POLYTRONICS TECHNOLOGY CORP. AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
REVIEW REPORT OF INDEPENDENT
ACCOUNTANTS
FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2017 AND 2016
------------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanyingfinancial statements have been translated into English from the original Chinese version prepared and used inthe Republic of China. In the event of any discrepancy between the English version and the original Chineseversion or any differences in the interpretation of the two versions, the Chinese-language auditors’ report andfinancial statements shall prevail.
~1~
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
PWCR17000006
To Polytronics Technology Corp.
We have reviewed the accompanying consolidated balance sheets of Polytronics Technology Corp.
and its subsidiaries as of March 31, 2017 and 2016, and the related consolidated statements of
comprehensive income, of changes in equity and of cash flows for the three-month periods then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is
to express a conclusion on these consolidated financial statements based on our reviews.
We conducted our reviews in accordance with the Statement of Auditing Standards No. 36
“Engagements to Review Financial Statements” in the Republic of China. A review consists primarily
of inquiries of Company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit conducted in accordance with gererally accepted auditing
standards in the Republic of China, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the
consolidated financial statements referred to above for them to be in conformity with the “Rules
Governing the Preparation of Financial Statements by Securities Issuers” and International Accounting
Standard 34 “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.
PricewaterhouseCoopers, Taiwan
May 9, 2017-------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results ofoperations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions otherthan the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of suchfinancial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China.Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended foruse by those who are not informed about the accounting principles or auditing standards generally accepted in the Republicof China, and their applications in practice.As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability forthe use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)(The consolidated balance sheets as of March 31, 2017 and 2016 are reviewed, not audited)
~1~
March 31, 2017 December 31, 2016 March 31, 2016Assets Notes AMOUNT % AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 972,866 39 $ 904,914 35 $ 1,006,970 38
1150 Notes receivable, net 97,851 4 114,489 4 83,941 3
1170 Accounts receivable, net 6(4) 226,409 9 271,557 11 252,913 10
1180 Accounts receivable - related
parties
6(4) and 7
48,600 2 65,006 3 51,115 2
1200 Other receivables 2,501 - 1,609 - 12,253 -
130X Inventories, net 6(5) 280,475 11 285,975 11 291,958 11
1410 Prepayments 23,406 1 30,382 1 30,945 1
1470 Other current assets 8 4,028 - 3,263 - 3,852 -
11XX Total current assets 1,656,136 66 1,677,195 65 1,733,947 65
Non-current assets
1543 Non-current financial assets at
cost, net
6(3)
2,100 - 3,000 - 3,000 -
1600 Property, plant and equipment, net 6(6) 729,612 29 764,135 30 826,965 31
1760 Investment property, net 6(7) 101,040 4 101,573 4 58,688 2
1780 Intangible assets 2,779 - 3,211 - 3,875 -
1840 Deferred income tax assets 6(21) 11,267 - 8,950 - 11,722 1
1900 Other non-current assets 8 24,646 1 27,254 1 26,026 1
15XX Total non-current assets 871,444 34 908,123 35 930,276 35
1XXX Total assets $ 2,527,580 100 $ 2,585,318 100 $ 2,664,223 100
(Continued)
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)(The consolidated balance sheets as of March 31, 2017 and 2016 are reviewed, not audited)
The accompanying notes are an integral part of these consolidated financial statements.
~2~
March 31, 2017 December 31, 2016 March 31, 2016Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %
Current liabilities
2120 Financial liabilities at fair value
through profit or loss - current
6(2)
$ - - $ 386 - $ - -
2150 Notes payable 855 - 1,446 - 432 -
2170 Accounts payable 6(8) 113,135 5 149,102 6 120,920 5
2200 Other payables 6(9) 159,494 6 186,887 7 211,487 8
2230 Current income tax liabilities 112,637 4 99,677 4 111,041 4
2300 Other current liabilities 1,963 - 3,237 - 3,402 -
21XX Total current liabilities 388,084 15 440,735 17 447,282 17
Non-current liabilities
2600 Other non-current liabilities 6(10) 26,799 1 32,761 1 27,058 1
25XX Total non-current liabilities 26,799 1 32,761 1 27,058 1
2XXX Total liabilities 414,883 16 473,496 18 474,340 18
Equity
Equity attributable to owners of
parent
Share capital 6(11)
3110 Share capital - common stock 800,018 32 800,018 31 800,018 30
Capital surplus 6(12)
3200 Capital surplus 235,900 10 235,900 10 235,900 9
Retained earnings 6(13)
3310 Legal reserve 373,487 15 373,487 14 326,834 12
3320 Special reserve 11,982 - 11,982 1 11,982 -
3350 Unappropriated retained earnings 747,079 29 683,017 26 754,630 28
3400 Other equity interest 6(14) ( 55,769)( 2)( 25,650)( 1) 15,497 1
31XX Equity attributable to owners of
the parent 2,112,697 84 2,078,754 81 2,144,861 80
36XX Non-controlling interests - - 33,068 1 45,022 2
3XXX Total equity 2,112,697 84 2,111,822 82 2,189,883 82
Significant contingent liabilities
and unrecognized contract
commitments
9
Significant events after the balance
sheet date
11
3X2X Total liabilities and equity $ 2,527,580 100 $ 2,585,318 100 $ 2,664,223 100
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)(UNAUDITED)
The accompanying notes are an integral part of these consolidated financial statements.
~3~
For the three-month periods ended March 312017 2016
Items Notes AMOUNT % AMOUNT %4000 Operating revenue 6(15) $ 351,869 100 $ 371,569 1005000 Operating costs 6(5)(19)(20) ( 177,055)( 50)( 188,807)( 51)5950 Net operating margin 174,814 50 182,762 49
Operating expenses 6(19)6100 Selling expenses ( 21,208)( 6)( 21,139)( 5)6200 General and administrative
expenses ( 34,036)( 10)( 36,068)( 10)6300 Research and development
expenses ( 29,916)( 8)( 25,602)( 7)6000 Total operating expenses ( 85,160)( 24)( 82,809)( 22)6900 Operating profit 89,654 26 99,953 27
Non-operating income andexpenses
7010 Other income 6(16) 13,662 4 7,848 27020 Other gains and losses 6(17) ( 26,499)( 8)( 7,784)( 2)7050 Finance costs 6(18) ( 58) - - -7000 Total non-operating
income and expenses ( 12,895)( 4) 64 -7900 Profit before tax 76,759 22 100,017 277950 Income tax expense 6(21) ( 15,517)( 5)( 16,325)( 4)8200 Profit for the period $ 61,242 17 $ 83,692 23
Components of othercomprehensive income thatwill be reclassified to profit orloss
8361 Cumulative translationdifferences of foreignoperations
6(14)
($ 30,119)( 8)($ 10,041)( 3)8300 Other comprehensive loss for
the period ($ 30,119)( 8)($ 10,041)( 3)
8500 Total comprehensive incomefor the period, net of tax $ 31,123 9 $ 73,651 20
Profit attributable to:8610 Owners of the parent $ 64,062 18 $ 83,453 238620 Non-controlling interests ( 2,820)( 1) 239 -
Profit for the period $ 61,242 17 $ 83,692 23
Comprehensive (loss)incomeattributable to:
8710 Owners of the parent $ 33,943 10 $ 73,412 208720 Non-controlling interest ( 2,820)( 1) 239 -
Total comprehensiveincome for the period $ 31,123 9 $ 73,651 20
9750 Basic earnings per share 6(22) $ 0.80 $ 1.04
9850 Diluted earnings per share 6(22) $ 0.79 $ 1.03
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of New Taiwan dollars)(UNAUDITED)
Equity attributable to owners of the parentCapital Surplus Retained Earnings
Notes
Share capital- common
stock
Additionalpaid-incapital
Treasurystock
transactions
Employeestock
warrants Legal reserveSpecialreserve
Unappropriatedretainedearnings
Financialstatementstranslation
differences offoreign
operations TotalNon-controlling
interest Total equity
The accompanying notes are an integral part of these consolidated financial statements.
