Stock Code:4915

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

FINANCIAL STATEMENTS

December 31, 2016 and 2015 (With Independent Auditors’ Report Thereon)

Address: No. 669, Ruey Kuang Road, Neihu, Taipei Telephone: (02)2798-9008

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.

		Contents	Page
1.	Cover Page		1
2.	Table of Contents		2
3.	Independent Auditors’ Report		3
4.	Balance Sheets		4
5.	Statements of Comprehensive Income		5
6.	Statements of Changes in Equity		6
7.	Statements of Cash Flows		7
8.	Notes to the Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the financial statements	8
	(3)	New standards, amendments and interpretations adopted	8`～`11
	(4)	Summary of significant accounting policies	12`～`23
	(5)	Significant accounting assumptions and judgments, and major sources	23`～`24
		of estimation uncertainty
	(6)	Explanation of significant accounts	24`～`58
	(7)	Related-party transactions	59`～`63
	(8)	Pledged assets	63
	(9)	Commitments and contingencies	63
	(10)	Losses due to major disasters	63
	(11)	Subsequent events	63
	(12)	Other	64
	(13)	Other disclosures
		(a) Information on significant transactions	64`～`68
		(b) Information on investees	68`～`69
		(c) Information on investments in mainland China	69`～`71
	(14)	Segment information	71
9.	Statement of major accounting items		72~82

Independent Auditors’ Report

To the Board of Directors of PRIMAX ELECTRONICS LTD.:

Opinion

We have audited the financial statements of PRIMAX ELECTRONICS LTD.(“the Company”), which comprise the balance sheets as of December 31, 2016 and 2015, the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2016 and 2015, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained, inclusive of the report from other auditors, is sufficient and appropriate to provide a basis of our opinion.

Other Matter

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 the amounts included for those investments, is based solely on the reports of the other auditors. The Company’s investment in these companies constituting 4% of the total assets, as of December 31, 2016 and 2015. The related share of profit of associates accounted for using the equity method amounted constituting 11% and 9% of the profit before tax, for the years ended December 31, 2016 and 2015, respectively.

Key Audit Matters

Key audit matters are those matters that, in our professional judgments, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

3-1

In our professional judgments, key audit matters to be communicated in the independent auditors’ report are listed below:

1. Evaluation of inventories

Please refer to Note 4(g) “Inventories”, Note 5 “Significant accounting assumptions and judgments, and major sources of estimation uncertainty”, and Note 6(e) “Inventories” of the financial statements.

Description of key audit matter:

Inventories of the Company are measured at the lower of cost and net realizable value. Due to the fast hightech revolution, as well as the advancement of production technologies that may lead the dramatic change in customers’demand, the net realizable value of inventories requires subjective judgments of the management, which is the major source of estimation uncertainty. Therefore, the evaluation of inventories is one of the key audit matters for our audit.

How the matter was addressed in our audit:

Our principal audit procedures included: understanding the policies of evaluating the inventories of the Company; inspecting whether existing inventory policies are applied; examine the accuracy of the aging of inventories by sampling and analyse the changes of the aging of inventories; inspecting the reasonability for allowance provided on inventory valuation in the past and compare it to the current year to ensure that the measurements and assumptions are reasonable; sampling the inventories sold in subsequent period to assess whether the allowance for inventories are reasonable.

2. Investments accounted for using equity method

Please refer to Note 4(h) “Investments in subsidiaries”, and Note 5 “Significant accounting assumptions and judgments, and major sources of estimation uncertainty” of the financial statements.

Description of key audit matter:

The Company’s investments accounted for using equity method are all subsidiaries of the Company. Based on the scope and nature of their businesses which may influence the outcome of their operations, the net realizable value of inventories in certain subsidiaries required the managements to make subjective judgments, which is the major source of estimation uncertainty. Therefore, the valuation of inventories of the investments accounted for using equity method is one of the key audit matters for our audit.

In 2014, the Company acquired Tymphany Worldwide Enterprises Ltd. through its subsidiary, Diamond (Cayman) Holdings Ltd., and recognized its goodwill, technologies and customer relations as intangible assets. Due to the rapid industrial transformation, and the assessment of imapirment contains estimation uncertainty. Therefore, the assessment of impairment of intangible assets, recognized from the business combination by the subsidiary accounted for using equity method, is one of the key audit matters for our audit.

How the matter was addressed in our audit:

For the principal audit procedures on the valuation of inventories of the investments accounted for using equity method, please refer to key audit matters 1 “Evaluation of invetories”. In addition, the consolidated financial statements of Tymphany Worldwide Enterprises Ltd. and its subsidiaries were audited by other auditors; therefore, we issued audit instructions to their auditors as guidelines to communicate the key audit matters with them and obtained the feedbacks required in the audit instructions.

3-2

The principal audit procedures on the assessment of impairment of intangible assets of the investments accounted for using equity method included: evaluating the identification of cash generating units and any indication of impairment relating to intangible assets made by management; acquiring intangible evaluation reports from external expert engaged by the Company; appointing our internal expert to review the evaluation reports and assessing the reasonability of measurements, parameters, and assumptions; evaluating the operation outcomes and comparing them to the past forecasts; making sensitivity analysis for evaluation of impairment losses and evaluating the completeness of disclosure in the financial reports.

3. Disposal of subsidiaries

Please refer to Note 4(h) “Investments in subsidiaries”, Note 6(c) “Available-for-sale financial assetsnoncurrent of the financial statements”, and Note 6(f) “Investments accounted for using equity method” of the consolidated financial statements.

Description of key audit matter:

The Company sold parts of its shares in its subsidiary, Global TEK Fabrication Co., Ltd, and lost control over the subsidiary on October 3, 2016. This is a non-recurring transaction to the Company, wherein the trading parties are its related parties. Therefore, the disposal of subsidiaries is one of the key audit matters for our audit.

How the matter was addressed in our audit:

The principal audit procedures on the disposal of its subsidiary included: assessing whether the transactions complies with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies and the Regulations of Internal Control System of PRIMAX ELECTRONICS LTD.; reading the contracts to fully understand the trading parties involved, prices, and other agreements; inspecting the external materials of cash proceeds and amendment of shares register; obtaining the audit report from other auditors on the date the Company lost its control over the subsidiary to be the base to recognize its profit (loss) using equity method accordingly; and evaluating the completeness of disclosure in the financial reports.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

3-3

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of the investments in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

3-4

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are YUNG-HUA HUANG and CHI-LUNG YU.

KPMG

Taipei, Taiwan (Republic of China) March 7, 2017

Notes to Readers

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

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Balance Sheets

December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1110 Current financial assets at fair value through profit or loss (note 6(b)) 1170 Accounts receivable, net (note 6(d)) 1180 Accounts receivable from related parties, net (notes 6(d) and 7) 1200 Other receivables, net (notes 6(d) and 7) 1310 Inventories (note 6(e)) 1470 Other current assets Non-current assets: 1523 Available-for-sale financial assets-non-current (note 6(c)) 1550 Investments accounted for using equity method (note 6(f)) 1600 Property, plant and equipment (note 6(g)) 1760 Investment property (note 6(h)) 1780 Intangible assets (note 6(i)) 1840 Deferred tax assets (note 6(n)) 1990 Other non-current assets Total assets	December 31, 2016 Amount % $ 4,751,198 18 141,317 1 7,339,708 27 513,446 2 1,050,923 4 2,293,419 8 33,532 - 16,123,543 60 873,921 3 9,317,894 35 68,785 - 255,149 1 22,966 - 348,269 1 73,776 - 10,960,760 40 $ 27,084,303 100	December 31, 2015 Amount % 2,267,560 8 79,052 - 9,321,764 34 2,052,505 8 28,841 - 2,551,571 9 28,453 - 16,329,746 59 567,897 2 10,088,961 37 65,554 - 258,709 1 29,514 - 293,519 1 62,016 - 11,366,170 41 27,695,916 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6(j)) 2170 Notes and accounts payable 2180 Accounts payable to related parties (note 7) 2120 Current financial liabilities at fair value through profit or loss (note 6(b)) 2200 Other payables (note 7) 2201 Salary payable (note 6(p)) 2300 Other current liabilities 2320 Long-term borrowings, current portion (note 6(k)) Non-Current liabilities: 2622 Long-term accounts payable to related parties (note 7) 2540 Long-term borrowings (note 6(k)) 2630 Long-term deferred revenue (note 6(g)) 2600 Other non-current liabilities (notes 6(m) and (n)) Total liabilities 3110 Ordinary shares (note 6(o)) 3140 Capital collected in advance (note 6(o)) 3200 Capital surplus (note 6(o)) 3310 Legal reserve (note 6(o)) 3320 Special reserve (note 6(o)) 3350 Unappropriated retained earnings (note 6(o)) 3400 Other equity interest Total equity Total liabilities and equity	December 31, 2016	December 31, 2016		December 31, 2015
			Amount	%		Amount % 1,120,518 4 264 - 11,340,202 41 52,765 - 1,583,478 6 411,680 1 147,176 1 548,889 2 15,204,972 55 - - 767,778 3 1,018,732 3 274,053 1 2,060,563 7 17,265,535 62 4,411,877 16 15,174 - 777,368 3 611,322 2 97,300 - 3,951,934 15 565,406 2 10,430,381 38 27,695,916 100
			$ - 783,593 9,352,640 150,430 2,331,760 359,279 219,856 382,222 13,579,780 781,263 218,889 1,159,073 345,574 2,504,799 16,084,579 4,421,343 3,024 791,466 788,634 97,300 4,779,419 118,538 10,999,724 $ 27,084,303	- 3 35 1 8 1 1 1 50 3 1 4 1 9 59 16 - 3 3 - 18 1 41 100

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Comprehensive Income

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

4000 Operating revenue (notes 6(r) and 7) 5000 Operating costs (notes 6(e), (m), (o), (p), (s), 7 and 12) Gross profit Operating expenses (notes 6(m), (o), (p), (s), 7 and 12): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses Net operating income Non-operating income and expenses: 7010 Other income (notes 6(t) and 7) 7020 Other gains and losses (notes 6(c), (u) and 7) 7070 Share of profit of subsidiaries accounted for using equity method 7050 Finance costs Total non-operating income and expenses Profit from operations before tax 7950 Less: Income tax expense (note 6 (n)) Profit 8300 Other comprehensive income (loss): 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Actuarial gains (losses) on defined benefit plans 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences on translation of foreign operation’s financial statements 8362 Unrealised gains on available-for-sale financial assets (notes 6(c) and (v)) Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income after tax Comprehensive income Earnings per share (note 6(q)) 9710 Basic earnings per share (NT dollars) 9810 Diluted earnings per share (NT dollars)	2016	% 100 92 8 2 1 2 5 3 - 1 1 - 2 5 1 4 - - (1) - (1) (1) 3 4.40 4.36	2015
	Amount $ 45,739,783 42,106,442 3,633,341 670,475 442,145 970,860 2,083,480 1,549,861 33,468 371,406 424,575 (31,786) 797,663 2,347,524 413,454 1,934,070 (1,340) (1,340) (610,956) 110,706 (500,250) (501,590) $ 1,432,480 $ $		Amount % 51,638,181 100 48,703,633 94 2,934,548 6 610,013 1 414,570 1 983,295 2 2,007,878 4 926,670 2 22,053 - 283,488 - 755,092 1 (53,380) - 1,007,253 1 1,933,923 3 160,801 - 1,773,122 3 (8,100) - (8,100) - (71,337) - 294,053 - 222,716 - 214,616 - 1,987,738 3 4.06
			4.01

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Changes in Equity

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars)

Share capital	Share capital	Capital surplus	Retained earnings	Retained earnings	Retained earnings	Retained earnings	Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on available- for-sale financial assets
Ordinary shares	Capital collected in advance		Legal reserve	Special reserve	Unappropri ated retained earnings
$ 4,346,578 - - - - - 30,000 (2,800) - - - 38,099 4,411,877 - - - - - (3,850) - - - 13,316 $ 4,421,343	38,903 - -	673,543 - -	456,853 - -	97,300 - -		3,132,488 1,773,122 (8,100) 1,765,022 (154,469) (791,107) - - - - - - 3,951,934 1,934,070 (1,340) 1,932,730 (177,312) (927,933) - - - - - 4,779,419	422,382 - (71,337) (71,337) - - - - - - - - 351,045 - (610,956) (610,956) - - - - - - - (259,911)	707 - 294,053
	-	-	-	-				294,053
			154,469 - - - - - - -	- - - - - - - -				- - - - - - - -
			611,322 - -	97,300 - -				294,760 - 110,706
			-	-				110,706
			177,312 - - - - - -	- - - - - - -				- - - - - - -
			788,634	97,300				405,466

Note1 ： For the years ended December 31, 2016 and 2015, the Directors’ remuneration amounted to 36,803 and 31,907, and the employee remuneration amounted to 74,000 and 78,269, respectively. The amounts were deducted from the statements of comprehensive income in 2016 and 2015, respectively.

