,026 8,100,122 39.10
Capital stock 4,427,051 4,385,481 41,570 0.95
Capital surplus 777,368 673,543 103,825 15.41
Retained earnings 4,660,556 3,686,641 973,915 26.42
Other equity 565,406 404,848 160,558 39.66
Non-controlling Interests 2,486,204 1,158,234 1,327,970 114.65
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Unit: NT$1,000

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Year Difference
2015 2014
Item
Amount %
Total shareholders' equity 12,916,585 10,308,747 2,607,838 25.30
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（1） Increase of current assets from the previous period: It was mainly due to the increase in cash, notes and accounts receivable, and inventories.
（2） Increase of fixed assets from the previous period: It was mainly due to the increase of fixed assets through merging Global TEK.
（3） Increase of other assets from the previous period: It was mainly due to the increase of available-for-sale financial assets – non-current as a result of acquiring stock shares of YIHFENG, a non-listed (non-OTC) company.
（4） Increase of total assets from the previous period: It was mainly due to the increase of all assets through merging Global TEK.
（5） Increase of current liabilities from the previous period: It was mainly due to the increase of notes payable and accounts payable.
（6） Increase of long-term liabilities from the previous period: It was mainly due to the increase of future amortization deferred subsidy income of manufacturer's equipment subsidy acquired by the consolidated company.
（7） Increase of total liabilities from the previous period: It was mainly due to the increase of notes payable and accounts payable.
（8） Increase of retained earnings from the previous period: It was mainly due to the increase of earnings as a result of the good profitability of the consolidated company.
（9） Increase of other equity from previous the period: It was mainly due to the increase of available-for-sale financial assets unrealized gains and losses.
（10） Increase of non-controlling interests from the previous period: It was mainly due to the increase of non-controlling interests obtained from merging Global TEK.
（11） Increase of total stockholders' equity from the previous period: The good profit position and high earnings of the acquires and the acquisitions of additional non-controlling interests through merger. .

the growth of operating incomes and return on investments. The stable injection of cash flow contributed to the increase of shareholders' equity, to the extent that the company can maintain healthy financial structure.

（ 2 ） Expected sales within the year and its basis, and the possible impact on the Company's future financial operations and the responsive plan

The Company sales forecast is based on the industrial environment and future market supply and demand; also, taken into account the business development, current purchase orders status, production base capacity planning, etc. For the sales forecast of each major product in 2016, in terms of PC peripherals business unit, product sales will likely remain the same or grow slightly, while the non-PC peripherals business unit is expected to

grow steadily due to the effect of global information and communications commodity and mobile phone market development and market demand for electrospeaker products. Currently, the Company has sound financial structure and excellent business constitution. The Company's proprietary funds and the net cash inflow from operating activities are sufficient to support the demand for working capital and capital expenditure needs resulted from revenue growth.

（ 1 ） the most recent year (2015)

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Unit: NT$1,000
Cash balance Net cash provided by Net cash used in Cash balance Remedy for liquidity shortfall
12.31.2014 operating activities in 2015 investing and financing activities in 2015 12.31.2015 Investment plan Financing plan
6,814,023 5,022,351 809,357 7,623,380 －－
----- End of picture text -----

（1）Operating activities: Net cash inflow from operating activities amounted to NT$5,022,351 thousand, mainly due to the increase of profit, notes and accounts payable.
（2）Investing activities: Net cash outflow from investing activities amounted to NT$1,974,604 thousand, mainly due to merging Global TEK and acquiring additional property, plant and equipment.
（3）Financing activities: Net cash outflow from financing activities amounted to NT$2,227,894 thousand, mainly due to the repayment of short-term loans and long-term loans, and the distribution of cash dividends.

2. Financial performance

（ 1 ） The financial performance analysis in the last two years

Unit: NT$1,000

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Item Year 2015 2014 Amount increase or decrease (%)
Net Sales 65,589,293 52,239,777 13,349,516 25.55
Operating costs 58,448,955 46,020,978 12,427,977 27.01
Gross profit 7,140,338 6,218,799 921,539 14.82
Operating expense 4,972,156 4,389,057 583,099 13.29
Operating income 2,168,182 1,829,742 338,440 18.50
Non-operating income and expense 304,771 217,839 86,932 39.91
Continuing operations income before tax 2,472,953 2,047,581 425,372 20.77
Income tax expense (benefit) 656,018 438,614 217,404 49.57
Continuing operations income after tax 1,816,935 1,608,967 207,968 12.93
----- End of picture text -----

Increase of net sales from the previous period: It was mainly due to the booming sales of notebook touch panel related products, and the increasing demand for gaming series of notebook peripheral products, so the sales of the Company's PC peripheral business groups are growing. On the other hand, benefited from the stable growth of global information and communications commodity and mobile phone market penetration, so the demand for camera modules is also growing significantly and the revenues of the Company's related products is also growing.
Increase of non-operating income from the previous period: It was mainly due to the increase of exchange gains from the previous period.
Increase of continuing operations income before tax from the previous period: The rise in gross margin that brought about an increase of operating incomes.
Increase of income tax expense from the previous period: It was mainly due to the increase of net income before tax of the continuing operations.

（ 2 ） Improvement plan for inadequate liquidity: The Company is without any inadequate liquidity that has occurred in the most recent year.