~4~
For the three-month period endedMarch 31, 2016
Balance at January 1, 2016 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 326,834 $ 11,982 $ 671,177 $ 25,538 $2,071,449 $ - $2,071,449
Profit for the period - - - - - - 83,453 - 83,453 239 83,692
Other comprehensive loss forthe period
6(14)- - - - - - - ( 10,041 ) ( 10,041 ) - ( 10,041 )
Changes in non-controllinginterests - - - - - - - - - 44,783 44,783
Balance at March 31, 2016 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 326,834 $ 11,982 $ 754,630 $ 15,497 $2,144,861 $ 45,022 $2,189,883
For the three-month period endedMarch 31, 2017
Balance at January 1, 2017 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 373,487 $ 11,982 $ 683,017 ($ 25,650 ) $2,078,754 $ 33,068 $2,111,822
Profit for the period - - - - - - 64,062 - 64,062 ( 2,820 ) 61,242
Other comprehensive loss forthe period
6(14)- - - - - - - ( 30,119 ) ( 30,119 ) - ( 30,119 )
Changes in non-controllinginterests - - - - - - - - - ( 30,248 ) ( 30,248 )
Balance at March 31, 2017 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 373,487 $ 11,982 $ 747,079 ($ 55,769 ) $2,112,697 $ - $2,112,697
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of New Taiwan dollars)(UNAUDITED)
For the three-month periods ended March 31Notes 2017 2016
~5~
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax $ 76,759 $ 100,017
Adjustments
Adjustments to reconcile profit (loss)
Provision for bad debt expense 6(4) ( 567 ) ( 16 )
Depreciation (including investment property) 6(17)(19) 26,489 21,828
Amortization 6(19) 402 393
Interest expense 6(18) 58 -
Interest income 6(16) ( 1,069 ) ( 1,342 )
Loss on disposal of property, plant and equipment 6(17) 944 -
Changes in operating assets and liabilities
Changes in operating assets
Financial liabilities at fair value through profit or loss -
current ( 386 ) -
Notes receivable, net 11,058 23,290
Accounts receivable, net 39,755 694
Accounts receivable, net - related parties 16,604 ( 10,287 )
Other receivables ( 892 ) ( 8,164 )
Inventories 5,500 ( 41,049 )
Prepayments 6,976 ( 6,541 )
Other current assets ( 765 ) ( 460 )
Changes in operating liabilities
Notes payable ( 591 ) ( 375 )
Accounts payable ( 35,967 ) 28,505
Other payables ( 26,362 ) ( 30,621 )
Other current liabilities ( 1,274 ) 1,065
Other non-current liabilities ( 191 ) ( 189 )
Cash inflow generated from operations 116,481 76,748
Interest paid 6(18) ( 58 ) -
Interest received 1,069 1,342
Income tax paid ( 4,874 ) ( 12,104 )
Net cash flows from operating activities 112,618 65,986
(Continued)
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of New Taiwan dollars)(UNAUDITED)
For the three-month periods ended March 31Notes 2017 2016
The accompanying notes are an integral part of these consolidated financial statements.
~6~
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of financial assets at cost $ 900 $ -
(Decrease) increase in other non-current assets ( 2,917 ) 968
Acquisition of property, plant and equipment 6(24) ( 10,588 ) ( 54,939 )
Proceeds from disposal of property, plant and equipment 6,784 -
Net cash flows used in investing activities ( 5,821 ) ( 53,971 )
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in deposits-in ( 5,771 ) ( 550 )
Changes in non-controlling interests ( 30,248 ) 44,783
Net cash flows (used in) from financing activities ( 36,019 ) 44,233
Effect of exchange rate ( 2,826 ) ( 2,156 )
Net increase in cash and cash equivalents 67,952 54,092
Cash and cash equivalents at beginning of period 904,914 952,878
Cash and cash equivalents at end of period 6(1) $ 972,866 $ 1,006,970
~8~
POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2017 AND 2016
(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)
(UNAUDITED)
1. HISTORY AND ORGANIZATION
Polytronics Technology Corporation (the “Company”) was incorporated on December 18, 1997 and
started to operate from August 1, 1999. The Company and its subsidiaries (collectively referred herein
as the “Group”) are primarily engaged in the research, development, manufacturing and sale of Polymeric
Positive Temperature Coefficent, Overvoltage protection element and its production related semi-
finished goods, modules, heat conductive substrate, thermal module, heat dispersing materials, and LED
lightings and modules.
2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL
STATEMENTS AND PROCEDURES FOR AUTHORIZATION
These consolidated financial statements were reported to the Board of Directors on May 9, 2017.
3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting
Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”)
New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Investment entities: applying the consolidation exception (amendments
to IFRS 10, IFRS 12 and IAS 28)
January 1, 2016
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
January 1, 2016
IFRS 14, ‘Regulatory deferral accounts’ January 1, 2016Disclosure initiative (amendments to IAS 1) January 1, 2016Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
January 1, 2016
Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016Defined benefit plans: employee contributions (amendments to IAS
19R)
July 1, 2014
Equity method in separate financial statements (amendments to IAS 27) January 1, 2016Recoverable amount disclosures for non-financial assets (amendments to
IAS 36)
January 1, 2014
~9~
The above standards and interpretations have no significant impact to the Group’s financial condition
and operating results based on the Group’s assessment.
(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by
the Group
None.
(3) IFRSs issued by IASB but not yet endorsed by the FSC
New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs
endorsed by the FSC effective from 2017 are as follows:
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
January 1, 2014
IFRIC 21, ‘Levies’ January 1, 2014Improvements to IFRSs 2010-2012 July 1, 2014Improvements to IFRSs 2011-2013 July 1, 2014Improvements to IFRSs 2012-2014 January 1, 2016
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Classification and measurement of share-based payment transactions
(amendments to IFRS 2)
January 1, 2018
Applying IFRS 9 ‘Financial instruments’ with IFRS 4‘Insurance contracts
’(amendments to IFRS 4)
January 1, 2018
IFRS 9, ‘Financial instruments’ January 1, 2018Sale or contribution of assets between an investor and its associate or
joint venture (amendments to IFRS 10 and IAS 28)
To be determined by
International Accounting
Standards BoardIFRS 15, ‘Revenue from contracts with customers’ January 1, 2018Clarifications to IFRS 15, ‘Revenue from contracts with customers’
(amendments to IFRS 15)
January 1, 2018
IFRS 16, ‘Leases’ January 1, 2019Disclosure initiative (amendments to IAS 7) January 1, 2017Recognition of deferred tax assets for unrealised losses (amendments to
IAS 12)
January 1, 2017
Transfers of investment property (amendments to IAS 40) January 1, 2018IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS
1, ‘First-time adoption of International Financial Reporting Standards’
January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS
12, ‘Disclosure of interests in other entities’
January 1, 2017
~10~
Except for the following, the above standards and interpretations have no significant impact to the
Group’s financial condition and operating results based on the Group’s assessment. The quantitative
impact will be disclosed when the assessment is complete.
A. IFRS 9, ‘Financial instruments’
(a) Classification of debt instruments is driven by the entity’s business model and the contractual
cash flow characteristics of the financial assets, which would be classified as financial asset at
fair value through profit or loss, financial asset measured at fair value through other
comprehensive income or financial asset measured at amortized cost. Equity instruments
would be classified as financial asset at fair value through profit or loss, unless an entity makes
an irrevocable election at inception to present in other comprehensive income subsequent
changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’
approach. An entity assesses at each balance sheet date whether there has been a significant
increase in credit risk on that instrument since initial recognition to recognize 12-month
expected credit losses or lifetime expected credit losses (interest revenue would be calculated
on the gross carrying amount of the asset before impairment losses occurred); or if the
instrument that has objective evidence of impairment, interest revenue after the impairment
would be calculated on the book value of net carrying amount (i.e. net of credit allowance).
The Company shall always measure the loss allowance at an amount equal to lifetime expected
credit losses for trade receivables that do not contain a significant financing component.
(c) The amended general hedge accounting requirements align hedge accounting more closely
with an entity’s risk management strategy. Risk components of non-financial items and a group
of items can be designated as hedged items. The standard relaxes the requirements for hedge
effectiveness, removing the 80-125% bright line, and introduces the concept of ‘rebalancing’;
while its risk management objective remains unchanged, an entity shall rebalance the hedged
item or the hedging instrument for the purpose of maintaining the hedge ratio.
B. IFRS 15, ‘Revenue from contracts with customer’
IFRS 15, ‘Revenue from contracts with customer’ replaces IAS 11, ‘Construction Contract’, IAS
18, ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognized when a
customer obtains control of promised goods or services. A customer obtains control of goods or
services when a customer has the ability to direct the use of, and obtain substantially all of the
remaining benefits from, the asset.
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS
28, ‘Investments in associates and joint ventures’
January 1, 2018
~11~
The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity recognizes revenue in
accordance with that core principle by applying the following steps:
Step 1: Identify contracts with customer
Step 2: Identify separate performance obligations in the contract(s)
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognize revenue when the performance obligation is satisfied
Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity
to disclose sufficient information to enable users of financial statements to understand the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
C. Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from Contracts with Customers’
The amendments clarify how to identify a performance obligation (the promise to transfer goods
or services to a customer) in a contract; determine whether a company is a principal (the provider
of goods or services) or an agent (responsible for arranging the goods or services to be provided);
and determine whether the revenue from granting a licence should be recognized at a point in time
or over time. In addition to the clarifications, the amendments include two additional reliefs to
reduce cost and complexity for a company when it first applies the new Standard.