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Cash Flows

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit before tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation and amortization
Losses related to inventories
Amortization of long-term deferred revenue
Provision (reversal of provision) for bad debt expense and sales returns and discounts
Interest expense
Interest income
Compensation cost of share-based payment
Share of profit of subsidiaries accounted for using equity method
Gain on disposal of subsidiaries
Loss from disposal of property, plan and equipment
Gain on disposal of available-for-sale financial assets
Impairment losses on financial assets
Total adjustments to reconcile profit (loss)
Changes in operating assets and liabilities:
Accounts receivable, including related parties
Other receivables
Inventories
Other current assets
Deferred tax assets
Other operating assets
Changes in operating assets
Notes and accounts payable, including related parties
Salary payable
Other payables
Other current liabilities
Other operating liabilities
Changes in operating liabilities
Total adjustments
Cash inflow generated from operations
Interest received
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows from (used in) investing activities:
Proceeds from disposal and settle of share of subsidiaries using equity method
Acquisition of share of subsidiaries using equity method
Proceeds from capital reduction of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Acquisition of property, plant and equipment
Acquisition of long-term deferred revenue
Acquisition of unamortized expense
Decrease in refundable deposits
Other investing activities
Net cash flows from investing activities
Cash flows from (used in) financing activities:
Decrease in short-term borrowings
Repayment of long-term borrowings
Increase (decrease) in guarantee deposits
Cash dividends
Exercise of employee stock options
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

2016
2015
$ 2,347,524
1,933,923
41,765
36,999
32,516
175,361
(336,211)
(121,262)
43,345
(4,603)
31,383
53,380
(11,599)
(13,235)
43,182
49,041
(424,575)
(755,092)
(248,006)
-
474
269
(140,969)
-
-
939
(968,695)
(578,203)
3,477,770
(2,686,191)
(1,022,082)
(19,177)
225,636
(1,268,443)
(5,079)
(4,688)
(54,750)
(229,498)
(62,265)
(58,729)
2,559,230
(4,266,726)
(422,970)
3,306,055
(52,401)
23,768
569,820
679,328
72,680
86,321
132,613
51,366
299,742
4,146,838
1,890,277
(698,091)
4,237,801
1,235,832
11,599
13,235
(31,315)
(53,265)
(234,992)
(159,152)
3,983,093
1,036,650
559,498
-
-
(808,020)
1,280
1,600
220,270
-
(23,062)
(23,292)
476,552
1,076,851
(23,710)
(9,862)
(441)
(684)
91
(35)
1,210,478
236,558
(1,120,518)
(1,028,282)
(715,556)
(183,333)
34,977
(37,478)
(927,933)
(791,107)
19,097
32,673
(2,709,933)
(2,007,527)
2,483,638
(734,319)
2,267,560
3,001,879
$
4,751,198
2,267,560

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Notes to the Financial Statements

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

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.

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.

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) Approval date and procedures of the financial statements:

The financial statements were authorized for issuance by the board of directors on March 7, 2017.

(3) New standards, amendments and interpretations adopted:

(a) Impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the FSC but not yet in effect

According to Ruling No. 1050026834 issued on July 18, 2016, by the FSC, public entities are required to conform to the IFRSs which were issued by the International Accounting Standards Board (IASB) before January 1, 2016, and were endorsed by the FSC on January 1, 2017 in preparing their financial statements. The related new standards, interpretations and amendments are as follows:

	Effective date per
New, Revised or Amended Standards and Interpretations	IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying	January 1, 2016
the Consolidation Exception"
Amendments to IFRS 11 "Accounting for Acquisitions of Interests in Joint	January 1, 2016
Operations"

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

	Effective date per
New, Revised or Amended Standards and Interpretations	IASB
IFRS 14 "Regulatory Deferral Accounts"	January 1, 2016
Amendment to IAS 1 "Disclosure Initiative"	January 1, 2016
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of	January 1, 2016
Depreciation and Amortization"
Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants"	January 1, 2016
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions"	July 1, 2014
Amendment to IAS 27 "Equity Method in Separate Financial Statements"	January 1, 2016
Amendments to IAS 36 "Recoverable Amount Disclosures for Non-Financial	January 1, 2014
Assets"
Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge	January 1, 2014
Accounting"
Annual improvements cycles 2010-2012 and 2011-2013	July 1, 2014
Annual improvements cycle 2012-2014	January 1, 2016
IFRIC 21 "Levies"	January 1, 2014

The Company assessed that the initial application of the above IFRSs would not have any material impact on the financial statements.

(b) Newly released or amended standards and interpretations not yet endorsed by the FSC

A summary of the new standards and amendments issued by the IASB but not yet endorsed by the FSC is listed below. As of the date the Company’s financial statements were issued, except for IFRS 9 and IFRS 15, which should be applied starting January 1, 2018, the FSC has yet to announce the effective dates of the other IFRSs.

effective dates of the other IFRSs.
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 9 "Financial Instruments"	January 1, 2018
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture"	be determined by
	IASB
IFRS 15 "Revenue from Contracts with Customers"	January 1, 2018
IFRS 16 "Leases"	January 1, 2019
Amendment to IFRS 2 "Clarifications of Classification and Measurement of	January 1, 2018
Share-based Payment Transactions"
Amendment to IFRS 15 "Clarifications of IFRS 15"	January 1, 2018
Amendment to IAS 7 "Disclosure Initiative"	January 1, 2017
Amendment to IAS 12 "Recognition of Deferred Tax Assets for Unrealized	January 1, 2017
Losses"
Amendments to IFRS 4 "Insurance Contracts"	January 1, 2018

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Annual Improvements to IFRSs 2014 - 2016 Cycle :
IFRS 12 "Disclosure of Interests in Other Entities"	January 1, 2017
IFRS 1 "First-time Adoption of International Financial Reporting Standards"	January 1, 2018
and IAS 28 "Investments in Associates and Joint Ventures"
IFRIC 22 "Foreign Currency Transactions and Advance Consideration"	January 1, 2018
IAS 40 "Transfers of Investment Property"	January 1, 2018

Those standards that possibly impact the Company’s financial statements are listed below:

Issuance / Release Dates May 28, 2014 April 12, 2016	Standards or Interpretations Content of amendment IFRS 15 "Revenue from Contracts with Customers" IFRS 15 establishes a five-step model for recognizing revenue that applies to all contracts with customers, and will supersede IAS 18 "Revenue," IAS 11 "Construction Contracts," and a number of revenue-related interpretations.

Final amendments issued on April 12, 2016, clarify how to (i) identify performance obligations in a contract; (ii) determine whether a company is a principal or an agent; (iii) account for a license for intellectual property (IP); and (iv) apply transition requirements.

		clarify how to (i) identify performance obligations in a contract; (ii) determine whether a company is a principal or an agent; (iii) account for a license for intellectual property (IP); and (iv) apply transition requirements.
November 19, 2013	IFRS 9 "Financial	The standard will replace IAS 39 "Financial
July 24, 2014	Instruments"	Instruments: Recognition and Measurement", and
		the main amendments are as follows:

‧ Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial assets’ contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore, there is a requirement that "own credit risk" adjustments be measured at fair value through other comprehensive income.
‧ Impairment: The expected credit loss model is used to evaluate impairment.
‧ Hedge accounting: Hedge accounting is more closely aligned with risk management activities, and hedge effectiveness is measured based on the hedge ratio.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Issuance / Release
Dates
January 13, 2016
January 29, 2016
June 20, 2016
December 8, 2016 Standards or
Interpretations
Content of amendment
IFRS 16 "Leases"
The new standard of accounting for lease is
amended as follows:
For a contract that is, or contains, a lease, the
‧
lessee shall recognize a right-of-use asset and a
lease liability in the balance sheet. In the
statement
of
profit
or
loss
and
other
comprehensive income, a lessee shall present
interest expense on the lease liability separately
from the depreciation charge for the right-of
use asset during the lease term.
A lessor classifies a lease as either a finance
‧
lease or an operating lease, and therefore, the
accounting remains similar to IAS 17.
Amendments to IAS 7
"Disclosure Initiative"
The amendments will require entities to provide
disclosures that enable investors to evaluate
changes in liabilities arising from financing
activities, including changes arising from cash
flows and non-cash changes.
Amendments to IFRS 2
"Clarifications of
Classification and
Measurement of Share
based Payment
Transactions"
The amendments, which were developed through
the IFRS Interpretations Committee, provide
requirements on the accounting for:
the
effects
of
vesting
and
non-vesting
‧
conditions on the measurement of cash-settled
share-based payments;
share-based payment transactions with a net
‧
settlement
feature
for
withholding
tax
obligations; and
a modification to the terms and conditions of a
‧
share-based
payment
that
changes
the
classification of the transaction from cash-
settled to equity-settled.
IFRIC 22 "Foreign
Currency Transactions and
Advance Consideration"
IFRIC 22 clarifies the transaction date used to
determine the exchange rate. The transaction date
is the date on which the Company initially
recognizes the prepayment or deferred income
arising from the advance consideration.

The Company is evaluating the impact on its financial position and financial performance of the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(4) Summary of significant accounting policies:

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.

(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
(i) 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;
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.
(ii) 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.

(c) Foreign currencies
(i) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Company 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. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Foreign currency differences arising on retranslation are recognized in profit or loss except for the differences relating to available-for-sale equity investment which are recognized in other comprehensive income.

(ii) 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.

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 noncontrolling 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

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) 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.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non current.

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) 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 issuing equity instruments do not affect its classification.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash, cash in bank, and short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Time deposits with maturities within three months or less which meet the above definition and are held for the purpose of meeting short term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(f) Financial instruments

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

(i) 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

Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the other categories of financial assets. Available-for-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 nonoperating 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 exdividend 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 with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise accounts 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 short-term receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using tradedate accounting.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

3) Impairment of financial assets

Except for financial assets at fair value through profit or loss, financial assets are assessed for impairment at each reporting date. A financial asset 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 (a “loss event”) and that loss event (or events) has an impact 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.

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 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.

An impairment loss in respect of a financial asset is deducted from the carrying amount except for accounts 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-for-sale 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Impairment losses and recoveries of accounts receivable are recognized in operating expense; impairment losses and recoveries of other financial assets are recognized in other gains and losses under non-operating income and expenses.

4) Derecognition of financial assets

Financial assets are derecognized 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.

On derecognition of a financial asset in its entirety, 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 non-operating income and expenses.

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 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.

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

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

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

2) Other financial liabilities

Financial liabilities not classified as held for trading or designated as at fair value through profit or loss, which comprise notes and accounts payable (including related parties), salary payable, other payables and loan and borrowings, 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

3) Derecognition of financial liabilities

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.

4) Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis when the Company 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.

(iii) Derivative financial instruments

The Company holds derivative financial instruments to hedge 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 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.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-costing method, and includes 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.

(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. When the Company loses control over its subsidiaries, the Company derecognizes the investment by the book value on the date of loss of control and remeasures the rest of the investments at fair value on the same date.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(i) Investment property

Investment property is 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. Depreciation expense is calculated based on the depreciation method, useful life, and residual value which are the same as those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

When the use of an investment property changes such that it is reclassified as property, plant and equipment, its book value 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
(i) 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 recognized as other gains and losses under non-operating income and expense.

(ii) Reclassification to investment property

A property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment use.

(iii) 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 Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iv) Depreciation

Depreciation is calculated on the cost of an asset less its residual value on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment. 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 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 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 expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

(k) Lease
(i) Lessor

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

(ii) 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 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.

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 from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(i) Trademarks 10 years
(ii) Patents 2.5~10 years
(iii) 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 estimates.

(m) Impairment of non-financial assets

Non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. If it is not possible to determine the recoverable amount for the individual asset, then the Company 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 cash-generating unit is less than its carrying amount, the carrying amount of the individual asset or cash-generating 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 an improvement 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

(i) 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 goods is received at the customer’s warehouse.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(ii) 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) Employee benefits

(i) Defined contribution plans

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.

(ii) Defined benefit plans

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, based on the discounted present value of the said defined benefit obligation. The fair value of any plan assets are deducted for purposes of determining the Company’s net defined benefit obligation. The discount rate used in calculating the present value is the market yield at the reporting date of 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.

The calculation is performed annually by a qualified 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.

When the benefits of a plan are improved, the portion 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.