（ 3 ） Cash Flow Analysis within the year (2016)

Unit: NT$1,000

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

Cash balance Net cash provided by Net cash used in Remedy for liquidity shortfall
12.31.2015 operating activities in 2015 investing and financing activities in 2015 Cash balance Investment plan Financing plan
7,623,380 3,947,261 841,173 8,464,553 －－
----- End of picture text -----

（1）Operating activities: Net cash inflow from operating activities is expected to be NT$3,947,261 thousand, mainly due to the expected profits in the period.
（2）Investing activities: Net cash outflow from investing activities is expected to be NT$1,467,076 thousand, mainly due to the expected acquisition of plant and equipment.
（3）Financing activities: Net cash outflow from financing activities is expected to be NT$1,639,012 thousand, mainly due to the repayment of long-term loans, and the distribution of cash dividends.
1. Improvement plan for expected cash deficiency and liquidity analysis: There is no cash deficiency expected; therefore, it is not applicable.

4. The impact of major capital expenditures on financial business in the most recent year: None

179

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Primax Electronics Ltd. 2015 Annual Report

5. Investment policy in the most recent year, main reason for its profits or losses, improvement plan and the investment plans within the year

（ 1 ） Investment policy

The Company's management team for the operational requirements and future strategic development has professional information provided by the responsible units. The Finance and Management Office is to have data collected and proposals presented to the responsible supervisor. For the investment proposals presented, the history and prospect of the invested company, market conditions and business constitution should be assessed for the reference of the decision-maker in making investment decisions.

（ 2 ）

improvement plans in the most recent year

12.31.2015 / Unit: NT$1,000

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Amount of The main reason
Item Remarks profit (loss) in 2015 for the profit or loss generated Improvement plan
Primax Industries (Cayman Holding) Ltd. 507,448 Normal operation —
Primax Technology (Cayman Holding) Ltd. 100,443 Normal operation —
Destiny Technology Holding Co., Ltd 22,379 Normal operation —
Destiny Technology (Japan) Corporation 426 Normal operation —
Primax Electronics Korea Co., Ltd 145 Normal operation —
Dimond (Cayman)Holdings Ltd. 111,356 Normal operation —
Global Tek Fabrication 12,784 Normal operation —
Gratus Technology Corp. 111 Normal operation —
Primax Industries (Hong Kong) Ltd. 574,450 Normal operation —
Polaris Electronics Inc. 11,248 Normal operation —
Tymphany Worldwide Enterprises Ltd 53,162 Normal operation —
Tymphany HK Ltd 191,857 Normal operation —
TYP Enterprises Ltd 2,079 Normal operation —
TYMPHANY LOGISTICS, INC 20,843 Normal operation —
Global Tek Co., Ltd (19,046) Normal operation —
Global TEK Fabrication Co., Ltd. (Samoa) 113,194 Normal operation —
GP Tech, Inc. (1,767) Normal operation —
Global TEK Co., Ltd (Samoa) 93,878, Normal operation —
Global TEK Fabrication Co., Ltd. (HK) 21,003 Normal operation —
Dongguan Primax Electronic Telecommunication Products Ltd. 359,434 Normal operation —
Beijing Destiny Electronic Technology Ltd 22,379 Normal operation —
Primax Electronics (Kunshan) Corp., Ltd. 97,672 Normal operation —
Primax Electronics (Chongqing) Corp., Ltd. 108,001 Normal operation —
Premium Loudspeakers (Huizhou) Co., Ltd. 72,838 Normal operation —
—
Dongguan Tymphany Acoustic Technology Co., Ltd (868) Normal operation
WUXI GLOBAL TEK FABRICATION CO., LTD 6,106 Normal operation —
GLOBAL TEK (XI'AN) CO., LTD 3,487 Normal operation —
GLOBAL TEK (WU'XI) CO., LTD 28,917 Normal operation —
----- End of picture text -----

6. Risk analysis and evaluation

（ 1 ） on the Company's profit or loss and future responsive measures

1. Changes in exchange rate

2. Changes in interest rate

The Company's revenue-based business is targeting on exporting business. The exporting products are mainly quoted in US dollars; also, the Company's transactions conducted with overseas suppliers and the purchase of machinery equipment from overseas suppliers are denominated in US dollars too, resulting in mutual offset effect, so it provides a natural hedging effect against changes in the exchange rate. The Company's 2015 net foreign exchange gain amounted to NT$354,082 thousand, accounted for 0.54% of net operating income. Therefore, the overall foreign exchange does not constitute a risk factor burden on the profit status. However, the Company in response to the risk of changes in the exchange rate on the Company's profit or loss, in addition to using spot and forward foreign exchange transactions for foreign exchange hedging, will continue to monitor changes in the exchange rate and the foreign exchange positions within the Company; also, will maintain foreign currency assets and liabilities balanced in order to avoid the risk of changes in exchange rates and reduce the impact of changes in exchange rate on the Company's profit and loss.

The consolidated company's 2015 interest expense accounted for 0.24% of the annual revenues, indicating that such interest expense had no significant impact on the consolidated company's profits and losses. In addition, the Company regularly assesses bank loan interest rates and maintains good relations with banks in order to obtain more favorable interest rates and to reduce interest expenses.