D. IFRS 16, ‘Leases’
IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard
requires lessees to recognize a ‘right-of-use asset’ and a lease liability (except for those leases with
terms of 12 months or less and leases of low-value assets). The accounting stays the same for
lessors, which is to classify their leases as either finance leases or operating leases and account for
those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided
by lessors.
E. Amendments to IAS 7, ‘Disclosure initiative’
This amendment requires that an entity shall provide more disclosures related to changes in
liabilities arising from financing activities, including both changes arising from cash flows and
non-cash changes.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted are consistent with Note 4 in the consolidated financial
statements for the year ended December 31, 2016, except for the compliance statement, basis of
preparations, basis of consolidation and additional policies as set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
~12~
(1) Compliance statement
A.These consolidated financial statements of the Group have been prepared in accordance with the
“Regulations Governing the Preparation of Financial Reports by Securities Issuers” and
International Accounting Standards 34, “Interim Financial Reporting” as endorsed by the FSC.
B.These consolidated financial statements are to be read in conjunction with the consolidated
financial statements for the year ended December 31, 2016.
(2) Basis of preparation
A. Except for the following items, the consolidated financial statements have been prepared under
the historical cost convention:
(a)Financial assets and financial liabilities (including derivative instruments) at fair value through
profit or loss.
(b)Defined benefit liabilities recognized based on the net amount of pension fund assets less
present value of defined benefit obligation.
B. The preparation of financial statements in conformity with International Financial Reporting
Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as
endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process
of applying the Group’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 5.
(3) Basis of consolidation
A. Basis for preparation of consolidated financial statements:
The same basis of consolidation have been followed in these consolidated financial statements as
were applied in the preparation of the Group’s consolidated financial statements for the year ended
December 31, 2016.
(Blank below)
~13~
B. Subsidiaries included in the consolidated financial statements:
Name of Investor Name of Subsidiaries Main Business Activities March 31, 2017 December 31, 2016 March 31, 2016
Polytronics Technology
Corporation
Polytronics (B.V.I.)
Corporation
Investments and general
business operations
100 100 100
Polytronics Technology
Corporation
Polycarbide Material Co.,
Ltd.
Manufacturing of electrical
components and wholesale
and retail of chemical raw
materials
100 100 100
Polytronics (B.V.I.)
Corporation
P-Circuit Corporation Investments and general
business operations
100 100 100
P-Circuit Corporation Polystar Electronics Co., Ltd. Production and sale of
varistor and potentiometer
100 100 100
Polystar Electronics
Co., Ltd.
Hanpu (Kunshan) Trading
Co., Ltd.
Wholesale, import and
export business
100 100 100
Polystar Electronics
Co., Ltd.
Polystar Senchip
Microeletronics, Inc.
Production and sale of
resistors, discrete
semiconductor devices and
other resistive elements
100 73.65 71.875
Ownership (%)
~14~
C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.
(4) Employee benefits
Pension cost for the interim period is calculated on a year-to-date basis by using the actuarially
determined pension cost rate at the end of the prior financial year, adjusted for significant market
fluctuations since that time and for significant curtailments, settlements, or other significant one-off
events. Additionally, the related information is disclosed accordingly.
(5) Income tax
The interim period income tax expense is recognised based on the estimated average annual effective
income tax rate expected for the full financial year applied to the pretax income of the interim period,
and the related information is disclosed accordingly.
5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION
UNCERTAINTY
There have been no significant changes as of March 31, 2017. Please refer to Note 5 in the consolidated
financial statements for the year ended December 31, 2016.
6. DETAILS OF SIGNIFICANT ACCOUNTS
(1) Cash and cash equivalents
A. The Group transacts with a variety of financial institutions all with high credit quality to disperse
credit risk, so it expects that the probability of counterparty default is remote.
B. Details of cash and cash equivalents pledged as collateral (recorded as ‘other current assets’ and
‘other non-current assets’) are provided in Note 8.
March 31, 2017 December 31, 2016 March 31, 2016
Cash on hand and
revolving funds
489$ 514$ 813$
Checking accounts and
demand deposits 281,846 259,254 144,608
Time deposits 640,201 480,612 638,092
Cash equivalent
-short-term notes 50,330 164,534 223,457
Total 972,866$ 904,914$ 1,006,970$
~15~
(2) Financial assets/liabilities at fair value through profit or loss
1. The Group recognized net gain of $822 and $0 on financial assets (liabilities) held for trading for
the three-month periods ended March 31, 2017 and 2016, respectively.
2. The non-hedging derivative instruments transaction and contract information are as follows:
No forward foreign exchange contracts were outstanding as of March 31, 2017 and 2016.
Note: Expressed in thousands of US dollars.
The Group entered into forward foreign exchange contracts to sell US dollars to hedge exchange
rate risk of export proceeds. However, these forward foreign exchange contracts are not accounted
for under hedge accounting.
(3) Financial assets measured at cost
A. According to the Group’s intention, its investment in GreenMark Inc. stocks should be classified
as ‘available-for-sale financial assets’. However, as GreenMark Inc. stocks are not traded in active
market, and there is no sufficient industry information of companies similar to GreenMark Inc. or
GreenMark Inc.’s financial information cannot be obtained, the fair value of the investment in
GreenMark Inc. stocks cannot be measured reliably. Accordingly, the Group classified those
stocks as “financial assets measured at cost”.
B. As of March 31, 2017, December 31, 2016 and March 31, 2016, no financial assets measured at
cost held by the Group were pledged to others.
Items March 31, 2017 December 31, 2016 March 31, 2016
Current items:
Financial assets
(liabilities) held for
trading
Derivative instrument-
forward foreign
exchange contracts
-$ -$ -$
Financial assets
(liabilities) held for
trading valuation
adjustment - 386)( -
Total -$ 386)($ -$
Derivative Contract amount Contract
instruments (Notional principal) period
Forward foreign
exchange contracts
USD 1,000$ 2016/12/12~2017/1/5
December 31, 2016
Items March 31, 2017 December 31, 2016 March 31, 2016
Non-current items:
Non-listed stocks 2,100$ 3,000$ 3,000$
~16~
C. The shareholders of GreenMark Inc. have resolved a 30% capital reduction, which has been filed
to and approved by competent authority on March 3, 2017.
(4) Accounts receivable
A. The credit quality of accounts receivable that were neither past due nor impaired was in the
following categories based on the Group’s Credit Quality Control Policy:
Group 1: Listed companies or customers who are considered to have good credit conditions.
Group2: Non-listed companies or customers whose credit conditions are considered to be inferior
than Group 1 customers.
B. The ageing analysis of accounts receivable that were past due but not impaired is as follows:
C. Movement analysis of financial assets that were impaired is as follows:
(a) As of March 31, 2017, December 31, 2016 and March 31, 2016, the Group’s accounts
receivable that were impaired amounted to $3,978, $4,914 and $2,158, respectively.
(b) Movement in the provision for impairment of accounts receivable are as follows:
