Primax — Interim / Quarterly Report 2016

Nov 10, 2016

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Financial Statements

September 30, 2016 and 2015

(With Independent Auditors' Review Report Thereon)

要侯建業群合會計師事務府 KPMG

台北市11049信義路5段7號68樓(台北101大樓) 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

Telephone 電話 + 886 (2) 8101 6666 傳真 + 886 (2) 8101 6667 Fax 網址 kpmg.com/tw Internet

Independent Auditors' Review Report

The Board of Directors Primax Electronics Ltd.:

We have reviewed the accompanying consolidated balance sheets of Primax Electronics Ltd. and its subsidiaries as of September 30, 2016 and 2015, and the related restated consolidated statements of comprehensive income, changes in stockholders' equity, and cash flows for the three months and for the nine months ended September 30, 2016 and 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews. The financial statements of Tymphany Worldwide Enterprises Ltd. were reviewed by other auditors. Therefore, our report, insofar as it relates to Tymphany Worldwide Enterprises Ltd., is based solely on the reports of the other auditors. The assets of Tymphany Worldwide Enterprises Ltd. amounted to NT\$4,353,056 thousand, constituting 10.6% of the consolidated total assets as of September 30, 2016. Its operating revenue amounted to NT\$2,156,067 thousand and NT\$5,654,910 thousand, constituting 11.7% and 12.1% of the consolidated operating revenue for the three months and nine months ended September 30, 2016, respectively.

Except as described in the following paragraph, we conducted our reviews in accordance with Statement on Auditing Standards No. 36, "Engagements to Review Financial Statements". Those guidelines require that we plan and perform the review, consisting principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the auditing standards generally accepted in the Republic of China, with the objective of expressing an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Also included in the accompanying consolidated financial statements are the financial statements of nonmajor subsidiaries, which were not reviewed by independent auditors. The total assets of these subsidiaries amounted to NT\$5,170,051 thousand and NT\$12,452,302 thousand, constituting 12.5% and 30.4% of the total consolidated assets as of September 30, 2016 and 2015, respectively. The total liabilities amounted to NT\$4,058,872 thousand and NT\$4,225,379 thousand, constituting 14.5% and 14.7% of the total consolidated liabilities as of September 30, 2016 and 2015, respectively. The comprehensive income amounted to NT\$30,515 thousand and NT\$367,673 thousand, constituting 5.9% and 47.4% of the total consolidated comprehensive income for the three months ended September 30, 2016 and 2015, respectively. Also, for the nine months ended September 30, 2016 and 2015, the comprehensive income amounted to NT\$90,775 thousand and NT\$660,183 thousand, constituting 7.9% and 45.6% of the total consolidated comprehensive income.

Based on our reviews and the reviews of other auditors, except for the effects of the adjustments, if any, that might have emerged had the financial statements of the said consolidated subsidiaries been reviewed by independent auditors, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements described in the first paragraph for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standards No. 34, "Interim Financial Reporting" which was endorsed by the Financial Supervisory Commission.

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KPM G

November 10, 2016

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and consolidated cash flows in accordance with the Regulations Governing the Preparation of Financial Report by Securities Issuers and IAS 34 Interim Financial Reporting as endorsed by the Financial Supervisory Commission in the Republic of China and not those of any other jurisdictions. The standards, procedures, and practices to review such financial statements are those generally accepted and applied in the Republic of China.

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

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

As of September 30, 2016 and 2015 reviewed only, not audited in accordance with generally accepted auditing standards.

Consolidated Balance Sheets

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September 30, 2016 and December 31 and September 30, 2015
(expressed in thousands of New Taiwan dollars)

	September 30, 2016	$\frac{\text{December 31,2015}}{\text{Amount}}$		September 30, 2015			September 30, 2016	December 31, 2015		September 30, 2015
Assets Current assets:	ر په Amount			$A$ mount	×,	Liabilities and equity Current liabilities:	่ำ Amount	Amount	ำ∣ี่	Amount	×
Cash and cash equivalents (note 6(a))	$\tilde{=}$ 6,700,586 u,	7,623.380	B	7,949,345	ສ	Short-term borrowings (note 6(k))	2,892,208 69	1,350,565		4,086,918	≌
Financial assets at fair value through profit or loss --						Notes and accounts payable	ግ 16,157,807	18,723,930	슧	16,452,740	্ব
current (note 6(b))	69,673	88,717		193,053		Financial liabilities at fair value through profit or loss-
Notes and accounts receivable, net (note 6(d))	$\mathcal{S}$ 14,592,671	14,424,622		13,681,614	నె	Other payables (note 7(b)) current (note 6(b))	60,578 3.162,843	60, ICS		140,024
Accounts receivable -- related parties, net							998,131	1,891,786 227,107		270,329
(notes $6(d)$ and $7(b)$ )	68,825	54.995		53,196		Salary payable (note 6(q))				,075,675
Other receivables (note 6(d))	108,783	462,242		489,888		Other current liabilities	292,856	279,120		349,896
Inventories, net (note 6(e))	6,449,479	7,350,609		7,294,433		Current portion of long-term borrowings (note 6(1))	715,555	622,347		679,709
Non-current assets held for sale (note 6(f))	3,660,447					Liabilities directly associated with non-current assets held
Other current assets (note 8)	42.77	408.596		458,937		for sale (note 6(f))	1.710,877			26,055.291	· 적
	32.093,236	30,413,161		30,120,466	티		ଖ୍ 25,990,850	26,154,964	63
						Non-current liabilities:
Non-current assets:						Long-term borrowings (note 6(l))	218,889	1,055,140		1,0.56,574
Available-for-sale financial assets - non-current						Long-term deferred revenue (note 6(h))	1,464,370	1,084,133		1,034,570
$($ note $6(c)$	730,803	584,430		319,061		Other non-current liabilities	381,348	$-320.911$ $2,660.184$		521,695
Property, plant and equipment (notes 6(h) and 8)	4.760,409	6,284,023		6,129,265			2,064,607			2,612,845
Investment property, net (note 6(1))	35,792	258.709		259,599		Total liabilities	ๆะ 28.055.457	28,815,148	ଞ୍	28,668,136	ಿಗಿ
Intangible assets (note 6(J)	2,703,302	3,322,191		3,471,832
Deferred tax assets	469,404	390,414		137,449		Equity attributable to stockholders of parent:
Long-term prepaid rent (note 8)	276,668	306,125		356,185		Common stock (note 6(p))	4.417.478	411,877		1,412,137
Other non-current assets (note 8)	171,310	172,680		165,927	٠	Capital collected in advance	0740	15,174		3,406
	$\tilde{a}$ 9,147,688	11,318.572	$\overline{E}$	10,839,318	$\frac{56}{5}$	Capital surplus (note 6(p))	784,936	777,368		780,058
						Legal reserve (note 6(p))	788,634	611,322		611,322
						Special reserve (note 6(p))	9.300	97,300		97,300
						Unappropriated retained carnings (note 6(p))	4,256,076	3,951,934		3,455,346
						Other equity	264,778	565,406		432,931
						Non-controlling interests (note 6(g))	၂၁ 2.566.52	2,486.20		2,499,148
						Total equity	13,185,467	12.916.585	ᅯ	12,291,648	శి
Total assets	目 $$ -41.240.924$	41,731,733	녬	40,959,784	힄	Total liabilities and equity	ᅨ \$ 41.240.924	41,731,733	룈	40,959,784	힄

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income

For the three months and for the nine months ended September 30, 2016 and 2015 (expressed in thousands of New Taiwan dollars, except earnings per share)

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2016 2015 (restated) 2016 2015 (restated) % $\%$ % Amount Amount Amount $\frac{1}{2}$ Amount 100 18,488,446 100 Operating revenue (notes 6(s) and 7(b)) \$ 17,220,627 46,794,027 100 43,804,569 100 Operating cost (notes 6(e), (n), (q) and (t) and 12(a)) 16,294,983 88 15,375,245 89 89 41,631,843 39,145,882 89 12 Gross profit 2,193,463 1,845,382 11 5,162,184 $\mathbf{\mu}$ 4,658,687 $\mathbf{11}$ Operating expenses (notes 6(n), (q) and (t) and 12(a)): Selling expenses 3 417,538 386,425 3 1.111,663 $\mathbf{2}$ 1,025,083 3 Administrative expenses $\overline{c}$ $\overline{2}$ $\mathbf{2}$ 347,496 327,163 821,924 $\boldsymbol{2}$ 845,154 Research and development expenses 3 $\overline{3}$ 535,264 $\overline{\mathbf{3}}$ 586,091 1,565,682 3 1,440,943 8 8 $\frac{7}{4}$ 1,351,125 1,248,852 3,499,269 3,311,180 8 3 842,338 4 Net operating income 596,530 1,662,915 1,347,507 $\overline{\mathbf{3}}$ Non-operating income and expenses: Other income (note 6(u)) 51,286 50,477 148,040 125,192 Other gains and losses (notes 6(c) and (v)) (62, 785) 140,066 1 288,412 297,249 1 Share of profit of subsidiaries accounted for using equity method 3,772 ÷ Finance costs (34,300) (81, 671) (85,090) (109, 834) $\bullet$ (45, 799) 108,872 328,514 339,227 $\overline{a}$ $\overline{4}$ 4 796,539 705,402 4 1,991,429 4 Income before income taxes 1,686,734 213,692 Income tax expense (note 6(o)) 217,231 581,770 -1 414,593 3 3 3 3 Net income from continuing operations 582,847 488,171 1,409,659 1,272,141 Net income from discontinued operations (note 12(b)) 49,221 50,411 146,284 33,111 $\overline{\mathbf{3}}$ 3 3 633,258 537,392 1.555,943 1,305,252 3 Other comprehensive income (loss): Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operation's financial statements (298,990) (1) 233,515 (642,998) (1) 1 114,631 Unrealized gains and losses on available-for-sale financial assets (notes 6(c) and (v)) 184,984 5,475 $\mathbf{I}$ 229,209 28,684 Income tax relating to items that may be reclassified to profit or loss (413,789) $\omega$ (114,006) 238.990 143,315 238,990 143.315 (114,006) (413,789) (1) Other comprehensive income $\mathbf{1}$ 519,252 3 776,382 1.448,562 Comprehensive income 4 1,142,154 $\overline{\mathbf{z}}$ 3 S Net income attributable to: Stockholders of parent S 561,764 3 501,294 3 1,409,387 3 1,268,434 3 36,098 71.494 Non-controlling interests 146,556 36,818 ÷. $\overline{\mathbf{3}}$ 3 537,392 3 633,258 1.555.943 1.305.252 3 s Comprehensive income attributable to: s 705,056 Stockholders of parent 491,024 3 4 1,062,631 2 1,380,844 3 Non-controlling interests 28,228 71,326 79,523 67.723 $\overline{2}$ 519.252 3 776,382 1.142.154 \$ 1,448,567 $\overline{\mathbf{3}}$ Earnings per share (note 6(r)): Basic earnings per share (NT dollars) Net income from continuing operations \$ 1 28 1.12 3.15 2.89 Net income from discontinued operations 0.03 0.06 0.02 1.28 1.15 3.21 2.91 Net income $\cdot$ s Diluted earnings per share (NT dollars) Net income from continuing operations \$ 1.27 1.11 3.12 2.85 0.03 0.06 Net income from discontinued operations 0.02 1.27 1.14 S 3.18 2.87 Net income			For the three months ended September 30		For the nine months ended September 30