(iii) Short-term employee benefits

Short-term employee benefit obligations are measured 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(p) 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 non-market 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 sharebased payment is measured to reflect such conditions, and there is no true-up for differences between the expected and the actual outcomes.

(q) 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 for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following exceptions:

(i) Assets and liabilities that are initially recognized but are not related to a business combination and have no effect on profit or taxable gains (losses) at the time of the transaction.
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, which are normally the 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:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:
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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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.

(r) Earnings per share

The Company discloses the basic and diluted earnings per share attributable to ordinary stockholders of the Company. Basic earnings per share is calculated as the profit attributable to the ordinary stockholders of the Company divided by the weighted-average number of ordinary shares outstanding. Diluted earnings per share is calculated as 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 potentially dilutive ordinary shares. Dilutive potential ordinary shares comprise employee stock options, employee remuneration, and restricted stock.

(s) Operating segments

Please refer to the Company’s consolidated financial statements for the years ended December 31, 2016 and 2015, for further details.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity 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 management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

There are no critical judgments made in applying the accounting policies that have significant effects on the amounts recognized in the financial statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Valuation of inventories

As inventories are measured at the lower of cost or net realizable value, the Company estimates the amount due to inventories’ obsolescence and unmarketable items at the reporting date and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(b) Valuation of inventories and assessment of impairment of intangible assets of investments using equity method

Please refer to note 5(a) for inventories valuation. The Company’s investments accounted for using equity method include intangible assets from premium investment. The assessment of imapirment of intangible assets required the Company to make subjective judgments on cash-generating units, allocate the intangible assets to relevant cash-generating units, and estimate the recoverable amount of relevant cash-generating units. Changes in economic conditions or changes in assessment caused by business strategies could result in significant impairment charges or reversal in future years.

The Company’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss. 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 valuations should be classified.

The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

(i) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
(ii) 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).
(iii) Level 3: inputs for the assets or liability that are not based on observable market data (unobservable inputs).

For any transfer within the fair value hierarchy, the impact of transfer is recognized on the reporting date. Please refer to note 6(w) for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Checking accounts and demand deposits Time deposits	December 31, 2016 December 31, 2015 $ 543 625 931,183 1,075,455 3,819,472 1,191,480 $ 4,751,198 2,267,560

Please refer to note 6(w) for the currency risk and the interest rate risk of the Company’s cash and cash equivalents.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(b) Financial assets and liabilities at fair value through profit or loss
(i) The derivative financial instruments was as follows:

Financial assets at fair value through profit or loss – current: Forward exchange contracts Foreign exchange swap contracts Financial liabilities at fair value through profit or loss – current: Forward exchange contracts Foreign exchange swap contracts	December 31, 2016 December 31, 2015 $ 141,317 79,052 - - $ 141,317 79,052 $ (72,909) (52,765) (77,521) - $ (150,430) (52,765)

(ii) The Company held the following derivative financial instruments not designated as hedging instruments presented as held-for-trading financial assets as of December 31, 2016 and 2015:

	December 31, 2016
Derivative financial instruments Forward exchange contracts – buy USD / sell TWD Forward exchange contracts – buy TWD/sell USD Forward exchange contracts – swap in TWD/swap out USD	Nominal amount Maturity date Predetermined rate USD 252,000 January 5, 2017~ March 27, 2017 31.157~32.015 USD 189,500 January 5, 2017~ March 27, 2017 31.765~32.290 USD 81,000 January 5, 2017~ January 19, 2017 31.245~31.920

	December 31, 2015
Derivative financial instruments Forward exchange contracts – buy USD / sell TWD Forward exchange contracts – buy CNY / sell USD Forward exchange contracts – buy TWD/sell USD	Nominal amount Maturity date Predetermined rate USD 205,000 January 7, 2016~ February 26, 2016 32.754~32.892 USD 40,000 January 19, 2016 6.6380 USD 205,000 January 7, 2016~ February 26, 2016 32.802~33.010

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iii) Please refer to note 6(w) for the liquidity risk of the Company’s financial instruments.
(iv) The Company did not provide any of the aforementioned financial assets at fair value through profit or loss – current as collateral.
(c) Available-for-sale financial assets – non-current

Stocks listed in domestic markets Stocks unlisted in domestic markets	December 31, 2016 December 31, 2015 $ 586,404 551,600 287,517 16,297 $ 873,921 567,897

(i) WK Technology Fund IV Ltd. refunded $1,600 and $1,280 to the Company due to capital reduction in July, 2015 and April, 2016, respectively.
(ii) 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.
(iii) The impairment loss was $939 for the years ended December 31, 2015 and was recognized as other gains and losses.
(iv) The Company held 30% shares of Global TEK Fabrication Co., Ltd’s shares and sold 20% of them at $50 per share on October 3, 2016. The total proceeds of $549,347 were received. The Company recorded the total gain of $248,004 under other gains or losses, including the amount of $83,219 from the remaining shares measured at fair value due to losing its control over Global TEK Fabrication Co., Ltd. The Company reclassified the carrying amounts of the －
remaining shares to available-for-sale financial asset non-current. Please refer to the Company’s consolidated financial statements for further information on losing control of subsidiaries.
(v) In the second quarter of 2016, the Company sold 841 thousand shares of Nien Made Enterprise Co., Ltd. for $220,270. The gain on disposal which was recognized as other gains and losses, amounted to $140,969, deducting the cost of $79,301.
(vi) The unrealized gains were $111,105 and $294,900 for the years ended December 31, 2016 and 2015, respectively, and were recognized as unrealized gains on available-for-sale financial assets.
(vii) The Company did not provide any of the aforementioned available-for-sale financial assets as collateral.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(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 Total	December 31, 2016 December 31, 2015 $ 7,437,179 9,376,338 513,446 2,052,505 1,050,923 28,841 (76,977) (19,647) (20,494) (34,927) $ 8,904,077 11,403,110

(i) The Company did not provide any of the aforementioned accounts receivable and other receivables (including related parties) as collateral.
(ii) Please refer to note 6(w) for the movements in the allowance for doubtful accounts and the credit risk and currency risk for the years ended December 31, 2016 and 2015.
(iii) The Company entered into agreements with banks to sell its accounts receivable without recourse. According to the agreements, within the limit of its credit facilities, the Company does not need to guarantee the capability of its customers to pay for reasons other than commercial disputes when transferring its accounts receivable. The Company receives partial advances upon sales of accounts receivable and pays interest calculated based on the interest rates agreed for the period through the collection of the accounts receivable. The remaining amounts are received upon the collection of the accounts receivable, and are recorded as other receivables. In addition, the Company shall pay handling charges based on a fixed rate. As of December 31, 2016 and 2015, the details of transferred accounts receivable which conformed to the criteria for derecognition were as follows:

			December 31, 2016
Buyer Mega International Commercial Bank HSBC Bank Bank of Taiwan	Amount sold NT$ $ 374,057 592,397 449,051 $ 1,415,505	Credit facilities US$ (expressed in thousand) 20,000 64,400 26,000 110,400	Cash received in advance NT$ Interest rate Guarantee (promissory note) expressed in thousands 336,651 % 1.75 US 5,000 533,157 % 1.42 US 58,000 404,146 % 2.10 NT 772,200 1,273,954 December 31, 2015	Amount derecognized NT$ Amount not received NT$ 336,651 37,406 533,157 59,240 404,146 44,905 1,273,954 141,551
Buyer Mega International Commercial Bank HSBC Bank Bank of Taiwan		Credit facilities US$ (expressed in thousand) 25,000 64,400 26,000 115,400	Cash received in advance NT$ Interest rate Guarantee (promissory note) expressed in thousands - US 7,000 - US 58,000 - NT 725,400 -	Amount derecognized NT$ Amount not received NT$ - - - - - - - -

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iv) 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, 2016 December 31, 2015 $ 102,684 1,188 2,190,735 2,550,383 $ 2,293,419 2,551,571

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

For the years ended December 31, 2016 and 2015, the Company recognized the following items as cost of goods sold:

Gains (losses) on inventory valuation Loss on disposal of inventories Losses on physical inventories, net	2016 2015 $ (10,601) 9,500 (19,737) (184,276 (2,178) (585 $ (32,516) (175,361

(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, 2016 December 31, 2015 $ 9,317,894 10,088,961

(i) Please refer to the Company’s consolidated financial statements for the years ended December 31, 2016, for details of subsidiaries.
(ii) The Company did not provide investments accounted for using the equity method as collateral.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(g) Property, plant and equipment

The cost, and depreciation of the property, plant and equipment of the Company for the years ended December 31, 2016 and 2015, were as follows:

Land	Buildings and additional equipment	Other equipment
$ 22,879 - - - $ 22,879 $ 22,879 - - - $ 22,879 $ - - - $ - $ - - - $ - $ 22,879 $ 22,879 $ 22,879	141,789 - - -	44,743 4,580 (3,059) - 46,264 44,152 2,756 (2,469) 304 44,743 35,445 4,995 (2,584) 37,856 32,271 5,374 (2,200) 35,445 8,408 9,298 11,881
	141,789
	141,789 - - -
	141,789
	131,577 358 -
	131,935
	131,218 359 -
	131,577
	9,854
	10,212
	10,571

(i) The unamortized deferred revenue of equipment subsidy amounted to $1,159,073 and $1,018,732 for the years ended December 31, 2016 and 2015, respectively.

(ii) The Company did not provide property, plant and equipment as collateral.

(Continued)

PRIMAX ELECTRONICS LTD.

Notes to Financial Statements

(h) Investment property

Cost or deemed cost: Balance on January 1, 2016 Additions Balance on December 31, 2016 Balance on January 1, 2015 Additions Balance on December 31, 2015 Depreciation and impairment losses: Balance on January 1, 2016 Depreciation Balance on December 31, 2016 Balance on January 1, 2015 Depreciation Balance on December 31, 2015 Carrying amounts: Balance on December 31, 2016 Balance on December 31, 2015 Balance on January 1, 2015 Fair value: Balance on December 31, 2016 Balance on December 31, 2015 Balance on January 1, 2015	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 Total 172,167 334,179 - - 172,167 334,179 172,167 334,179 - - 172,167 334,179 41,529 75,470 3,560 3,560 45,089 79,030 37,969 71,910 3,560 3,560 41,529 75,470 127,078 255,149 130,638 258,709 134,198 262,269 $ 629,690 $ 592,092 $ 561,338

(i) The fair value of investment property is based on the quotation from third parties, which is categorized within Level 3.
(ii) 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.

(iii) The Company did not provide any of the aforementioned investment property as collateral.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(i) Intangible assets

The cost and amortization of the intangible assets of the Company for the years ended December 31, 2016 and 2015, were as follows:

Cost: Balance at January 1, 2016 Acquisition Balance at December 31, 2016 Balance at January 1, 2015 Acquisition Balance at December 31, 2015 Amortization: Balance at January 1, 2016 Amortization Balance at December 31, 2016 Balance at January 1, 2015 Amortization Balance at December 31, 2015 Carrying amount: Balance at December 31, 2016 Balance at December 31, 2015 Balance at January 1, 2015	Trademarks		Patents 64,271 - 64,271 64,271 - 64,271 62,337 1,934 64,271 58,468 3,869 62,337 - 1,934 5,803	Copyrights Total 30,832 120,687 - - 30,832 120,687 30,832 120,687 - - 30,832 120,687 12,846 91,173 2,056 6,548 14,902 97,721 10,791 82,690 2,055 8,483 12,846 91,173 15,930 22,966 17,986 29,514 20,041 37,997
	$ 25,584 - $ 25,584 $ 25,584 - $ 25,584 $ 15,990 2,558 $ 18,548 $ 13,431 2,559 $ 15,990 $ 7,036 $ 9,594 $ 12,153

The Company did not provide any of the aforementioned intangible assets as collateral.

(j) Short-term borrowings

The details were as follows:

Unsecured bank loans Unused credit lines Annual interest rates	December 31, 2016 December 31, 2015 $ - 1,120,518 $ 10,044,220 6,960,042 0.93%~1.27% 0.85%~1.38%

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(k) Long-term borrowings

Unsecured bank loans Less: current portion Total Unused credit lines Unsecured bank loans Less: current portion Total Unused credit lines		December 31, 2016 Annual interest rate Maturity year Amount 0.95%~1.56% 2017~2020 $ 601,111 (382,222) $ 218,889 $ - December 31, 2015 Annual interest rate Maturity year Amount 0.95%~1.56% 2017~2020 $ 1,316,667 (548,889) $ 767,778 $ 150,000
	Currency	Annual interest rate
	TWD
	Currency	Annual interest rate
	TWD	0.95%~1.56%

(i) 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, 2016, 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.
(ii) Please refer to note 9 for the details of the outstanding guarantee notes.
(l) Operating lease
(i) Lessee

Non-cancellable operating lease rentals are payable as follows:

Less than one year Between one and five years	December 31, 2016 December 31, 2015 $ 90,708 90,708 93,430 184,138 $ 184,138 274,846

The Company leases a number of offices under operating leases. The lease terms are 15 years.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(ii) 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 between two and five years More than five years	December 31, 2016 December 31, 2015 $ 10,957 1,060 37,775 - 84,857 - $ 133,589 1,060

(m) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value are as follows:

Present value of defined benefit obligations Fair value of plan assets Deficit in the plan Asset ceiling Net defined benefit liability	December 31, 2016 December 31, 2015 $ 160,593 160,913 96,865 97,683 63,728 63,230 - - $ 63,728 63,230

The Company 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 retirement benefits based on years of service and average salary for the six months prior to retirement.