According to the announcement of the DirectorateGeneral of Budget, Accounting and Statistics (DGBAS), Executive Yuan, R.O.C. (Taiwan), the 2015 Consumer Price Index (CPI) rose by 0.14%, the Wholesale Price Index (WPI) dropped by 7.30%, indicating that there was no significant inflation occurred, which had no significant impact on the Company's December 2015 profit and loss. The Company always pays attention to fluctuations in market prices and will have sales price and raw materials and inventory adjusted accordingly; however, there was no significant impact that

（ 2 ） The policy of engaging in high-risk, highly leveraged investments, loans to others, endorsements and guarantees, and derivative products, the main reason for the profit or loss, and future response measures

response measures enacted in accordance with the Company's "Procedures for Loaning of Funds" and "Procedures for Making of Endorsement/Guarantee;" also, the related operations are processed prudently with the possible risks and relevant regulations considered.

1. Engaged in high-risk and highly leveraged investments

The Company focuses on its business management without engaging in high-risk investments and has never engaged in any highly leveraged investment.

2. Engaged in the loaning of funds and making of

endorsement and guarantee

3. Derivative products trading

The Company had the derivatives transactions assessed carefully. The operations of any derivatives trading is aimed to help improve business performance and reduce the Company's operations and financial risks; also, it is processed in accordance with the "Procedures for Acquisition or Disposal of Assets" and scope of authorization.

The Company had arranged the loaning of funds and making of endorsements/guarantees for the 100% owned subsidiaries for the need of business dealings in the most recent year and as of the printing date of the annual report. The Company's loaning of funds and making of endorsements/ guarantees are handled according to the policies and

181 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 182

（ 3 ） Future research and development plans and the expected R&D expenses

1. Future R&D plans

1. Future R&D plans home appliances, smart health and smart home The Company's products mainly include PC technology products, to further enhance the peripheral products, mobile devices components, Company's research and development capabilities and MFP and digital home products. The in order to increase the market share of the Company's future development plan is to continue Company's products and to help the Company's cooperating with international companies and products be more internationalized and competitive. forming a strategic partnership with newly established companies, focusing on the game 2. Expected R&D expenses mouse, keyboard and keyboard module, multi-color The Company's expected R&D expenses are based backlit module, dual-lens phone camera module, on the progress of new products and new technology computer built-in camera module, Bluetooth development; also, maintain a certain percentage and wireless headphone related products, of growth depending on future operating conditions MFP scanning module, inkjet and laser MFP, in order to ensure the Company's competitive automotive electronics, automated production lines, advantage. The Company plans to invest in R&D for networked audio equipment, artificial intelligence around NT$2.3 billion in 2016.

（ 7 ） measures: None.
（ 8 ） plant expansion: None.

（ 9 ） The risks of centralized purchasing or sales and the response measures.

1. The risks of centralized purchase and the[responsive measures]

procurement in order to maintain purchase flexibility, ensure uninterrupted supply, and uphold bargaining advantage in order to achieve the goal of reducing cost. In summary, the Company has not faced any risks of centralized purchasing of raw materials or supply interruption.

2. The risks of centralized sale and the[responsive measures]

（ 4 ） The impact of changes in domestic and foreign policies and law on the Company's financial operations and responsive measures:

The Company has operated business in compliance regulations for the reference of the management. with the governing regulations of the domestic and Therefore, the Company is able to grasp any foreign invested companies. The related personnel changes in policies and law domestically and also pay attention to changes in the law and internationally with effective response initiated.

（ 5 ） The impact of changes in technologies and industry on the Company's financial business and the responsive measures:

The Company pays attention to, collects and analyzes PC peripheral products, mobile devices components and products, and market and technology development of MFP and digital home products. In addition to reducing the impact of technological change, enhance the research and development of high value-added products with high margins in order to have the Company's products diversified and stabilized, and ensure a profit source.

The Company with outstanding process technologies continues to expand the strategic alliance system in-depth and in-width with the existing customers from product design, production, logistics support, distribution and after-sales service in order to strengthen the mutual long-term co-existence and common prosperity. The technological and industrial changes do not have a significant impact on the Company's financial operations so far.

（ 6 ） The impact of changes in corporate image on the enterprise's crisis management and the responsive measures:

the operating results to shareholders and fulfill corporate social responsibilities. Also, the Company while pursuing maximum shareholders' equity shall fulfill corporate social responsibility to lift up the Company's corporate image; therefore, there was not any incident occurred that was detrimental to the Company's corporate image in the most recent year and as of the printing date of the annual report.

The Company has a good corporate image and is one of the leading suppliers for PC peripheral products, mobile device components, MFP and digital home products. Attract more talents and technologies into the Company with the complete personnel cultivation and training programs, together with staff-oriented humanity management. Build up the strength of the management team and feedback

The top-ten customers accounted for 52% of the net revenues generated in 2015. For the top-ten customers, the proportion of sales to a single customer does not exceed 30% of the total sales; therefore, the Company did not have any centralized sales. The Company, in addition to maintaining good relations with the existing customers, actively develops new products to expand the market and customers for new products in order to have the customers dispersed and to minimize the risk of centralized sales.

（ 10 ） The impact of massive stock transfer or exchange by the directors, supervisors or major shareholders with more than 10% shareholdings on the Company, risks and responsive measures: None
（ 11 ） The impact of change in the Company's right to operate, risks and responsive measures: None

（ 12 ） Litigation or non-litigation events

1. For the Company's litigation, non-litigation, or administrative contentious event that have been sentenced or are currently under proceeding in the court of law in the last two years and as of the printing date of the annual report; also, the results may be significantly influential to shareholders' equity or securities prices, such indisputable fact, the subject amount, the litigation proceeding starting date, the main parties of the lawsuit and its current situation should be disclosed:

CSAA Insurance Exchange (USA) had sued the Company's affiliate, Polaris Electronics, Inc. and the customer, Woods Industries, Inc., in the Superior Court of California (USA) on November 18, 2013 in accordance with product liability clause and had demanded compensation for fire damages by subrogation on behalf of the insured, Manuel Dias and Pamela Dias. The Company has reported it to the insurance company for record upon notice and has helped clarify the source of the product in question (Surge Protector) and

183

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Primax Electronics Ltd. 2015 Annual Report

necessary information. The case is still in the process of the California Superior Court of the United States.

