CHROMA — Annual Report 2016

Nov 25, 2016

Chroma Ate Inc.

Financial Statements for the Years Ended December 31, 2016 and 2015 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

Opinion

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

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Corporation in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters of the financial statements for the year ended December 31, 2016 are described as follows:

Impairment of Property, Plant and Equipment

In accordance with IAS 36 - Impairment of Asset, management assesses periodically whether there is any indication that property, plant and equipment may be impaired. If there is an indication that an asset may be impaired, management should estimate the recoverable amount of the asset or the cash-generating unit to which the asset belongs based on subjective judgements about the asset’s usage and industry conditions. Since the management’s evaluation of impairment and determination of the recoverable amount of an asset require management’s subjective judgements and assumptions, impairment of asset is deemed to be a key audit matter.

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Management determined that there is no indication that the property, plant and equipment may be impaired based on the assessment of industry trend, market conditions, and the Corporation’s operation performance and financial status. We have performed the audit procedures, included reviewing the impairment assessment of property, plant and equipment prepared by the management and assessing the rationale of underlying information used, to evaluate the appropriateness of the impairment indication assessment performed by the management.

Other information related to property, plant and equipment is disclosed in Notes 5 and 13.

Evaluation of Write-down of Inventories

The Corporation’s inventories are primarily test instruments widely used in technology industries including power supply, passive components, semiconductor, LED, and solar energy. The Corporation needs to change the product combinations in response to the rapid change in the market and business fluctuation. The market competition or technique replacement may result in the risk that inventories cannot be sold, or prices may be reduced due to lack of demand in the market. As stated in Note 5 - Critical accounting judgments and key sources of estimation uncertainty, inventory valuation includes the consideration of whether the test instruments are obsolete or unmarketable and the estimation of demand for the products in the future. Since the evaluation process involves material assumptions and estimations, the valuation of inventories is deemed to be a key audit matter.

We assessed the rationale of the Corporation’s policy on providing allowance for inventory valuation and obsolescence losses, and we tested the accuracy of inventory aging report. We also reviewed the sales forecast of the products, tested the recent selling prices, and participated in annual inventory count to observe the condition of the inventories in order to evaluate the reasonableness of the inventory value.

Please refer to Note 11 to the financial statements for the details of the information about inventories.

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

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

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

Those charged with governance, including supervisor, are responsible for overseeing the Corporation’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

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

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Wen Wang and Wen-Chi Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China February 21, 2017

Notice to Readers

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

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

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CHROMA ATE INC.

BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets of fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Notes 4 and 8) Notes receivable Notes receivable - related parties (Note 26) Accounts receivable, net (Notes 4 and 10) Accounts receivable - related parties (Notes 4, 10 and 26) Other receivables - related parties (Note 26) Inventories (Notes 4, 5 and 11) Prepayments Other current assets (Note 26) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets non-current (Notes 4 and 8) Financial assets carried at cost non-current (Notes 4 and 9) Investments accounted for using equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 27) Goodwill (Notes 4 and 14) Deferred tax assets (Notes 4 and 21) Prepayments for land and equipment Refundable deposits Prepayments for investments Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Financial liability at fair value through profit or loss - current (Notes 4 and 7) Notes payable (Note 26) Accounts payable Accounts payable - related parties (Note 26) Other payables (Note 17) Current tax liabilities (Notes 4 and 21) Receipts in advance (Note 26) Current portion of long-term borrowings (Notes 4 and 15) Other current liabilities - other (Note 26) Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Notes 4 and 16) Long-term borrowings (Notes 4 and 15) Deferred tax liabilities (Notes 4 and 21) Net defined benefit liabilities (Notes 4 and 18) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 19 and 23) Common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity TOTAL		2016 Amount % $ 1,624,838 10 725 - 2,030,362 12 4,478 - 354 - 683,832 4 1,604,262 10 161,874 1 1,458,032 9 30,995 - 109,537 - 7,709,289 46 314,233 2 172,173 1 3,301,105 20 1,805,031 11 94,424 1 131,806 1 3,035,154 18 2,076 - 20,000 - 960 - 8,876,962 54 $ 16,586,251 100 $ - - - - 510 - 1,070,615 6 81,610 - 658,120 4 248,414 2 167,082 1 800,000 5 10,651 - 3,037,002 18 1,397,140 9 1,200,000 7 177,153 1 157,760 1 569 - 2,932,622 18 5,969,624 36 3,898,872 23 1,960,159 12 1,724,576 10 86,888 1 2,923,811 18 4,735,275 29 58,035 - (35,714) - 10,616,627 64 $ 16,586,251 100		2015
				Amount % $ 878,892 6 - - 1,824,521 13 6,784 - 3,920 - 591,750 4 1,063,503 8 168,854 1 1,300,519 9 51,834 1 109,114 1 5,999,691 43 359,543 2 181,760 1 3,339,519 24 1,844,215 13 94,424 1 88,429 1 2,046,426 15 1,943 - - - 8,966 - 7,965,225 57 $ 13,964,916 100 $ 100,000 1 1,483 - 35 - 534,402 4 34,647 - 459,173 4 136,340 1 28,111 - - - 16,515 - 1,310,706 10 1,758,093 12 1,230,000 9 115,166 1 140,281 1 566 - 3,244,106 23 4,554,812 33 3,791,699 27 1,302,269 9 1,600,920 11 86,888 1 2,264,377 16 3,952,185 28 399,665 3 (35,714) - 9,410,104 67 $ 13,964,916 100

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

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CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUES (Notes 4 and 26) Sale revenues Less: Sales returns Sales allowances Net operating revenues OPERATING COSTS (Notes 11, 20 and 26) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 20 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Share of profit of subsidiaries, associates and joint ventures, net (Notes 4 and 12) Dividend income (Note 4) Rental income (Note 26) Interest income (Note 26) Management service income (Note 26) Subsidy income (Note 4) Gain on reversal of bad debts Other income - other (Note 26) Foreign currency exchange loss, net (Notes 4 and 29) (Losses) gain on disposal of property, plant and equipment, net (Note 4) Valuation gain on financial assets (liabilities), at fair value through profit, net (Notes 4 and 16) Impairment loss (Notes 4 and 9)		2016 Amount % $ 7,254,581 100 (18,534) - (2,732) - 7,233,315 100 (3,389,602) (47) 3,843,713 53 (80,134) (1) 3,763,579 52 651,576 9 449,079 6 936,526 13 2,037,181 28 1,726,398 24 246,007 3 46,998 1 29,738 1 8,793 - 8,600 - 3,384 - - - 20,424 - (57,580) (1) (3,387) - 2,884 - - -		2015
				Amount % $ 4,605,024 101 (62,184) (1) (3,399) - 4,539,441 100 (1,977,863) (44) 2,561,578 56 (41,744) (1) 2,519,834 55 552,449 12 357,284 8 784,380 17 1,694,113 37 825,721 18 416,646 9 29,724 1 30,882 1 6,141 - 8,650 - 18,302 - 9,000 - 20,735 1 - - 394 - - - (14,674) - (Continued)

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CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Valuation loss on financial assets (liabilities) at fair value through loss, net Gain on disposal of investments, net (Note 4) Foreign currency exchange gain, net (Notes 4 and 29) Other expenses Interest expense (Notes 4 and 20) Total nonoperating income and expense INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 21) NET INCOME OTHER COMPREHENSIVE INCOME, NET (Note 19) Items that will not be reclassified subsequently to profit or loss Remeasurement of defined benefit plans Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using the equity method Item that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations Unrealized loss from available-for-sale financial assets Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using the equity method Total other comprehensive income TOTAL COMPREHENSIVE INCOME EARNINGS PER SHARE (NT$; Note 22) Basic Diluted		2016 Amount % $ - - 2,431 - - - (29) - (27,140) - 281,123 4 2,007,521 28 287,586 4 1,719,935 24 (24,936) - (1,709) - (127,798) (2) (39,469) (1) (24,411) - (218,323) (3) $ 1,501,612 21 $4.53 $4.23		2015
				Amount % $ (556) - 368 - 52,536 1 (850) - (28,834) (1) 548,464 12 1,374,185 30 137,628 3 1,236,557 27 (26,849) (1) 352 - (17,071) - (99,791) (2) 9,423 - (133,936) (3) $ 1,102,621 24 $3.28 $3.10