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Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2016 and 2015
(expressed in thousands of New Taiwan dollars)

						Equity attributable to stockholders of parent
	Capital				Retained earnings		differences on Exchange
							translation of foreign	Unrealized
	Common	collected Capital	Capital	Legal	Special	Unappropriated retained	operation's financial	available-for-sale gains (losses) on	Unearned employee		controlling Non-
	stock	in advance	surplus	reserve	reserve	carnings	statements	financial assets	compensation	Total	interests	Total equity
Balance on January 1, 2015	\$4,346,578	38,903	673,543	456,853	97,300	3,132,488	422,382	707	(18, 241)	9,150,513	1,158,234	10,308,747
Net income						1,268,43				1,268,434	36,818	1,305,252
Other comprehensive income							83,726	28,684		112,410	30,905	143,31
Comprehensive income						1,268,434	83,726	28.684		$-1.380.844$	67,723	1,448,567
Appropriation and distribution of retained earnings:
Legal reserve				154,469		(154, 469)
Cash dividends						(791, 107)				(791, 107)		(791, 107)
Issuance of restricted stock	30,000		91,693						(121, 693)
Amortization expense of restricted stock									31,604	31,604		31,604
Retirement of restricted stock	(900)		(4,862)						5,762
Compensation cost of share-based payment			3,147							3,147		3,528
Exercise of employee stock options		17,499								17,499		17,499
Issuance of common stock for employee stock options and abandonment	36,459	(32,996)	16, 337
Changes in non-controlling interests			$\cdot$							Н	1.272.810	1.272.81
Balance on September 30, 2015	$5 + 412.13$	电阻	$-80,058$	TETTE	电子机	145.34	$-506,108$	29.39	$-0.02,568$	19, 192, 50	2.499.148	ग्रिपेल
Balance on January 1, 2016	4,411,877 ú	15,174	777,368	611,322	97,300	3,951,934	351,045	294,760	(80, 399)	10,430.38	2,486,204	12,916,58
Net income						1,409,387				1,409.387	146,556	1,555,94
Other comprehensive income						⊣	(5.5,96)	229.209		1346.750	(67,033)	(413.789
Comprehensive income						1,409,387	(573,965	229.20		1.062.63	$-23.523$	1,142,154
Appropriation and distribution of retained earnings:
Legal reserve				17,312		(177, 312)
Cash dividends						(921, 933)				(92, 933)		(927, 933)
Amortization expense of restricted stock									35,929	35,929		35,929
Retirement of restricted stock	(3,850)		(6,349)						10,199
Compensation cost of share-based payment			1,861							1,861	264	2,659
Exercise of employee stock options		16,073								16,073		16,073
Issuance of common stock for employee stock options		21.307
Balance on September 30, 2016	S 4417.478	$\frac{9}{4}$	12.056 284.936	$-33.63$	$\frac{1}{2}$	1,256,076	121.910	$-22.969$	134.21)	10,618,942	2.566.525	11185.46

See accompanying notes to consolidated financial statements.

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PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2016 and 2015 (expressed in thousands of New Taiwan dollars)

		For the nine months ended September 30
	2016	2015
Cash flows from operating activities:
Income before income taxes from continuing operations	\$ 1,991,429	1,686,734
Income before income taxes from discontinued operations	202,982	50,847
Income before income taxes	2,194,411	1,737,581
Adjustments:
Adjustments to reconcile (profit):
Depreciation and amortization	1,231,025	1,069,445
Losses related to inventories	733,331	235.768
Provision (reversal of provision) for bad debt allowance and sales returns	61,119	(2,002)
Gain on disposal of available-for-sale financial assets	(140, 969)
Interest expenses	91,983	119,963
Interest income	(103, 892)	(137, 461)
Compensation cost of share-based payment	38,588	35,132
Other	5,016	2,506
	1,916,201	1,323,351
Changes in operating assets and liabilities:
Notes and accounts receivable	(958, 940)	(2,610,930)
Accounts receivable - related parties	(13, 830)	7,385
Other receivables – current and non-current	272,878	(106, 119)
Inventories	(275, 156)	(2, 288, 713)
Other current assets	(176, 211)	79,562
Financial assets at fair value through profit or loss	18,041	(95, 565)
Other	(109, 696)	67,059
Changes in operating assets	(1,242,914)	(4,947,321)
Notes and accounts payable	(2,009,472)	3,427,459
Salary payable	(228, 976)	22,043
Other payables	(166, 648)	235,973
Other current liabilities	27,377	192,802
Other	4,476	57,079
Changes in operating liabilities	(2,373,243)	3,935,356
Changes in operating assets and liabilities	(3,616,157)	(1,011,965)
Adjustments	(1,699,956)	311,386
Cash flows from operations	494,455	2,048,967
Interest received	103,892	137,461
Interest paid	(91, 933)	(54, 885)
Income taxes paid	(839,064)	(291, 478)
Net cash flows provided by (used in) operating activities	(332, 650)	1,840,065
Cash flows from investing activities:
Acquisition of subsidiary (minus cash acquired)		(39,041)
Cash from non-current assets held for sale	(439, 531)
Proceeds from disposal of available-for-sale financial assets	220,270
Acquisition of property, plant and equipment	(683, 149)	(1,320,170)
Proceeds from disposal of property, plant and equipment	48,707	38,264
Acquisition of other deferred assets Other	(37, 451) 27,968	(47, 728) 21,866
Net cash flows used in investing activities Cash flows from financing activities:	(863,186)	(1,346,809)
Increase in short-term borrowings	1,909,114	1,635,710
Decrease in long-term borrowings	(417, 568)	(202, 606)
Decrease in guarantee deposits	(5,668)	(54, 176)
Decrease in other payables – related parties	(63,994)	(21, 408)
Cash dividend	(927, 933)	(791, 107)
Exercise of employee stock options	16,073	17,499
Net cash flows provided by financing activities	510,024	583,912
Effect of foreign currency exchange translation	(236,982)	58,154
Net increase (decrease) in cash and cash equivalents	(922, 794)	1,135,322
Cash and cash equivalents at beginning of period	7,623,380	6,814,023
Cash and cash equivalents at end of period	\$ 6,700,586	7,949,345

See accompanying notes to consolidated financial statements.

PRIMAX ELECTRONICS LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2016 and 2015 (expressed in thousands of New Taiwan dollars unless otherwise specified)

(1) Organization

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

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 consolidated financial statements of the Company as at and for the years ended September 30, 2016, comprised the Company and subsidiaries (together referred to as "the Group"). The major business activities of the Group were the manufacture and sale of multi-function printers, scanners, digital camera modules, computer mice, keyboards, track pads, mobile phone accessories, consumer electronics products, shredders, amplifiers, speakers, audio systems and industrial automation parts. Please refer to note 13 for further information.

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

(2) Financial Statements Authorization Date and Authorization Process

The consolidated financial statements were authorized for issuance by the board of directors on November 10, 2016.

(3) New Standards and Interpretations Not Yet Adopted

(a) Impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial Supervisory Commissions R.O.C. ("FSC") but not yet in effect

PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

According to the 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 (excluding IFRS 9 "Financial Instruments", IFRS 15 "Revenue from Contracts with Customers", and others which have yet to be approved by the FSC in order for them to take effect) in preparing their financial statements. The related new standards, interpretations and amendments are as follows:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities:	January 1, 2016
Applying the Consolidation Exception"
Amendments to IFRS 11 "Accounting for Acquisitions of Interests in	January 1, 2016
Joint Operations"
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	January 1, 2016
Methods of Depreciation and Amortization"
Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants"	January 1, 2016
Amendments to IAS 19 "Defined Benefit Plans: Employee	July 1, 2014
Contributions"
Amendment to IAS 27 "Equity Method in Separate Financial	January 1, 2016
Statements"
Amendments to IAS 36 "Recoverable Amount Disclosures for	January 1, 2014
Non-Financial Assets"
Amendments to IAS 39 "Novation of Derivatives and Continuation of	January 1, 2014
Hedge 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 Group assessed that the initial application of the above IFRSs would not have any material impact on the consolidated financial statements.

Notes to Consolidated 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 as of the end of reporting date is as follows:

	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	Effective date to be
Between an Investor and Its Associate or Joint Venture"	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	January 1, 2018
of 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	January 1, 2017
Unrealized Losses"

The Group is still currently determining the potential impact of the standards listed below:

Issuance / Release Dates	Standards or Interpretations	Content of amendment
May 28, 2014 April 12, 2016	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;

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Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Issuance / Release	Standards or
Dates	Interpretations	Content of amendment
		(iii) account for a license for intellectual property (IP); and (iv) apply transition requirements.
November 19, 2013 July 24, 2014	IFRS 9 "Financial Instruments"	The standard will replace IAS 39 "Financial 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.

Notes to Consolidated Financial Statements

Issuance / Release	Standards or
Dates	Interpretations	Content of amendment
January 13, 2016	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.
January 19, 2016	Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses"	The objective of this project is to clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value. It clarifies that taxable profit excluding tax deductions' used for assessing the utilization of deductible temporary differences is different from taxable profit on which income taxes are payable.
January 29, 2016	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.

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

(Continued)

$\overline{5}$

6

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Summary of Significant Accounting Policies

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations") and the guidelines of IAS 34 Interim Financial Reporting, which were endorsed by the FSC. These consolidated financial statements do not include all of the information required by the International Financial Reporting Standards, the International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC ("the IFRS endorsed by the FSC") for the annual financial statements.

Except as described in the following paragraph, the significant accounting policies adopted in the preparation of the consolidated financial statements are applied consistently with those of the consolidated financial statements for the year ended December 31, 2015. For other related information, please refer to Note (4) of the consolidated financial statements for the year ended December 31, 2015.