Hui Jun Landscape Co., Ltd. of Dongguan City for the dispute over the Plant Stage III green plantation and the new plant green surroundings construction unpaid balance had appealed to the 1st People's Court of Dongguan City in July 2014 against the Company's affiliate, Dongguan PRIMAX Electronic Telecommunication Products Co., Ltd., to have a specific performance carried out for an amount of RMB 2,714,960.8.The Company after being informed of this incident had appealed to the court to have the execution postponed with a petition for re-trial filed with Dongguan Intermediate People's Court. However, Dongguan Intermediate People's Court denied the Company's petition for retrial and the Company had appealed to Guangdong Higher People's Court and it was accepted accordingly. Guangdong Provincial Higher People's Court ruled on January 29, 2015 to have the case returned to Dongguan Intermediate People's Court for retrial, and ruled to suspend the execution of the original judgment during the retrial. The ruling of the retrial was for the Company to pay a fine to Hui Jun Landscape Co., Ltd. of Dongguan City based on a computing base of RMB 292,650 plus interest accrued according to 130% of the bank interest rate for the similar accounts payable in the same period since April 20, 2012 to the debt liquidation date. However, Hui Jun Landscape Co., Ltd. of Dongguan City refused to accept the verdict of the re-trial and had appealed to Guangdong Province, Dongguan City, People's Prosecutor Office for supervisory review, but the

Prosecutor Office did not support the protest and had the appeal dismissed.

The plaintiff, the couples of Millicent Lombardi and Anthony Lombardi, was injured by a paper shredder and had a lawsuit filed with Eastern District Court of New York State (USA) on October 27, 2015 against the Company's customer, ACCO Brands Corp. and its dealer, Staples, Inc., for damages. ACCO Brands Corp. and Staples, Inc. claimed that the paper shredder was manufactured by the Company and supplied to ACCO Brands Corp. for sales; therefore, a lawsuit was filed with Eastern District Court of New York State (USA) on April 14, 2016 against the Company for third party liability. The Company had notified the insurance company upon notice and was in the process of clarifying the source of products in question and related necessary information.

2. The litigation, non-litigation or administrative contentious event of the Company's directors, supervisors, general manager, active owner, shareholders with more than 10% shareholdings and the subsidiaries that have been or are currently under proceeding in the court of law in the last two years and as of the printing date of the annual report; also, the results may be significantly influential to shareholders' equity or securities prices: None

3. The Company's directors, supervisors, general manager and major shareholder with more than 10% shareholding had experienced any of the events defined in Article 157 of the Securities Exchange Act and the related process handled by the Company in the last two years and as of the printing date of the annual report: None

VIII. Special notes

（ 13 ） Other important risks and response measures: None

7. Other important events: None

185 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 186

（ 1 ）

Primax Electronics Ltd. （ TW ）

==> picture [500 x 488] intentionally omitted <==

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

Primax
Primax Diamond
Technology Gratus
Destiny （Cayman）
（Cayman Holding） Technology
Co., Ltd. Holdings Ltd.
（Japan） Ltd. （Cayman） 30 Corp.
（Cayman） %
Destiny Primax
Primax
Technology Industries GLOBAL TEK
Electronics Korea
Holding Co., （Cayman Holding） FABRICATION
Co., Ltd.
Ltd. Ltd. CO., LTD
（Korea）
（BVI）（Cayman）
70
Polaris % GLOBAL TEK
Beijing Destiny Primax Electronics GLOBAL TEK FABRICATION
Electronic Industries Inc. Tymphany CO., LTD CO., LIMITED
Technology Co., （Hong Kong）（US） Worldwide （Samoa）
Ltd. Ltd. Enterprises Ltd.
（PRC）（HK） 32.84 （Cayman） GP
% TECH,
INC.
Tymphany TYP
Dongguan.Primax HK Ltd. Enterprises, GLOBAL GLOBAL TEK
Electronic &. （HK） Inc. TEK FABRICATION
67.16 Te lecommunication （US） CO., LTD CO.,LIMITED.
%
Products Ltd （Samoa）（HK）
（PRC）
Premium 時碩科技無錫時碩
Primax Loudspeakers （西安）金屬製品
Electronics （Huizhou）Co., Ltd. 有限公司製造有限公司
（PRC）
（Kun Shan）
Corp., Ltd. 7.83
（PRC） %
Tymphany Logistics.
Primax INC 時碩科技
Electronics （US） 92.17 （無錫）
（Chong Qing） % 有限公司
Corp., Ltd
（PRC） Dongguan
Tymphany
Acoustic Technology
Co. Ltd.
（PRC）
----- End of picture text -----