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

(Concluded)

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CHROMA ATE INC.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Amounts Per Share)

BALANCE, JANUARY 1, 2015 Appropriation of the 2014 earnings Legal reserve Cash dividends - NT$2.6 per share Change in other capital surplus Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using the equity method Net income for the year ended December 31, 2015 Other comprehensive income for the year ended December 31, 2015 Total comprehensive income for the year ended December 31, 2015 Conversion of convertible bonds Adjustments of capital surplus for the Corporation's cash dividends received by subsidiaries Compensation recognized on employee stock options BALANCE, DECEMBER 31, 2015 Appropriation of the 2015 earnings Legal reserve Cash dividends - NT$2.4 per share Change in other capital surplus Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using the equity method Net income for the year ended December 31, 2016 Other comprehensive income for the year ended December 31, 2016 Total comprehensive income for the year ended December 31, 2016 Conversion of convertible bonds Adjustment of capital surplus for the Corporation's cash dividends received by subsidiaries Share-based payment transaction BALANCE, DECEMBER 31, 2016	Issued Capital Capital Surplus $ 3,787,821 $ 1,256,654 - - - - - - - - - - - - 42 239 - 4,994 3,836 40,382 3,791,699 1,302,269 - - - - - 27,978 - - - - - - 59,823 326,205 - 4,545 47,350 299,162 $ 3,898,872 $ 1,960,159		**Retained Earnings **	Total $ 3,737,083 - (987,433 ) (7,525 ) 1,236,557 (26,497) 1,210,060 - - - 3,952,185 - (910,200 ) - 1,719,935 (26,645) 1,693,290 - - - $ 4,735,275		Other Equity	Total Treasury Stock $ 507,104 $ (35,714 ) - - - - - - - - (107,439) - (107,439) - - - - - - - 399,665 (35,714 ) - - - - - - - - (191,678) - (191,678) - - - - - (149,952) - $ 58,035 $ (35,714)	Total Equity $ 9,252,948 - (987,433 ) (7,525 ) 1,236,557 (133,936) 1,102,621 281 4,994 44,218 9,410,104 - (910,200 ) 27,978 1,719,935 (218,323) 1,501,612 386,028 4,545 196,560 $ 10,616,627
						Exchange Differences on Unrealized Gain Translating (Loss) from Foreign Available-for-sale Unearned Operations Financial Assets Employee Benefit $ 136,756 $ 370,348 $ - - - - - - - - - - - - - (8,788) (98,651) - (8,788) (98,651) - - - - - - - - - - 127,968 271,697 - - - - - - - - - - - - - (152,882) (38,796) - (152,882) (38,796) - - - - - - - - - (149,952) $ (24,914) $ 232,901 $ (149,952)
			Unappropriated Legal Reserve Special Reserve Earnings $ 1,469,276 $ 86,888 $ 2,180,919 131,644 - (131,644 ) - - (987,433 ) - - (7,525 ) - - 1,236,557 - - (26,497) - - 1,210,060 - - - - - - - - - 1,600,920 86,888 2,264,377 123,656 - (123,656 ) - - (910,200 ) - - - - - 1,719,935 - - (26,645) - - 1,693,290 - - - - - - - - - $ 1,724,576 $ 86,888 $ 2,923,811

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

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CHROMA ATE INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Net income before income tax Adjustments for: Share of profits of subsidiaries, associates and joint venture accounted for by the equity method, net Depreciation Compensation cost of share-based payments Unrealized gain on the transactions with subsidiaries and associates Unrealized loss (gain) on foreign currency exchange, net Dividend income Finance cost Provision (reversal of provision) for bad debts expense Interest income Impairment loss on non-derivative financial assets Loss (gain) on disposal and retirement of property, plant and equipment, net Gain on disposal of investments, net Impairment loss on financial assets Net changes in operating assets and liabilities Financial assets held for trading Notes receivable Accounts receivable Inventories Prepayments Other current assets Financial liabilities held for trading Notes payable Accounts payable Other payables Receipts in advance Other current liabilities Net defined benefit liabilities Cash generated from operating Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire property, plant and equipment Payment to acquire available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Dividend received Payment to acquire investments accounted for using the equity method Increase in prepayments for long-term investments Cash returned of capital reduction of financial assets carried at cost	2016 $ 2,007,521 (246,007) 157,159 86,618 80,134 52,244 (46,998) 27,140 11,000 (8,793) 8,500 3,387 (2,431) - (1,401) 5,872 (684,082) (249,471) 20,839 2,969 (1,483) 475 586,054 196,817 138,971 (5,864) (7,457) 2,131,713 (156,902) 1,974,811 (1,008,799) (600,000) 400,910 353,099 (225,749) (20,000) 9,587	2015 $ 1,374,185 (416,646) 158,264 25,077 41,744 (43,566) (29,724) 28,834 (9,000) (6,141) 32,452 (394) (368) 14,674 - (2,577) 662,903 (118,162) (23,180) (6,175) 556 (1,016) 30,657 (40,500) 20,296 348 (5,438) 1,687,103 (164,175) 1,522,928 (658,699) (300,000) 119,942 259,269 (131,840) - 11,750 (Continued)

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CHROMA ATE INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

Decrease in other non-current assets Decrease in other receivables - related parties Interest received Proceeds from disposal of property, plant and equipment Proceeds on sale of financial assets measured at cost (Increase) decrease in refundable deposits Proceeds from disposal of investments in bonds with no active market Increase in prepayments for investments Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash dividend Increase in long-term borrowings Decrease in short-term borrowings Exercise of employee stock options Exercise of employee restricted stock Interest paid Increase in guarantee deposits Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR	2016 $ 8,006 5,594 7,905 7,046 1,521 (133) - - (1,061,013) (910,200) 770,000 (100,000) 80,049 31,000 (25,245) 3 (154,393) (13,459) 745,946 878,892 $ 1,624,838	2015 $ 15,846 11,384 6,303 3,452 - 732 51,091 (16,140) (626,910) (987,433) 530,000 (50,000) 19,141 - (13,480) - (501,772) 2,631 396,877 482,015 $ 878,892

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

(Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHROMA ATE INC.

1. GENERAL INFORMATION

Chroma Ate Inc. (the “Corporation”) was incorporated in the Republic of China (ROC) in November 1984. The Corporation mainly designs, assembles, calibrates, manufactures, sells, repairs and maintains software/hardware for computers and peripherals, computerized automatic test systems, electronic test instruments, signal generators, power supplies, telecom power supplies, etc. as well as serves as an agent to sell these products. The Corporation’s shares have been listed on the Taiwan Stock Exchange since December 21, 1996.

The Corporation’s functional currency is New Taiwan dollar (NTD).

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Corporation’s board of directors on February 21, 2017.

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

• a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Corporation should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: January 1, 2016 Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations” 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 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” (Continued)

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New, Amended or Revised Standards and Interpretations (the“New IFRSs”) Amendment to IAS 27 “Equity Method in Separate Financial Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” IFRIC 21 “Levies”	Effective Date Announced by IASB (Note 1)
	January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 (Concluded)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

• Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application in 2017 of the above IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Corporation’s accounting policies, except for the following:

1) Amendment to IFRS 2 “Share-Based Payment”

IFRS 2 was amended by the Annual Improvements to IFRSs: 2010-2012 Cycle to change the definitions of “vesting condition” and “market condition” and add definitions of “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Corporation or another entity in the same Corporation or the market price of the equity instruments of the Corporation or another entity in the same Corporation (i.e. a market condition); that a performance target can relate either to the performance of the Corporation as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Corporation, but also of other entities outside the Corporation. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions will be accounted for differently, and the aforementioned amendment will be applied prospectively to those share-based payments granted on or after January 1, 2017.

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

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed by the FSC for application starting from 2017. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

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

The disclosures of related party transactions and impairment of goodwill will be enhanced when the above amendments are retrospectively applied in 2017.