March 31, 2017 December 31, 2016 March 31, 2016
Accounts receivable 230,387$ 276,471$ 255,071$
Accounts receivable
-related parties 48,600 65,006 51,115
Less: allowance for
bad debts 3,978)( 4,914)( 2,158)(
275,009$ 336,563$ 304,028$
March 31, 2017 December 31, 2016 March 31, 2016
Group 1 126,336$ 150,872$ 142,454$
Group 2 116,658 124,341 102,726
242,994$ 275,213$ 245,180$
March 31, 2017 December 31, 2016 March 31, 2016
Up to 30 days 21,067$ 43,046$ 12,496$
31 to 90 days 5,947 11,611 8,274
91 to 180 days 3,832 6,693 9,332
Over 181 days 1,169 - 28,746
32,015$ 61,350$ 58,848$
Individual
provision Group provision Total
At January 1 96$ 4,818$ 4,914$
Provision for impairment 87)( 480)( 567)(
Effects of foreign exchange - 369)( 369)(
At March 31 9$ 3,969$ 3,978$
2017
~17~
D. The Group does not hold any collateral as security.
(5) Inventories
The cost of inventories recognized as expense for the period:
Individual
provision Group provision Total
At January 1 27$ 2,182$ 2,209$
Provision for impairment 16)( - 16)(
Effects of foreign exchange - 35)( 35)(
At March 31 11$ 2,147$ 2,158$
2016
March 31, 2017 December 31, 2016 March 31, 2016
Raw materials 108,695$ 76,242$ 112,806$
Work-in-process 83,633 102,204 90,096
Finished goods 88,147 107,529 89,056
Total 280,475$ 285,975$ 291,958$
2017 2016
Cost of goods sold 183,344$ 188,415$
(Gain) loss on (recovery) decline in
market value 6,289)( 392
177,055$ 188,807$
For the three-month periods ended March 31,
~18~
(6) Property, plant and equipment
Buildings Machinery
Office
equipment
Transportation
equipment
Computer and
communication
equipment
Leasehold
improvements
Construction in
progress Others Total
At January 1, 2017
Cost 665,084$ 585,356$ 8,156$ 9,330$ 9,100$ 32,133$ 1,507$ 106,102$ 1,416,768$
Accumulated depreciation
and impairment 191,465)( 347,385)( 4,173)( 6,421)( 7,635)( 31,816)( - 63,738)( 652,633)(
473,619$ 237,971$ 3,983$ 2,909$ 1,465$ 317$ 1,507$ 42,364$ 764,135$
For the three-month period
ended March 31, 2017
Opening net book amount 473,619$ 237,971$ 3,983$ 2,909$ 1,465$ 317$ 1,507$ 42,364$ 764,135$
Additions - 4,543 89 - 273 - - 8,116 13,021
Disposals - 6,841)( 801)( - - - - 86)( 7,728)(
Reclassifications - - - - - - - 1,895 1,895
Depreciation charge 7,258)( 12,547)( 323)( 172)( 196)( 83)( - 5,377)( 25,956)(
Net exchange differences 5,117)( 8,769)( 180)( 72)( - - 77)( 1,540)( 15,755)(
Closing net book amount 461,244$ 214,357$ 2,768$ 2,665$ 1,542$ 234$ 1,430$ 45,372$ 729,612$
At March 31, 2017
Cost 655,766$ 564,289$ 6,813$ 9,096$ 9,373$ 32,133$ 1,430$ 111,630$ 1,390,530$
Accumulated depreciation
and impairment 194,522)( 349,932)( 4,045)( 6,431)( 7,831)( 31,899)( - 66,258)( 660,918)(
461,244$ 214,357$ 2,768$ 2,665$ 1,542$ 234$ 1,430$ 45,372$ 729,612$
~19~
1. For the three-month periods ended March 31, 2017 and 2016, there was no capitalization of borrowing interests attributable to the property, plant and
equipment.
2. There were no property, plant and equipment pledged to others as collateral.
Buildings Machinery
Office
equipment
Transportation
equipment
Computer and
communication
equipment
Leasehold
improvements
Construction in
progress Others Total
At January 1, 2016
Cost 695,866$ 509,348$ 5,849$ 9,936$ 8,322$ 32,133$ 26,895$ 91,904$ 1,380,253$
Accumulated depreciation
and impairment 171,331)( 336,189)( 3,251)( 7,366)( 7,044)( 31,432)( - 54,431)( 611,044)(
524,535$ 173,159$ 2,598$ 2,570$ 1,278$ 701$ 26,895$ 37,473$ 769,209$
For the three-month period
ended March 31, 2016
Opening net book amount 524,535$ 173,159$ 2,598$ 2,570$ 1,278$ 701$ 26,895$ 37,473$ 769,209$
Additions 240 68,468 1,375 - - - 7,765 1,851 79,699
Reclassifications - 27 - - - - - 4,260 4,287
Depreciation charge 7,371)( 10,112)( 242)( 102)( 177)( 105)( - 3,415)( 21,524)(
Net exchange differences 1,313)( 2,625)( 61)( 11)( - - 552)( 144)( 4,706)(
Closing net book amount 516,091$ 228,917$ 3,670$ 2,457$ 1,101$ 596$ 34,108$ 40,025$ 826,965$
At March 31, 2016
Cost 693,518$ 572,037$ 7,125$ 9,856$ 8,321$ 32,133$ 34,108$ 94,889$ 1,451,987$
Accumulated depreciation
and impairment 177,427)( 343,120)( 3,455)( 7,399)( 7,220)( 31,537)( - 54,864)( 625,022)(
516,091$ 228,917$ 3,670$ 2,457$ 1,101$ 596$ 34,108$ 40,025$ 826,965$
~20~
(7) Investment property
A. Rental income from investment property and direct operating expenses arising from investment
property are shown below:
Buildings
At January 1, 2017
Cost 108,725$
Accumulated depreciation 7,152)(
101,573$
For the three-month period ended March 31, 2017Opening net book amount 101,573$
Depreciation charge 533)(
Closing net book amount 101,040$
At March 31, 2017
Cost 108,725$
Accumulated depreciation 7,685)(
101,040$
Buildings
At January 1, 2016
Cost 62,029$
Accumulated depreciation 3,037)(
58,992$
For the three-month period ended March 31, 2016Opening net book amount 58,992$
Depreciation charge 304)(
Closing net book amount 58,688$
At March 31, 2016
Cost 62,029$
Accumulated depreciation 3,341)(
58,688$
2017 2016
Rental income from investment property 4,228$ 5,068$
Direct operating expenses arising from the
investment property that generated rental
income during the period 533$ 304$
For the three-month periods ended March 31,
~21~
B. The fair value of investment property held by the Company as of March 31, 2017, December 31,
2016 and March 31, 2016 were $207,463, $207,463 and $118,364, respectively. The fair value is
estimated using the valuation method frequently used by market participants. The valuation is
based on evidence of similar trading prices.
C. There were no borrowing costs capitalized as part of investment property.
D. The investment property was not pledged to others as collateral.
(8) Accounts payable
(9) Other payables
(10) Pensions
A.(a)The Company and its domestic subsidiaries have a defined benefit pension plan in accordance
with the Labor Standards Law, covering all regular employees’ service years prior to the
enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of
employees who chose to continue to be subject to the pension mechanism under the Law.
Under the defined benefit pension plan, two units are accrued for each year of service for the
first 15 years and one unit for each additional year thereafter, subject to a maximum of 45
units. Pension benefits are based on the number of units accrued and the average monthly
salaries and wages of the last 6 months prior to retirement. The Company contributes monthly
an amount equal to 2.5% of the employees’ monthly salaries and wages to the retirement fund
deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund
committee. Also, the Company would assess the balance in the aforementioned labor pension
reserve account by the end of December 31, every year. If the account balance is insufficent
to pay the pension calculated by the aforementioned method to the employees expected to be
qualified for retirement in the following year, the Company will make contributions for the
deficit by next March.
March 31, 2017 December 31, 2016 March 31, 2016
Accounts payable 87,145$ 103,202$ 66,700$
Estimated accounts payable 25,990 45,900 54,220
113,135$ 149,102$ 120,920$
March 31, 2017 December 31, 2016 March 31, 2016
Wages and salaries payable 53,333$ 87,777$ 51,674$
Employee bonus and
directors' remuneration
payable
63,335 60,221 74,249
Payables on machinery and
equipment
9,947 7,514 36,212
Other payables, others 32,879 31,375 49,352
159,494$ 186,887$ 211,487$
~22~
(b) For the aforementioned pension plan, the Group recognised pesion costs of $445 and $435
for the three-month periods ended March 31, 2017 and 2016, respectively.
(c) Expected contributions to the defined benefit pension plans of the Group for the year ending
December 31, 2017 amounts to $2,547.
B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined
contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering
all regular employees with R.O.C. nationality. Under the New Plan, the Company and its
domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly
salaries and wages to the employees’ individual pension accounts at the Bureau of Labor
Insurance. The benefits accrued are paid monthly or in lump sum upon termination of
employment.
(b)The Company’s Mainland China subsidiaries, Polystar Electronics Co., Ltd., Hanpu (Kunshan)
Trading Co., Ltd. and Polystar Senchip Microelectronics, Inc., have a defined contribution
plan. Monthly contributions to an independent fund administered by the government in
accordance with the pension regulations in the People’s Republic of China (PRC) are based
on a certain percentage of employees' monthly salaries and wages. Other than the monthly
contributions, the Group has no further obligations.
(c) The pension costs under the defined contribution pension plans of the Group for the three-
month periods ended March 31, 2017 and 2016 were $3,850 and $3,408, respectively.
(11) Share capital
As of March 31, 2017, the Company’s authorized capital was $1,000,000, consisting of 100 million
shares of ordinary stock (including 5 million shares reserved for employee stock options), and the
paid-in capital was $800,018 with a par value of $10 (in dollars) per share. All proceeds from shares
issued have been collected.
Movements in the number of the Company’s ordinary shares outstanding are as follows (in
thousands of shares):
(12) Capital surplus
Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par
value on issuance of common stocks and donations can be used to cover accumulated deficit or to
issue new stocks or cash to shareholders in proportion to their share ownership, provided that the
Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires
that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the
paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the
legal reserve is insufficient.
2017 2016
At January 1 / At March 31 80,002 80,002
~23~
(13) Retained earnings
A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be
used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining
amount shall be set aside as legal reserve, then setting aside or reversing special reserve
according to the resolution of shareholders during their meeting or the request by competent
authorities. Appropriation of remainder shall be proposed by the Board of Directiors and
resolved by the stockholders.