Unit: NT$1,000 / 12.31.2015

==> picture [441 x 640] intentionally omitted <==

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

Company Name Establishment Date Address Paid-in capital Principal businesses or production projects
Dongguan Primax Produce and sell PC
B4079, Liu Wu Dao Section,
Telecommunication Electronic & 12.21.1995 Xincheng Qu, Shijie Chen, 2,270,762 peripherals, mobile device components, business
Products Ltd. Dongguan City equipment and other products.
Primax (Kunshan ) 11.17.2009 No. 2688 Tong Xin Road, 994,291 Produce PC peripheral
Electronics Co., Ltd. Yushan Zhen, Kunshan City products.
Primax Electronics No. 999, Building No. 1, Xing
(Chongqing) 02.23.2011 Guang Blvd, Yongcuan Qu, 638,152 Produce PC peripheral
products.
Corp. Ltd. Chongqing City
Suite 201-202, 2F., No. 10, He Research and develop PC
Beijing Destiny Electronic 03.24.1994 Fang Road, Dinghai District, 44,982 peripheral products and
Technology Corp., Ltd
Beijing business equipment.
Market development and
customer service of PC
Destiny Technology 6th Fl., Hamamatsucho MK peripherals, mobile device
(Japan) 07.28.1995 Bldg., 1-4-12 Kaigan, Minato-ku, 6,858 components, business
Corp., Ltd Tokyo 105-0022 JAPAN equipment, other products of
Market development, customer
service, etc.
Market development and
customer service of PC
Primax Electronics Korea 7F, SIGMA Tower, Olympic-Ro peripherals, mobile device
07.02.2013 289, Songpa-Gu, Seoul 138- 9,454 components, business
Co, Ltd.
734 KOREA equipment, other products of
Market development, customer
service, etc.
Market development and
customer service of PC
peripherals trading, mobile
Polaris Electronics, Inc. 04.24.1996 356 S. Milpitas Blvd, Milpitas. CA. 95035 USA 52,906 device components, business
equipment, other products
and Market development,
customer service, etc.
Rm.1520-21, 15/F., Block A, Hi-
Primax Industries Trade PC peripherals, mobile
Tech Industrial Centre, 5-21 Pak
(Hong Kong) 05.19.1989 2,571,677 device components, business
Tin Par Street, Tsuen Wan, N.T.,
Ltd. equipment and other products.
Hong Kong.
2nd Floor, Midtown Plaza, Elgin
Primax Technology
(Cayman Holding) 10.08.1997 Avenue, George Town, Grand 942,602 Holding company
Ltd. Cayman KY1-1106, Cayman
Islands.
Primax Industries 2F, Zephyr House, Mary St.,
(Cayman Holding) 10.24.1996 PO. Box 709, George Town, 2,694,097 Holding company
Ltd. Grand Cayman, Cayman
Islands, British West Indies.
Destiny Technology 01.19.2001 Sealight House, Tortola, British 34,719 Holding company
Holding Co., Ltd. Virgin Islands
P.O. Box 32052, The Grand
Diamond Pavilion Commercial Centre,
(Cayman) 10.8.2013 Oleander Way, 802 West Bay 2,779,197 Holding company
Holdings Ltd. Road, Grand Cayman, KY1-
1208 Cayman Islands.
P.O. Box 309, Ugland House,
Tymphany Worldwide 10.29.2013 Grand Cayman, KY1-1104 550,010 Holding company
Enterprises Ltd.
Cayman Islands.
Market development
1 Harbor Drive, Suite 209 and customer service of
TYP Enterprises, Inc. 01.06.2014 17
Sausalito, CA94965 loudspeakers and their
components.
ROOM 1307-8 DOMINION Sales of all types of audio
Tymphany HK Ltd. 5.11.1995 CENTRE. 43-59 QUEENS ROAD 616,004 accessories, speakers and
EAST, WANCHAI , HONG KONG components
----- End of picture text -----

187

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Primax Electronics Ltd. 2015 Annual Report

12.31.2015

Unit: NT$1,000 / 12.31.2015

==> picture [442 x 548] intentionally omitted <==

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

Company Name Establishment Date Address Paid-in capital Principal businesses or production projects
Manufacture, research
Tymphany Industrial Zone,
Premium Loudspeakers and develop, design and
(Huizhou) 8.9.2004 Xin Lian Village, Xinxu Zhen, 160,102 sell various types of audio
Huiyang Qu, Huizhou,
Co., Ltd. accessories, speakers and
Guangdong
components.
Sales of all types of audio
TYMPHANY LOGISTICS, INC 04.29.2015 356 S. Milpitas Blvd, Milpitas. CA. 95035 USA 6,613 accessories, speakers and
components
Manufacture, research
Dongguan Tymphany and develop, design and
Acoustic Technology 09.06.2015 Liu Wu Dao Section, Xincheng 16,533 sell various types of audio
Qu, Shijie Chen, Dongguan City
Co., Ltd accessories, speakers and
components.
Gratus Technology Corp 04.01.2015 356 S. Milpitas Blvd, Milpitas. CA. 95035 USA 9,920 Market development, customer service, etc.
Precision processing,
15F., No.94, Sec. 1, Xintai 5th industrial automation control
Global Tek Fabrication 11.07.2008 Rd., Xizhi Dist., New Taipei City 551,000 components, communications
221 components, aerospace
equipment parts, etc.
15F., No.94, Sec. 1, Xintai 5th
Global Tek Co., Ltd 07.11.2000 Rd., Xizhi Dist., New Taipei City Precision processing, auto
221 166,000 parts, etc.
GlobalTek Fabrication 10.06.2008 Offshore Chambers, P.O. 413,325 Holding company
Co., Ltd. (Samoa) Box 217, Apia, Samoa
GlobalTek Co., Ltd. 12.22.2000 Offshore Chambers, P.O. 304,207 Holding company
(Samoa) Box 217, Apia, Samoa
1004 AXA Centre, 151
GlobalTek Fabrication
05.25.2007 Gloucester Road, Wan Chai, 111,772 Holding company
Co., Ltd. (HK)
Hong Kong
Sales of automotive
components, industrial
GP Tech. Inc. 07.24.2000 South Cody Court Littleton, CO 661 automation control
80123 components, communications
components and aerospace
equipment parts
GLOBAL TEK (WU'XI) 08.03.2001 No. 17-15, Changjiang South 297,594 Precision processing, auto
CO., LTD Road, Wuxi parts, etc.
The development and
production of low-power
WUXI GLOBAL TEK 03.27.1993 New Century Industrial Park, Chengchar Bridage, Anzheng, 111,763 pneumatic control valve,
FABRICATION CO., LTD pneumatic tools and spare
Xishan District, Wuxi City
parts, small air compressor
and high-end hardware
GLOBAL TEK #1, Export Processing Zone, Industrial automation control
(XI'AN) 09.29.2004 Fengcheng 12th Road, Xi'an 69,439 components, communications
City Economic Development components and aerospace
CO., LTD
Zone equipment parts
----- End of picture text -----