Except for the above impacts, as of the date the financial statements were authorized for issue, the Corporation continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Corporation’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

b. New IFRSs in issue but not yet endorsed by the FSC

The Corporation have not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

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

New IFRSs Annual Improvements to IFRSs 2014-2016 Cycle Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance contracts” IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 15 “Revenue from Contracts with Customers” Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from Contracts with Customers” IFRS 16 “Leases” Amendment to IAS 7 “Disclosure Initiative” Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of investment property” IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

Effective Date Announced by IASB (Note 1)

Note 2 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 To be determined by IASB January 1, 2018 January 1, 2018 January 1, 2019 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

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• Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

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

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

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

All other financial assets are measured at fair value through profit or loss. However, the Corporation may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

The impairment of financial assets

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

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

Transition

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

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

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

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

• Identify the contract with the customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contract; and

• Recognize revenue when the entity satisfies a performance obligation.

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

Except for the above impact, the Corporation is continuously assessing the possible impact that the application of other standards and interpretations will have on the Corporation’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

Basis of Preparation

The accompanying financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

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

• c. Level 3 inputs are unobservable inputs for the asset or liability.

When preparing its financial statements, the Corporation used equity method to account for its investment in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the financial statements to be the same with the amounts attributable to the owner of the Corporation in its consolidated financial statements, adjustments arising from the differences in accounting treatment between basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in the financial statements.

Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

• a. Assets held primarily for the purpose of trading;

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• b. Assets expected to be realized within twelve months after the reporting period; and

• c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

• a. Liabilities held primarily for the purpose of trading;

• b. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and

• c. Liabilities for which the Corporation does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as noncurrent.

Foreign Currencies

In preparing the Corporation’s financial statements, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Nonmonetary items that are measured at historical cost in a foreign currency are not retranslated.

Inventories

Inventories consist of raw materials, semifinished goods, finished goods and work-in-process, which are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.

Investments Accounted for Using Equity Method

Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity method.

a. Investment in subsidiaries

Subsidiaries are the entities that are controlled by the Corporation.

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Under the equity method, the investment is initially recognized at cost and adjusted thereafter to recognize the Corporation's share of the profit or loss and other comprehensive income of the subsidiary. The Corporation also recognizes the Corporation’s share of the change in other equity of the subsidiary.

Changes in the Corporation’s ownership interest in a subsidiary that do not result in the Corporation losing control of the subsidiary are equity transactions. The Corporation recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Corporation’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long-term interests that, in substance, form part of the Corporation’s net investment in the subsidiary), the Corporation continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Corporation’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Corporation’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Corporation assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the invested Corporation. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Corporation recognizes reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Corporation loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Corporation had directly disposed of the related assets or liabilities.

Profits and losses resulting from downstream transactions are eliminated in full in the Corporation’s financial statement. Profits and losses from upstream transactions and transactions between subsidiaries are recognized in the Corporation’s financial statements only to the extent of interests in the subsidiary that are not related to the Corporation.

• b. Investment in associates and joint ventures

An associate is an entity over which the Corporation has significant influence and that is neither a subsidiary nor an interest in a joint venture. Joint venture is a joint arrangement whereby the Corporation and other parties that have joint control of arrangement have right to the net assets of the arrangement.

The Corporation uses the equity method to account for its investments in associates and joint ventures.

Under the equity method, investments in an associate and a joint venture are initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of the profit or loss and other comprehensive income of the associate and joint venture. The Corporation also recognizes the changes in the Corporation’s share of equity of associates and joint venture.

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Any excess of the cost of acquisition over the Corporation’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Corporation’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Corporation subscribes for additional new shares of the associate and joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Corporation’s proportionate interest in the associate and joint venture. The Corporation records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in the Corporation’s share of equity of associates and joint ventures. If the Corporation’s ownership interest is reduced due to the additional subscription of the new shares of associate and joint venture, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate and joint venture is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Corporation’s share of losses of an associate and a joint venture equals or exceeds its interest in that associate and joint venture (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Corporation’s net investment in the associate and joint venture), the Corporation discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Corporation has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate and joint venture.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Corporation discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that associate and the joint venture on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Corporation continues to apply the equity method and does not remeasure the retained interest.

When a group entity transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Corporation’s financial statements only to the extent of interests in the associate and the joint venture that are not related to the Corporation.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment loss.

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Properties, plant and equipment in the course of construction are carried at cost, less any recognized impairment loss. Cost include professional fees and borrowing cost eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

Goodwill

For the purposes of impairment testing, goodwill is allocated to each of the Corporation’s cash-generating units or groups of cash-generating units (referred to as cash-generating unit) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized on goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the Corporation disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets

• a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• b. Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

• c. Derecognition of intangible assets

On derecognition of intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

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Impairment of Tangible and Intangible Assets Other Than Goodwill

At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible and intangible assets (other than goodwill) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the CGUs to which the asset belongs. Corporate assets are allocated to the smallest group of cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

• a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

• 1) Measurement category

Financial assets are classified into the following categories: Available-for-sale financial assets, and loans and receivables.

• a) Available-for-sale financial assets (AFS financial assets)

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

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Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Corporation’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Corporation’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

c) Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalent, debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

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• 2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Corporation’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivables and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

• 3) Derecognition of financial assets

The Corporation derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset are transferred to another party.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

• b. Equity instruments

Debt and equity instruments issued by a Corporation entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Corporation are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Corporation’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Corporation’s own equity instruments.

• c. Financial liabilities

• 1) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method:

• Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

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A financial liability may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

• a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• b) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Corporation’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• c) The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest or dividend paid on the financial liability. Fair value is determined in the manner described in Note 26.

• 2) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

• d. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Corporation are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable and reduced for estimated customer returns, rebates and other similar allowances.

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• a. Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

• 1) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;

• 2) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• 3) The amount of revenue can be measured reliably;

• 4) It is probable that the economic benefits associated with the transaction will flow to the Corporation; and

• 5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Corporation does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

• b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Corporation and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Corporation and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time that the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Corporation will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Corporation recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, Government grants whose primary condition is that the Corporation should purchase, construct or otherwise acquire noncurrent assets are recognized as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

• 25 -

Government grants that are used to compensate for expenses or losses already incurred or to give the Corporation immediate financial support with no future related costs are recognized in profit or loss in the period in which they become receivable.

Employee Benefits

• a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

• b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur/when the plan amendment or curtailment occurs/when the settlement occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Corporation’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• c. Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss.

Options Share-based Payment Arrangements

Equity-settled share-based payments arrangements and restricted shares for employees granted to employees and others who provide similar services are measured at the fair value of the equity instruments at the grant date.

The fair value at the grant date of the employee share options and restricted shares for employees is expensed on a straight-line basis over the vesting period, based on the Corporation's best estimate of the number of the employee share options that will ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vesting immediately.

When restricted shares for employees are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration, and should be returned once the employee resigns, they are recognized as payables. Dividends paid to employees, on the restricted shares that do not need to be returned if employees resign in the vesting period, are recognized as expenses when the dividends are declared with a corresponding adjustment in retained earnings and capital surplus - restricted shares for employees.

At the end of each reporting period, the Corporation revises its estimate of the number of employee share options and restricted shares for employees expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - employee share options.

• 26 -

Taxation

Income tax expense represent the sum of the current tax payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

• b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforward and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures to extent that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are recognized only to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Previously unrecognized deferred tax assets are also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply to in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences based on the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from a business combination, the tax effect is included in the accounting for the business combination.

• 27 -

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the Corporation’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key Sources of Estimation and Uncertainty

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

• a. Impairment of tangible and intangible assets other than goodwill

In the valuation of assets for impairment, on assets, the Corporation uses subjective judgment to determine the individual cash flows, useful lives and future revenues and expenses of specific asset groups based on subjective judgment, the assets’ useful model and industrial characteristic. Any changes in estimation due to economic circumstances and the Corporation’s strategies could result in significant impairment of tangible and intangible assets.