• (b) Basis of consolidation
• 1. Except as described in the following paragraph, the principles of preparation of the consolidated financial statements are consistent with the consolidated financial statements for the year ended December 31, 2015. Please refer to note $4(c)$ of the consolidated financial statements for the year ended December 31, 2015 for further information.
• 1. List of subsidiaries in the consolidated financial statements

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

The details of the subsidiaries included in the consolidated financial statements are as follows:

Name of	Name of	Principal		Percentage of shareholding
investor	subsidiarv	activities	2016	September 30. December 31, 2015	September 30, 2015	Description
The Company	Primax Industries (Cayman Holding) Ltd. (Primax Cayman)	Holding company	100.00%	100.00%	100.00%
The Company	Primax Technology (Cayman Holding) Ltd. (Primax Tech.)	Holding company	100.00%	100.00%	100.00%

Notes to Consolidated Financial Statements

Name of	Name of	Principal		Percentage of shareholding
				September 30, December 31,	September 30,
investor	subsidiary	activities	2016	2015	2015	Description
The Company	Destiny Technology Holding Co., Ltd. (Destiny BVI.)	Holding company	100.00%	100.00%	100.00%
The Company	Primax Destiny Co., Ltd. Market development and (Destiny Japan)	customer service	100.00%	100.00%	100.00%
The Company	Primax Electronics Korea Market development and Co., Ltd. (Primax Korea)	customer service		100.00%	100.00%	Primax Korea was closed and finished the liquidation process in March 2016
The Company	Diamond (Cayman) Holdings Ltd. (Diamond)	Holding company	100.00%	100.00%	100,00%
The Company	(Gratus Tech.)	Gratus Technology Corp. Market development and customer service	100.00%	100.00%	100.00%
The Company	Global TEK Fabrication Co., Ltd. (Global TEK)	Manufacture and sale of sophisticated machinery components, automotive parts, industrial automation parts, communication parts and aerospace components	30.00%	30,00%	30.00%	(note 2 & 3)
	Kong) Ltd. (Primax HK)	Primax Cayman Primax Industries (Hong Export and import trading	100.00%	100.00%	100.00%
Diamond	Tymphany Worldwide Enterprises Ltd. (TWEL)	Holding company	70.00%	70.00%	70.00%	(note 1)
Global TEK	Global TEK Co., Ltd. (GT)	Manufacture of sophisticated machinery components and automotive parts	100.00%	100.00%	100.00%	(note 2 & 3)
Global TEK	Global TEK Fabrication Co., Ltd. (Samoa) $(GTF-S)$	Holding company	100.00%	100.00%	100.00%	(note 2 & 3)
Primax Tech.	Primax HK and Dongguan Primax Electronic & Telecommunication Products Ltd. (PCH2)	Manufacture of multifunctional peripherals, computer mice, mobile phone accessories, consumer electronics products, and shredders	100.00%	100.00%	100.00%
Primax HK	Primax Electronics (KS) Corp., Ltd. (PKS1)	Manufacture of computer, peripherals and keyboards	100.00%	100.00%	100.00%
Primax HK	Primax Electronics (Chongqing) Corp., Ltd. (PCQ1)	Manufacture of computer peripherals and keyboards	100.00%	100.00%	100.00%

$\bf{8}$

L.

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of	Name of	Principal		Percentage of shareholding
investor	subsidiary	activities	2016	September 30, December 31, 2015	September 30, 2015	Description
Primax Tech.	Polaris Electronics Inc. (Polaris)	Sale of multi-function printers and computer peripheral devices	100.00%	100.00%	100.00%
Destiny BVI.	(Destiny Beijing)	Destiny Electronic Corp. Research and development of computer peripheral devices and software	100.00%	100.00%	100.00%
TWEL	Tymphany HK Ltd. (TYM HK)	Sale of audio accessories. amplifiers and their components	100.00%	100.00%	100.00%	(note 1)
TWEL	TYP Enterprises, Inc. (TYP)	Market development and customer service of amplifiers and their components	100.00%	100.00%	100.00%	(note 1)
TYM HK	Premium Loudspeakers (Hui Zhou) Co., Ltd. (Premium Hui Zhou)	Manufacture, research and development, design, and sale of audio accessories, amplifiers and their components	100.00%	100.00%	100.00%	(note 1)
TYM HK	Tymphany Australia Pty Ltd. (TYM Australia)	Research and development, design, and sale of audio accessories, amplifiers and their components			100.00%	TYM Australia was closed and finished the liquidation process in August 2015
TYM HK	TYMPHANY LOGISITCS, INC. (TYML)	Sale of audio accessories, amplifiers and their components	100.00%	100.00%	100.00%	TYML was incorporated in May 2015
TYM HK	Dongguan Tymphany (Tymphany Dongguan)	Manufacture, research and Acoustic Technology Co., development, design, and sale of audio accessories. amplifiers and their components	100.00%	100.00%	100.00%	Tymphany Dongguan was incorporated in September 2015
GT	GP Tech, Inc. (GP)	Sale of automotive parts, industrial automation parts, communication parts and aerospace components	100.00%	100.00%	100.00%	(note 2 & 3)
GTF-S	Global TEK Fabrication Co., Ltd. (HK) (GTF-HK)	Holding company	100.00%	100.00%	100.00%	(note 2 & 3)
GTF-S	Global TEK Co., Ltd. (Samoa) (GTS)	Holding company	100.00%	100.00%	100.00%	(note 2 & 3)
GTF-HK	WUXI GLOBAL TEK FABRICATION CO., LTD. (WUXI GLOBAL TEK)	Manufacture of sophisticated machinery components	100.00%	100.00%	100.00%	(note 2 & 3)
GTS	GLOBAL TEK (XI' AN) CO., LTD. (GLOBAL TEK XI' AN)	Manufacture of industrial automation parts, communication parts and aerospace components	100.00%	100.00%	100.00%	(note 2 & 3)

$\boldsymbol{Q}$

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of	Name of	Principal		Percentage of shareholding
investor	subsidiarv	activities	September 30, December 31, 2016	2015	September 30. 2015	Description
GLOBAL TEK	GTS and WUXI GLOBAL TEK CO. (WUXI), LTD. (GLOBAL sophisticated machinery TEK WUXI)	Manufacture of components and automotive parts	100.00%	100.00%	100.00%	(note 2 & 3)

• Note 1: TWEL was incorporated in October 2013, acquiring all shares of TYM HK by issuing new common stock. The Company acquired 70% of the shares of TWEL by cash through its subsidiary Diamond on January 10, 2014. Therefore, the Company indirectly acquired all shares of TWEL's subsidiaries, and included them in the consolidated 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 transaction has been settled on October 13, 2016, and the Company lost control over Global TEK on the same date.
• (c) Non-current assets held for sale and discontinued operations
• 1. Non-current assets held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale or distribution rather than through continuing use are reclassified as held for sale or held for distribution to owners. Non-current assets or disposal group under this classification must be available for instant sale, which is highly probable within a year, under current condition. The assets or components of a disposal group are re-measured in accordance with the Group's accounting policies before classifying them as held for sale or held for distribution to owners. Thereafter, generally, the assets or disposal groups are measured at the lower of their carrying amount and fair value, less, costs to sell.

Any impairment loss on a disposal group will first be allocated to goodwill, and then the remaining assets and liabilities will be apportioned on a pro rata basis, except that no loss is allocated to assets not within the scope of IAS 36 – Impairment of Assets. Such assets will continue to be measured in accordance with the Group's accounting policies. Impairment losses on assets initially classified as held for sale or held for distribution to owners and any subsequent gains or losses on re-measurement are recognized in profit or loss. Gains are not recognized in excess of any cumulative impairment loss.

When the assets classified as held for sale or held for distribution to owners are intangible assets or property, plant and equipment, they are no longer amortized or depreciated, and any equity-accounted investee is no longer equity accounted.

10

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2. Discontinued operations

A discontinued operation is a component, which is a single operating line or area, disposed or available for sale of the Group or a subsidiary acquired for resale. An operation will be classified as a discontinued operation upon disposal or when the operation meets the criteria to be classified as held for sale or held for distribution to owners, whichever comes first. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the beginning of the comparative year. Therefore, the Group restates the comparative periods in the consolidated statements of comprehensive income.

(d) Income taxes

Tax expense in the financial statements is measured and disclosed according to paragraph B12 of IAS 34 "Interim Financial Reporting".

Income tax expense for the period is best estimated by multiplying the profit before tax for the reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

If tax expense is recognized directly in equity or other comprehensive income, temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the effective tax rate at the time, of realization or liquidation.

(e) Employee benefits

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

(5) Significant Accounting Assumptions and Judgments, and Major Sources of Estimation Uncertainty

The preparation of the consolidated financial statements in conformity with IAS 34 Interim Financial Reporting endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In the preparation of this consolidated financial statements, the major sources of significant accounting assumptions, judgments and estimation uncertainty are consistent with note 5 of the consolidated financial statements for the year ended December 31, 2015.

Notes to Consolidated Financial Statements

(6) Explanation of Significant Accounts

Except as described on the following paragraphs, there were no significant change between the explanations on the significant accounts and those of the consolidated financial statements for the year ended December 31, 2015. Please refer to note 6 of the consolidated financial statements for the year ended December 31, 2015 for further information.

(a) Cash and cash equivalents

	2016	2015	September 30, December 31, September 30, 2015
Cash on hand Checking accounts and demand deposits	3.169 2,076,992	4.097 2,939,622	4,100 2,719,884
Time deposits	4,620,425	4,679,661	5,225,361
	6,700,586	7,623,380	7,949,345

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

(b) Financial assets and liabilities at fair value through profit or loss

1. The fair value of financial instruments was as follows:

	September 30, December 31, September 30, 2016	2015	2015
Financial assets at fair value through profit or
loss – current:
Non-derivative financial assets:
Open-ended funds	S	969	.20.
Derivative financial assets:
Forward exchange contracts	\$ 57,895	87,748	190,887
Foreign exchange swap contracts	11.778		963
	S 69.673	87.748	191.850
Financial liabilities at fair value through profit
or loss – current:
Derivative financial liabilities:
Forward exchange contracts	\$ (57,720)	(60, 105)	(139, 528)
Foreign exchange swap contracts	(2.858)		(496)
	S (60.578)	(60.105)	40.024

$12$

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

$\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\$

$\bar{z}$

1. The Group held the following derivative financial instruments not designated as hedging instruments presented as held-for-trading financial assets as of September 30, 2016, and December 31 and September 30, 2015:

	September 30, 2016
Derivative financial instruments	Nominal amount	Maturity date	Predetermined rate
Forward exchange contracts - USD 371,000 thousand October 3, 2016~ buy USD / sell TWD		December 28, 2016	31.053~31.965
Forward exchange contracts - USD 262,000 thousand buy TWD / sell USD		October 3, 2016 $\sim$ December 28, 2016	31.204~32.005
Forward exchange swap contracts – swap in TWD / swap out USD	USD 109,000 thousand November 4, 2016 $\sim$	December 28, 2016	31.192~31.654
$D$ .	December 31, 2015