1) Composition of plan assets

The Company allocates 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 Company’s Bank of Taiwan labor pension reserve account balance amounted to $96,865 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

2) Movements in present value of defined benefit obligations

The movements in present value of defined benefit obligations for the Company for the years ended December 31, 2016 and 2015, were as follows:

		2016	2015
Defined benefit obligation on January 1	$	160,913	162,598
Business combinations
Benefits paid		(4,995)	(14,885)
Current service costs and interest cost		3,417	4,685
Remeasurement of net defined benefit liabilities		1,258	8,515
Defined benefit obligation on December 31	$	160,593	160,913

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Company for the years ended December 31, 2016 and 2015, were as follows:

Fair value of plan assets on January 1 Interest income Remeasurement of net defined liabilities Contributions paid Benefits paid Fair value of plan assets on December 31	2016 2015 $ 97,683 104,919 942 2,167 (271) 603 3,506 4,879 (4,995) (14,885) $ 96,865 97,683

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company for the years ended December 31, 2016 and 2015, were as follows:

Current service costs Net interest of net liabilities for defined benefit Expenses	2016 2015 $ 1,401 1,322 1,074 1,196 $ 2,475 2,518

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

5) Remeasurement of net defined liability (asset) recognized in other comprehensive income

The Company’s remeasurement of net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2016 and 2015, was as follows:

Balance on January 1 Recognized during the period Balance on December 31	2016 2015 $ 2,892 (5,020) 1,529 7,912 $ 4,421 2,892

6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increase rate	December 31, 2016 December 31, 2015 % 1.375 % 1.750 % 3.250 % 3.250

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date was $3,336. The weighted-average lifetime of the defined benefit plans is 12 years.

7) Sensitivity analysis

When computing the present value of the defined benefit obligations, the Company 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.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2016 Discount rate Future salary increase rate December 31, 2015 Discount rate Future salary increase rate	Influences of defined benefit obligations
	Increased 0.25% Decreased 0.25% $ (3,586) 3,708 $ 3,545 (3,447) $ (3,835) 3,971 $ 3,811 (3,701)

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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 change in the method and assumptions used in the preparation of the sensitivity analysis for 2016 and 2015.

(ii) Defined contribution plans

The Company allocates 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 allocates 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 $41,230 and $39,743 for the years ended December 31, 2016 and 2015, respectively, recorded as operating expenses and operating cost in the statement of comprehensive income.

(n) Income taxes

(i) The components of income tax expenses for the years ended December 31, 2016 and 2015, were as follows:

Current tax expense Deferred tax expense Income tax expense	2016 2015 $ 432,225 366,500 (18,771) (205,699) $ 413,454 160,801

(ii) The Company had no income tax recognized directly in equity or other comprehensive income for the years ended December 31, 2016 and 2015.
(iii) Reconciliation of income tax expenses and profit before tax for the years ended December 31, 2016 and 2015, were as follows:

Profit 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 Gains on disposal of stocks Others Income taxes expense	2016 2015 $ 2,347,524 1,933,923 399,079 328,767 (47,655) (105,331) (41,196) (83,224) 7,106 157 65,978 60,246 (50,023) - 80,165 (39,814) $ 413,454 160,801

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iv) 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:

follows:
		December 31,	December 31,
		2016	2015
Aggregate amount of temporary differences related
to investments in subsidiaries	$	422,133	475,399

2) Unrecognized deferred tax assets

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

Deductible temporary differences	December 31, 2016 December 31, 2015 $ 109,500 60,300

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 the years ended December 31, 2016 and 2015, were as follows:

Deferred tax liabilities: Balance on January 1, 2016 Recognized in profit or loss Balance on December 31, 2016 Balance on January 1, 2015 Recognized in profit or loss Balance on December 31, 2015	Investment income recognized under the equity method (overseas)	Unrealized foreign exchange gains	Unrealized foreign exchange gains		Others Total
	$ 112,054 24,523 $ 136,577 $ 89,222 22,832 $ 112,054		- -		5,528 117,582 11,456 35,979 16,984 153,561 1,061 93,783 4,467 23,799 5,528 117,582
			-

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Deferred tax assets: Balance on January 1, 2016 Recognized in profit or loss Balance on December 31, 2016 Balance on January 1, 2015 Recognized in profit or loss Balance on December 31, 2015	Bad debt in excess of tax limit $ 20,939 4,515 $ 25,454 $ 11,521 9,418 $ 20,939	Unfunded pension fund contribution 14,473 (175) 14,298 14,875 (402) 14,473	Unrealized sales returns and allowances 44,241 13,374 57,615 29,977 14,264 44,241	Loss on inventory valuation 3,267 1,303 4,570 4,382 (1,115) 3,267	Deferred granted revenue 173,185 23,857 197,042 - 173,185 173,185	Unrealized exchange losses 17,339 (17,290) 49 - 17,339 17,339	Others Total 20,075 293,519 29,166 54,750 49,241 348,269 3,266 64,021 16,809 229,498 20,075 293,519

(v) 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.
(vi) Information related to the unappropriated earnings and tax deduction ratio is summarized below:

Unappropriated earnings in 1998 and after Balance of imputation credit account Creditable ratio for earnings distribution to ROC residents stockholders	December 31, 2016 December 31, 2015 $ 4,779,419 3,951,934 $ 508,028 420,838 2016 (estimated) 2015 (actual) 19.06 % 13.69 %

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

As of December 31, 2016 and 2015, the nominal ordinary shares amounted to $5,000,000. Face value of each share is $10 (dollars), which means in total there were 500,000 thousand authorized ordinary shares, of which 442,134 and 441,188 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Reconciliation of shares outstanding for the years ended December 31, 2016 and 2015, was as follows:

(in thousands of shares) Balance on January 1 Exercise of employee stock options Issued for restricted stock Redemption of restricted stock Balance on December 31		Ordinary shares
		2016 2015 441,188 434,658 1,331 3,810 - 3,000 (385) (280) 442,134 441,188

(i) Ordinary shares
1) The Company issued 1,331 thousand and 3,810 thousand new shares of ordinary shares for the exercise of employee stock options in 2016 and 2015, 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, 2016 and 2015, were as follows:

Exercise price per share: $25.20 Exercise price per share: $11.42 Exercise price per share: $26.50	December 31, 2016
	Exercised shares (in thousands) Exercise price 120 $ 3,024 December 31, 2015

	Exercised shares (in thousands) Exercise price 235 $ 2,679 472 12,495 707 $ 15,174

(ii) Capital surplus

The balances of capital surplus as of December 31, 2016 and 2015, were as follows:

Additional paid-in capital Employee stock options Restricted employee stock options	December 31, 2016 December 31, 2015 $ 508,583 447,630 229,175 236,277 53,708 93,461 $ 791,466 777,368

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

According to the ROC Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the capital increase via transferring of the paid-in capital, in excess of par value, should not exceed 10% of the total common stock outstanding.

(iii) Retained earnings

According to the articles of the Company, when allocating the earnings for each year, the Company shall first offset its losses in previous year and set aside a legal capital reserve at 10% of the earing left over, until the accumulated legal capital reserve has equaled the total capital of the Company; then set aside a special capital reserve in accordance with relevant laws, the balance of the earnings shall combined into an aggregate amount of undistributed earnings, which shall become the aggregate distributable earnings to be distributed by the directors’ distribution proposals proposed to the resolution at the stockholders’ meeting.

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.

1) Legal reserve

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, 2016.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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

On June 20, 2016, and June 29, 2015, the stockholders’ meeting resolved the distribution of earnings for 2015 and 2014, respectively. The distribution was NT$2.1 and 1.8 (dollars) per share, which amounted to $927,933 thousand and $791,107 thousand, respectively.

(p) Share-based payment

(i) 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 grant of options 2 years 3 years	Exercisable percentage (cumulative)
	50 % 100 %

b) Procedure for fulfilling obligation: Primax Holdings fulfills its obligation by issuing new ordinary shares.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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 nonvoting 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 long-term 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 ordinary share of the Company.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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 ordinary 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 $2,517 and $1,523 in 2016 and 2015, respectively.
7) As of December 31, 2016, outstanding employee stock options of the Company for equity-settled share-based payment were as follows:

Modification and grant date Exercise price Granted units (thousand) Service period (from the grant date of the original stock options) Vesting period (from the grant date of the original stock options)	Plan 1 (note 1) December 30, 2008/ November 12, 2009 11.42 30,828 5 years (May 23, 2005~ November 11, 2014) 2 ~ 3 years	Plan 2 (note 2) December 30, 2008/ November 12, 2009 11.42 7,224 6~8 years (January 2, 2008~ November11, 2017) 3 ~ 5 years	Plan 3 (note 3)
			Issued in November 2011 Issued in October 2012 November 24, 2011 October 22, 2012 16.20 25.2 1,500 3,500 5 years (November 24, 2011~ November 23, 2016) 5 years (October 22, 2012~ October 21, 2017) 2 ~ 3 years 2 ~ 3 years

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:

Period of stock options	Plan 1 Plan 2 0.2 0.2 2.37~5 6~8 0.91677~1 0.91677~0.92827 34.78%~44.59% 38.98%~48.44% - - 2.439%~2.665% 2.509%~2.538%
Exercise price of Primax Holdings’s stock options (USD) Expected time until expiration (years) Stock price per share of Primax Holdings (USD) Expected volatility of stock price Expected cash dividend rate Risk-free interest rate

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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

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

8) The incremental fair value resulting from the modification described in section (4) 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:

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

The information on the stock options using the Black-Scholes option pricing model to measure the incremental fair value at the modification date was as follows:

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

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

9) The related information on compensatory employee stock option plans 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	2016 Weighted- average exercise price Stock options (in thousands) 24.66 1,728 - - 25.20 (25) 25.62 (746) - - 22.16 957 22.16 957	2015 Weighted- average exercise price Stock options (in thousands) 22.66 3,724 - - 25.66 (169) 18.67 (1,750) 27.70 (77) 24.66 1,728 24.66 1,728
	Weighted- average exercise price 24.66 - 25.20 25.62 - 22.16 22.16

As of December 31, 2016 and 2015, 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, 2016 December 31, 2015 - - 211 211 - - 746 1,517 957 1,728 0.82 1.82

(ii) Restricted stock
1) As of December 31, 2016, the outstanding restricted stock of the Company was as follows:

follows:
		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 (per share)	22.80	25.15	27.30	52.00	43.70	38.40
Exercise price	Free grants	Free grants	Free grants	Free grants	Free grants	Free grants
Granted units (thousand shares)	1,450	186	135	220	1,225	1,775
Vesting period	1~3 years	1~2 years	1~2 years	1~2 years	1~3years	1~3 years
	(notes 2 and 3)	(notes 3 and 4)	(notes 3 and 4)	(note 3)	(notes 2 and 3)	(note 2)

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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 2016 and 2015 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		2016 2015 3,270 1,310 - 3,000 - - (1,214) (660) (285) (380) 1,771 3,270

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iii) Expenses and liabilities attributable to share-based payment for 2016 and 2015 were as follows:

Expenses attributable to employee stock options Restricted stock Total Salary payable: Current	2016 2015 $ - 2,564 43,182 46,477 $ 43,182 49,041 $ 1,938 4,092

(q) Earnings per share

(i) Basic earnings per share

The calculation of basic earnings per share for the years ended December 31, 2016 and 2015, based on the profit and the weighted-average number of ordinary shares outstanding was as follows:

Profit of the Company for the year Weighted-average number of ordinary shares (thousand shares) Basic earnings per share (NT dollars)	2016 2015 $ 1,934,070 1,773,122 439,169 436,372 $ 4.40 4.06

Weighted-average number of ordinary shares (thousand shares)

Ordinary shares at January 1 Exercise of employee stock options Vesting of restricted stock Ordinary shares at December 31	2016 2015 437,818 433,348 760 2,818 591 206 439,169 436,372

(ii) Diluted earnings per share

The calculation of diluted earnings per share for the years ended December 31, 2016 and 2015, based on the profit and the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares was as follows:

Profit of the Company for the year $ Weighted-average number of ordinary shares (diluted / thousand shares) Diluted earnings per share (NT dollars) $	2016 2015 1,934,070 1,773,122 443,212 441,810 4.36 4.01

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Weighted-average number of ordinary shares at December 31 (basic) Effect of employee stock options Effect of employee stock bonuses Effect of restricted stock Weighted-average number of ordinary shares at December 31 (diluted)		2016 2015 439,169 436,372 745 1,707 2,174 2,769 1,124 962 443,212 441,810

(r) Operating revenue

The details of operating revenue for the years ended December 31, 2016 and 2015, were as follows:

Goods sold Services rendered Total	2016 2015 $ 44,778,842 50,323,410 960,941 1,314,771 $ 45,739,783 51,638,181

(s) Employee’s, directors’ and supervisors’ remuneration

In accordance with the Articles of incorporation, the Company should contribute 2 to 10 percent of the profit as employee remuneration and less than 2 percent as directors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The recipients of shares and cash may include the employees of the Company’s affiliated companies who meet certain conditions.