• b. Valuation of inventories

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits with original maturities less than three months		**December 31 **	**December 31 **
		2016 $ 2,244 1,412,520 210,074 $ 1,624,838	2015 $ 2,698 876,194 - $ 878,892

• 28 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Derivative instruments Call and put option of convertible bonds payable (Note 16) Financial liabilities at FVTPL-current Derivative instruments Call and put option of convertible bonds payable (Note 16)		December	31
		2016 $ 725 $ -	2015 $ - $ 1,483

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Domestic investments Listed stocks Open-end beneficiary certificates Current Non-current		**December 31 **	**December 31 **
		2016 $ 314,233 2,030,362 $ 2,344,595 $ 2,030,362 314,233 $ 2,344,595	2015 $ 359,543 1,824,521 $ 2,184,064 $ 1,824,521 359,543 $ 2,184,064

9. FINANCIAL ASSETS CARRIED AT COST- NON-CURRENT

Domestic unlisted common stocks Foreign open-end beneficial certificates Classification by measurement of financial instruments Available-for-sale financial assets		December 31	December 31
		2016 $ 162,021 10,152 $ 172,173 $ 172,173	2015 $ 171,608 10,152 $ 181,760 $ 181,760

The above unlisted stock investments were measured at cost less impairment at the balance sheet date. The Corporation thought the fair value of these investments could not be estimated reliably because the range of reasonable fair value estimates is significant and the probabilities of various estimates cannot be reasonably assessed.

For the year ended December 31, 2015, the Corporation recognized impairment losses of $2,411 thousand, on Qualitysource S.A.S. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments.

• 29 -

For the year ended December 31, 2015, the Corporation recognized impairment losses of $12,263 thousand on Lasfocus Corporation. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments.

The Corporation sold part of foreign unlisted common stocks and all preferred stock of financial assets carried at cost in the year ended December 31, 2016.

The Corporation did not dispose of financial assets carried at cost in the year ended December 31, 2015.

10. ACCOUNTS RECEIVABLE, NET

Accounts receivable Less: Allowance for doubtful accounts Accounts receivable - related parties		December 31	December 31
		2016 $ 727,915 (44,083) 683,832 1,604,262 $ 2,288,094	2015 $ 627,890 (36,140) 591,750 1,063,503 $ 1,655,253

The average credit period for sales of goods is 60 to 90 days after the goods were approved, and no interest is charged on accounts receivable. In determining the recoverability of a trade receivable, the Corporation considers any change in the credit quality of the accounts receivable from the date when credit was initially granted up to the balance sheet date. Allowances for doubtful amounts are based on estimated irrecoverable amounts determined by referring to the counterparty’s past default experience and the counterparty’s current financial position.

The Corporation did not recognize an allowance accounts against accounts receivable which were past due at the end of the reporting period because there was not a significant change in credit quality and the amounts were still considered recoverable. In addition, the Corporation did not hold any collateral or other credit enhancements for those accounts receivable.

The aging of receivables was as follows:

Less than 60 days 61-365 days Over 365 days		December 31	December 31
		2016 $ 491,119 188,626 48,170 $ 727,915	2015 $ 409,394 116,489 102,007 $ 627,890

The above aging analysis was based on the past due days from end of credit period.

• 30 -

Age of receivables that were past due but not impaired:

Less than 60 days 61-365 days Over 365 days		December 31	December 31
		2016 $ 106,437 182,955 13,057 $ 302,449	2015 $ 102,627 107,048 78,337 $ 288,012

The above aging schedule was based on the past due days from end of credit period.

The movements of the allowance for doubtful accounts receivable were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2015 $ 1,657 $ 43,699 Bad debts expense reversed on accounts receivable - (9,000) Reclassification of impairment loss from collective assessment to individual assessment 26,971 (26,971) Reclassification of impairment loss from individual assessment to collective assessment (1,640) 1,640 Amounts written off during the period as uncollected (16) (200) Balance at December 31, 2015 $ 26,972 $ 9,168 Balance at January 1, 2016 $ 26,972 $ 9,168 Impairment losses recognized on receivables - 11,000 Reclassification of impairment loss from collective assessment to individual assessment 17,885 (17,885) Reclassification of impairment loss from individual assessment to collective assessment (8,080) 8,080 Amounts written off during the period as uncollected (3,057) - Balance at December 31, 2016 $ 33,720 $ 10,363

Total $ 45,356 (9,000) - - (216) $ 36,140 $ 36,140 11,000 - - (3,057) $ 44,083

The recognized impairment represents the difference between the carrying amount of these trade receivables and the present value of the expected proceeds to be received from liquidation. The allowance for impairment loss included allowance for individually impaired trade receivable in the amounts of $33,720 thousand and $26,972 thousand as of December 31, 2016 and 2015, respectively. The Corporation did not hold any collateral over these balances.

• 31 -

11. INVENTORIES

Finished goods Semi-finished products Work in process Raw materials		December 31	December 31
		2016 $ 200,538 317,900 471,511 468,083 $ 1,458,032	2015 $ 194,339 277,762 368,814 459,604 $ 1,300,519

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2016 and 2015 was $3,389,602 thousand and $1,977,863 thousand, respectively.

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2016 and 2015 included $8,500 thousand and $32,452 thousand write-downs of inventories, respectively.

12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in subsidiaries Investments in associates Investments in joint venture		December 31	December 31
		2016 $ 2,659,608 623,904 17,593 $ 3,301,105	2015 $ 2,786,380 535,634 17,505 $ 3,339,519

a. Investments in subsidiaries

The details of investment and equity interest in subsidiaries were as follows:

Unlisted company Neworld Electronics Ltd. San Eagle Development Corp. Chroma New Material Corporation Wei Kuang Automatic Equipment Co., Ltd. CHI Incorporation Ltd. Chen Hwa Technology Inc. Quantel Private Ltd. Chroma Investment Co., Ltd. Chroma Ate Europe B.V. Chroma Ate Inc. (“Chroma USA”) Sensational Holding Ltd.	December 31	December 31
	2016 Amount Percentage of Equity Interest (%) $ 696,690 100.0 567,548 100.0 439,369 100.0 316,050 100.0 109,043 100.0 106,449 100.0 108,073 60.0 106,210 100.0 85,621 100.0 70,824 100.0 53,358 100.0	2015
		Amount Percentage of Equity Interest (%) $ 705,291 100.0 624,769 100.0 437,683 100.0 446,591 100.0 133,231 100.0 111,655 100.0 - - 102,030 100.0 84,939 100.0 68,577 100.0 52,699 100.0 (Continued)

• 32 -

Deep Red Holding Co., Ltd. Chroma Systems Solutions Inc. Chroma Japan Corp. Adivic Technology Co. Testar Electronic Corporation EVT Technology Co., Ltd.		**December 31 **	**December 31 **	**December 31 **
		2016 Amount Percentage of Equity Interest (%) $ 49,021 100.0 (43,893) 25.0 (36,904) 100.0 35,298 51.0 (5,545) 67.2 2,396 53.2 $ 2,659,608		2015
				Amount Percentage of Equity Interest (%) $ 45,408 100.0 (56,946) 25.0 (24,387) 100.0 36,119 51.0 10,446 67.2 8,275 53.2 $ 2,786,380

(Concluded)

In May 2016 and April 2015, Advic Technology Co. (“Advic”) increased its capital by $60,000 thousand and $60,000 thousand, respectively to strengthen its financial structure. The Corporation’s board of directors resolved to participate proportionately in the capital increase by buying shares at the same percentage as its original equity interest of Advic. The Corporation’s equity interest in Advic is still 51%.

In May 2015, EVT Technology Co., Ltd. (“EVT”), the Corporation’s investee (originally recognized as financial assets carried at cost), increased its capital by $30,000 thousand to strengthen its financial structure, the Corporation’s board of directors resolved to participate in the capital increase of EVT by buying $23,000 thousand that resulted in higher percentage than its previous equity interest; thus, the Corporation equity interest rose to 53.2% and acquired control over EVT.

In February 2015, Chroma (Shanghai) Trading Co., Ltd., the Corporation’s grandson company increase its capital by US$2,500 thousand to purchase plants and expand its operating scale, the Corporation’s board of directors resolved to fully participate in the capital increase of Chroma (Shanghai) Trading Co., Ltd. through Chen Hwa Technology Inc. by buying shares and the full investment amount has been fully paid.