Derivative financial instruments	Nominal amount	Maturity date	Predetermined rate
Forward exchange contracts - USD 205,000 thousand January 7, 2016~			32.754~32.892
buy USD / sell TWD Forward exchange contracts - USD 205,000 thousand		February 26, 2016 January 7, 2016~	32.802~33.010
buy TWD / sell USD		February 26, 2016
Forward exchange contracts $-$ USD 63,500 thousand buy USD / sell CNY		January 4, 2016~ May 19, 2016	6.4115~6.5934
Forward exchange contracts - USD 40,000 thousand buy CNY / sell USD		January 19, 2016	6.6380
Foreign exchange contracts $-$ USD buy JPY / sell USD		516 thousand January 25, 2016	120.75~122.40

	September 30, 2015
Derivative financial instruments	Nominal amount	Maturity date	Predetermined rate
Forward exchange contracts $-$ USD 145,000 thousand October 5, 2015 $\sim$ buy USD / sell TWD		November 17, 2015	32.187~33.029
Forward exchange contracts $-$ USD 155,000 thousand October 5, 2015 $\sim$ buy TWD / sell USD		November 17, 2015	32.325~33.203
Forward exchange contracts - USD 125,000 thousand buy USD / sell CNY		October 16, 2015 $\sim$ January 19, 2016	$6.452 - 6.5208$
Forward exchange contracts - USD 125,000 thousand buy CNY / sell USD		October 16, 2015~ January 19, 2016	$6.494 - 6.638$
Forward exchange contracts $-$ EUR buy TWD / sell EUR		300 thousand October 20, 2015	35.825
Foreign exchange swap contracts - swap in USD / swap out TWD	USD.	10,000 thousand November 16, 2015	33.027
Foreign exchange swap contracts - swap in TWD / swap out USD	USD	800 thousand October 1, 2015	32.508

• 1. Please refer to note 6(w) for the liquidity risk of the Group's financial instruments.
• 1. The Group 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

	2016	2015	September 30, December 31, September 30, 2015
Stocks listed in domestic markets	705,299	551,600
Stocks unlisted in domestic markets	12.017	16.297	302,497
Stocks unlisted in foreign markets	13.487	16,533	16,564
	730.803	584.430	319.061

1. In the second quarter of 2016, the Group 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.

Notes to Consolidated Financial Statements

1. The unrealized gains and losses were recognized as unrealized gains and losses on available-for-sale financial assets. Details were as follows:

	For the three months		For the nine months
	ended September 30		ended September 30
	2016	2015	2016	2015
Unrealized gains (losses)	184.984	5.475	229,209	28,684

• 1. The Group did not provide any of the aforementioned available-for-sale financial assets as collateral.
• (d) Notes and accounts receivable, and other receivables (including related parties)

÷.

		2016	2015	September 30, December 31, September 30, 2015
Notes receivable	S	8,977	134,860	53,774
Accounts receivable		14,703,279	14,353,936	13,690,695
Accounts receivable – related parties		68,825	54,995	53,196
Other receivables		108,783	462,242	489,888
Less: allowance for doubtful accounts		(69, 243)	(29, 247)	(25,702)
allowance for sales returns and discounts		(50, 342)	(34, 927)	(37, 153)
		S 14,770,279	14.941.859	14,224,698

• 1. The Group did not provide any of the aforementioned notes and accounts receivable, and other receivables (including related parties) as collateral.
• 1. Please refer to note 6(w) for changes in the allowance for doubtful accounts and the credit risk and currency risk.

$\sim$

14

1. 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 September 30, 2016, and December 31 and September 30, 2015, the details of transferred accounts receivable which conformed to the criteria for derecognition were as follows:

			September 30, 2016
Buver	Amount sold NTS	Credit facilities US\$ (expressed in thousands)	Cash received in advance NT\$	Interest rate	Guarantee (promissory note) expressed in thousands	Amount derecognized NTS	Amount not received
Mega International \$ Commercial Bank		20.000			US\$ 5,000
HSBC Bank Bank of Taiwan	S	64.400 26,000 110,400			USS 58,000 772,200 NT\$
			December 31, 2015
Buyer	Amount sold NTS	Credit facilities US\$ (expressed in thousands)	Cash received in advance NTS	Interest rate	Guarantee (promissory note) expressed in thousands	Amount derecognized NT\$	Amount not received
Mega International \$ Commercial Bank		25,000			7,000 US\$
HSBC Bank Bank of Taiwan	\$	64.400 26.000 115,400	$\sim$		USS 58,000 NT S 725,400
			Septebmer 30, 2015
Buyer	Amount sold NTS	Credit facilities USS (expressed in thousands)	Cash received in advance NTS	Interest rate	Guarantee (promissory note) expressed in thousands	Amount derecognized NT S	Amount not received
Mega International \$		25,000			7,000 USS
Commercial Bank HSBC Bank Bank of Taiwan	623,846 623,846 S	64,400 26.000 115.400	561,461 561.461	0.97%~1.14%	58,000 USS NT\$ 725,400	561,461 561.461	62,385 62,385

1. Please refer to note 9 for guarantee notes provided by the Company to sell its accounts receivable.

Notes to Consolidated Financial Statements

(e) Inventories

	September 30, December 31, September 30, 2016	2015	2015
Raw materials Semi-finished goods and work in process Finished goods and merchandise	1,551,115 1,368,635 3,529,729 S 6,449,479	1,465,472 1,488,325 4,396,812 7,350,609	1,972,834 2,180,421 3,141,178 7.294.433

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

The Group recognized the following items as cost of goods sold from continuing operations:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Additional losses on inventory valuation Unallocated manufacturing overhead resulting from the actual production being lower than	\$(143, 496)	(111, 477)	(602,711)	(90, 376)
the normal capacity	(33,994)	(16, 142)	(115,070)	(55, 516)
Losses on disposal of inventories		(2,990)	(19, 737)	(87, 239)
Gain (losses) on physical inventories, net	2,351	(1,025)	4,187	(1,064)
	(175, 139)	(131.634)	733.331	(234, 195)

16

PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(f) Non-current assets held for sale

The Group resolved to dispose parts of the shares of Global TEK during the directors' meeting held on June 21, 2016, and started the selling progress. The said shares were sold on October 3, 2016. Please refer to note 11. Details of assets and liabilities held for sale as of September 30, 2016 were as follows:

		September 30, 2016
Current assets:
Cash and cash equivalents	S	439,531
Financial assets at fair value through profit or loss - current		1,003
Notes and accounts receivable, net		729,772
Other receivables		80,610
Inventories, net		442,955
Other current assets		108,397
		1,802,268
Non-current assets:
Property, plant and equipment		1,209,963
Intangible assets		515,368
Deferred tax assets		34,145
Long-term prepaid rent		72,263
Other non-current assets		26,440
		1,858,179
Reclassified as assets held for sale	\$	3,660,447
Current liabilities:
Short-term borrowings	\$	367,475
Notes and accounts payable		556,651
Other payables		309,682
Other current liabilities		13,641
Current portion of long-term borrowings		74,810
		1,322,259
Non-current liabilities:
Long-term borrowings		250,665
Deferred tax liabilities		131,545
Other non-current liabilities		6,403
		388,613
Reclassified as liabilities held for sale	S	1.710.872

Reclassification of group held for sale is not retroactive on the reporting date; therefore, the comparative periods are not restated. Please refer to note 12(b) for the operating results and cash flows from discontinued operations.

Notes to Consolidated Financial Statements

(g) Details of subsidiaries that have material non-controlling interests

Details of subsidiaries that have material non-controlling interests were as follows:

Name of subsidiary	Principal Place of Business/Registered Country		Proportion of Ownership and Voting Rights Held by Non-controlling Interests	September 30, December 31, September 30,
		2016	2015	2015
TWEL and its subsidiaries	Hong Kong and China/Cayman Is.	30%	30%	30%
Global TEK and its subsidiaries	Taiwan and China/Taiwan	70%	70%	70%

Summarized financial information in respect of each of the Group's subsidiaries that has material non-controlling interests is set out below. The summarized financial information prepared in accordance with the IFRSs endorsed by the FSC reflects the adjustments of fair value and differences in accounting policies. It represents amounts before intragroup eliminations.

1. TWEL and its subsidiaries:

		2016	2015	September 30, December 31, September 30, 2015
Current assets	S	3,928,615	4,380,696	2,927,090
Non-current assets		3,122,470	3,126,982	3,109,549
Current liabilities		(2,843,118)	(3,440,368)	(1,983,809)
Non-current liabilities		(221, 183)	(97, 340)	(101, 871)
Net assets		\$3.986,784	3,969,970	3,950,959
Non-controlling interests		.196.035	.190.991	.185.288

ended September 30	For the nine months ended September 30
2016 2016 2015	2015
2,163,868 1,701,532 5,680,021 Operating revenue S	3,964,130
S 70,276 5,480 96,779 Net income	45,469
(40,482) Other comprehensive income (loss) 61,305 (82, 626)	43,437
Comprehensive income 29,794 66,785 14.153 S.	88,906
Net income attributable to non-controlling $$ -21,083$ 1,643 29.034 interests	13,640
Comprehensive income attributable to non-controlling interests 20.035 $$ -8,938$ 4,246	26,672
105,853 (592, 821) \$. 559,813 Cash flows from operating activities	6,026
(125, 396) (61,989) (200, 042) Cash flows from investing activities	(85,299)
(361) (430) Cash flows from financing activities (669)	10,047
Effect of foreign currency exchange translation (29, 633) 56,742 (60, 408)	42,216
Net increase (decrease) in cash and cash 853.940) equivalents S (49, 537) 554.136	(27.010)
Dividends paid to non-controlling interests

1. Global TEK and its subsidiaries

	September 30, December 31, September 30, 2016	2015	2015
Current assets	1,802,268	1,447,425	1,522,914
Non-current assets	1,858,179	1,805,801	1,877,293
Current liabilities	(1,322,259)	(994, 338)	(1,084,426)
Non-current liabilities	(388, 613)	(408, 586)	(438, 837)
Net assets	\$1,949,575	1.850.302	1,876,944
Non-controlling interests	\$1,370,490	295,213,	1.313.860