PC peripheral product design, manufacturing, processing, and sales. In general, the interaction and job division among the affiliated companies is to create maximum synergy through the mutual support of technology, production, marketing and services.

==> picture [440 x 631] intentionally omitted <==

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

Company Name Title Name or representative
Primax Industries (Hong Kong) Ltd. &
Chairman Primax Technology (Cayman Holding) Ltd.
Representative: Lee, Chiu-Sheng
Primax Industries (Hong Kong) Ltd. &
Dongguan Primax Electronic & Director Primax Technology (Cayman Holding) Ltd.
Telecommunication Products Ltd. Representative: Ying, Chung-Wen
Primax Industries (Hong Kong) Ltd. &
Director Primax Technology (Cayman Holding) Ltd.
Representative: Chang, Chen-Deh
General Manager Lee, Chiu-Sheng
Executive Director Primax Industries (Hong Kong) Ltd.
Representative: Yang, Hai-Hung
Primax (Kunshan ) Electronics Co., Ltd. Primax Industries (Hong Kong) Ltd.
Supervisors
Representative: Chang, Chen-Deh
General Manager Lee, Chiu-Sheng
Executive Director Primax Industries (Hong Kong) Ltd.
Representative: Yang, Hai-Hung
Primax Electronics
(Chongqing) Primax Industries (Hong Kong) Ltd.
Corp. Ltd. Supervisors Representative: Chang, Chen-Deh
General Manager Lee, Chiu-Sheng
Chairman Destiny Technology Holding Co., Ltd.
Representative: Liang, Li-Sheng
Beijing Destiny Electronic Technology Director Destiny Technology Holding Co., Ltd.Representative: Yang, Hai-Hung
Corp. Ltd.
Director Destiny Technology Holding Co., Ltd.
Representative: Ying, Chung-Wen
General Manager Wang, Po-Ying
Director Liu, Chia-Lun
Destiny Technology Director Pan, Yung-Chung
(Japan)
Corp. Ltd. Director Lee, Yi-Ping
Supervisors Wei, Hao-San
Director Shih, Chia-Ling
Primax Electronics Korea Co., Ltd. Director Pan, Yung-Chung
Director Liu, Chia-Lun
Director Yang, Hai-Hung
Polaris Electronics, Inc.
Director Liang, Li-Sheng
Director Liang, Li-Sheng
Primax Industries (Hong Kong) Ltd.
Director Yang, Hai-Hung
Director Liang, Li-Sheng
Primax Technology (Cayman Holding) Ltd. Director Yang, Hai-Hung
Director Lee, Yi-Ping
Director Liang, Li-Sheng
Primax Industries (Cayman Holding) Ltd. Director Yang, Hai-Hung
Director Lee, Yi-Ping
Destiny Technology Holding Co., Ltd. Director Liang, Li-Sheng
----- End of picture text -----