To expand its market scale and set up sales channel in Southeast Asia, the Corporation’s board of directors resolved in December. 2015 to buy 60% equity interest of Quantel Private Ltd. (“Quantel”) amounting to SGD3,240 thousand. Quantel Private Ltd. is mainly engaged in the sales of electronic test instruments, etc. In April 2016, Quantel Private Ltd. increased its capital by SGD2,500 thousand to strengthen its financial structure. The Corporation’s board of directors resolved to participate proportionally in the capital increase by buying shares at the same percentage as its original equity interest of Quantel. The Corporation’s equity interest in Quantel remained the same.

Refer to Note 30 for the detail of the subsidiaries indirectly held by the Corporation.

• 33 -

The Corporation’s share of profits of subsidiaries under equity method is as follows:

Unlisted company Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma New Material Corporation Adivic Technology Co. Testar Electronic Corporation CHI Incorporation Ltd. Chroma Systems Solutions Inc. Chroma Japan Corp. San Eagle Development Corp. Chroma Ate Inc. Chroma Ate Europe B.V. Deep Red Holding Co., Ltd. Quantel Private Ltd. EVT Technology Co., Ltd. Chen Hwa Technology Inc. Sensational Holding Ltd. Chroma Investment Co., Ltd.		Years Ended December 31	Years Ended December 31
		2016 $ 81,411 69,459 47,089 (31,309) (29,720) 21,946 18,002 (13,118) (12,895) 11,231 8,716 7,587 7,500 (5,848) 2,928 1,583 (534) $ 184,028	2015 $ 85,873 222,533 49,527 (32,621) (32,541) (19,416) 10,255 (5,965) 11,571 31,090 20,710 961 - (7,200) 4,173 1,165 365 $ 340,480

The investments in subsidiaries accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2016 and 2015 were based on the subsidiaries’ financial statements audited by auditors for the same years.

• b. Investment in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31
		2016 $ 535,490 88,414 $ 623,904	2015 $ 457,674 77,960 $ 535,634

Aggregate information of associates that are not individually material:

The Corporation’s share of: Income from continuing operations Other comprehensive income Total comprehensive income for the year		Years Ended December 31	Years Ended December 31
		2016 $ 61,891 (25,820) $ 36,071	2015 $ 76,072 9,015 $ 85,087

Refer to Table 7 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associates.

• 34 -

The Corporation is able to exercise significant influence over Adlink Technology Inc. even if it holds less than 20% of their voting right, therefore, the Corporation recognizes the gain and loss under the equity method.

Fair values (Level 1) of investments in associates which were measured at closing prices at balance sheet date were as follows:

Name of Associates Adlink Technology Inc.		December 31	December 31
		2016 $ 1,497,088	2015 $ 1,763,821

The investments in associates accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2016 and 2015 were based on the associates’ financial statements audited by auditors for the same years.

c. Investment in joint venture

Joint ventures that are not individually material Chih Ho Shun Development Co., Ltd.		**December **	**31 **
		2016 $ 17,593	2015 $ 17,505

Aggregate information of joint ventures that are not individually material:

The Corporation’s share of: Income from continuing operations Other comprehensive income Total comprehensive income for the year		Years Ended December 31	Years Ended December 31
		2016 $ 88 - $ 88	2015 $ 94 - $ 94

Refer to Table 7 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the joint venture.

For the investment and development plan, “The Action Plan for Developing Land Surrounding the MRT Airport Station to Improve Civilians’ Life,” the board of directors decided to invest jointly with Dynapack International Corporation and Heran Tech. Co., Ltd. to set up Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”). The Corporation invested $17,500 thousand for a 35% entity interest in Chih Ho Shun but did not have control over this investee.

The investments in joint ventures accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2016 and 2015 was based on the joint ventures’ financial statements audited by auditors for the same years.

• 35 -

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2015 Additions Disposals Intercompany transfer Reclassification Balance, December 31, 2015 Accumulated depreciation and impairment Balance, January 1, 2015 Disposals Depreciation Reclassification Balance, December 31, 2015 Carrying value December 31, 2015 Cost Balance, January 1, 2016 Additions Disposals Intercompany transfer Reclassification Balance, December 31, 2016 Accumulated depreciation and impairment Balance, January 1, 2016 Disposals Depreciation Reclassification Balance, December 31, 2016 Carrying value December 31, 2016	Land $ 450,575 - - - - $ 450,575 $ - - - - $ - $ 450,575 $ 450,575 - - - - $ 450,575 $ - - - - $ - $ 450,575	Buildings $ 1,992,239 8,301 - - - $ 2,000,540 $ (742,101) - (84,354) - $ (826,455) $ 1,174,085 $ 2,000,540 8,978 (5,081) - - $ 2,004,437 $ (826,455) 2,149 (81,953) - $ (906,259) $ 1,098,178	Machinery Miscellaneous Equipment $ 96,538 $ 819,135 7,152 46,564 (332) (16,330) 2,294 33,797 (2,804) 2,804 $ 102,848 $ 885,970 $ (78,426) $ (630,531) 332 13,272 (10,792) (63,118) 594 (594) $ (88,292) $ (680,971) $ 14,556 $ 204,999 $ 102,848 $ 885,970 7,810 49,241 (623) (28,740) 4,556 57,823 (4,321) 4,321 $ 110,270 $ 968,615 $ (88,292) $ (680,971) 623 21,239 (8,718) (66,488) 4,499 (4,499) $ (91,888) $ (730,719) $ 18,382 $ 237,896	Total $ 3,358,487 62,017 (16,662) 36,091 - $ 3,439,933 $ (1,451,058) 13,604 (158,264) - $ (1,595,718) $ 1,844,215 $ 3,439,933 66,029 (34,444) 62,379 - $ 3,533,897 $ (1,595,718) 24,011 (157,159) - $ (1,728,866) $ 1,805,031

The following useful lives are used in the calculation of depreciation:

Building Primary buildings 55 years Mechanical and electrical equipment 10 years Duty-free rooms equipment 10 years Others 6-50 years Machinery 2-12 years Miscellaneous equipment 3-15 years

Refer to Note 27 for property, plant and equipment pledged to secure borrowings of the Corporation.

• 36 -

14. GOODWILL

Cost		Years Ended December 31	Years Ended December 31
		2016 $ 94,424	2015 $ 94,424

For assessing goodwill for impairment, the Corporation took value in use as basis for calculating the recoverable amount of goodwill. The Corporation used the cash flows of a five-year financial forecast as the basis for calculating value in use to reflect the specific risk of cash-generating units. After these calculations, the Corporation did not recognize any impairment loss on goodwill for the years ended December 31, 2016 and 2015.

15. BORROWINGS

Short-term Borrowings

Unsecured borrowings Bank loans Interest rate (%)		December 31	December 31
		2016 $ - -	2015 $ 100,000 1.01%

Long-term Borrowings

Unsecured loans Syndicated bank loans Less: Loans due in one year		**December 31 **	**December 31 **
		2016 $ 2,000,000 800,000 $ 1,200,000	2015 $ 1,230,000 - $ 1,230,000

On August 30, 2012, the Corporation applied to E.SUN and other banks for syndicated bank loans with $2,000,000 thousand credit line to pay each installment of “The Action Plan for Developing Land surrounding the MRT Airport Station to Improve Civilians Life” (refer to Note 28). The Corporation borrowed $700,000 in September 2013 to pay the second installment and $530,000 in November 2015 to pay the first part of the third installment and $770,000 thousand in July 2016 to pay the remaining part of the third installment. The syndicated bank loan is due on September 3, 2018 and repayable from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per one installment), the remaining $800,000 thousand will be paid on September 3, 2018 (which is the due date), and the interest is payable monthly. As of December 31, 2016 and 2015, the interest rate per annum was 1.58% and 1.60% (floating interest rate), respectively.