Notes to Consolidated Financial Statements

		For the three months ended September 30		For the nine months ended September 30
		2016	2015	2016	2015
Operating revenue Net income Other comprehensive income (loss) Comprehensive income	S S.	613,236 50,411 (31.121) 19.290	562.205 49,221 24,052 73.273	1,878,077 146,284 (47,012) 99,272	1,475,753 33,111 25,533 58,644
Net income attributable to non-controlling interests		$$ -50,411$	34,455	117,522	23,178
Comprehensive income attributable to non-controlling interests	S	19.290	51.291	75.277	41,051
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of foreign currency exchange translation	S	55,683 (38, 866) 128,964 (29, 105)	41,979 (65, 043) 31,516 (7, 288)	266,018 (157, 523) 102,080 (49,606)	70,284 (173, 562) (186, 460) 12,960
Net increase (decrease) in cash and cash equivalents Dividends paid to non-controlling interests	S. \$	116,676	1.164	60,969	276,778)

(h) Property, plant and equipment

$\mathcal{A}^{\mathcal{A}}$

The cost, depreciation, and impairment loss of the property, plant and equipment of the Group for the nine months ended September 30, 2016 and 2015, were as follows:

		Land	Buildings. leasehold improvement, and additional equipment		Machinery and equipment	Office and other equipment		Construction in progress and testing equipment	Government grants	Total
Cost or deemed cost:
Balance on January 1, 2016	S.	284,973	4,145,565		6,578,407	680,211		503,242	(12, 731)	12,179,667
Additions				35,631	287,320		29,869	722,543		1,075,363
Disposals				(65, 505)	(423, 858)		(26, 198)			(515, 561)
Reclassifications		111,822		325,418	455,865		(15, 126)	(736,898)	(4, 813)	136,268
Reclassifications to assets held for sale		(262,096)		(424, 878)	(767, 431)		(159, 034)	(128,330)		(1,741,769)
Effect of movements in exchange rates				(295,037)	(488.285)		(44, 758)	(30, 115)	1,104	(857.091)
Balance on September 30, 2016		S 134,699	3.721.194		5,642,018		464,964	330,442	(16.440)	10,276,877
Balance on January 1, 2015		22,879	3,062,153		4,741,057		578,964	779,029	(12, 911)	9,171,171
Additions				13,032	477,975		33,796	1,613,565		2,138,368
Disposals				(28, 261)	(156, 052)		(19,903)			(204, 216)
Acquisition from business combination		174,276		278,206	333,876		72,676	124,127		983.161
Reclassifications				49.329	862,735		(2,103)	(971, 837)		(61, 876)
Effect of movements in exchange rates				19,572	107,516		8,008	(12,577)	(109)	122,410
Balance on September 30, 2015		197,155	3,394,031		6,367,107		671,438	,532,307	(13.020)	12,149,018

Notes to Consolidated Financial Statements

	Land	Buildings, leasehold improvement, and additional equipment	Machinery and equipment	Office and other equipment	Construction in progress and testing equipment	Government grants	Total
Depreciation and impairments loss:
Balance on January 1, 2016	s	1,737,377	3,718,475	449,371		(9, 579)	5,895,644
Depreciation		177,042	848,556	56,864		(2, 881)	1,079,581
Disposals		(62, 530)	(376, 322)	(23,003)			(461, 855)
Reclassifications to assets held for sale		(115, 154)	(313, 558)	(103, 094)			(531, 806)
Reclassifications		52,850	(32, 772)	(12, 105)			7,973
Effect of movements in exchange rates		(129, 822)	(309, 555)	(34, 554)		862	(473,069)
Balance on September 30, 2016	s.	.659.763	3,534,824	333.479		(11, 598)	5,516,468
Balance on January 1, 2015		1,643,871	3,214,184	384,695		(6, 724)	5,236,026
Depreciation		187,113	651,386	72,306		(2,193)	908,612
Disposals		(28, 262)	(115,700)	(17, 486)			(161, 448)
Reclassifications		5,521	(48,992)	11,434			(32,037)
Effect of movements in exchange rates		17,963	45,183	5,580		(126)	68,600
Balance on September 30, 2015		1,826,206	3,746,061	456,529		(9,043)	6,019,753
Carrying amounts:
Balance on January 1, 2016	\$284,973	2,408,188	2,859,932	230.840	503.242	(3,152)	6,284,023
Balance on September 30, 2016	S 134,699	2,061,431	2,107.194	131.485	330.442	(4, 842)	4,760,409
Balance on January 1, 2015	$-22,872$	1.418.282	1,526,873	194,269	779.029	(6,187)	3,935,145
Balance on September 30, 2015	197.155	1.567.825	2,621,046	214.909	1,532,307	(3,977)	6.129.265

• 1. The unamortized deferred revenue of equipment subsidy amounted to \$1,365,744, \$1,018,732 and \$967,345 as of September 30, 2016 and December 31 and September 30, 2015, respectively.
• 1. Please refer to note 8 for further information on property, plant and equipment provided as collateral.

(i) Investment property

	Land	Buildings and other equipment	Total
Carrying amounts:
Balance on January 1, 2016	128,071 S	130.638	258,709
Balance on September 30, 2016	16,249 \$	19.543	35,792
Balance on January 1, 2015	128,071 S	134.198	262,269
Balance on September 30, 2015	S	131.528	259,599

1. The Group reclassified \$222,053 as property, plant and equipment from investment property due to the change of the use of such property in the first quarter of 2016.

22

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• 1. Except for the above paragraph, there was no significant additions, disposals, or recognition and reversal of impairment losses of the investment property for the nine months ended September 30, 2016 and 2015. Please refer to note 6(i) of the consolidated financial statements for the year ended December 31, 2015 for further information.
• 1. The fair value of the investment property has no significant change from note 6(i) of the consolidated financial statements for the year ended December 31, 2015.
• 1. The Group did not provide any of the aforementioned investment property as collateral.

(i) Intangible assets

The carrying amounts of the intangible assets of the Group as of September 30, 2016 and 2015, were as follows:

	Goodwill	Customer Relationships Technology		Trademarks, Patents and Copyrights	Total
Carrying amount:
Balance at January 1, 2016	\$2,191,382	676,241	423.954	30,614	3,322,191
Balance at September 30, 2016	\$1,850,383	522,869	305,007	25,043	2,703,302
Balance at January 1, 2015	\$1.850,383	648,659	378,384	39,218	2,916,644
Balance at September 30, 2015	\$2,101,996	852,760	484,289	32,787	3,471,832

• 1. Intangible assets were transferred out due to the resolution to dispose parts of shares of Global TEK approved by the board of directors' meeting. Please refer to note 6(f) for further detail.
• 1. For the intangible assets from obtaining control over Global TEK and its subsidiaries on January 5, 2015, please refer to note 6(f) of the consolidated financial statements for the year ended December 31, 2015.
• 1. Except for above paragraph, there was no significant change on intangible assets for the nine months ended September 30, 2016 and 2015, please refer to note 6(j) of the consolidated financial statements for the year ended December 31, 2015.
• 1. The Group did not provide any of the aforementioned intangible assets as collateral.

(k) Short-term borrowings

The details were as follows:

		2016	September 30, December 31, September 30, 2015	2015
Unsecured bank loans	S	2.892,208	1,130,518	3,995,350
Secured bank loans			220,051	91,568
Short-term borrowings		2.892.208	1.350.569	4,086,918
Unused credit lines		6.800.992	10,729,002	6.412.143
Annual interest rates		$0.93\%$ ~1.27%	$0.85\% - 5.89\%$	$0.85\%$ ~5.89%

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

(l) Long-term borrowings

		September 30, 2016
	Currency	Annual interest rate	Maturity year		Amount
Unsecured bank loans	TWD	$0.95\%$ ~1.56%	2017~2020	S	934,444
Less: current portion					(715, 555)
Total				\$	218,889
Unused credit lines				\$
		December 31, 2015
	Currency	Annual interest rate	Maturity year		Amount
Unsecured bank loans	TWD	0.95%~2.78%	2016~2020	\$	1,374,282
	USD	2.66%	2018		41,037
Secured bank loans	TWD	1 73% 2 13%	2016~2026		215,963
Ð	USD	3.24%~3.3%	2018~2030		46,205
Less: current portion					(622, 347)
Total				S	.055.140

Notes to Consolidated Financial Statements

	September 30, 2015
	Currency	Annual interest rate	Maturity year		Amount
Unsecured bank loans	TWD	$0.95\%$ ~1.56%	2017~2020	S	1,316,667
Ħ	USD	2.66%	2018		44,738
Secured bank loans	TWD	1.80%~2.85%	2016~2026		326,449
	USD	3.24%	2018		48,429
Less: current portion					(679, 709)
Total				S	1,056,574
Unused credit lines					.974.274

• 1. 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 September 30, 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.
• 1. Please refer to note 9 for the details of the outstanding guarantee notes.
• 1. Please refer to note 8 for further information on assets provided as collateral.

(m) Operating lease

1. Lessee

Non-cancellable operating lease rentals are payable as follows:

	2016	2015	September 30, December 31, September 30, 2015
Less than one year	230,713	251,403	236,502
Between one and five years	339,387	508,595	559,316
More than five years	6,818	7,203	17,130
	576.918	767,201	812,948

The Group leases a number of offices, warehouses and pieces of equipment under operating leases. The lease terms are between 1 and 15 years.

2. Lessor

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

	September 30, December 31, September 30, 2016	2015	2015
Less than one year	1.414	1,060	2,318

(n) Employee benefits from continuing operations

1. Defined benefit plans

There was no material volatility of the market, reimbursement and settlement or other material one-time events after the end of the prior fiscal year. As a result, the pension cost in the financial statements was measured and disclosed based on the actuarial calculation as of December 31, 2015 and 2014.

1. Defined contribution plans

The Company contribute the pension cost on the defined contribution plans to the labor pension personal account at the Bureau of Labor Insurance. Subsidiaries other than the Company set up their defined contribution plans in accordance with the regulations of their respective countries.

1. The Group recognized its pension costs from continuing operations and recorded them as operating expenses and operating cost in the statement of comprehensive income.

		For the three months ended September 30		For the nine months ended September 30
		2016	2015	2016	2015
Defined benefit plans		618	629	1.856	1.888
Defined contribution plans		94.001	104,817	276,957	269,423
	S	94.619	105.446	278.813	71,311

Notes to Consolidated Financial Statements

• (o) Income taxes from continuing operations
• 1. Income tax expense for the period is best estimated by multiplying the profit before tax of the reporting period by the effective annual tax rate as forecasted by the management.
• 1. The details of the Group's income tax expenses from continuing operations were as follows:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Income tax expense	213.692	217.231	581,770	414.593

• 1. There were no income tax recognized in equity or other comprehensive income.
• 1. The income tax returns of the Company have been examined by the tax authority through 2013. However, the Company disagreed with the examination of the income tax return for 2008 and requested an administrative remedy. The tax effect of the administrative remedy had been recognized by the Company.
• 1. Information related to the unappropriated earnings and tax deduction ratio is summarized below:

	2016	2015	September 30, December 31, September 30, 2015
Unappropriated earnings in 1998 and after Balance of imputation credit account	4,256,076 392.819 S	3,951,934 420.838	3,455,346 331,396
		2015 (actual)	2014 (actual)
Creditable ratio for earnings distribution to ROC residents stockholders	S	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.