B. Dividend policy: As the Company is in a rapidly changing industry and in the growing stage, and
considering the Company’s long-term financial plans, shareholders’ long-term profit and
stabilizing performance target, cash dividend distribution shall not be lower than 10% of the total
dividend distribution.
C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in
proportion to their share ownership, the legal reserve shall not be used for any other purpose.
The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their
share ownership is permitted, provided that the distribution of the reserve is limited to the portion
in excess of 25% of the Company’s paid-in capital.
D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit
balance on other equity items at the balance sheet date before distributing earnings. When
debit balance on other equity items is reversed subsequently, the reversed amount could be
included in the distributable earnings.
(b) The amounts previously set aside by the Company as special reserve on initial application of
IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012,
shall be reversed proportionately when the relevant assets are used, disposed of or reclassified
subsequently.
E. The appropriations for 2016 earnings proposed by the Board of Directors on March 16, 2017, is
as follows:
As of May 9, 2017, the proposal for appropriation has not been resolved at the shareholders’
meeting.
G. For information relating to employees’ compensation and directors’ remuneration, please refer to
Note 6(20).
Dividends per share
Amount (in NT dollars)
Legal reserve 40,528$ -$
Cash dividends 364,008 4.55
Total 404,536$ 4.55$
2016
~24~
(14) Other equity items
(15) Operating revenue
(16) Other income
(17) Other gains and losses
(18) Finance costs
2017 2016
At January 1 25,650)($ 25,538$
Currency translation differences 30,119)( 10,041)(
At March 31 55,769)($ 15,497$
2017 2016
Sales revenue 351,869$ 371,569$
For the three-month periods ended March 31,
2017 2016
Rental revenue $ 4,228 $ 5,068
Interest income 1,069 1,342
Other income, others 8,365 1,438
Total 13,662$ 7,848$
For the three-month periods ended March 31,
2017 2016
Net gain on financial assets
at fair value through profit or loss 822$ -$
Net currency exchange loss 25,045)( 7,120)(Loss on disposal of
property, plant and equipment 944)( -Depreciation charge -investment
property 533)( 304)(Other expenses 799)( 360)(
Total 26,499)($ 7,784)($
For the three-month periods ended March 31,
2017 2016
Interest expense:
Bank borrowings 58$ -$
For the three-month periods ended March 31,
~25~
(19) Expenses by nature
(20) Employee benefit expenses
A. According to the amendment to the Articles of Incorporation of the Company, a ratio of
distributable profit of the current year, after covering accumulated losses, shall be distributed as
employees’ compensation and directors’ remuneration. The ratio shall not be lower than 6% for
employees’ compensation and shall not be higher than 1.5% for directors’ remuneration.
B. For the three-month periods ended March 31, 2017 and 2016, employees’ compensation was
accrued at $7,497 and $9,765, respectively; directors’ remuneration was accrued at $1,153 and
$1,502, respectively. The aforementioned amounts were recognized in salary expenses.
Employees’ compensation and directors’ remuneration for 2016 as resolved by the Board of
Directors were in agreement with those amounts recognized in the 2016 financial statements.
Information about the employees’ compensation and directors’ remuneration of the Company as
resolved by the board of directors will be posted in the “Market Observation Post System” at the
website of the Taiwan Stock Exchange.
2017 2016
Employee benefit expenses 79,294$ 77,267$
Depreciation charges on property,
plant and equipment 25,956 21,524
Amortisation charges on intangible
assets 402 393
Total 105,652$ 99,184$
For the three-month periods ended March 31,
2017 2016
Wages and salaries 63,171$ 62,594$
Labor and health insurance fees 3,779 3,603
Pension costs 4,295 3,843
Other personnel expenses 8,049 7,227
79,294$ 77,267$
For the three-month periods ended March 31,
~26~
(21) Income tax
A. Income tax expense
(a)Components of income tax expense:
(b)The income tax (charge)/credit relating to components of other comprehensive income :
None.
B. The Company’s income tax returns through 2014 have been assessed and approved by the Tax
Authority.
C. Unappropriated retained earnings:
D. As of March 31, 2017, December 31, 2016 and March 31, 2016, the balance of the imputation
tax credit account was $69,461, $69,461 and $65,675, respectively. The creditable tax rate was
13.15% for 2015 and the estimated creditable tax rate is 16.55% for 2016.
2017 2016
Current tax:
Current tax on profits for the
year 17,834$ 17,748$
Prior year income tax
overestimation - -
Total current tax 17,834 17,748
Deferred tax:
Origination and reversal of
temporary differences 2,317)( 1,423)(
Total deferred tax 2,317)( 1,423)(
Income tax expense 15,517$ 16,325$
For the three-month periods ended March 31,
March 31, 2017 December 31, 2016 March 31, 2016
Earnings generated
in and after 1998 747,079$ 683,017$ 754,630$
~27~
(22) Earnings per share
(23) Operating leases
The Group leases land and plants under non-cancellable operating lease agreements. These leases
have terms expiring between 2 and 20 years and have renewable right at the end of the lease period.
Rent will be increased in accordance with lease agreements depending on market rents. Rents of
$3,679 and $3,408 were recognized for these leases for the three-month periods ended March 31,
2017 and 2016, respectively. The future aggregate minimum lease payments under non-cancellable
operating leases are as follows:
Weighted average number of
ordinary shares outstanding Earnings per share
Amount after tax (shares in thousands) (in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent 64,062$ 80,002 0.80$
Diluted earnings per share
Assumed conversion of all
dilutive potential ordinary
shares
Employees’ bonus - 1,142
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares 64,062$ 81,144 0.79$
For the three-month period ended March 31, 2017
Weighted average number of
ordinary shares outstanding Earnings per share
Amount after tax (shares in thousands) (in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent 83,453$ 80,002 1.04$
Diluted earnings per share
Assumed conversion of all
dilutive potential ordinary
shares
Employees’ bonus - 862
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares 83,453$ 80,864 1.03$
For the three-month period ended March 31, 2016
~28~
(24) Supplemental cash flow information
Investing activities with partial cash payments:
7. RELATED PARTY TRANSACTIONS
(1) Names of related parties and relationship
(2) Significant related party transactions and balances
A. Operating revenue
There are no significant differences in sales prices and collection terms between related parties
and third parties.
B. Accounts receivable
The receivables from related parties arise mainly from sale transactions. The receivables are due
60 days after the date of sale. The receivables are unsecured in nature and bear no interest. There
are no provisions held against receivables from related parties.
March 31, 2017 December 31, 2016 March 31, 2016
Not later than one year 10,269$ 10,829$ 10,433$
Later than one year but
not later than five years 25,605 26,213 28,161
Later than five years 41,663 43,201 44,566
77,537$ 80,243$ 83,160$
2017 2016
Purchase of property, plant,
and equipment 13,021$ 79,699$
Net change of payable on
machinery and equipment 2,433)( 24,760)(
Cash paid during the period 10,588$ 54,939$
For the three-month periods ended March 31,
Names of related parties Relationship with the Group
Littlefuse, Inc.The Board of director of
the Parent Company
2017 2016
Sales of goods:
-Other associates 71,088$ 51,126$
For the three-month periods ended March 31,
March 31, 2017 December 31, 2016 March 31, 2016
Accounts receivable
-Other associates 48,600$ 65,006$ 51,115$
~29~
(3) Key management compensation
8. PLEDGED ASSETS
The Group’s assets pledged as collateral are as follows:
9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT
COMMITMENTS
(1) Contingencies
None.
(2) Commitments
A. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
B. Operating lease agreement
Please refer to Note 6(23).
10. SIGNIFICANT DISASTER LOSS
None.
11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
None.
12. OTHERS
(1) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure. The Group
may adjust the amount of dividends paid to shareholders, return capital or issue new shares to
achieve the optimal capital structure.
(2) Financial instruments
A. Fair value information of financial instruments
The carrying amounts of financial instruments (including cash and cash equivalents, notes
2017 2016
Short-term employee benefits 15,975$ 18,152$
Termination benefits 339 381
Total 16,314$ 18,533$
For the three-month periods ended March 31,
Pledged asset March 31, 2017 December 31, 2016 March 31, 2016 Purpose
Time deposit (recorded under
‘other current assets’)
3,134$ 3,123$ 3,277$ Guarantee for duty paid
after customs release
Time deposit (recorded under
‘other non-current assets’)
6,770 6,770 6,770 Guarantee for land lease
in science park
Book value
March 31, 2017 December 31, 2016 March 31, 2016
Property, plant and
equipment21,668$ 21,298$ 42,011$
~30~
receivable, accounts receivable, other receivables, other current assets, short-term borrowings,
notes payable, accounts payable, other payables, and guarantee deposits received (shown as non-
current liabilities)) are approximate to their fair value.