• 37 -

16. BONDS PAYABLE

Unsecured domestic convertible bonds Less: Discounts on bonds payable		December 31	December 31
		2016 $ 1,450,500 53,360 $ 1,397,140	2015 $ 1,854,100 96,007 $ 1,758,093

On May 23, 2014, the Corporation issued its second domestic unsecured 0% convertible bonds with aggregate par value of $2,000,000 thousand and face value of $100 thousand. These bonds were listed on the GreTai Securities Market at the same date. Except for the book closure period, bondholders are entitled to convert bonds into the Chroma Ate Inc.’s common stock at $74.2 (conversion price) per share since June 24, 2014 to May 13, 2019. Due to the appropriation of 2015 and 2014 earnings approved at the annual shareholders’ meetings in 2016 and 2015, the shareholders approved to distribute dividend of NT$2.4 and NT$2.6 per share, respectively; thus, the conversion price was adjusted to NT$67.2 and NT$69.3 per share, respectively.

If the closing price of the Corporation’s common share exceeds 30% of the conversion price of the bonds payable for 30 consecutive days or the aggregate outstanding amounts of bonds payable is less than 10% of the amounts of original issuance, the Corporation has the right to redeem all of the outstanding bonds payable at face value during the period beginning one month after the issuance date (June 24, 2014) to 40 days before the maturity date (April 13, 2019).

At end of the third year from the bond issuance date, bondholders have the right to request the Corporation to redeem the convertible bonds at face value.

The convertible bonds contain both liability and equity components. The equity component presented in equity under the heading of “capital surplus - option” was $141,487 thousand. The liability components were recognized into embedded derivative and non-derivative liability of $4,989 thousand and $1,849,108 thousand, separately. The estimation of fair value of derivative instruments as of December 31, 2016 resulted in loss of $2,884 thousand.

Proceeds of the issue (less transaction costs $5,320 thousand) Equity component Deferred tax assets Derivative financial liability component Liability component at the date of issue Interest charged at an effective interest rate of 1.57% Current portion of long-term borrowings and bonds payable Liability component as of December 31, 2016	$ 1,994,680 (141,487) 904 (4,989) 1,849,108 70,393 (522,361) $ 1,397,140

17. OTHER PAYABLE

Salaries payable and bonus payable Other payable		December 31	December 31
		2016 $ 583,387 74,733 $ 658,120	2015 $ 393,474 65,699 $ 459,173

• 38 -

18. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

The Corporation adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The Corporation recognized pension costs of $46,629 thousand and $43,336 thousand for the years ended December 31, 2016 and 2015, respectively.

Defined Benefit Plans

The defined benefit plan adopted by the Corporation in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of length of service and average monthly salaries of the six month before retirement. The Corporation contribute amount equal to 4% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of year, the Corporation assesses the balances in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Corporation has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Corporation’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Deficit (surplus) Asset ceiling Net defined benefit liability		December 31	December 31
		2016 $ 431,536 (273,776) 157,760 - $ 157,760	2015 $ 399,442 (259,161) 140,281 - $ 140,281

Movements in net defined benefit liability were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of	Benefit
	Obligation	the Plan Assets	Liability
Balance at January 1, 2015	$ 362,979	$ (244,109)	$ 118,870
Service cost
Current service cost	4,185	-	4,185
Net interest expense (income)	6,736	(4,686)	2,050
Recognized in profit or loss	10,921	(4,686)	6,235
			(Continued)

• 39 -

	Present Value	Present Value
	of the Defined				Net Defined
		Benefit	Fair Value of			Benefit
	Obligation		the	Plan Assets	Liability
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	$	-	$	(1,876)	$	(1,876)
Actuarial loss - changes in demographic
assumptions		9,710		-		9,710
Actuarial loss - changes in financial
assumptions		12,751		-		12,751
Actuarial loss - experience adjustments		6,264		-		6,264
Recognized in other comprehensive income		28,725		(1,876)		26,849
Contributions from the employer		-		(11,673)		(11,673)
Benefits paid		(3,183)		3,183		-
Balance at December 31, 2015		399,442		(259,161)		140,281
Service cost
Current service cost		4,325		-		4,325
Net interest expense (income)		6,491		(4,306)		2,185
Recognized in profit or loss		10,816		(4,306)		6,510
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-		2,428		2,428
Actuarial loss - changes in demographic
assumptions		1,479		-		1,479
Actuarial loss - changes in financial
assumptions		13,693		-		13,693
Actuarial loss - experience adjustments		7,336		-		7,336
Recognized in other comprehensive income		22,508		2,428		24,936
Contributions from the employer		-		(13,967)		(13,967)
Benefits paid		(1,230)		1,230		-
Balance at December 31, 2016	$	431,536	$	(273,776)	$	157,760
						(Concluded)

Through the defined benefit plans under the Labor Standards Law, the Corporation is exposed to the following risks:

• a. Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

• 40 -

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 0.88%-1.38% 1.00%-1.63% 1.50%-2.50% 1.50%-2.50%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		**December 31 **	**December 31 **
		2016 $ (13,805) $ 14,449 $ 14,052 $ (13,499)	2015 $ (13,114) $ 13,743 $ 13,397 $ (12,852)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		**December **	**31 **
		2016 $ 15,070 14 years	2015 $ 11,564 14 years

19. EQUITY

Capital Stock

a. Common stock

Authorized shares (shares in thousands) Authorized capital stock Shares issued and fully received (in thousands) Issued capital		December 31	December 31
		2016 450,000 $ 4,500,000 389,887 $ 3,898,872	2015 450,000 $ 4,500,000 379,170 $ 3,791,699

A total of 30,000 thousand shares of the Corporation’s authorized shares were reserved for the employee share options.

• 41 -

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends or transferred to share capital (Note) Additional paid-in capital Treasury stock From merger Used to offset a deficit Employee stock options expired Share of changes of subsidiaries, associates or joint ventures’ capital surplus May not be used for any purpose Convertible bonds payable options Employee stock options Employee restricted shares		December 31	December 31
		2016 $ 1,209,905 165,059 146,976 5,239 52,703 102,614 90,459 187,204 $ 1,960,159	2015 $ 769,143 160,514 146,976 1,640 24,725 131,166 68,105 - $ 1,302,269

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

c. Appropriation of earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on June 7, 2016 and, in that meeting, had resolved amendments to the Corporation’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration to directors and supervisors before and after amendment, please refer to Note 20 employee benefits expense.

Taking into account future capital expenditure requirements and its cash position, the total of cash dividends paid in any given year may not be less than 20% of total dividends distributed in that year. The final amount, type and percentage of the cash dividends and stock dividends are subject to actual earnings and capital requirements of the Corporation in a particular year.

• 42 -

Legal reserve should be appropriated until the reserve equals the Corporation’s paid-in capital. The reserve may be used to offset deficit. If the Corporation has no deficit and the legal reserve has exceeded 25% of the Corporation’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Corporation should appropriate or reverse to a special reserve. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and thereafter distributed.

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

The appropriations of earnings for 2015 and 2014 have been approved in the annual shareholders’ meeting on June 7, 2016 and June 10, 2015, respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2015 For Fiscal Year 2014 $ 123,656 $ 131,644 910,200 987,433	Dividends Per Share (NT$)
		For Fiscal Year 2015 For Fiscal Year 2014 $2.4 $2.6

The appropriations of earnings for 2016 had been proposed by the Corporation’s board of directors on February 21, 2017. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per
	of	Earnings	Share (NT$)
Legal reserve	$	171,994
Cash dividends		1,314,425	$3.3

The appropriations of earnings for 2016 are subject to the resolution in the shareholders’ meeting to be held on June 8, 2017.

• d. Other equity

• 1) Exchange differences on translating foreign operations

Balance, beginning of the year Exchange differences on translation of foreign financial statements Share of exchange differences on translation of associates and joint ventures accounted for using the equity method Balance, end of the year		**Years Ended December 31 **	**Years Ended December 31 **
		2016 $ 127,968 (127,798) (25,084) $ (24,914)	2015 $ 136,756 (17,071) 8,283 $ 127,968

• 43 -

• 2) Unrealized gain/loss on available-for-sale financial assets

Balance, beginning of the year Unrealized loss on available-for-sale financial assets Share of unrealized gain on revaluation of available-for-sale financial assets of associates and joint ventures accounted for by the equity method Balance, end of the year		Years Ended December 31	Years Ended December 31
		2016 $ 271,697 (39,469) 673 $ 232,901	2015 $ 370,348 (99,791) 1,140 $ 271,697

• 3) Unearned employee benefit

In the shareholders meeting on June 7, 2016, the shareholders approved a Restricted Share Unit Plan (“RSU” Plan). Please refer to Note 23.