189

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

Company Name Title Name or representative
Primax Electronics Ltd.
Diamond (Cayman) Director Representative:
Holdings Ltd. Liang, Li-Sheng
Lee, Yi-Ping
Diamond (Cayman) Holdings Ltd.
Representative:
Liang, Li-Sheng
Yang, Hai-Hung
Tymphany Worldwide Director Pan, Yung-Chung
Enterprises Ltd. Pan Yung-Tai
United Industrial Development Limited
Representative:
Edward Townsend Boyd III
Thomas Lee Jacoby
Edward Townsend Boyd III
TYP Enterprises, Inc. Director Thomas Lee Jacoby
Representative: Pan, Yung-Chung
Tymphany HK Ltd. Director Edward Townsend Boyd III
Representative: Pan, Yung-Chung
Premium Loudspeakers (Huizhou) Director Representative: Pan, Yung-Chung
Co., Ltd
TYMPHANY LOGISTICS, INC Director Liang, Li-Sheng
Dongguan Tymphany Acoustic Director Representative: Pan, Yung-Chung
Technology Co., Ltd
Chairman Liang, Li-Sheng (Representative of Primax)
Director Yang, Hai-Hung (Representative of Primax)
Director Huang, Ya-Hsing
GLOBAL TEK FABRICATION Director Lo, Chun-Hao (Representative of Hao Chi Investment Co.)
CO., LTD Director Liu, Tsu-Ying (Representative of Primax)
Director Liu, Guang-Hung (Representative of Primax)
Director Kao, Hsiung-Shen (Representative of Gains Investment Corp.)
Supervisors Liu, Tsu-Lien
Chairman Liu, Guang-Hung (Representative of Global TEK)
Director Liu, Tsu-Ying (Representative of Global TEK)
GLOBAL TEK CO., LTD
Director Huang Hao (Representative of Global TEK)
Director Huang, Ya-Hsing (Representative of Global TEK)
Global TEK FABRICATION CO., LTD.
Director Liu, Tsu-Ying
(Samoa)
GLOBAL TEK CO., LTD. (Samoa) Director Huang, Ya-Hsing
Global TEK FABRICATION CO., LTD.
Director Huang, Ya-Hsing
(HK)
Representative Huang Hao
GLOBAL TEK (XI'AN) CO., LTD Director Huang, Ya-Hsing
Director Lo, Chun-Hao
Representative Huang Hao
GLOBAL TEK（WU’XI）CO., LTD Director Huang, Ya-Hsing
Director Liu, Guang-Hung
Representative Huang Hao
WUXI GLOBAL TEK FABRICATION
Director Huang, Ya-Hsing
CO., LTD
Director Liu, Guang-Hung
GP TECH INC. Director Huang, Ya-Hsing
Director Liang, Li-Sheng
Gratus Technology Corp.
Director Yang, Hai-Hung
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（ 2 ）

Unit: NT$1,000 / 12.31.2015

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Earnings Earnings per
Capital Total Total Net Operating Operating in current share
Company Name amount assets liabilities worth income income period (NT$)
(After tax) (After tax)
Dongguan
Primax Electronic -
2,270,762 23,445,386 18,468,959 4,976,427 51,362,109 882,509 359,434
&Telecommunication
Products Co., Ltd.
Primax Electronics -
994,291 1,206,725 274,344 932,381 1,748,413 71,460 97,672
(Kunshan )Co., Ltd.
Primax Electronics -
638,152 2,221,106 1,485,802 735,304 3,994,408 82,205 108,001
(Chongqing) Corp. Ltd.
Beijing Destiny
Electronic Technology 44,982 53,291 20,352 32,939 133,315 312 22,379 -
Co., Ltd.
Destiny Technology 6,858 19,343 3,596 15,747 27,629 1,316 426 852
(Japan) Co., Ltd.
Polaris Electronics, Inc. 52,906 1,953,010 1,560,300 392,710 3,909,047 18,478 11,248 7.03
Primax Industries
2,571,677 14,837,553 10,196,447 4,641,106 43,933,525 22,831 574,450 0.95
(Hong Kong) Ltd.
Primax Technology 942,602 2,126,734 - 2,126,734 - -200 133,113 0.47
(Cayman Holding) Ltd.
Primax Industries
2,694,097 4,777,670 121,491 4,656,179 449,427 -1,617 573,680 0.07
(Cayman Holding) Ltd.
Destiny Technology 34,719 32,943 - 32,943 - - 22,379 21.31
Holding Co., Ltd.
Primax Electronics 9,454 10,468 - 10,468 15,826 754 145 2.16
Korea Co., Ltd.
Diamond (Cayman) 2,779,197 2,903,282 - 2,903,282 75,807 52,445 111,189 1.32
Holdings Ltd.
Tymphany Worldwide 550,010 1,281,816 10,081 1,271,735 94,691 -5,666 189,978 4.93
Enterprises Ltd.
Tymphany HK Ltd. 616,004 4,220,630 2,955,969 1,264,661 6,270,205 185,052 191,857 1.33
TYP Enterprises, Inc. 17 22,633 20,405 2,228 111,850 4,551 2,079 4,158
Premium
-
Loudspeakers 160,102 1,726,020 1,217,147 508,873 3,819,029 81,264 104,055
(Huizhou) Co., Ltd.
Dongguan Tymphany
- -
Acoustic Technology 16,533 12,625 111,801 14,824 -1,684 -1,240
Co., Ltd
Gratus Technology 9,920 10,231 191 10,040 5,806 329 111 0.37
Corporation
Tymphany Logistics, 6,613 554,112 548,088 6,024 195,242 -570 -570 -2.85
Inc.
Global Tek Fabrication
551,000 1,637,967 551,011 1,086,956 631,908 11,573 110,794 2.04
Co., Ltd.
Global Tek Co., Ltd 166,000 634,130 532,608 101,522 772,337 -27,638 -19,046 -1.15
Global Tek Fabrication 413,325 647,419 260 647,159 - -28 115,341 Unincorporated
Co., Ltd (Samoa)
GP Tech Inc. (US) 661 963 1,957 -994 5,585 -1,556 -1,767 Unincorporated
Global Tek Co., Ltd. 304,207 541,717 30,009 511,708 - -504 93,878 Unincorporated
(Samoa)
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191 Primax Electronics Ltd. 2015 Annual Report