Details of remuneration to employees and directors for the years ended December 31, 2016 and 2015, were as follows:

Employee remuneration Directors’ remuneration	2016 2015 $ 74,000 78,269 36,803 31,907 $ 110,803 110,176

The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company’s articles. These remunerations were expensed under operating costs or operating expenses during 2016 and 2015. Any differences between the estimated amounts in the financial statements and the actual amounts approved by the Board of Directors, if any, shall be accounted for as a change in accounting estimate and recognized in the distribution year.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

The differences between the amounts approved in the directors’ meeting and those recognized in the financial statements for the distributions of earnings for 2015 were as follows:

Employee remuneration Stock Cash Directors’ remuneration		2015
	Actual earnings distributed $ - 78,500 32,000	Accrued in the financial statements Difference - - 78,269 (231) 31,907 (93)

The differences were accounted for as changes in accounting estimates and recognized as profit or loss in the year 2016. Information about the remuneration to employee and directors approved in the board of directors’ meetings can be accessed in the Market Observation Post System website.

(t) Other income

The other income for the years ended December 31, 2016 and 2015, were as follows:

Interest revenue of cash in banks Rent revenue Cash dividend revenue	2016 2015 $ 11,599 13,235 7,177 8,555 14,692 263 $ 33,468 22,053

(u) Other gains and losses

The details of other gains and losses for the years ended December 31, 2016 and 2015, were as follows:

Net gains (losses) on financial assets/liabilities measured at fair value through profit or loss Foreign currency exchange gains, net Impairment loss on available-for-sale financial assets Gain on sale of or liquidate of available-for-sale financial assets Gain on disposal of subsidiaries Compensation loss Other	2016 2015 $ (9,113) 26,287 160,646 263,893 - (939) 140,969 175 248,006 - (180,000) - 10,898 (5,928) $ 371,406 283,488

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(v) Reclassification adjustments of components of other comprehensive income

The reclassification adjustment for other comprehensive income for the year ended December 31, 2016 and 2015 were as follows:

Unrealized gains or losses of available-for-sale financial assets, net of tax: Net changes in fair value Net changes in fair value reclassified to profit or loss Net changes in fair value recognized in other comprehensive income	2016 2015 $ 251,675 294,053 (140,969) - $ 110,706 294,053

(w) Financial instruments
(i) 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, 2016 December 31, 2015 $ 505,192 989,857 208,462 8,870 10,926 7,107 4,028 855 $ 728,608 1,006,689

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 movements in the allowance for the year ended December 31, 2016 and 2015, were as follows:

Balance on January 1, 2016 Impairment loss recognized Amounts written off Exchange differences on translation of foreign currency Balance on December 31, 2016	Individually assessed impairment $ - - - - $ -	Collectively assessed impairment Total 19,647 19,647 57,778 57,778 - - (448) (448 76,977 76,977

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Balance on January 1, 2015 Impairment loss recognized Amounts written off Exchange differences on translation of foreign currency Balance on December 31, 2015	Individually assessed impairment $ - - - - $ -	Collectively assessed impairment Total 19,430 19,430 - - (625) (625) 842 842 19,647 19,647

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities:

December 31, 2016 Non-derivative financial liabilities: Notes and accounts payable Accounts payable - related parties Other payables Long-term accounts payable to related parties Long-term borrowings Guarantee deposits Derivative financial liabilities: Outflow Inflow December 31, 2015 Non-derivative financial liabilities: Short-term borrowings Notes and accounts payable Accounts payable - related parties Other payables Long-term borrowings Guarantee deposits Derivative financial liabilities: Outflow Inflow	Carrying amount $ 783,593 9,352,640 1,520,893 781,263 601,111 125,703 150,430 - - $ 13,315,633 $ 1,120,518 264 11,340,202 1,025,313 1,316,667 90,726 52,765 - - $ 14,946,455	Contractual cash flows 783,593 9,352,640 1,520,893 781,263 609,653 125,703 - 2,766,941 (2,615,359) 13,325,327 1,120,518 264 11,340,202 1,025,313 1,342,525 90,726 - 52,765 - 14,972,313	Within 6 months 783,593 9,352,640 1,520,893 - 277,546 - - 2,766,941 (2,615,359) 12,086,254 1,120,518 264 11,340,202 1,025,313 282,503 - - 52,765 - 13,821,565	6~12 months - - - - 110,096 - - - - 110,096 - - - - 280,977 - - - - 280,977	1~2 years - - - - 137,431 - - - - 137,431 - - - - 555,552 - - - - 555,552	2~5 years Over 5 years - - - - - - 781,263 - 84,580 - - 125,703 - - - - - - 865,843 125,703 - - - - - - - - 223,493 - - 90,726 - - - - - - 223,493 90,726

The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iii) Currency risk

1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency risk was as follows:

Financial assets Monetary items USD:TWD Financial liabilities Monetary items USD:TWD	December 31, 2016 Foreign currency Exchange rate TWD $ 416,943 32.279 13,458,517 376,297 32.279 12,146,505	December 31, 2016 Foreign currency Exchange rate TWD $ 416,943 32.279 13,458,517 376,297 32.279 12,146,505	December 31, 2015	December 31, 2015
	Foreign currency $ 416,943 376,297	Exchange rate 32.279 32.279	Foreign currency 411,446 392,674	Exchange rat TWD 33.066 13,604,883 33.066 12,984,166

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, accounts and other receivables (including related parties), loans and borrowings, notes and accounts payable (including related parties), and other payables (including related parties) that are denominated in foreign currency.

A weakening (strengthening) of 5% of the TWD against the USD as of December 31, 2016 and 2015, would have increased or decreased the net profit after tax by $54,449 and $25,760, 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	2016 Exchange gains and losses Average exchange rate $ 160,646 1	2015
	Exchange gains and losses $ 160,646	Exchange gains and losses Average exchange rate 263,893 1

(iv) Interest rate analysis

Please refer to note 6(x) for the interest rate exposure of financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of nonderivative financial instruments on the reporting date. Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 0.25% when reporting to management internally, which also represents the Company management’s assessment of the reasonably possible interest rate change.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

If the interest rate had increased or decreased by 0.25%, and assumed all other variables remain constant the net profit before tax would have increased or decreased by $6,678 and decreased or increased by $2,585 for the years ended December 31, 2016 and 2015, respectively. This is mainly due to bank savings and borrowings with variable interest rates.

(v) Other price risk

If the market price had changed of the equity securities on the reporting date, the influence on other comprehensive income are as follows (The analysis is performed on the same basis for both periods, and assumes all other variables remain constant):

Securities’ price on December 31 10% rise 10% fall	2016 2015 Other ecomprehensive income after tax Other ecomprehensive income after tax $ 58,640 55,160 $ (58,640) (55,160)

(vi) Fair value

1) Kinds of financial instruments and fair value

The carrying amount and fair value of the Company’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required:

Financial assets at fair value through profit or loss – current Available-for-sale financial assets – non-current Loans and receivables Cash and cash equivalents Notes and accounts receivable (including related parties) Other receivables Refundable deposits Total Financial liabilities at fair value through profit or loss – current		December 31, 2016	December 31, 2016	December 31, 2016
	Carrying amounts $ 141,317 $ 873,921 $ 4,751,198 7,853,154 1,050,923 26,209 $ 13,681,484 $ 150,430		Fair Value
		Level 1 - 586,404 -	Level 2 - - -	Level 3 Total 141,317 141,317 287,517 873,921 150,430 150,430

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

	December 31, 2016	December 31, 2016	December 31, 2016
Carrying amounts $ 601,111 10,136,233 2,331,760 781,263 359,279 125,703 $ 14,335,349		Fair Value
	Level 1 Level 2 Level 3 Total December 31, 2015
		Fair Value
	Level 1 - 551,600 -	Level 2 - - -	Level 3 Total 79,052 79,052 16,297 567,897 52,765 52,765

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

2) Fair value valuation techniques for financial instruments measured at fair value

If a financial instrument has a quoted price in an active market, the quoted price is used as fair value. The 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.

The Company uses the following methods in determining the fair value of its financial instruments without a 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.
b) Available-for-sale financial assets – non-current are investments in domestic or foreign non-listed 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) Transfers between Level 1 and 3

The fair value of shares of Nien Made Enterprise Co., Ltd. amounted to $586,404 and $551,600 as of December 31, 2016 and 2015, respectively. 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) Reconciliation of Level 3 fair values

Balance on January 1 Recognized in profit or loss Recognized in other comprehensive income Transfer out of Level 3 Acquisition / disposal Balance on December 31		2016	Total 42,584 (9,113) (3,000) - 247,933 278,404		2015 Available for sale Total 275,536 273,799 (939) 25,348 294,900 294,900 (551,600) (551,600) (1,600) 137 16,297 42,584
	Fair value through profit or loss $ 26,287 (9,113) - - (26,287) $ (9,113)	Available for sale 16,297 - (3,000) - 274,220 287,517		Fair value through profit or loss (1,737) 26,287 - - 1,737 26,287

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The fair value measurements of the Company which are categorized within Level 3 are classified as 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:

Item Available-for-sale financial assets – equity securities not listed on emerging stock market Financial assets and liabilities at fair value through profit or loss	Valuation technique (note 1) (note 2)	Significant unobservable inputs Inter-relationships between significant unobservable inputs and fair value (note 1) (note 1) (note 2) (note 2)

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.

(x) Financial risk management

(i) Briefings

The Company is exposed to the following risks arising from financial instruments:

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.

(ii) 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

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.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financial instrument fails to 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.

1) Cash and cash equivalents

The Company had deposited $4,634,282 (including restricted deposits) in DBS Bank and 7 other financial institutions, and $1,909,353 (including restricted deposits) in CTBC Bank and 3 other financial institutions, representing 17% and 7% of total assets, as of December 31, 2016 and 2015, respectively. The Company believes that there is no significant credit risk from the above-mentioned financial institutions.

2) Accounts receivable

Sales to individual customers (including related parties) constituting over 10% of total revenue for the years ended December 31, 2016 and 2015, totaled 21% and 26%, respectively. As of December 31, 2016 and 2015, 7% and 15%, respectively, of the ending balance of accounts receivable (including 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.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial 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.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company had unused bank facilities of $10,044,220 and $7,110,042 as of December 31, 2016 and 2015, respectively.

(v) 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’s main assets and liabilities with a floating-interest-rate basis are deposits and borrowings. The Company believes that cash flow risk arising from interest rate fluctuation is insignificant.

3) Other market price risk

The Company is exposed to equity price risk due to the investments in listed equity securities. Those equity securities are strategic investments and is not held for trading.

(y) Capital management

The board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence, and to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained earnings, other equity, and non-controlling interests.