				Year Ended	Year Ended
				December 31,
					2016
Balance, beginning of the year				$	-
Shares granted					(188,311)
Share-based payment expenses recognized					38,359
Balance, end of the year				$	(149,952)
Treasury stock
				Corporation’s
				Shares Held by
				Its Subsidiaries
				(In	Thousand
					Shares)
Balance, January 1, 2015					1,916
Decrease during the year					-
Balance, December 31, 2015					1,916
Balance, January 1, 2016					1,916
Decrease during the year					-
Balance, December 31, 2016					1,916
	Shares Held
	(In Thousand
Subsidiaries	Shares)	Carrying Value		Market Price
December 31, 2016
Chroma Investment Co., Ltd.	1,916	$	35,714	$	144,435
December 31, 2015
Chroma Investment Co., Ltd.	1,916	$	35,714	$	122,405

• e. Treasury stock

• 44 -

For the years ended December 31, 2016 and 2015, there were no changes in the shares held by the subsidiary.

Under the Securities and Exchange Act, the Corporation shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote. The subsidiaries holding treasury shares, however, retain shareholders’ rights, except the rights to participate in any share issuance for cash and to vote.

20. ADDITIONAL INFORMATION ON EXPENSES

The following items were included in net income for the years ended December 31, 2016 and 2015:

Finance cost Interest on bank loans Interest on convertible bonds Less: Amount included in the cost of qualifying assets Information about capitalized interest were as follows: Capitalized interest Capitalization rate Depreciation expense Depreciation of property, plant and equipment An analysis of depreciation by function Operating cost Operating expense Employee benefits expense Short-term benefits Share-based payments Equity-settled share-based payments Post-employment benefits (see Note 18) Defined contribution plans Defined benefit plans Other employee benefits An analysis of employee benefits expense by function Operating cost Operating expense		Years Ended December 31	Years Ended December 31
		2016 $ 26,144 25,751 (24,755) $ 27,140 $ 24,755 1.58%-1.60% $ 157,159 $ 27,046 130,113 $ 157,159 $ 1,496,160 86,618 46,629 6,510 33,326 $ 1,669,243 $ 277,005 1,392,238 $ 1,669,243	2015 $ 14,119 27,368 (12,653) $ 28,834 $ 12,653 1.60%-1.69% $ 158,264 $ 30,724 127,540 $ 158,264 $ 1,211,338 25,077 43,336 6,235 27,893 $ 1,313,879 $ 238,325 1,075,554 $ 1,313,879

• 45 -

In compliance with the Company Act as amended in May 2015 and the amended Articles as resolved in the shareholders’ meeting held on June 7, 2016, the Corporation distributed employees’ compensation and remuneration to directors and supervisors at the rates of 5%-20% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors and supervisors. The bonus to employees and remuneration to directors and supervisors for the years ended December 31, 2016 and 2015 have been proposed by the Corporation’s board of directors on February 21, 2017 and February 23, 2016. The accrual rates and accrued amounts were as follows:

Employee’s compensation Remuneration of directors and supervisors	**Years Ended **	**December 31 **
	2016 Amount Estimated Rate (%) $ 300,000 12.96 8,000 0.35	2015
		Amount Estimated Rate (%) $ 135,000 8.90 8,000 0.53

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

The appropriations for employee’s compensation and remuneration to directors and supervisors for 2015 have been resolved by the Corporation’s board of directors on February 23, 2016, and the appropriations for bonuses to employees and remuneration to directors and supervisors for 2014 have been approved in the shareholders’ meeting on June 10, 2015. The amounts of the employee’s compensation/bonus and remuneration to directors and supervisors are disclosed on the table below. After the amendments to the Articles had been resolved in the shareholders’ meeting held on June 7, 2016, the appropriations of the employees’ compensation and remuneration to directors and supervisors for 2015 were reported in the shareholders’ meeting.

Employee’s compensation/bonus to employees Remuneration of directors and supervisors	Years Ended	December 31
	2015 Cash Share $ 135,000 $ - 8,000 -	2014
		Cash Share $ 195,000 $ - 8,000 -

The amounts of the employee’s compensation and the remuneration to directors and supervisors resolved by the board of directors on February 23, 2016 and the amounts of the bonus to employees and the remuneration to directors and supervisors approved in the shareholders’ meeting on June 10, 2015 did not have difference compared to the respective amounts recognized in the financial statements for the years ended December 31, 2015 and 2014.

Information on the employee’s compensation and remuneration to directors and supervisors for 2016 and 2015 resolved by the board of directors in 2017 and 2016, and the bonuses to employees, directors and supervisors for 2014 resolved by the shareholders’ meeting in 2015 are available at the Market Observation Post System website of the Taiwan Stock Exchange.

• 46 -

21. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

Current tax In respect of the current period In respect of unappropriated earnings (10%) In respect of prior year’s adjustment Deferred tax In respect of the current period Total income tax expense recognized in profit or loss		**Years Ended December 31 **	**Years Ended December 31 **
		2016 $ 280,109 17,620 (28,753) 268,976 18,610 $ 287,586	2015 $ 144,443 17,067 (27,789) 133,721 3,907 $ 137,628

Reconciliation of accounting profit and income tax expenses the applicable tax rate is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Adjustment Adjustment items in determining taxable income Tax-exempt income Temporary difference Income tax on unappropriated earnings Investment tax credits Prior year’s adjustments Income tax expense recognized in profit or loss		Years Ended December 31	Years Ended December 31
		2016 $ 2,007,521 $ 341,279 (28,841) - 18,610 17,620 (32,329) (28,753) $ 287,586	2015 $ 1,374,185 $ 233,612 (53,969) (12,018) 3,907 17,067 (23,182) (27,789) $ 137,628

The applicable tax rate used above is the corporate tax rate of 17% payable by the Corporation.

As the status of 2017 appropriations of earnings is uncertain, the potential income tax consequences of 2016 unappropriated earnings are not reliably determinable.

• 47 -

b. Deferred tax assets and liabilities

The movement of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

For the year ended December 31, 2016
	Balance,
	Beginning of		Recognized in		Balance, End of
	the Year		Profit or Loss		the Year
Deferred tax assets
Temporary difference
Unrealized intercompany gain	$	42,287	$	28,133	$	70,420
Net defined benefit liability		6,640		1,611		8,251
Allowance for loss on decline in inventory
market price		21,104		9,632		30,736
Impairment loss		14,158		1,872		16,030
Unrealized foreign exchange		-		3,336		3,336
Others		4,240		(1,207)		3,033
	$	88,429	$	43,377	$	131,806
Deferred tax liabilities
Temporary difference
Investment income on foreign investments
accounted for by the equity method	$	101,879	$	59,315	$	161,194
Unrealized foreign exchange gain		3,191		(3,191)		-
Goodwill		10,096		5,863		15,959
	$	115,166	$	61,987	$	177,153
For the year ended December 31, 2015
	Balance,
	Beginning of		Recognized in		Balance, End of
	the Year		Profit or Loss		the Year
Deferred tax assets
Temporary difference
Unrealized intercompany gain	$	38,112	$	4,175	$	42,287
Net defined benefit liability		9,157		(2,517)		6,640
Allowance for loss on decline in inventory
market price		17,859		3,245		21,104
Impairment loss		12,691		1,467		14,158
Others		2,338		1,902		4,240
	$	80,157	$	8,272	$	88,429
Deferred tax liabilities
Temporary difference
Investment income on foreign investments
accounted for by the equity method	$	89,044	$	12,835	$	101,879
Unrealized foreign exchange gain		5,149		(1,958)		3,191
Goodwill		8,794		1,302		10,096
	$	102,987	$	12,179	$	115,166

• 48 -

c. Information about tax-exemption

Expansion of Construction Project Profits on expansion and construction projects for year 2010	Tax-exemption Period
	2013.1.1-2017.12.31

• d. Integrated income tax information is as follows:

Balance of imputation credit account (ICA)		December 31	December 31
		2016 $ 302,877	2015 $ 250,190

The expected and actual creditable ratios for the appropriation of the Corporation’s earnings of 2016 and 2015, respectively, were 17.67% (expect) and 17.10%, respectively.