Primax Electronics Ltd. 2015 Annual Report 192

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Unit: NT$1,000 / 12.31.2015
Earnings Earnings per
Capital Total Total Net Operating Operating in current share
Company Name amount assets liabilities worth income income period (NT$)
(After tax) (After tax)
Global Tek Fabrication 111,772 145,560 18,928 126,632 - -42 21,003 Unincorporated
Co., Ltd.(HK)
Global Tek (XI'AN) Co.,
Ltd 69,439 206,927 120,448 86,479 268,645 16,770 11,623 Unincorporated
Global Tek (WU'XI) Co.,
Ltd 297,594 1,104,220 554,406 549,814 1,192,816 140,760 96,389 Unincorporated
WUXI Global Tek 111,763 145,950 506 145,444 - -4,572 20,354 Unincorporated
Fabrication Co., Ltd
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（ 2 ）
（ 1 ）
（ 2 ） Independent Auditor's Report on the affiliated company's consolidated financial statements: See Page 85 ~ 135.
（ 3 ） Relations Report: Not applicable

2. The process of private placement in the most recent year and as of the printing date of the annual report: None

3. The disposition of the Company's stock shares by the subsidiaries in the most recent year and as of the printing date of the annual report: None

4. Other supplementary information: None

shareholders' equity or securities price as defined in Article 36, Paragraph 2 Section 2 of Securities Exchange Act in the most recent year and as of the printing date of the annual report: None

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Primax Electronics Limited
Chairman: Liang, Li-Sheng
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193 Primax Electronics Ltd. 2015 Annual Report

AI assistant

Primax — Annual Report 2015

52436_rns_2016-07-07_ef440834-06d0-44b9-bf10-3c3aba6f6a63.pdf

Primax Electronics Ltd. 2015 Annual Report

I. Letter to shareholders

04

III. Corporate Governance Report 05

4. Other supplementary information

1. 2015 Financial Performance

（ 1 ） Financial Results

（ 2 ） Budget Execution

（ 3 ） Cash Flow Analysis

（ 4 ）

I. Letter to shareholders

Ladies and Gentlemen:

（ 5 ） R&D Investments

2. 2016 Business Strategy and Technology Developments

3. Commitment to Sustainability and Corporate Social Responsibility

II.

1. Establishment date: March 20, 2006

2. Company background:

（ 2 ） The business operations of each main department

III. Corporate Governance Report

1. Organizational system

（ 1 ） Directors and Supervisors

（ 2 ） General Manager, department heads, and branch officers

（ 1 ） Remuneration to Directors in the most recent year (2015)

（ 3 ） Remuneration to General Manager and Vice General Manager in the most recent year (2015)

（ 4 ） Name of the managers receiving remuneration to employees in the most recent year (2015) and the distribution implemented

Note 5: Pan, Wu-Lung retired on 03.31.2015.

4. Corporate governance operation

（ 1 ） Board of Directors operation:

Other mandatory notes:

（ 2 ） The operation of the Audit Committee or the Supervisors' participating in the Board of Directors operation:

Other mandatory notes:

（ 3 ） "Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies" and its root cause?

（ 4 ） If the Company has a Remuneration Committee setup, the composition, mandate, and operation of the Committee should be disclosed accordingly:

1. Information of the Remuneration Committee members

2. The operation of the Remuneration Committee

（ 2 ） The tenure of the current term is from July 7, 2015 to June 28, 2018. There were four

Other mandatory notes:

（ 6 ） Substantiating ethical corporate management:

1. Internal Control Declaration

PRIMAX Electronics Limited Statement of Internal Control System

PRIMAX Electronics Limited

2. If the internal control system is commissioned to CPAs for project review, the CPA's review report should be disclosed: None

1. The content of the important resolution reached in the shareholders' meeting and its implementation.

2. Important resolutions of the Board of Directors

5. CPAs fees

1. Passed the Company's current dividend policy.

6. CPAs replacement

（ 1 ） Information of former CPAs:

（ 2 ） About the successor CPAs

（ 2 ） The counterparty of equity transfer is a related party: None

（ 3 ） The counterparty of equity pledge is a related party: None

8. The change in equity transfer and equity pledge of the directors, supervisors, managers, and shareholders with over 10% shareholding in the most recent year and as of the printing date of the annual report.

9. The Top-Ten shareholders who are related party mutually, or spouse, and relatives within the second degree of kinship

10. The stock shares of one invested business held by the Company, the Company's directors, supervisors, and managers, and the business controlled by the Company directly or indirectly, and the consolidated shareholding ratio.

IV. Capital Overview

1. Capitalization

03.31.2016 Unit: Shares

2. Composition of Shareholders

Governmental Agencies

Financial Institutions

Others Juridical person

4. List of Major Shareholders

5. Market price, net worth, earnings, and dividends per share within two (2) years and the related information

6. The Company's dividend policy and its implementation

（ 1 ） Dividend policy enacted in the Company's Articles of Association:

I. Making up losses

（ 2 ） The distribution of dividend proposed in current year:

7. The impact of the stock dividend proposed in the shareholders' meeting on the Company's business performance and the earnings per share: No dividend distribution scheduled

8. Remuneration to employees and remuneration to directors and supervisors

9. The Company's buying back shares: None

10. The process of corporate bonds, preferred stock, and GDR: None

11. Employee stock warrant status

（ 1 ） Outstanding employee stock warrant status and its impact on shareholders' equity

Schedule:

（ 2 ） The managers received employee stock warrant and the name, acquisition, and subscription of the employees on the top-ten stock warrant subscribers list for an amount over NT$30 million:

12. The process of new restricted employee shares

Primax Annual Report 2015