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, 2016 and 2015, was 59% and 62%, respectively.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(7) Related-party transactions:

(a) The Company and its subsidiaries

				Percentage of	Percentage of	Percentage of
				shareholding
			December			December
Name of investor	Name of subsidiary	Principal activities	31,	2016		31, 2015		Description
The Company	Primax Industries (Cayman Holding) Ltd.	Holding company	100.00		%	100.00	%
	(Primax Cayman)
The Company	Primax Technology (Cayman Holding)	Holding company	100.00		%	100.00	%
	Ltd. (Primax Tech.)
The Company	Destiny Technology Holding Co., Ltd.	Holding company	100.00		%	100.00	%
	(Destiny BVI.)
The Company	Primax Destiny Co., Ltd.	Market development and	100.00		%	100.00	%
	(Destiny Japan)	customer service
The Company	Primax Electronics Korea Co., Ltd.	Market development and	-		%	100.00	%	Primax Korea was
	(Primax Korea)	customer service						closed and finished
								the liquidation
								process in March
								2016
The Company	Diamond (Cayman) Holdings Ltd.	Holding company	100.00		%	100.00	%
	(Diamond)
The Company	Gratus Technology Corp.	Market development and	100.00		%	100.00	%
	(Gratus Tech.)	customer service
The Company	Global TEK Fabrication Co., Ltd.	Manufacture and sale of	-		%	30.00	%	(notes 2 & 3)
	(Global TEK)	sophisticated machinery
		components, automotive
		parts, industrial
		automation parts,
		communication parts and
		aerospace components
Primax Cayman	Primax Industries (Hong Kong) Ltd.	Export and import	100.00		%	100.00	%
	(Primax HK)	trading
Diamond	Tymphany Worldwide Enterprises Ltd.	Holding company	70.00		%	70.00	%	(note 1)
	(TWEL)
Global TEK	Global TEK Co., Ltd. (GT)	Manufacture of	-		%	100.00	%	(notes 2 & 3)
		sophisticated machinery
		components and
		automotive parts
Global TEK	Global TEK Fabrication Co., Ltd.	Holding company	-		%	100.00	%	(notes 2 & 3)
	(Samoa) (GTF-S)
Primax HK	Dongguan Primax Electronic &	Manufacture of	100.00		%	100.00	%
and Primax Tech.	Telecommunication Products Ltd.	multifunctional
	(PCH2)	peripherals, computer
		mice, mobile phone
		accessories, consumer
		electronics products, and
		shredders
Primax HK	Primax Electronics (KS) Corp., Ltd.	Manufacture of	100.00		%	100.00	%
	(PKS1)	computer, peripherals and
		keyboards
Primax HK	Primax Electronics (Chongqing) Corp.,	Manufacture of computer	100.00		%	100.00	%
	Ltd. (PCQ1)	peripherals and
		keyboards

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Name of investor	Name of subsidiary	Principal activities Sale of multi-function printers and computer peripheral devices Research and development of computer peripheral devices and software Sale of audio accessories, amplifiers and their components Market development and customer service of amplifiers and their components Manufacture, research and development, design, and sale of audio accessories, amplifiers and their components Sale of audio accessories, amplifiers and their components Manufacture, research and development, design, and sale of audio accessories, amplifiers and their components Research and development, design, and sale of audio accessories, amplifiers and their components Sale of automotive parts, industrial automation parts, communication parts and aerospace components Holding company Holding company Manufacture of sophisticated machinery components Manufacture of industrial automation parts, communication parts and aerospace components Manufacture of sophisticated machinery components and automotive parts	Percentage of shareholding December 31, 2016 December 31, 2015 Description	Percentage of shareholding December 31, 2016 December 31, 2015 Description
			December 31, 2016
Primax Tech. Destiny BVI. TWEL TWEL TYM HK TYM HK TYM HK Tymphany Dongguan GT GTF-S GTF-S GTF-HK GTS GTS and WUXI GLOBAL TEK	Polaris Electronics Inc. (Polaris) Destiny Electronic Corp. (Destiny Beijing) Tymphany HK Ltd. (TYM HK) TYP Enterprises, Inc. (TYP) Premium Loudspeakers (Hui Zhou) Co., Ltd. (Premium Hui Zhou) TYMPHANY LOGISITCS, INC. (TYML) Dongguan Tymphany Acoustic Technology Co., Ltd. (Tymphany Dongguan) Dongguan Dongcheng Tymphany Acoustic Technology Co., Ltd. (TYDC) GP Tech, Inc. (GP) Global TEK Fabrication Co., Ltd. (HK) (GTF-HK) Global TEK Co., Ltd. (Samoa) (GTS) WUXI GLOBAL TEK FABRICATION CO., LTD. (WUXI GLOBAL TEK) GLOBAL TEK (XI’ AN) CO., LTD. (GLOBAL TEK XI’ AN) GLOBAL TEK CO. (WUXI), LTD. (GLOBAL TEK WUXI)		% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % - % - % - % - % - % -	% 100.00 % 100.00 % 100.00 (note 1) % 100.00 (note 1) % 100.00 (note 1) % 100.00 TYML was incorporated in May 2015 % 100.00 Tymphany Dongguan was incorporated in September 2015 % - TYDC was incorporated in October 2016 % 100.00 (notes 2 & 3) % 100.00 (notes 2 & 3) % 100.00 (notes 2 & 3) % 100.00 (notes 2 & 3) % 100.00 (notes 2 & 3) % 100.00 (notes 2 & 3)

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Note 1: TWEL was incorporated in October 2013, acquiring all shares of TYM HK by issuing new ordinary shares. 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 financial statements from the same date.
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.
Note 3: The Board resolved to dispose 20% of the shares of Global TEK on June 21 and September 21, 2016. The disposal transaction has been settled on October 3, 2016, and the Company lost control over Global TEK on the same date.

(b) Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Company and its subsidiaries.

(c) Significant transactions with related-party
(i) Sales

The amounts of significant sales by the Company to related parties and the outstanding balances were as follows:

Subsidiaries	Sales 2016 2015 $ 4,445,229 6,264,761	Accounts receivable – related parties
	2016 $ 4,445,229	December 31, 2016 December 31, 2015 513,446 2,052,505

The sales prices for related parties and other customers were not significantly different. The credit terms for other customers are within 90 days, but they can be lengthened for related parties.

(ii) Purchases

The amounts of significant purchases by the Company from related parties and the outstanding balances were as follows:

Subsidiaries	Purchases 2016 2015 $ 41,258,401 49,233,250	Accounts payable – related parties
	2016 $ 41,258,401	December 31, 2016 December 31, 2015 9,352,640 11,340,202

The prices of purchases were determined based on the cost plus a reasonable profit margin. The payment terms of related parties and other vendors are 60 days and 45 or 90 days, respectively.

Accounts payable to subsidiaries over normal payment terms agreed by both sides was reclassified to long-term payable. On December 31, 2016, long-term accounts payable to related parties is $781,263.

The Company’s sales of products to subsidiaries’ customers on behalf of its subsidiaries amounted to $883,662 and $1,209,503 for the years ended December 31, 2016 and 2015, respectively. Related sales and purchases were eliminated and recorded on a net basis.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iii) Purchase of service

The amounts of purchase of service by the Company from its related parties and the outstanding balances were as follows:

Subsidiaries	Purchase of service 2016 2015 $ 28,448 45,293	Other payables
	2016 $ 28,448	December 31, 2016 December 31, 2015 1,540 3,490

(iv) Receivable and payable on behalf of related parties

The other payables arising from receiving the equipment subsidy on behalf of subsidiaries amounted to $9,828 and 60,958 for the years ended December 31, 2016 and 2015.

The other receivables arising from the materials purchased on behalf of the subsidiaries amounted to $854,518 and 17,018 for the years ended December 31, 2016 and 2015.

(v) Property transaction- disposal of equity securities

Details of the Company’s disposal of its investment accounted by equity method to its related parties were as follows:

Relationship	Account Investment using equity method		201	6	Gains or losses from disposal 164,785		20	15
		Trading quantities 11,020 (thousand)	Trading targets Shares	Proceeds from disposal (note) 549,347		Trading quantities -	Trading targets -	Proceeds from disposal Gains or losses from disposal - -
Other related parties

Note: Pricing was based on the Global TEK’s financial statements audited by other auditors and the opinion for reasonable transaction price issued by Sosian accounting firm.

The Company had received all the proceeds as of December 31, 2016.

(vi) Guarantees and endorsements

The amounts of guarantee the Company provided to related parties were as follows:

Purchasing of raw materials	December 31, 2016 December 31, 2015 $ 338,930 384,227

(vii) Lease

The Company leased out its investment properties to its subsidiaries as office buildings and entered into 15-years lease contract by reference of the rental price of the nearby offices. The rental income in 2016 amounted to $8,640 and there were no receivables on December 31, 2016. Please refer to note 6(l) for non-cancellable receivable.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(d) Key management personnel compensation

Short-term employee benefits Post-employment benefits Termination benefits Other long-term benefits Share-based payments	2016 2015 $ 121,107 123,092 1,129 721 - - - - 17,088 15,124 $ 139,324 138,937

Please refer to note 6(p) for information related to share-based payments.

(8) Pledged assets:None

(9) Commitments and contingencies:

(a) Please refer to notes 7 and 13 for guarantees and endorsements provided to subsidiaries.
(b) The following are savings accounts provided by the Company to the banks in order for the bank to issue a guarantee letter to customs as guarantee deposits.

Guarantee letters	December 31, 2016 December 31, 2015 $ 6,000 -

(c) Guarantee notes provided as part of agreements with banks to sell its accounts receivable and to acquire long-term borrowings were as follows:

Sales of accounts receivable Long-term borrowings	December 31, 2016 December 31, 2015 $ 2,805,777 2,874,690 $ 2,160,000 2,160,000

(d) The Company entered into lease agreements for its office. Please refer to note 6(l) for future rent payables.

(10) Losses due to major disasters:None

(11) Subsequent events:None

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(12) Other:

Employee benefit, depreciation, and amortization expenses are summarized by function as below:

By function By item	2016	2016	2016	2015	2015	2015
	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension Others Depreciation Amortization	153,736 6,883 3,699 5,963 7 -	1,178,444 68,929 40,006 53,531 18,058 20,140	1,332,180 75,812 43,705 59,494 18,065 20,140	121,905 6,190 3,415 4,040 10 -	1,209,513 66,821 38,846 57,451 15,801 17,628	1,331,418 73,011 42,261 61,491 15,811 17,628

The average number of the Company’s employees for the years ended December 31, 2016 and 2015, was 783 and 752, respectively.

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required to be disclosed by the Regulations for the Company:

(i) Loans to other parties:

No.	Name of lender	Name of borrower	Account name	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Coll	ateral	Individual funding loan limits	Maximum limit of fund financing
												Item	Value
1 2 `〃` `〃`	PKS1 Global TEK `〃` `〃`	The Company GLOBAL TEK WUXI GT GTS	Other accounts receivable Other accounts receivable Other accounts receivable Other accounts receivable	781,263 96,846 101,353 30,000	781,263 47,049 30,000 -	781,263 47,049 30,000 -	- 0%~2% 2.896% 2.000%	Necessary to loan to other parties `〃` `〃` `〃`	- - - -	Operating capital `〃` `〃` `〃`	- - - -		- - - -	920,598 217,391 217,391 217,391	920,598 434,782 434,782 434,782

Note 1: The Board of directors approved PKS1 to extend loan to any indiviual of the parent company or subsidiaries having 100% voting share, with the loan amount and the total amount not exceeding its net worth in the latest financial statements.

Note 2: The loan amount and the total loan amount for the Company shall not exceed 10% and 20%, respectively, of its net worth in the latest financial statements. The Company lost control over Global TEK group in October 2016. The information on Global TEK group was disclosed as of September 30, 2016.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(ii) Guarantees and endorsements for other parties:

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsemen ts to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0 1 `〃` 2 3 `〃`	The Company PCH2 `〃` Global TEK GT `〃`	PCH2 PCQ1 PKS1 GT Global TEK Global TEK WUXI	The subsidiary of PHK1 and PTH2 The same parent company `〃` The same parent company The same parent company `〃`	3,299,917 1,336,851 1,336,851 217,391 50,761 50,761	390,432 235,200 100,800 30,000 50,000 50,400	338,930 193,674 96,837 - - 47,049	20,917 26,560 56,676 - - 27,445	- - - - - -	% 3.08 % 4.35 % 2.17 % - % - % 46.34	8,799,779 3,564,936 3,564,936 543,478 91,370 91,370	Y - - Y - -	- - - - Y -	Y Y Y - - Y

Note 1: The amount and the total amount of the guarantee to a company shall not exceed 30% and 80%, respectively, of its net worth in the latest financial statements. Note 2: The amount and the total amount of the guarantee to a company shall not exceed 30% and 80%, respectively, of PCH2’s net worth in the latest financial statements. Note 3: The amount and the total amount of the guarantee to a company shall not exceed 20% and 50%, respectively, of Global TEK’s net worth in the latest financial statements. The Company lost control over Global TEK group in October, 2016. The information for Global TEK group ended on September 30, 2016.

Note 4: The amount and the total amount of the guarantee to a company shall not exceed 50% and 90%, respectively, of GT’s net worth in the latest financial statements. The Company lost control over Global TEK group in October 2016. The information on Global TEK group was disclosed as of September 30, 2016.