Notes to Consolidated Financial Statements

(p) Capital and other equity

Except for the following paragraph, there were no significant change between the capital and the other equity for the nine months ended September 30, 2016 and 2015. Please refer to note 6(p) of the consolidated financial statements for the year ended December 31, 2015 for further information.

1. Common stock

As of September 30, 2016 and December 31 and September 30, 2015, the nominal common stock amounted to \$5,000,000. Face value of each share is \$10 (dollars), which means in total there were 500,000 thousand authorized common shares, of which 441,748, 441,188 and 441,214 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

Reconciliation of shares outstanding was as follows:

	Ordinary shares (in thousands of shares) For the nine months ended September 30
	2016	2015
Balance on January 1	441,188	434,658
Exercise of employee stock options	945	3,646
Issued for restricted stock		3,000
Retirement of restricted stock	(385)	(90)
Balance on September 30	441.748

2. Capital surplus

The balances of capital surplus were as follows:

	September 30, 2016	December 31, 2015	September 30, 2015
Additional paid-in capital	496,415	447,630	437,398
Employee stock options	231,741	236,277	237,162
Restricted employee stock options	56,780	93,461	105,498
	784.936	777,368	780,058

3. 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 according to the resolution adopted 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.

(i) 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 stockholders' meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.

(ii) 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 The carrying amount of special reserve amounted to \$97,300 on proportionately. September 30, 2016.

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 Amounts of pertaining to prior periods due to the first-time adoption of IFRSs. subsequent reversals pertaining to the net reduction of other stockholders' equity shall qualify for additional distributions.

(iii) Earnings distribution

On June 20, 2016 and on 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 and \$791,107, respectively. The differences between the amounts approved in the stockholders' meeting and those recognized in the financial statements for employee bonuses and remuneration for directors and supervisors for 2014 were as follows:

			2014
		Actual earnings distributed	Accrued in the financial statements	Difference
Employee bonuses
Stock	S	$\overline{\phantom{a}}$
Cash		71,000	71,318	318
Directors' and supervisors' remuneration		27,800	28,527	727

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

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

(a) Share-based payment

Except for the following paragraph, there were no significant change on the share-based payment for the nine months ended September 30, 2016 and 2015. Please refer to note $6(q)$ of the consolidated financial statements for the year ended December 31, 2015 for further information.

1. Employee stock options and share-based payment

$\sim$ $\sim$

(i) As of September 30, 2016, outstanding employee stock options of the Company for equity-settled share-based payment were as follows:

			Plan $3$ (note $3$ )
	Plan 1 (note 1)	Plan $2$ (note $2$ )	Issued in November 2011	Issued in October 2012
Modification/grant date	December 30, 2008/ November 12, 2009	December 30, 2008/ November 12, 2009	November 24, 2011	October 22, 2012
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)	\$11.42 30,828 5 years (May 23, 2005~ November 11, 2014) $2 \sim 3$ years	\$11.42 7.224 $6 - 8$ years (January 2, 2008~ November11, 2017) $3 - 5$ years	\$16.20 1.500 5 vears (November 24, 2011~ November 23, 2016) $2 - 3$ years	\$25.20 3,500 5 years (October 22, 2012~ October 21, 2017) $2 - 3$ 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 Company applied the Black-Scholes option pricing model to measure the fair value of employee stock options.

Notes to Consolidated Financial Statements

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

	For the nine months ended September 30
	2016			2015
	Weighted-average exercise price	Stock options (in thousands)	Weighted-average exercise price	Stock options (in thousands)
Outstanding at January 1	24.66	1,728	22.66	3,724
Granted during the period
Forfeited during the period		$\overline{\phantom{a}}$	25.10	(102)
Exercised during the period	25.70	(626)	16.76	(1,044)
Expired during the period			27.70	(77)
Outstanding at September 30	22.56	l.102	23.81	2,501
Exercisable at September 30	22.56	1.102	20.72	162

As of September 30, 2016 and December 31 and September 30, 2015, the information on the employee stock option plans outstanding was as follows:

	September 30, December 31, September 30, 2016	2015	2015
Employee stock option plan 1
Employee stock option plan 2	211	211	446
Employee stock option plan 3
-Issued in November 2011
Employee stock option plan 3
-Issued in October 2012	891	1.517	2.055
Outstanding at end of period	⊟ 1 O 2	1.728	2.501

(ii) As of September 30, 2016, the outstanding employee stock options of TWEL for equity-settled share-based payment were as follows:

	November 2014	July 2015
Grant date	November 18, 2014	July 1, 2015
Exercise price	\$15.74	\$18.82
Granted units (thousand)	700	2,750
Service period	5 years	5 years
Vesting period	$3 - 4$ years	$3 \sim 5$ years

TWEL applied the Black-Scholes option pricing model to measure the fair value of employee stock options.

l,

Notes to Consolidated Financial Statements

The related information on compensatory employee stock option plans of TWEL was as follows:

			For the nine months ended September 30
	2016		2015
	Weighted-average exercise price	Stock options (in thousands)	Weighted-average exercise price	Stock options (in thousands)
Outstanding at January 1 Granted during the period Forfeited during the period Exercised during the period	18.20	3,450	15.74 18.82	700 2,750
Expired during the period Outstanding at September 30 Exercisable at September 30	16.50 18.27	(142) 3.308	18.195	3.450

1. Restricted stock

As of September 30, 2016, the outstanding restricted stocks of the Company were as follows:

			Plan 1 (note 1)			Pl an 2 (note 1)
Grant date air value on grant date (per share) Exercise price Granted units (thousand shares) Vesting period	October 1, 2013 22.80 Free grants 1.450 $1 - 3$ years (notes 2 and 3)	November 20, 2013 February 10, 2014 25.15 Free grants 186 $1-2$ years (notes 3 and 4)	27.30 Free grants 135 $1 - 2$ years (notes 3 and 4)	July 17, 2014 52.00 Free grants 220 $1 - 2$ years (note 3)	February 24, 2015 August 18, 2015 43.70 Free grants 1.225 $1 - 3$ years (note 2 and 3)	38.40 Free grants 1,775 $1 - 3$ years (note 2)

• 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.

$\mathbf{r}$

PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

$\ddot{\phantom{a}}$

• 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 related information on restricted stock of the Company was as follows:

	For the nine months ended September 30
	2016	2015
(Thousand shares)
Outstanding at January 1	3,270	1,310
Granted during the period		3,000
Forfeited during the period
Vesting during the period	(974)	(155)
Expired during the period	(285	(140)
Outstanding at September 30	2.011	4.015

1. Expenses and liabilities attributable to share-based payment from continuing operations were as follows:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Expenses attributable to
employee stock options	\$ 932	1,843	2,659	3,528
Restricted stock	8,736	13,297	35,929	31,604
Total	\$ 9.668	5.140	38,588	35,132
		2016	September 30, December 31, September 30, 2015	2015
Salary payable: Current		S .938	4,092	4.884

Notes to Consolidated Financial Statements

(r) Earnings per share

The calculation of basic earnings and diluted earnings per share was as follows:

1. Basic earnings per share

	For the three months ended September 30			For the nine months ended September 30
		2016	2015	2016	2015
Profit attributable to common stockholders Continuing operations Discontinued operations Total	\$	561,764 $$ -561,764$	486,528 14,766 501.294	1,380,625 28,762 1,409,387	1,258,501 9,933 1,268,434
Weighted-average number of common shares (thousand shares) Basic earnings per share (NT dollars)		439.380	437,115	438,857	435,961
Continuing operations	\$	1.28	1.12	3.15	2.89
Discontinued operations			0.03	0.06	0.02
Total	\$	0.28	l.15	3.21	2.91

1. Diluted earnings per share

		ended September 30		ended September 30
		2016	2015	2016	2015
Profit attributable to ordinary common				1,380,625	1,258,501
Continuing operations	\$	561,764	486,528
Discontinued operations			14,766	28,762	9,933
Total		\$ 561,764	501.294	1,409,387	1,268,434
Weighted-average number of common shares (diluted / thousand shares)		442,685	441.101	442,884	441.845
Diluted earnings per share (NT dollars):
Continuing operations	\$	1.27	1.11	3.12	2.85
Discontinued operations			0.03	0.06	0.02
Total	S		1.14	3.18	2.87

For the three months

For the nine months

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Weighted-average number of common
shares at September 30 (basic)	439,380	437,115	438,857	435,961
Effect of employee stock options	698	1,063	759	1,886
Effect of employee stock remuneration	1,444	1,537	2,105	2,735
Effect of restricted stock	1,163	1,386	1,163	1,263
Weighted-average number of common
shares at September 30 (diluted)	442,685	441.101	442.884	441.845

(s) Operating revenue

The operating revenue was as follows:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Goods sold	\$18,220,719	16,748,135	45,673,753	42,390,727
Services rendered	267,727	472,492	1,120,274	1,413,842
Continuing operations	18,488,446	17,220,627	46,794,027	43,804,569
Discontinued operations	613,236	562,204	1,878,077	1,475,753
Total	\$19,101,682	17.782.831	48,672,104	45,280,322

Please refer to note 12(b) for operating results and cash flows from discontinued operations.

(t) Remuneration to employees and directors

The Company shall distribute 2 to 10 percent of distributable profit of the current year as employee remuneration, and not more than 2% of the profit as directors remuneration; provided, however, that the Company shall first reserve a sufficient amount to offset its accumulated losses. Employees from subsidiaries who meets the requirements are also included in the condition.

36

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Details of remuneration to employees and directors were as follows:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Employee remuneration Directors remuneration	\$ 24,970 9.988	31,966 12.786	66,365 26.546	65,631 26.252
	34.958	44.752	92.91 ,	91.883

The amounts were calculated based on the Company's income before income taxes, excluding remuneration to employees and directors, by using the earnings allocation method as stated under the Company's articles. These benefits were expensed under operating costs or operating expenses during each period. The differences between the amounts approved in the directors' meeting and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the distribution year.

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:

	2015
	Actual earnings distributed	Accrued in the financial statements	Difference
Employee remuneration
Stock	$\sim$
Cash	78,500	78,269	(231)
Directors remuneration	32,000	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.