B. Financial risk management policies
(a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk and price risk), credit risk and liquidity risk. The Group’s overall risk
management programme focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on the Group’s financial position and financial performance.
The Group uses derivative financial instruments to hedge certain risk exposures (see Note
6(2)).
(b) Risk management is carried out by a central treasury department (Group treasury) under
policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges
financial risks in close cooperation with the Group’s operating units. The Board provides
written principles for overall risk management, as well as written policies covering specific
areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments, and investment of excess
liquidity.
C. Significant financial risks and degrees of financial risks
(a) Market risk
Foreign exchange risk
i. The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the USD and RMB. Foreign
exchange risk arises from future commercial transactions, recognized assets and liabilities
and net investments in foreign operations.
ii. Management has set up a policy to require group companies to manage their foreign
exchange risk against their functional currency. The group companies are required to hedge
their entire foreign exchange risk exposure with the Group treasury. To manage their
foreign exchange risk arising from future commercial transactions and recognized assets
and liabilities, entities in the Group use forward foreign exchange contracts, transacted with
Group treasury. Foreign exchange risk arises when future commercial transactions or
recognized assets or liabilities are denominated in a currency that is not the entity’s
functional currency.
iii.The Group uses derivative financial instruments such as forward exchange transaction to
hedge assets and liabilities denominated in foreign currencies or transactions that are
considered highly probable to occur in order to decrease fair value risk of cash flow arising
from exchange rate fluctuations. The Group monitors changes in exchange rate and sets
stop loss point to decrease exchange rate risk.
D. The Group’s businesses involve some non-functional currency operations (the Company’s
~31~
functional currency: NTD; other certain subsidiaries’ functional currency: USD and RMB). The
information on assets and liabilities denominated in foreign currencies whose values would be
materially affected by the exchange rate fluctuations is as follows:
Foreign currency
amount
(In thousands) Exchange rate
Book value
(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD USD 13,646 30.330 413,897$
USD:RMB USD 1,389 6.8893 42,164
RMB:NTD RMB 7,870 4.407 34,684Non-monetary items
USD:NTD USD 20,132 30.330 610,600$
Financial liabilities
Monetary items
USD:NTD USD 1,777 30.330 53,909$
JPY:NTD JPY 2,560 0.2713 695
USD:RMB USD 1,775 6.8893 12,229
Non-monetary items: None.
March 31, 2017
Foreign currency
amount
(In thousands) Exchange rate
Book value
(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD USD 11,148 32.25 359,523$
JPY:NTD JPY 44 0.2756 12
USD:RMB USD 1,229 6.9495 39,429
RMB:NTD RMB 4,032 4.617 18,614Non-monetary items
USD:NTD USD 19,974 32.25 644,161$
Financial liabilities
Monetary items
USD:NTD USD 1,846 32.25 59,520$
JPY:NTD JPY 5,184 0.2756 1,429
USD:RMB USD 1,951 6.9495 62,607
Non-monetary items: None.
December 31, 2016
~32~
E. Please refer to the following table for the details of unrealized exchange gain (loss) arising from
significant foreign exchange variation on the monetary items held by the Group.
Foreign currency
amount
(In thousands) Exchange rate
Book value
(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD USD 13,305 32.185 428,230$
JPY:NTD JPY 110 0.2863 32
USD:RMB USD 1,214 6.4676 7,851
RMB:NTD RMB 74,930 4.972 372,554Non-monetary items
USD:NTD USD 20,106 32.185 647,109$
Financial liabilities
Monetary items
USD:NTD USD 4,851 32.185 156,133$
RMB:NTD RMB 33,274 4.972 165,438
Non-monetary items: None.
March 31, 2016
Foreign currency
(Foreign currency: functional currency)amount
(In thousands) Exchange rate
Book value
(NTD)
Financial assets
Monetary items
USD:NTD -$ 30.330 1,582)($
USD:RMB - 6.8893 224
RMB:NTD - 4.4070 116)(
Financial liabilities
Monetary items
USD:NTD -$ 30.330 2,410$
JPY:NTD - 0.2713 14
USD:RMB - 6.8893 611)(
For the three-month period ended March 31, 2017
Unrealized exchange gain (loss)
~33~
F. Analysis of foreign currency market risk arising from significant foreign exchange variation:
Foreign currency
(Foreign currency: functional currency)
amount
(In thousands) Exchange rate
Book value
(NTD)
Financial assets
Monetary items
USD:NTD -$ 32.185 921)($
JPY:NTD - 0.2863 468
USD:RMB 187)( 6.4676 1,212)(
RMB:NTD - 4.972 1,315)(
Financial liabilities
Monetary items
USD:NTD -$ 32.185 672$
USD:RMB 81 6.4676 527
For the three-month period ended March 31, 2016
Unrealized exchange gain (loss)
Degree of
variation
Effect on
profit or loss
Effect on other
comprehensive
income
(Foreign currency: functional currency)
Financial assets
Monetary itemsUSD:NTD 1% 4,139$ -$USD:RMB 1% 422 -RMB:NTD 1% 347 -
Non-monetary itemsUSD:NTD 1% -$ 6,106$
Financial liabilitiesMonetary items
USD:NTD 1% 539)($ -$JPY:NTD 1% 7)( -USD:RMB 1% 122)( -
Non-monetary items: None.
For the three-month period ended March 31, 2017
Sensitivity analysis
~34~
Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and
classified on the consolidated balance sheet at fair value through profit or loss. To manage its price
risk arising from investments in equity securities, the Group diversifies its portfolio.
Diversification of the portfolio is done in accordance with the limits set by the Group.
(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients
or counterparties of financial instruments on the contract obligations. According to the
Group’s credit policy, each local entity in the Group is responsible for managing and
analyzing the credit risk for each of their new clients before standard payment and delivery
terms and conditions are offered. Internal risk control assesses the credit quality of the
customers, taking into account their financial position, past experience and other factors.
Individual risk limits are set based on internal or external ratings in accordance with limits
set by the Board of Directors. The utilization of credit limits is regularly monitored. Credit
risk arises from cash and cash equivalents, derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to customers, including
outstanding receivables and committed transactions.
Degree of
variation
Effect on
profit or loss
Effect on other
comprehensive
income
(Foreign currency: functional currency)
Financial assets
Monetary itemsUSD:NTD 1% 4,282$ -$JPY:NTD 1% - -USD:RMB 1% 79 -RMB:NTD 1% 3,725 -
Non-monetary items
USD:NTD 1% -$ 6,471$
Financial liabilitiesMonetary items
USD:NTD 1% 1,561)($ -$RMB:NTD 1% 1,654)( -
Non-monetary items: None.
For the three-month period ended March 31, 2016
Sensitivity analysis
~35~
ii. No credit limits were exceeded during the reporting periods, and management does not
expect any significant losses from non-performance by these counterparties.
iii. The credit quality information of financial assets that are neither past due nor impaired is
provided in the statement in Note 6(4).
iv. The credit quality information of financial assets that were past due but not impaired is
provided in the statement in Note 6(4).
(c) Liquidity risk
i.Cash flow forecasting is performed in the operating entities of the Group and aggregated by
Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity
requirements to ensure it has sufficient cash to meet operational needs while maintaining
sufficient headroom on its undrawn committed borrowing facilities. Such forecasting takes
into consideration the Group’s debt financing plans, and compliance with internal balance
sheet ratio targets.
ii.The table below analyzes the Group’s non-derivative financial liabilities and net-settled or
gross-settled derivative financial liabilities into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date for non-derivative
financial liabilities and to the expected maturity date for derivative financial liabilities. The
amounts disclosed in the table are the contractual undiscounted cash flows.
March 31, 2017
Less than 3
months
Between 3
months
and 1 year
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Notes payable 855$ -$ -$ -$ -$
Accounts payable - 113,135 - - -
Other payables - 159,494 - - -
Non-derivative financial liabilities:
December 31, 2016
Less than 3
months
Between 3
months
and 1 year
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Notes payable 1,446$ -$ -$ -$ -$
Accounts payable - 149,102 - - -
Other payables - 186,887 - - -
~36~
(3) Fair value information
A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at
fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment
property measured at cost are provided in Note 6(7).
B. The different levels that the inputs to valuation techniques are used to measure fair value of
financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date. A market is regarded as active where a
market in which transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
C. The related information of financial and non-financial instruments measured at fair value by level
on the basis of the nature, characteristics and risks of the assets and liabilities at March 31, 2017,
December 31, 2016 and March 31, 2016 is as follows:
March 31, 2016
Less than 3
months
Between 3
months
and 1 year
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Notes payable 432$ -$ -$ -$ -$
Accounts payable - 120,920 - - -
Other payables - 211,487 - - -
March 31, 2017 and 2016: None.