(iii) Securities held as of December 31, 2016 (excluding investment in subsidiaries, associates and joint ventures):

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance	Ending balance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company Primax Tech.	Shares: Green Rich Technology Co., Ltd. WK Technology Fund IV LTD. Changing Information Technology Inc. Formosoft International Inc. Syntronix Corp. Ricavision International Inc. Nien Made Enterprise Co., Ltd. Global TEK Shares: Echo. Bahn. WK Global Investment III Ltd.	- - - - - - - - - -	Available-for-sale financial asset-non- current `〃` `〃` `〃` `〃` `〃` `〃` `〃` Available-for-sale financial asset-non- current `〃`	359 512 179 53 6 917 1,764 5,510 400 630	4,000 3,820 2,802 646 749 - 586,404 275,500 873,921 - 13,880 13,880	3.59 0.38 1.66 0.76 0.02 2.04 0.60 10.00 11.90 1.32	4,000 3,820 2,802 646 749 - 586,404 275,500 - 13,880

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the Company’s issued capital:

Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance	Beginning Balance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares (thousands)	Amount	Shares (thousands)	Amount	Shares (thousands)	Price	Cost	Gain (loss) on disposal	Shares (thousands)	Amount
The Company PCH2 PCH2 PCQ1 Premium Huizhou	Shares: Global TEK Financial instruments of floating income and capital guaranteed Money market fund of RMB Money market fund of RMB Money market fund of RMB	Available- for-sale financial assets Held-for- trading financial assets `〃` `〃` `〃`	Related parties Initial offerings `〃` `〃` `〃`	Other related parties None `〃` `〃` `〃`	16,530 - - - -	555,091 - - - -	- - - - -	- 7,308,498 667,960 559,312 534,061	11,020 - - - -	549,347 7,315,451 667,774 558,388 527,401	384,562 7,308,498 666,565 557,754 526,428	248,004 (note 1) 6,953 (note 1) (186) (note 1) (924) (note 1) (6,660) (note 1)	5,510 - - - -	275,500 - - - -

Note 1: Gains of disposal include valuation and exchange differences on translation.

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the Company’s issued capital:None
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the Company’s issued capital:None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the Company’s issued capital:

Name of company	Related party	Nature of relationship		Transaction details	Transaction details	Transaction details	Transactions wi from	th terms different others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/ Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Primax Cayman Primax HK PCH2 PKS1 PCQ1 Polaris TYM HK Tymphany Dongguan	Subsidiary The subsidiary of Primax Cayman The subsidiary of Primax HK The subsidiary of Primax HK The subsidiary of Primax HK The subsidiary of Primax Tech The subsidiary of TWEL The subsidiary of TYM HK	Purchase Purchase Purchase Purchase Purchase (Sale) (Sale) (Sale)	429,806 16,357,886 18,234,471 1,012,723 5,189,828 (3,804,963) (400,149) (239,956)	% 1 % 39 % 45 % 2 % 13 % (8) % (1) % (1)	60 days `〃` `〃` `〃` `〃` 90 days 60 days `〃`	Price agreed by both side `〃` `〃` `〃` `〃` `〃` `〃` `〃`	The same as general purchasing `〃` `〃` `〃` `〃` The same as general selling `〃` `〃`	(49,873) - (6,971,192) (409,294) (1,922,281) 226,050 165,384 -	-% -% (69)% (4)% (19)% 3% 2% -%

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/ Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
Primax Cayman Primax HK `〃` PCH2 `〃` PKS1 PCQ1 Polaris TYM HK `〃` `〃` Premium Hui Zhou Tymphany Dongguan `〃` Global TEK GT Global TEK XI'AN Global TEK WUXI	The Company The Company PCH2 Primax HK The Company The Company The Company The Company Premium Hui Zhou The Company Tymphany Dongguan TYM HK The Company TYM HK Global TEK XI'AN Global TEK WUXI Global TEK GT	Parent Parent Subsidiary Parent The parent of Primax Cayman The parent of Primax Cayman The parent of Primax Cayman The parent of Primax Tech Subsidiary The parent of Diamond Subsidiary Parent Parent Parent The subsidiary of GTS The subsidiary of GTS and WUXI Global TEK The parent of GTF-HK The subsidiary of Global TEK	(Sale) (Sale) Purchase (Sale) (Sale) (Sale) (Sale) Purchase Purchase Purchase Purchase (Sale) Purchase (Sale) Purchase Purchase (Sale) (Sale)	(429,806) (16,357,886) 16,272,682 (16,272,682) (18,234,471) (1,012,723) (5,189,828) 3,804,963 3,825,446 400,149 3,871,980 (3,825,446) 239,956 (3,871,980) 122,441 393,728 (122,441) (393,728)	% (100) % (100) % 100 % (36) % (40) % (100) % (88) % 99 % 47 % 5 % 48 % (94) % 6 % (100) % 32 % 63 % (71) % (37)	`〃` `〃` 30 days `〃` 60 days `〃` `〃` 90 days 60 days `〃` `〃` `〃` `〃` `〃` `〃` 90 days `〃` `〃`	`〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	`〃` `〃` The same as general purchasing The same as general selling `〃` `〃` `〃` The same as general purchasing `〃` `〃` `〃` The same as general selling The same as general purchasing The same as general selling The same as general purchasing `〃` The same as general selling `〃`	49,873 - (305,434) 305,434 6,971,192 409,294 1,922,281 (226,050) (986,123) (165,384) (1,191,888) 986,123 - 1,191,888 (35,080) (236,385) 35,080 236,385	100% -% (100)% 3% 65% 34% 89% (24)% (40)% (7)% (49)% 98% -% 99% (27)% (42)% 58% 40%

Note 1: Accounts receivables over payment terms has been classified as other receivables-non-current.

Note 2: The Company has lost control over Global TEK in October, 2016. The information for Global TEK group are disclosed as of September 30, 2016.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the Company’s issued capital:

Name of company	Counter-party	Nature of relationship	Ending balance (note 2)	Turnover rate	Overdue	Overdue	Amounts received in subsequent period (note 1)	Allowance for bad debts
					Amount	Action taken
The Company `〃` CH2 `〃` KS1 CQ1 remium Hui Zhou Tymphany Dongguan Global TEK WUXI	Polaris TYM HK Primax HK The Company The Company The Company TYM HK TYM HK GT	The Subsidiary of Primax Tech The Subsidiary of TWEL Parent The Parent of Primax Cayman The Parent of Primax Cayman The Parent of Primax Cayman Parent Parent The Subsidiary of Global TEK	226,050 165,384 305,434 6,971,192 1,190,557 1,922,281 986,123 1,191,888 236,385	12.72 0.43 3.11 5.23 1.36 3.92 4.37 6.50 2.41	- - - - 781,263 - - - -	Reclassify to Long-term payable, and enhance the control of receivables	226,050 86,141 1,316 6,550,647 241,863 1,241,674 600,391 426,604 19,726	- - - - - - - - -

Note 1: Amounts collected as of March 7, 2017.

Note 2: The Company has lost control over Global TEK in October, 2016. The information for Global TEK group are disclosed as of September 30, 2016.

(ix) Trading in derivative instruments: Please refer to note 6(b) in the consolidated financial statements for the year ened December 31, 2016.

(b) Information on investees:

The following is the information on investees for the year ended December 31, 2016 (excluding information on investees in Mainland China):

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of Decembe	Balance as of Decembe	r 31, 2016	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2016	December 31, 2015	Shares (thousands)	Percentage of wnership	Carrying value
The Company `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Primax Cayman Primax Tech. Destiny BVI. Destiny Japan Primax Korea Diamond Global TEK Gratus Tech. Total	Cayman Islands Cayman Islands Virgin Island Japan Korea Cayman Islands Taiwan USA	Holding company Holding company Holding company Market development and customer service Market development and customer service Holding company Manufacture and sale of sophisticated machinery components, automotive parts, industrial automation parts, communication parts, and aerospace components Market development and customer service	2,540,588 897,421 30,939 7,032 - 2,517,298 - 9,330 6,002,608	2,540,588 897,421 30,939 7,032 9,101 2,517,298 545,490 9,330 6,557,199	8,147,636 285,067 1,050 0.50 - 84,050 - 300	100.00 100.00 100.00 100.00 - 100.00 - 100.00	4,336,069 1,922,225 26,320 16,146 - 3,007,259 - 9,875 9,317,894	211,690 (24,669) (3,452) 242 - 144,863 79,912 75	251,896 11,354 (3,452) 242 - 145,891 18,569 75 424,575	(note 3) (note 4)
									408,661

(Continued)

PRIMAX ELECTRONICS LTD.

Notes to Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2016	Balance as of December 31, 2016	Balance as of December 31, 2016	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2016	December 31, 2015	Shares (thousands)	Percentage of wnership	Carrying value
Primax Cayman	Primax HK	Hong Kong	Sale of multi-function printers and computer peripheral devices	2,375,164	2,375,164	602,817	100.00	4,433,962	213,540	213,540
Primax Tech.	Polaris	USA	Sale of multi-function printers and computer peripheral devices	52,680	52,680	1,600	100.00	394,322	11,071	11,071
Diamond	TWEL	Cayman Islands	Holding company	2,515,800	2,515,800	38,501	70.00	2,904,380	349,720	166,285
TWEL `〃`	TYM HK TYP	Hong Kong USA	Holding company and sale of audio accessories, amplifiers and their components Market development and customer service of amplifiers and their components	76,280 (note 1) 15 (note 1)	76,280 (note 1) 15 (note 1)	144,395 0.50	100.00 100.00	1,540,112 4,876	337,425 2,692	337,425 2,692
TYM HK	TYML	USA	Sales audio accessories, amplifiers and their components	6,628	6,628	200	100.00	(10,786)	3,436	4,674
Global TEK `〃`	GT GTF-S	Taiwan Samoa Islands	Manufacture of sophisticated machinery components and automotive parts Holding company	- -	166,000 (note 2) 360,029 (note 2)	- -	- -	- -	(31,844) 116,707	(31,844) 116,543	(note 4) (note 4)
GT	GP	USA	Sale of automotive parts, industrial automation parts, communication parts and aerospace components	-	641 (note 2)	-	-	-	(110)	(110)	(note 4)
GTF-S `〃`	GTS GTF-HK	Samoa Islands Hong Kong	Holding company Holding company	- -	330,650 (note 2) 123,916 (note 2)	- -	- -	- -	94,849 22,001	94,849 22,001	(note 4) (note 4)

Note 1: The amount is the initial investment costs from the original stockholders prior to the acquisition of the Company through Diamond. Note 2: The amount is the initial investment costs from the original stockholders prior to the acquisition of the Company through Global TEK. Note 3: The liquidation of Primax Korea was completed in March 2016.

Note 4: The Company has lost control over Global TEK in October 2016.

(c) Information on investments in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2016	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2016	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumu-late remittance o earnings in current period
					Outflow	Inflow
PCH2 Destiny Bejing PKS1	Manufacture of multifunctional peripherals, computer mice, mobile phone accessories, consumer electronics products, and shredders Research and development of computer peripheral devices and software Manufacture of computer, peripherals and keyboards	2,075,044 41,105 908,593	Indirect investment through Primax Cayman and Primax Tech. Indirect investment through Destiny BVI. Indirect investment through Primax Cayman	1,817,427 (note 2) 34,719 (note 2) 727,452 (note 2)	- - -	- - -	1,773,902 (note 2) 33,893 (note 2) 710,138 (note 2)	(103,572) (3,452) 69,114	100% 100% 100%	(103,572) (3,452) 69,114	4,456,136 26,316 920,591	- - -

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2016	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2016	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumu-lated remittance of earnings in current period
					Outflow	Inflow
PCQ1 Premiurn Hui Zhou Tymphany Dongguan TYDC WUXI Global TEK Global TEK XI'AN Global TEK WUXI	Manufacture of computer, peripherals and keyboards Research and development, design, and sale of audio accessories, amplifiers and their components Research and development, design, and sale of audio accessories, amplifiers and their components `〃` Manufacture of sophisticated machinery components Manufacture of industrial automation parts, communication parts and aerospace components Manufacture of sophisticated machinery components and automotive parts	583,149 146,303 (note 3) 16,140 93,064 - - -	Indirect investment through Primax Cayman Indirect investment through Diamond Indirect investment through Diamond `〃` Indirect investment through Global TEK Indirect investment through Global TEK Indirect investment through Global TEK	661,320 (note 2) 2,777,544 16,533 - 102,306 (note 4) 21,245 (note 4) 286,467 (note 4)	- - - - - - -	- - - - 102,306 21,245 286,467	645,580 (note 2) 2,711,436 16,140 - - - -	246,273 125,942 35,972 - 24,478 7,238 124,651	100% 70% 70% 70% 30% 30% 30%	246,273 88,159 25,180 - 7,343 2,171 37,395	915,196 410,738 33,904 65,144 - - -	- - - - - - -

Note 1: The above information on the exchange rate is as follows: HKD:TWD $4.1623; USD:TWD 32.279; CNY:TWD 4.6532.