Notes to Consolidated Financial Statements

(u) Other income

The other income from continuing operations was as follows:

$\ddot{\phantom{0}}$

	For the three months ended September 30		For the nine months ended September 30
		2016	2015	2016	2015
Interest revenue of cash in banks	S	33,775	46,139	103,396	137,281
Rent revenue		1,969	3,872	3,229	8,991
Dividend revenue		14,692		14,692
Other		850	466	3,875	1,768
	S	51,286	50,477	125,192	148,040

(v) Other gains and losses

The other gains and losses from continuing operations were as follows:

	For the three months ended September 30		For the nine months ended September 30
	2016	2015	2016	2015
Gain on disposal of available-for-sale
financial assets	\$		140,969
Net losses on disposal of property, plant and equipment	(4, 439)	(1,087)	(5,016)	(4,341)
Net gains (losses) on financial assets/liabilities measured at fair value
through profit or loss	(14,062)	49,702	9,097	52,053
Foreign currency exchange gains
(losses), net	(1,043)	90,726	153,076	233.928
Loss on impairment of available-for-sale
financial assets				(940)
Other	(43.241)	725	(9, 714)	16.549
	\$ (62.785)	40.066	288,412	297.249

38

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The reclassifications to the other comprehensive income from the Group in this year ended September 30, 2016 and 2015 were as follows:

		For the three months ended September 30 2016	2015	For the nine months ended September 30 2016	2015
Unrealized gains (losses) on available-for-sale financial assets (after
tax) Net changes measured at fair value during the period	\$	184,984	5,475	370,178	28,684
Net changes measured at fair value reclassified to income statement Net changes measured at fair value				(140,969)
recognized as other comprehensive income	S	84.984	5.475	229.209	28,684

(w) Financial instruments

Except for the following paragraph, the credit risk, liquidity risk, currency risk and fair value have no significant change from the consolidated financial statements for the year ended December 31, 2015. Please refer to note $6(x)$ of the consolidated financial statements for the year ended December 31, 2015 for further information.

1. Credit risk

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

	2016	September 30, December 31, September 30, 2015	2015
Past due 0-30 days	\$ 561,821	1,215,010	689,020
Past due 31-90 days	47,009	122,456	146,563 28,968
Past due 91-180 days	10,559 16,142	14,149 26,023	4,000
Past due 181-360 days
Past due over a year	635.531	.377,638	868.551

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

The changes in the allowance for the nine months ended September 30, 2016 and 2015 were as follows:

	Individually assessed impairment	Collectively assessed impairment	Total
	\$	29,247	29,247
Balance on January 1, 2016	$\overline{\phantom{0}}$	45,704	45,704
Impairment loss recognized		(865)	(865)
Amounts written off Reclassification to assets held for sale		(2,450)	(2,450)
Exchange differences on translation of foreign currency		(2.393)	(2,393) 69,243
Balance on September 30, 2016		69.243

		Individually assessed impairment	Collectively assessed impairment	Total
Balance on January 1, 2015 Impairment loss recognized Acquisition from business combination Amounts written off	\$		26,034 375 469 (1,893)	26,034 375 469 (1, 893)
Exchange differences on translation of foreign currency Balance on September 30, 2015	S		717 25.702	717 25.702

40

Reviewed only, not audited in accordance with generally accepted auditing standards. PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2. Liquidity risk

The following table shows the contractual maturities of financial liabilities:

		Carrying amount	Contractual cash flows	Within 6 months	$6 - 12$ months	1-2 vears	$2-5$ vears	Over 5 years
September 30, 2016
Non-derivative financial
liabilities:	\$	2,892,208	2,892,208	2.892,208
Short-term borrowings Notes and accounts
payable		16,157,807	16,157,807	16.157,807
Other payables		1.961,064	1.961,064	1,961,064		137,729	84,861
Long-term borrowings		934,444	944,148	611,474	110,084		÷	112,973
Guarantee deposits		112,973	112,973
Derivative financial
liabilities:		60,578		3,550,436
Outflow			3,550,436	(3.484, 502)
Inflow			(3,484,502)	21,688,487	110.084	137,729	84.861	112,973
		\$22,119,074	22,134.134
December 31, 2015
Non-derivative financial
liabilities:		1,350,569	1,350,569	1,350,569
Short-term borrowings	3
Notes and accounts		18,723,930	18,723,930	18,723,930
payable		2,737,288	2,737,288	2,737,288			326,777	96.264
Other payables Long-term borrowings		1,677,487	1,735.887	338,378	332,881	641,587		118,641
Guarantee deposits		118,641	118,641
Derivative financial
liabilities:		60,105
Outflow			1.217.415	1,217,415
Inflow			(1,157,310)	(1.157, 310)	332.881	641,587	326,777	214.905
		\$24,668,020	24,726,420	23,210,270
September 30, 2015
Non-derivative financial
liabilities:			4,086,918	4,086,918
Short-term borrowings	S.	4,086,918
Notes and accounts		16,452,740	16,452,740	16,452,740
payable		2,252,512	2,252,512	2,252,512				101,616
Other payables		1,736,283	1,792,944	352,810	343,205	662,609	322,704	110,534
Long-term borrowings		110,534	110,534
Guarantee deposits Derivative financial
liabilities:		140,024
Outflow			4,308,828	4,308,828
Inflow			(4, 177, 754)	(4, 177, 754)		662,609	332,704	212,150
		24 779 011 ¢	24.826.722	23,276,054	343,205

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

3. Currency risk

(i) Exposure to foreign currency risk

The Group's significant exposure to foreign currency risk was as follows:

	Sentember 30, 2016			December 31, 2015			Sentember 30, 2015
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial assets
Monetary items	\$346,113	6,6778	10,856,180	472,140	64936	15,611,768	359,995	6.3613	11,925,914
USD:CNY									8.195.337
USD:HKD	70.180	7.7561	2.201.259	403,487	7,751	13.341.701	247.384	7.75
USD:TWD	382,290	31.366	11.990.895	430.293	33.066	14.228.077	400.390	33.128	13.264.106
Financial liabilities
Monetary items
USD:CNY	372,337	6.6778	11,678,725	434,501	6.4936	14.367.209	405,086	6.3613	13,419,695
USD:HKD	78.235	7.7561	2,453,910	395,385	7.751	13,073,812	242,013	7.75	8.017.395
USD:TWD	339,487	31,366	10,648,360	397,940	33.066	13,158,292	333,485	33.128	11,047,685

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

A weakening (strengthening) of 5% of the TWD, CNY and HKD against the USD as of September 30, 2016 and 2015, would have increased or decreased the net profit after tax by \$11,095 and \$37,374, respectively. The analysis is performed on the same basis for both periods.

As the Group deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the three months ended September 30, 2016 and 2015, the foreign exchange gains, including both realized and unrealized, amounted to \$(1,043) and \$90,726, respectively. For the nine months ended September 30, 2016 and 2015, the foreign exchange gains, including both realized and unrealized, amounted to \$153,076 and \$233,928, respectively.

(ii) Interest rate analysis

Please refer to the note of liquidity risk for the exposure of financial assets and liabilities to changes in interest rates.

Notes to Consolidated Financial Statements

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

If the interest rate had increased or decreased by 0.25%, the net profit after tax would have increased or decreased by \$1,235 and decreased or increased \$930 for the nine months ended September 30, 2016 and 2015, respectively, mainly as a result of bank savings and borrowings with variable interest rates.

4 Fair value

(i) Kinds of financial instruments and fair value

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

			September 30, 2016
	Carrying		Fair Value
	amounts	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or
$loss - current$	69,673			69.673	.69.673
Available-for-sale financial assets – non-current	730.803	705,299		25,504	730.803
Loans and receivables
Cash and cash equivalents	6,700,586 \$
Notes and accounts receivable (including related parties)	14,661,496
Other receivables	108,783
Total	$$ -21,470,865$
Financial liabilities at fair value through profit or
$loss - current$	60.578 S			60.578	60.578
Financial liabilities carried at amortized cost
Borrowings	\$ 3,826,652
Notes and accounts payable	16,157,807
Salary payable	998,131
Other payables	3,162,843
Guarantee deposits received	112,972
Total	24,258,405

Notes to Consolidated Financial Statements

			December 31, 2015
	Carrying		Fair Value
	amounts	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or
$loss - current$	88.717 s	969		87,748	88.717
Available-for-sale financial assets – non-current	584,430 S	551.600		32,830	584,430
Loans and receivables
Cash and cash equivalents	\$ 7,623,380
Notes and accounts receivable (including related
parties)	14,479,617
Other receivables	462,242
Total	22,565,239 S
Financial liabilities at fair value through profit or
$loss - current$	60,105 S.			60,105	60.105
Financial liabilities carried at amortized cost
Borrowings	3,028,056 \$
Notes and accounts payable	18,723,930
Salary payable	1,227,107
Other payables	3,891,786
Guarantee deposits received	118,641
Total	\$26,989,520
			September 30, 2015
	Carrying			Fair Value
	amounts	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or
$loss - current$	193.053 \$.	1,203		191,850	193,053
Available-for-sale financial assets - non-current	319,061 S			319,061	319.061
Loans and receivables
Cash and cash equivalents	\$ 7,949,345
Notes and accounts receivable (including related
parties)	13,734,810
Other receivables	489,888
Total	22,174,043 \$_
Financial liabilities at fair value through profit or	140.024			140,024	140,024
$loss - current$	S.
Financial liabilities carried at amortized cost
Borrowings	\$ 5,823,201
Notes and accounts payable	16,452,740
Salary payable	1,075,675
Other payables	3,270,329
Guarantee deposits received	110,534
Total	$$ -26,732,479$

Notes to Consolidated Financial Statements

(ii) 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 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 Group 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 stock. The fair value is based on a valuation technique. For stocks in the emerging market, the estimated fair value is adjusted for the lack of liquidity. When prices listed in the emerging market are unavailable, the fair value is estimated on the basis of unadjusted prior trade prices.
• (iii) There is no transferring of fair value hierarchy for the nine months ended September 30, 2016 and 2015.