December 31, 2016
Less than 3
months
Between 3
months
and 1 year
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Foreign exchange contracts 386$ -$ -$ -$ -$
Derivative financial liabilities:
March 31, 2017Assets: None.
Liabilities: None.
~37~
D. The methods and assumptions the Group used to measure fair value are as follows:
(a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are
listed below by characteristics:
(b) Except for financial instruments with active markets, the fair value of other financial
instruments is measured by using valuation techniques or by reference to counterparty quotes.
The fair value of financial instruments measured by using valuation techniques can be
referred to current fair value of instruments with similar terms and characteristics in substance,
discounted cash flow method or other valuation methods, including calculated by applying
model using market information available at the consolidated balance sheet date (i.e. yield
curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).
(c) The valuation of derivative financial instruments is based on valuation model widely accepted
by market participants, such as present value techniques and option pricing models. Forward
exchange contracts are usually valued based on the current forward exchange rate.
(d) Under “Regulations Governing the Preparation of Financial Reports by Securities Issuers”,
the Group makes self-assessment using the income approach to calculate the fair value of
investment property. Related assumption and information of inputs are as follows:
i. Cash flow: Cash flow shall be valuated on the basis of existing lease contracts, rent at local
market rates, or current market rents for similar comparable properties in the same location
and condition, and overvalued and undervalued comparable properties shall be excluded.
If there is a period-end value, the discounted present period-end value may be added.
December 31, 2016Assets: None.
Liabilities:Recurring fair value measurement
of assets Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit or loss-forward
foreign exchange contracts -$ 386$ -$ 386$
March 31, 2016Assets: None.
Liabilities: None.
Listed shares
Closed-end
fund
Open-end
fund
Government
bond
Corporate
bond
Convertible
(exchangeable)
bond
Market quoted price
Closing
price
Closing
price
Net asset
value
Transaction
price
Weighted
average
quoted price Closing price
~38~
ii. Analysis period: When there is no specified period for the income, the analysis period in
principle shall not be longer than 10 years; when there is a specified period for the income,
the income shall be estimated for the remainder of the specified period.
iii.Discount rate: The discount rate shall be determined using the risk premium approach only,
with the calculation based on a certain interest rate, plus the estimate for the individual
characteristics of the investment property. The language "based on a certain interest rate"
means the interest rate may not be lower than the floating interest rate on a 2-year time
deposit of a small amount, as posted by the Chunghwa Post Co. Ltd., plus 0.75 percentage
points.
(e) The output of valuation model is an estimated value and the valuation technique may not be
able to capture all relevant factors of the Group’s financial and non-financial instruments.
Therefore, the estimated value derived using valuation model is adjusted accordingly with
additional inputs, for example, model risk or liquidity risk and etc. In accordance with the
Group’s management policies and relevant control procedures relating to the valuation models
used for fair value measurement, management believes adjustment to valuation is necessary in
order to reasonably represent the fair value of financial and non-financial instruments at the
consolidated balance sheet. The inputs and pricing information used during valuation are
carefully assessed and adjusted based on current market conditions.
(f) The Group takes into account adjustments for credit risks to measure the fair value of financial
and non-financial instruments to reflect credit risk of the counterparty and the Group’s credit
quality.
E. For the three-month periods ended March 31, 2017 and 2016, there was no transfer between Level
1 and Level 2.
13. SUPPLEMENTARY DISCLOSURES
(1) Significant transactions information
A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates
and joint ventures): Please refer to table 3.
D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or
20% of the Company’s paid-in capital: None.
E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
G.Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-
in capital or more: None.
H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:
None.
~39~
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes
6(2) and 12.
J. Significant inter-company transactions during the reporting periods: Please refer to table 4.
(2) Information on investees
Names, locations and other information of investee companies (not including investees in Mainland
China):Please refer to table 5.
(3) Information on investments in Mainland China
A. Basic information: Please refer to table 6.
B. Significant transactions, either directly or indirectly through a third area, with investee companies
in the Mainland Area: Please refer to table 7.
14. SEGMENT INFORMATION
1. General information
The Group mainly operates in a single industry. The chief operating decision-maker reviews the
Group’s reporting to assess performance and allocate resources. The Group mainly has a single
reportable segment.
2. Segment information
The Group’s chief operating decision-maker evaluates the performance of operating segments based
on the consolidated financial statements. The accounting policies of the operating segments are in
accordance with the significant accounting policies summarized in Note 4.
3. Information about segment profit or loss, assets and liabilities
4.Reconciliation for segment income (loss), assets and liabilities
None.
2017 2016
Revenue from external customers 351,869$ 371,569$
Inter-segment revenue -$ -$
Segment income 76,759$ 100,017$
Segment assets 2,527,580$ 2,664,223$
For the three-month periods ended March 31,
Item Value
0 Polytronics
Technology
Corp.
Polytronics
(B.V.I.)
Corporation
Other
receivables -
related party
Y $ 129,000 $ 121,320 $ 88,140 3.50% Reason for
short-term
financing
$ - Operational need $ - $ - $ - $ 422,539 $ 845,079
1 Polytronics
(B.V.I.)
Corporation
Polystar
Electronics Co.,
Ltd.
Inter-company
transactions
Y 129,000 121,320 88,140 4.35% Reason for
short-term
financing
- Operational need - - - 422,539 422,539
2 Polystar
Electronics
Co., Ltd.
Polystar Senchip
Microelectronics
Inc.
Other
receivables
Y 36,936 35,256 17,628 4.35% Reason for
short-term
financing
- Operational need - - - 422,539 422,539
Note 1: Follow the group policy “Procedure for Provision of Loans”.
Table 1 Expressed in thousands of NTD
Amount of
transactions
with the
borrower
Maximum
outstanding
balance during
the three-month
period ended
March 31,
2017
Balance at
March 31,
2017
Actual amount
drawn down
Interest
rate
Nature of
loan
Collateral
(Except as otherwise indicated)
Allowance
for
doubtful
accounts
Limit on loans
granted to
a single party
Ceiling on
total loans
granted
Polytronics Technology Corp. and Subsidiaries
Loans to others
For the three-month period ended March 31, 2017
Reason
for short-term
financingNo. Creditor Borrower
General
ledger
account
Is a
related
party
Table 1
Company
name
Relationship
with the
endorser/
guarantor
1 Polytronics
Technology
Corp.
Polytronics
(B.V.I.)
Corporation
100%,
owned
subsidiary
$ 528,175 $ 166,000 $ 166,000 $ - $ - 7.86 $ 1,056,349 Y N N
Note 1: Follow the corporation policy “Procedure for Provision of Endorsements and Guarantees to Others”.
Outstanding
endorsement/
guarantee
amount at
March 31, 2017Number
Endorser/
guarantor
Limit on
endorsements/
guarantees
provided for a
single party
Maximum
outstanding
endorsement/
guarantee
amount as of
March 31, 2017
Party being
endorsed/guaranteedProvision of
endorsements/
guarantees to
the party in
Mainland
China (Note 1)
Actual amount
drawn down
Amount of
endorsements/
guarantees
secured with
collateral
Ratio of
accumulated
endorsement/
guarantee
amount to net
asset value of
the endorser/
guarantor
company
Ceiling on
total amount of
endorsements/
guarantees
provided (Note 1)
Provision of
endorsements/
guarantees by
parent
company to
subsidiary
(Note 1)
Provision of
endorsements
/guarantees
by subsidiary
to parent
company
(Note 1)
Expressed in thousands of NTD
(Except as otherwise indicated)
Table 2
Polytronics Technology Corp. and Subsidiaries
Provision of endorsements and guarantees to others
For the three-month period ended March 31, 2017
Table 2
Table 3
Number of shares Book value Ownership (%) Fair value
Polytronics Technology Corp. GreenMark Inc. common
stock
None Non-current financial assets
at cost, net
210,000 $ 2,100 10 $ -
FootnoteSecurities held by Marketable securities
Relationship with the
securities issuer
General
ledger account
As of March 31, 2017
Polytronics Technology Corp. and Subsidiaries
Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)
March 31, 2017
Expressed in thousands of NTD
(Except as otherwise indicated)
Table 3
Table 4
General ledger account Amount Transaction terms
Percentage of consolidated total operating
revenues or total assets
0 Polytronics Technology Corp. Polytronics (B.V.I) Corporation 1 Processing charges 16,002$ Net 45 days 5%
0 " " 1 Purchases 2,886 " 1%
0 " " 1 Accounts payable 46,056 " 2%
0 " " 1 Sales 75,490 Net 60 days 22%
0 " " 1 Accounts receivable 68,991 " 3%
0 " " 1 Endorsements and guarantees 166,000 Note 6 6%
0 " " 1 Interest revenue 1,764 Note 4 0%
0 " " 1 Related party transaction 88,125 Note 4 3%
0 " Polystar Electronics Co., Ltd. 1 Other receivables 192 Note 5 0%
0 " Polycarbide Material Co., Ltd. 1 Rent revenue 11 Net 60 days 0%
0 " " 1 Other receivables 11 註6 0%
0 " Polystar Senchip Microelectronics Inc. 1 Sales 5 Net 45 days 0%
0 " " 1 Purchases 482 Net 60 days 0%
0 " " 1 Accounts receivable 474 Net 45 days 0%
0 " " 1 Other receivables 358 Note 5 0%
1 Polytronics (B.V.I) Corporation P-Circuit Corp. 3 Other receivables 719 Note 5 0%
1 " Polystar Electronics Co., Ltd. 3 Related party transaction 88,619 Note 4 3%
1 " " 3 Interest revenue 464 Note 4 0%
1 " " 3 Processing charges 15,931 Net 45 days 5%
1 " " 3 Purchases 2,836 " 1%
1 " " 3 Accounts payable 46,008 " 2%
1 " " 3 Sales 75,670 Net 60 days 22%
1 " " 3 Accounts receivable 78,494 " 3%
1 " Hanpu (Kunshan) Trading Co., Ltd. 3 Purchases 50 Net 45 days 0%
1 " " 3 Accounts payable 47 " 0%
1 " " 3 Sales 270 Net 60 days 0%
2 Polystar Electronics Co., Ltd. Hanpu (Kunshan) Trading Co., Ltd. 3 Purchases 2,129 Spot 1%
2 " " 3 Sales 19 " 0%
2 " Polystar Senchip Microelectronics Inc. 3 Purchases 192 Net 45 days 0%
2 " " 3 Sales 485 " 0%
2 " " 3 Accounts payable 543 " 0%
2 " " 3 Accounts receivable 502 " 0%
2 " " 3 Related party transaction 17,788 Note 4 1%
2 " " 3 Interest revenue 152 " 0%
Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:
(1) Parent company is ‘0’.