Note 2: The difference between the accumulated out flow of investments and paid in capital was derived from the currency exchange on translation, capital increase from retained earning and working capital.

Note 3: The amount is the initial investment costs from the original stockholders prior to the acquisition of the Company through Diamond.

Note 4: The amount is the initial investment costs from the original stockholders prior to the acquisition of the Company through Global TEK.

Note 5: The Company has lost control over Global TEK in October 2016.

(ii) Limitation on investment in Mainland China:

Name of Company	Accumulated Investment in Mainland China as of December 31, 2016	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
The Company	5,980,672	6,797,921	None(Note 1)

Note: The Company has received the Certificate issued by the Industrial Development Bureau, Ministry of Economic Affairs, allowing it to start the operating of its headquarters.

The above investment income (losses) in mainland China, except for PCH2, Destiny Beijing, PKS1, and PCQ1, which were based on financial statements audited by the Company’s auditors, others were based on the audited results of other auditors.

(Continued)

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of the consolidated financial statements, are disclosed in “Information on significant transactions”.

(14) Segment information:

Please refer to the Company’s consolidated financial statements for the years ended December 31, 2016 and 2015, for details.

PRIMAX ELECTRONICS LTD.

Statement of cash and cash equivalents

December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item Cash on hand Checking accounts and demand deposits Time deposits	Description Amount $ 543 931,183 USD118,327 thousand ; Exchange rate32.279 3,819,472 $ 4,751,198

Statement of accounts receivable

Item Accounts receivable: Corporation A Corporation S Corporation P Corporation T Corporation Q Other (individual amount not exceeding 5%) Total Less: Allowance for doubtful accounts Allowance for sales returns and discounts Net accounts receivable	Description Amount Operating revenue $ 567,098 `〃` 509,727 `〃` 477,199 `〃` 439,073 `〃` 419,081 `〃` 5,025,001 7,437,179 (76,977) (20,494) $ 7,339,708

PRIMAX ELECTRONICS LTD.

Statement of other receivables

December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item Other receivables`－`related parties Other receivables`－`other Taxes receivables Other (individual amount not exceeding 5%) Total	Description Amount Payable on behalf of related parties $ 854,518 Remaining receivable due to sale of accounts receivable 141,551 Income and sales tax refund receivable 48,272 6,582 $ 1,050,923

Statement of inventories

Item Finished goods and merchandises Less: Provision for finished goods and merchandises Subtotal Raw material Less: Provision for raw material Subtotal Net amount	Cost Net realizable value $ 2,228,739 2,424,891 (38,004) 2,190,735 102,736 98,207 (52) 2,523,098 102,684 $ 2,293,419	Cost Net realizable value $ 2,228,739 2,424,891 (38,004) 2,190,735 102,736 98,207 (52) 2,523,098 102,684 $ 2,293,419
		2,424,891 98,207 2,523,098

PRIMAX ELECTRONICS LTD.

－ Statement of changes in available-for-sale financial asset non-current

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Name of investee Green Rich Technology Co., Ltd. WK Technology Fund IV Ltd. Changing Information Technology Inc. Formosoft International Inc. Syntronix Corp. Global TEK Co., Ltd. Nien Made Enterprise Co., Ltd. Ricavision International Inc.	Beginning Balance Number of shares Amount 1,680 $ 7,000 640 5,100 179 2,802 53 646 6 749 - - 2,605 551,600 917 - $ 567,897	Additions Number of shares Amount - - - - - - - - - - - - - - - - -	Disposal Number of shares Amount - - - - - - - - - - - - (841) (79,301) - - (79,301)	Other adjustments (note) Number of shares Amount (1,321) (3,000) (128) (1,280) - - - - - - 5,510 275,500 - 114,105 - - 385,325	Ending Balance Pledged Number of shares Amount or guaranteed 359 4,000 None 512 3,820 `〃` 179 2,802 `〃` 53 646 `〃` 6 749 `〃` 5,510 275,500 `〃` 1,764 586,404 `〃` 917 - `〃` 873,921
		Number of shares - - - - - - - -	Number of shares - - - - - - (841) -	Number of shares (1,321) (128) - - - 5,510 - -

Note: Other adjustments comprise capital reduction for covering accumulated deficits, capital reduction to refund, reclassification from using equity method, and unrealized gains or losses on available-for-sale financial assets.

PRIMAX ELECTRONICS LTD.

Statement of changes in investment accounted for using equity method

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Name of investee Primax Industries (Cayman Holding) Ltd. Primax Technology (Cayman Holding) Ltd. Destiny Technology Holding Co., Ltd Primax Destiny Co., Ltd. Primax Electronics Korea Co.,Ltd Diamond (Cayman) Holdings Ltd. Global TEK Co., Ltd. Gratus Technolgy Corp.	Beginning Balance Number of shares Amount 8,147,636 $ 4,504,851 285,067 2,057,568 1,050 32,943 0.5 15,746 67 10,468 84,050 2,902,254 16,530 555,091 300 10,040 $10,088,961	Additions Number of shares Amount - - - - - - - - - - - - - - - - -	Disposal Number of shares Amount - - - - - - - - (67) (10,149) - - (16,530) (576,843) - - (586,992)	Other adjustments Number of shares Amount (Note1) - (168,782) - (135,343) - (6,623) - 400 - (319) - 105,005 - 21,752 - (165) (184,075)	Ending Balance Number of shares Percentage of holding shares Amount 8,147,636 % 100.00 4,336,069 285,067 % 100.00 1,922,225 1,050 % 100.00 26,320 0.5 % 100.00 16,146 - % - - 84,050 % 100.00 3,007,259 - % - - 300 % 100.00 9,875 9,317,894	Ending Balance Number of shares Percentage of holding shares Amount 8,147,636 % 100.00 4,336,069 285,067 % 100.00 1,922,225 1,050 % 100.00 26,320 0.5 % 100.00 16,146 - % - - 84,050 % 100.00 3,007,259 - % - - 300 % 100.00 9,875 9,317,894	Market value or book value Pledged of guaranteed 4,447,153 None 1,955,366 `〃` 26,320 `〃` 16,146 `〃` - `〃` 3,007,259 `〃` - `〃` 9,875 `〃` 9,462,119
		Number of shares - - - - - - - -	Number of shares - - - - (67) - (16,530) -	Number of shares - - - - - - - -	Number of shares 8,147,636 285,067 1,050 0.5 - 84,050 - 300	Percentage of holding shares % 100.00 % 100.00 % 100.00 % 100.00 % - % 100.00 % - % 100.00

Note 1: Adjustments under equity method valuation.

PRIMAX ELECTRONICS LTD.

Statement of changes in property, plant and equipment

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Please refer to note 6(g) for Property, plant and equipment.

Statement of change in investment property

Please refer to note 6(h) for Investment property.

PRIMAX ELECTRONICS LTD.

Statement of other payables

December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item Expense payables Others (note) Total	Description Amount Payables for allowance for sales return and discount $ 681,917 Taxes related to income and tariff 524,832 Research and development expense for projects and inspection 413,887 Employee and director remuneration 274,666 Compensation payment 180,000 Accounts payable for maintenance and equipment, labor and health insurance and employee benefits 256,458 $ 2,331,760

Note : individual amount not exceeding 5%

Statement of notes and accounts payable

Item Corporation`甲` Corporation`乙` Corporation`丙` Other (individual amount not exceeding 5%)	Description Amount Operating cost $ 652,922 `〃` 86,961 `〃` 41,655 2,055 $ 783,593

PRIMAX ELECTRONICS LTD.

Statement of other current liabilities

December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item	Description		Amount
Sales revenue received in advance	Advance sales receipts`－`non-related parties	$	212,326
Other (note)			7,530
Total		$	219,856

Note : (individual amount not exceeding	5%)

Statement of other non-current liabilities

Item		Amount
Deferred tax liabilities`－`non-current	$	153,561
Gurantee deposits		125,703
Accured pension liabilities		63,728
Other (note)		2,582
	$	345,574
Note : (individual amount not exceeding 5%)

PRIMAX ELECTRONICS LTD.

Statement of long-term borrowings

December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Creditor Industrial Bank of Taiwan CTBC Bank The Export-Import Bank of the Republic of China Total	Description Long-term borrowings `〃` `〃` Less: Current portion	Amount $ 166,667 240,000 194,444 (382,222) $ 218,889	Term of contract 2014.1~2017.1 2015.1~2018.1 2015.2~2020.2	Interest rate Pledged on guaranteed Note 1 None Note 1 `〃` Note 2 `〃`

Note 1: Interest rate is calculated by US CD rate plus 0.30% per annum. Note 2: Interest rate is calculated by TAIBOR plus 0.48% per annum.

PRIMAX ELECTRONICS LTD.

Statement of operating revenue

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item Operating revenue: Computer peripherals Non-Computer peripherals Less: Sales returns Sales discounts Net service revenue Net operating revenue	Quantity (in thousands) Amount 86,962 $ 24,692,372 209,586 20,750,838 45,443,210 (113,753) (550,615) 44,778,842 960,941 $ 45,739,783

PRIMAX ELECTRONICS LTD.

Statement of operating costs

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item		Amount
Raw material On January 1, 2016	$	1,240
Add: Purchases		101,496
Less: Raw material on December 31, 2016		(102,736)
Raw material used		-
Manufacturing overhead		184,676
Manufacturing cost		184,676
Add: Finished goods and merchandises on January 1, 2016		2,577,786
Purchases from triangular trade		40,783,089
Less: Finished goods and merchandises on December 31, 2016		(2,228,739)
Losses on physical inventories		(2,178)
Loss on disposal of inventories		(19,737)
Cost of finished goods and merchandises		41,294,897
Service costs		779,029
Loss on inventory valuation, obsolescence and physical inventories		12,779
Loss on disposal of inventories		19,737
Operating costs	$	42,106,442

PRIMAX ELECTRONICS LTD.

Statement of selling, administrative, research and development expenses

From January 1 to December 31, 2016

(Expressed in thousands of New Taiwan Dollars)

Item Salaries Rent expense Travel allowance Service expense Storage fee Bad debt expense Freight expense Other expense (note) Total	Selling expenses $ 278,763 17,084 37,934 31,765 57,848 57,778 46,083 143,220 $ 670,475	Administrative expenses Research and development expenses 251,619 648,062 23,207 49,095 12,717 59,100 86,955 7,223 - - - - 49 872 67,598 206,508 442,145 970,860

Note : individual amount not exceeding 5%

AI assistant

Primax — Audit Report / Information 2016

52436_rns_2016-11-10_6ea1e3e7-51a5-49ac-8a03-74e232e8182e.pdf

FINANCIAL STATEMENTS

Table of contents

Independent Auditors’ Report

Opinion

Basis for Opinion

Other Matter

Key Audit Matters

1. Evaluation of inventories

2. Investments accounted for using equity method

How the matter was addressed in our audit:

3. Disposal of subsidiaries

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor’s Responsibilities for the Audit of the Financial Statements

KPMG

Notes to Readers

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Balance Sheets

December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars)

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Comprehensive Income

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Changes in Equity

For the years ended December 31, 2016 and 2015

(English Translation of Financial Statements and Report Originally Issued in Chinese) PRIMAX ELECTRONICS LTD.

Statements of Cash Flows

For the years ended December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars)

Notes to the Financial Statements

For the years ended December 31, 2016 and 2015

(1) Company history

(2) Approval date and procedures of the financial statements:

(3) New standards, amendments and interpretations adopted:

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(4) Summary of significant accounting policies:

(a) Statement of compliance

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(ii) Foreign operations

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(e) Cash and cash equivalents

(f) Financial instruments

(i) Financial assets

1) Available-for-sale financial assets

2) Loans and receivables

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

3) Impairment of financial assets

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

4) Derecognition of financial assets

1) Classification of debt or equity

2) Other financial liabilities

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(g) Inventories

(h) Investments in subsidiaries

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(i) Investment property

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(iv) Depreciation

(ii) Lessee

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(m) Impairment of non-financial assets

(n) Revenue

(i) Goods sold

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(ii) Services

(o) Employee benefits

(i) Defined contribution plans

(ii) Defined benefit plans

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(p) Share-based payment

(q) Income taxes

PRIMAX ELECTRONICS LTD. Notes to Financial Statements

(r) Earnings per share

Primax Audit Report / Information 2016