					For the nine months ended September 30
			2016			2015
		Fair value through profit or loss	Available for sale	Total	Fair value through profit or loss	Available for sale	Total
Balance on January 1 Recognized in profit or loss	S	27.643 9095	32.830	60.473 9.095	15.695 51.826	292.916 (940)	308.611 50,886
Recognized in other comprehensive income Acquisition / disposal Balance on September 30 S		(27, 643) 9.095	(3.792) (3.534) 25.504	(3.792) (31,177) 34,599	(15,695) 51.826	28,684 (1.599) 319,061	28,684 (17.294) 370.887

(iv) Changes in Level 3

(v) Fair value measurements using significant unobservable inputs (Level 3)

The fair value measurements of the Group 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	Valuation technique	Significant unobservable inputs	between significant unobservable inputs and fair value
Available-for-sale	Guideline	Lack-of-Marketability	The higher the
$f$ inancial assets $-$ equity	Public	Discount(80% on	Lack-of-Marketability
securities listed on	Company	September 30, 2015)	Discount is, the lower
emerging stock market	method		the fair value will be.
Available-for-sale	(note 1)	(note 1)	(note 1)
$f$ inancial assets $-$ equity
securities not listed on
emerging stock market
Financial assets and	(note 2)	(note 2)	(note 2)
liabilities at fair value
through profit or loss

• 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.
• (vi) Sensitivity analysis for fair values of financial instrument using Level 3 Inputs

The Group's fair value measurement on financial instruments is reasonable. However, the measurement would be different if different valuation models or valuation parameters are used. For financial instruments using level 3 inputs, if the valuation parameters changed, the impact on net income or loss and other comprehensive income or loss are as follows:

Inter-relationships

Notes to Consolidated Financial Statements

			Other comprehensive income
	Input	Variation	Advantageous change	Disadvantageous change
September 30, 2015
Available-for-sale
$f$ inancial assets $-$ equity securities listed on	Discount of lock
emerging stock market	Marketability	10%	35,189 S	35.189

$(x)$ Financial risk management

The Group's objectives and policies on financial risk management are consistent with note 6(y) of the consolidated financial statements for the year ended December 31. 2015.

(y) Capital management

The Group's objectives, policies and process of managing capital are consistent with the consolidated financial statements for the year ended December 31, 2015. The information on capital management items has no significant change from that of the consolidated financial statements for the year ended December 31, 2015. Please refer to note 6(z) of the consolidated financial statements for the year ended December 31, 2015 for further information.

(7) Related-party Transactions

$\mathcal{A}$

$\bar{\beta}$

(a) Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Group.

• (b) Other related-party transactions
• 1. Sale of goods to related parties

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

	Sales				Notes and accounts receivable
	For the three months ended September 30 2016	2015	For the nine months ended September 30 2016	2015	September 30, 2016	December 31, 2015	September 30, 2015
Other related parties	\$54,464	37.509	142.549	110.350	68.825	.54.995	53.196

Notes to Consolidated Financial Statements

There were no significant differences in the selling prices and trading terms between the related parties and other customers.

1. Loans from related parties

The outstanding balance of loans to the Group from its related parties was as follows:

	September 30, 2015
Key management personnel of Global TEK	103.936

The highest outstanding balance amounted to \$144,330 for the nine months ended September 30, 2015.

(c) Key management personnel compensation

Key management personnel compensation from continuing operations:

	For the three months ended September 30			For the nine months ended September 30
		2016	2015	2016	2015
Short-term employee benefits	S	49,481	34,465	133,734	103,897
Post-employment benefits		262	231	834	721
Termination benefits
Other long-term benefits
Share-based payments		4,011	5,734	13,098	10,521
		53.754	40,430	147.666	(15.139

$\bar{\mathbf{z}}$

For information related to share-based payments, please refer to note $6(q)$ .

Notes to Consolidated Financial Statements

(8) Pledged Assets

Assets pledged as collateral were as follows:

		Book value of pledged assets
Pledged assets	Pledged to secure	September 30. 2016	2015	December 31, September 30, 2015
Other current assets $-$ restricted assets	Guarantee letters issued by bank		4.502
Other non-current assets - restricted assets	Loan collateral and guarantee letters issued by bank	1.174	4,667	4.310
Property, plant and equipment	Loan collateral		699.107	554.791
Long-term prepaid rent	Loan collateral		99,832	i30.981

(9) Commitments and Contingencies

(a) The amounts of guarantee were as follows:

Guarantor	Guarantee		2016	2015	September 30, December 31, September 30. 2015
The Company	PCH 2	\$	364,473	384,227	53,667
PCH 2	PCQ1		188,196	231,462	231,896
PCH 2	PKS1		94,098	99,198	99,384
Global TEK	GT			30,000	30,000
Global TEK	GLOBAL TEK CO (WUXI).,
	LTD				49.692
GT	Global TEK			50,000	50,000
GT	GLOBAL TEK CO (WUXI).,
	LTD		47,049	49,599	49,692
		S	693.816	844,486	564.331

(b) The following are savings accounts provided by the Group to the banks in order for the banks to issue a guarantee letter to customs as guarantee deposits. Please refer to note 8.

	September 30, December 31, September 30, 2016	2015	2015
Guarantee letters	99.527	39.912	24,935

(Continued)

48

(c) Guarantee notes provided as part of agreements with banks to sell accounts receivables, to acquire long-term borrowings, and to purchase materials were as follows. Please refer to note 6(d) for further information on sales of accounts receivable.

		2016	September 30, December 31, September 30, 2015	2015
Sales of accounts receivable		2,748,258	2,874,690	2,878,720
Long-term borrowings		2,160,000	2,598,906	5.498,836
Purchase of material	×		39.732

(d) The aggregate unpaid amounts of contracts pertaining to the purchase of equipment were as follows:

	September 30, December 31, September 30,	2015	2015
Property, plant and equipment	47.902	66.482	33,979

(e) TWEL Group entered into patent license agreements with several companies in July 2015. According to the agreements, the amounts that TWEL Group shall pay in the future were as follows:

	2016	2015	September 30, December 31, September 30, 2015
Patent license agreements	Contract Contract Contract ъb	69.670	99.384

(10) Loss Due to Major Disasters: None

(11) Subsequent Events:

The Board resolved to dispose 11,020 thousands of its 16,530 thousands shares in Global TEK, at NT\$50 per share, on June 21 and September 21, 2016. The related transaction has been settled on October 3, 2016. The Company recognized a gain on disposal of \$245,762 thousands, including the gain from revaluing the rest of its shares at fair value amounting to \$82,471 thousands due to its loss of control over Global TEK.

$\Delta \sim 1$

Notes to Consolidated Financial Statements

$(12)$ Others

(a) The following is a summary statement of current-period employee benefit, depreciation, and amortization expenses from continuing operations by function:

By function	For the three months ended September 30, 2016			For the three months ended September 30, 2015
By item	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefit expenses Salaries Labor and health insurance Pension Others Depreciation Amortization	1,070,495 26,009 69,790 12,751 319,817 5,163	767,526 25,263 24,829 39,939 26,463 39,774	1,838,021 51,272 94,619 52,690 346,280 44,937	1,121,000 30,636 80,501 18,689 273,131 3,447	661,447 24,706 24,945 39,543 31,210 67,944	1,782,447 55,342 105,446 58,232 304,341 71,391

By function	For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
By item	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefit expenses
Salaries	2,838,473	1,846,733	4,685,206	3,019,415	1,707,948	4,727,363
Labor and health insurance	79,678	81,096	160,774	80.751	80,409	161,160
Pension	204,299	74,514	278,813	200,001	71.310	271,311
Others	38,486	109,771	148,257	61,353	110,529	171,882
Depreciation	955,234	85,062	1,040,296	751,908	93,244	845,152
Amortization	15,161	119,970	135,131	9,818	146,971	156,789

(b) Discontinued operations

The Group resolved to dispose parts of the shares of Global TEK in the directors' meeting held on June 21, 2016. Since the business of Global TEK and its subsidiaries continued to operate on September 30, 2015, the comparative periods in the consolidated statements of comprehensive income are restated. Income from continuing and discontinued operations are disclosed respectively.

Details of discontinued operations were as follow:

	For the three months ended September 30		For the nine months ended September 30
		2016	2015	2016	2015
Operating revenue Operating cost Gross profit	S	613,236 (455,683) 157,553	562,204 (423,353) 138,851	1,878,077 (1, 413, 933) 464,144	1,475,753 (1, 172, 290) 303,463
Operating expenses Net operating income Non-operating income (expenses) Income before income taxes Income tax expense		(98, 788) 58,765 9,200 67,965 (17, 554)	(93, 544) 45,307 10,527 55,834 (6.613)	(270,040) 194,104 8,878 202,982 (56, 698)	(243,552) 59,911 (9,064) 50,847 (17, 736)
Net income from discontinued operations	s	50,411	49,221	146,284	33.111
Net income attributable to: Stockholders of parent Non-controlling interests	\$ S	50,411 50,411	14,766 34,455 49,221	28,762 117,522 146.284	9,933 23,178 33.111
Cash flows from discontinued operations: Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of foreign currency exchange translation Net increase (decrease) in cash and cash in	\$	55,683 (38, 866) 128,964 (29, 105)	41,979 (65, 043) 31,516 (7, 288)	266,018 (157, 523) 102,080 (49,606)	70,284 (173, 562) (186, 460) 12,960
equivalents	S	116,676	1.164	160.969	(276, 778)

(13) Segment Information

For the nine months ended September 30, 2016 and 2015, the Group's segment information has no significant change. Please refer to note 13 of the consolidated financial statements for the year ended December 31, 2015 for further information.

	For the three months ended September 30, 2016
		Computer	Non-computer
		Peripherals	Peripherals	Total
External revenue	S	6,586,438	12,515,244	19,101,682
Intra-group revenue
Elimination from discontinued operations			(613, 236)	(613, 236)
Total revenue		6.586.438	11.902.008	18,488,446
Profit from segments reported	\$	394,401	470,103	864,504
Elimination from discontinued operation			(67, 965)	(67, 965)
Total profit	S	394,401	402,138	796,539

PRIMAX ELECTRONICS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

			(restated)
		Computer Peripherals	Non-computer Peripherals	Total
External revenue	\$	7,605,687	10,177,144	17.782,831
Intra-group revenue Elimination from discontinued operation			(562, 204)	(562, 204) 17,220,627
Total revenue Profit from segments reported		7.605,687 408,255	9,614,940 352,981	761,236
Elimination from discontinued operation Total profit	S	408,255	(55, 834) 297,147	(55, 834) 705,402

For the nine months ended September 30, 2016

		Computer Peripherals	Non-computer Peripherals	Total
External revenue	S	19,628,038	29,044,066	48,672,104
Intra-group revenue				(1,878,077)
Elimination from discontinued operation Total revenue		19.628.038	(1,878,077) 27,165,989	46,794,027
Profit from segments reported	S	1,173,653	1,020,758 (202, 982)	2,194,411 (202,982)
Elimination from discontinued operation Total profit		173.653	817.776	1,991,429

$\ddot{\phantom{a}}$

$\mathbf{r}$

For the nine months ended September 30, 2015

			(restated)
		Computer Peripherals	Non-computer Peripherals	Total
External revenue	\$	21,095,329	24,184,993	45,280,322
Intra-group revenue Elimination from discontinued operation			(1,475,753)	(1,475,753)
Total revenue Profit from segments reported	\$	21,095,329 1,158,495	22,709,240 579,086	43,804,569 1,737,581
Elimination from discontinued operation Total profit	S	.158.495	(50, 847) 528,239	(50, 847) 1,686,734

For the three months ended September 30, 2015