(2) The subsidiaries are numbered in order starting from ‘1’.
Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between
subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction;
for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):
(1) Parent company to subsidiary.
(2) Subsidiary to parent company.
(3) Subsidiary to subsidiary.
Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on
accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.
Note 4: Interest payable of parent loan to subsidiary.
Note 5: Pay temporary debits for subsidiary.
Note 6: Follow the policy “Procedure for Provision of endorsements and guarentees to others”.
Number
(Note 1) Company name Counterparty
Relationship
(Note 2)
Transaction
Polytronics Technology Corp. and Subsidiaries
Significant inter-company transactions during the reporting periods
For the three-month period ended March 31, 2017
Expressed in thousands of NTD
(Except as otherwise indicated)
Table 4
Table 5
Balance as at March
31, 2017
Balance as at
December 31, 2016 Number of shares Ownership (%) Book value
Polytronics
Technolgy
Corp.
Polytronics (B.V.I)
Corporation
British
Virgin
Islands
Investment and
general business
operations
$ 211,431 $ 211,431 2,644 100 $ 591,189 ($ 2,214) ($ 2,214) Subsidiary
Polytronics
Technolgy
Corp.
Polycarbide
Material Co., Ltd.
Taiwan Manufacturing of
electrical
components and
wholesale and
retail of chemical
raw materials
6,000 6,000 200 100 6,922 ( 11) ( 11) Subsidiary
Polytronics
(B.V.I)
Corporation
P-Circuit Corp. America Investment and
general business
operations
215,343 215,343 2 100 570,757 ( 2,234) ( 2,234) Subsidiary
Initial investment amount Shares held as at March 31, 2017Net profit (loss)
of the investee for the
three-month periods ended
March 31, 2017
Investment income (loss)
recognised by the Company
for the three-month periods
ended March 31, 2017
Polytronics Technology Corp. and Subsidiaries
Information on investees
For the three-month period ended March 31, 2017
Expressed in thousands of NTD
(Except as otherwise indicated)
Footnote Investor Investee Location
Main business
activities
Table 5
Table 6
Remitted to
Mainland China
Remitted back
to Taiwan
Polystar
Electronics Co.,
Ltd.
Production and
sale of varistor
and
potentiometer
215,343$ Through investing
in an existing
company in the
third area, which
then invested in
the investee in
Mainland China.
195,932$ $ - $ - 195,932$ 2,234)($ 100 2,234)($ 571,445$ $ -
Hanpu (Kunshan)
Trading Co., Ltd.
Wholesale,
import and
export business
4,401 Other ways to
invest in Mainland
China.
- - - - 1,082 100 1,082 25,412 -
Polystar Senchip
Microelectronics
Inc.
Production and
sale of resistors,
discrete
semiconductor
devices and
other resistive
elements
154,038 Other ways to
invest in Mainland
China.
- - - - 11,762)( 100 8,942)( 111,249 -
Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of January 1,
2017 (Note 1)
Polytronics Technology Corp. and Subsidiaries
Information on investments in Mainland China
For the three-month period ended March 31, 2017
Expressed in thousands of NTD
(Except as otherwise indicated)
Accumulated
amount
of investment
income
remitted back to
Taiwan as of
March 31, 2017 Footnote
Amount remitted from Taiwan to
Mainland China/
Amount remitted back
to Taiwan for the three-month
period ended March 31, 2017
Accumulated
amount
of remittance
from Taiwan to
Mainland China
as of March 31,
2017
Net income of
investee as of
March 31, 2017
Ownership
held by
the
Company
(direct or
indirect)
Investment income
(loss) recognised
by the Company
for the three-
month period ended
March 31, 2017
Book value of
investments in
Mainland China
as of March 31,
2017
Investee in
Mainland China
Main business
activities Paid-in capital
Investment
method
Table 6, Page 1
Company name
Accumulated amount of
remittance from Taiwan
to Mainland China
as of March 31, 2017
Investment amount
approved by the
Investment Commission
of the Ministry of
Economic Affairs
(MOEA)
Ceiling on investments in
Mainland China imposed
by the Investment
Commission of MOEA
Polytronics Technology
Corp.
$ 195,932 $ 215,343 $ 1,267,619
Note 2:The financial statements were reviewed by R.O.C. parent company’s CPA.
Note 4: Mainland China’s investees information are translated using the exchange rates of USD:NTD = 1:31.058 for recognised investment income (loss) and remaining using the exchange rates of USD:NTD=1:30.330.
Note 1: During 2001~2002, the Company remitted US$360,000 for investment in Polytronics (B.V.I) Corporation in British Virgin Islands. In 1991, Polytronics (B.V.I) Corporation took this amount along with its own
US$640,000, totalling US$1,000,000 to invest in P-Circuit Corp. in U.S. P-Circuit Corp. then used this US$1,000,000 to invest in Polystar Electronics Co., Ltd. in Mainland China. During 2003~2010, the Company
remitted US$1,500,000, US$510,000, US$1,000,000, US$1,000,000 and US$2,100,000, respectively, to Polytronics (B.V.I) Corporation for investment. The cumulative investment amount was US$6,470,000. Then
Polytronics (B.V.I) Corporation’s remitted US$1,500,000, US$510,000, US$1,000,000, US$990,000 and US$2,100,000, respectively to P-Circuit Corp. for investment. P-Circuit Corp. then remitted this amount to Polystar
Electronics Co., Ltd.in Mainland China The cumulative investment amount in Polystar Electonics Co., Ltd. through P-Circuit Corp. was US$6,460,000.
Note 3: Under ‘Regulations Governing the Permission of Investment or Technical Cooperation in Mainland Area’, amendment to Jing-Shen-Zi No. 09704604680 of Ministry of Economic Affairs, effective August 2008, ceiling
of accumulated investment in Mainland China may not exceed 60% of the net assets and the ceiling is effective from August 1.
Table 6, Page 2
Table 7
Amount %
Balance at March
31, 2017 %
Maximum balance during
the three-month period
ended March 31, 2017
Balance at March
31, 2017 Interest rate
Interest during the
three-month period
ended March 31, 2017
Balance at
March 31,
2017 %
Polystar
Electronics
Co., Ltd.
$ 75,670 21.51% $ 78,494 28.54% $ 129,000 $ 121,320 4.35% $ 464 $ 15,931 54.85%
Polystar
Electronics
Co., Ltd.
( 2,836) 1.57% ( 46,008) 40.67% - - - - - -
Hanpu
(Kunshan)
Trading Co.,
Ltd.
270 0.08% - 0.00% - - - - - -
Hanpu
(Kunshan)
Trading Co.,
Ltd.
50)( 0.03% 47)( 0.04% - - - - - -
Others-processing charges
Expressed in thousands of NTD
(Except as otherwise indicated)
Polytronics Technology Corp. and Subsidiaries
Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas
For the three-month period ended March 31, 2017
Investee in
Mainland
China
Sale (purchase)
Accounts receivable
(payable) Financing
Table 7
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