• e. Assessment of income tax returns

As of December 31, 2016, the Corporation’s tax returns through 2014 had been examined and cleared by the tax authorities.

22. EARNINGS PER SHARE

Earnings and weighted average shares used to calculate earnings per share were as follows:

Net Income

Profit for the period attributable to owners of the Corporation Dilutive effect of potential common shares: Interest on unsecured convertible bonds and valuation gain on conversion option Income used to calculate dilutive earnings per share Shares		Years Ended December 31	Years Ended December 31
		2016 $ 1,719,935 23,543 $ 1,743,478	2015 $ 1,236,557 27,924 $ 1,264,481

Weighted average shares used to calculate basic earnings per share Dilutive effect of potential common shares: Convertible bonds Compensation or bonus to employees Employee stock options Weighted average shares used to calculate dilutive earnings per share		(In Thousands of Shares) Years Ended December 31	(In Thousands of Shares) Years Ended December 31
		2016 379,930 26,336 4,272 1,788 412,326	2015 376,984 26,755 2,974 1,292 408,005

• 49 -

Since the Corporation was able to settle compensation paid to employees by cash or shares, the Corporation presumed that the entire amount of the employee compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

23. SHARE-BASED PAYMENT ARRANGEMENTS

a. Share option plan

The Corporation granted specific employee share options 7,900 thousand units in March 2016 and 6,000 thousand units in July 2013, respectively, with each option eligible to subscribe for one common share of the Corporation when exercised. The options are valid for six years and exercisable at certain percentages subsequent to the second year of the grant date. The related information for the units granted and exercise price were as follows:

Number of options (in thousands of shares) Exercise prices per share on grant date (market value on grant date) Exercise prices per share (adjusted based on the Corporation’s employee share option plan)	Grant Date
	March 25, 2016 July 8, 2013 7,900 6,000 $67.8 $53.5 $65.7 $48.4

• 1) Information on granted employee share options was as follows:

Balance at January 1 Options granted Options exercised Options forfeited Balance at December 31 Options exercisable, end of the year Weighted-average fair value of options granted (NT $)	Years Ended	December 31
	2016 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 5,292 $ 49.9 7,900 65.7 (1,635) 49.0 (19) - 11,538 60.2 1,941 $ 18.7	2015
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 5,794 $ 49.9 - - (384) 49.9 (118) - 5,292 49.9 1,887 $ -

• 50 -

• 2) Information about outstanding options as of December 31, 2016 and 2015 is as follows:

Years Ended December 31

2016 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $48.4 2.52 65.7 5.24	2015
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $49.9 3.52 - -

• 3) The Corporation used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

Vested Period Expected volatility Risk-free interest rate Expected dividend rate Expected life	Grant Date	Grant Date
	March 25, 2016 2 Years 3 Years 4 Years 31.64% 32.62% 33.08% 0.52% 0.55% 0.61% - - - 4 years 4.5 years 5 years	July 8, 2013
		2 Years 3 Years 4 Years 36.43% 38.36% 41.74% 1.12% 1.18% 1.23% - - - 4 years 4.5 years 5 years

• 4) The Corporation used the fair value of share option to calculate the compensation cost for employee share options granted on March 25, 2016 and July 8, 2013, respectively.

Vested Period Fair value of options (NT$per share)	Grant Date	Grant Date
	March 25, 2016 2 Years 3 Years 4 Years $17.37 $18.97 $20.30	July 8, 2013
		2 Years 3 Years 4 Years $16.08 $17.88 $20.28

The Corporation recognized compensation cost of $48,259 thousand and $25,077 thousand for the years ended December 31, 2016 and 2015, respectively.

• b. Restricted shares for employees

In the shareholders’ meeting on June 7, 2016, the shareholders approved a Restricted Share Unit Plan (“RSU” Plan) for employees with a total amount of $36,000 thousand, consisting of 3,600 thousand shares with issuance price of $10 dollars per share. It can be issued at one time or several times depending on the circumstance. The RSU Plan is approved under Rule No. 1050024381 issued by the FSC on June 27, 2016. The Corporation issued 3,100 thousand shares on July 8, 2016, the subscription date. The details of RSU Plan are as follows:

• 1) Employees who are granted RSUs, upon meeting the Corporation’s financial performance and personal performance indicators, are eligible to be vested 10, 20, 30 and 40 percent of the RSUs granted after 1, 2, 3 and 4 years of tenure after the subscription date, respectively.

• 51 -

• 2) The restrictions on the rights of the employees who are granted RSUs but have not met the vesting conditions are as follows:

• a) The employees are not eligible to sell, pledge, transfer, donate or to dispose any RSUs in any form.

• b) The employees holding RSUs are entitled to receive dividends and similar purchasing rights to ordinary shares during capital increase. Cash dividends from RSUs are not restricted during the vesting period. Cash dividends are appropriated to the employees’ personal account from trust account after the dividend distribution date.

• c) Before the restricted shares are vested to the employees, the right of attendance, proposal, speech, voting and other rights of shareholders are acted by the custodian.

• d) The RSUs should be delivered to trust custodians upon grant date. The employees cannot request for return in any manner before vesting conditions are met.

• 3) If an employee fails to meet the vesting conditions, the Corporation will recall or buy back and cancel the restricted shares at issued price. If an employee voluntarily resigns, retires, disabled or decease due to occupational hazards, dismissed, be transferred to another post, violates labor contracts or working protocols substantially or abandons restricted shares, related guidelines of RSU Plan will be followed accordingly.

Information relating to outstanding employee restricted shares as of December 31, 2016 was as follows:

	Year Ended
	December 31,
	2016
Outstanding shares at the beginning of the year	-
Shares granted	3,100
Shares canceled	-
Outstanding shares at the end of the year	3,100

Compensation cost of share-based payment arising from the RSU Plan was $38,359 thousand was recognized for the year ended December 31, 2016. As of December 31, 2016, unearned compensation cost arising from issuance of restricted shares was $149,952 thousand and was recorded as a deduction to other equity.

24. CAPITAL MANAGEMENT

The Corporation manages its capital to ensure that entities in the Corporation will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance. The Corporation’s capital management is aims to maintain the sufficiency of financial resources and the soundness of operating strategies to meet the needs for operating capital, capital expenditure, R&D expenses, debt handling, dividend disbursement, etc.

• 52 -

25. FINANCIAL INSTRUMENTS

Information for Fair Value

• a. Fair value of financial statement that are not measured at fair value

The fair values of some financial assets and liabilities were not presented because they have no quoted prices in active market or their cost is close to fair value; thus, their fair values are not disclosed.

• b. Fair value of financial instrument that are measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2016 Available-for-sale financial assets Domestic listed market securities Equity securities Open-end beneficial certificate Financial assets at value through profit or loss December 31, 2015 Available-for-sale financial assets Domestic listed market securities Equity securities Open-end beneficial certificate Financial liabilities at value through profit or loss	Level 1 $ 314,233 2,030,362 $ 2,344,595 $ - $ 359,543 1,824,521 $ 2,184,064 $ -	Level 2 $ - - $ - $ 725 $ - - $ - $ 1,483	Level 3 $ - - $ - $ - $ - - $ - $ -	Total $ 314,233 2,030,362 $ 2,344,595 $ 725 $ 359,543 1,824,521 $ 2,184,064 $ 1,483

There were no transfers between Levels 1 and 2 for the years ended December 31, 2016 and 2015.

• 2) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

Financial Instruments Valuation Techniques and Inputs

Derivative - convertible Binomial tree valuation model of convertible bonds: The fair value bonds of the derivative financial assets embedded in convertible bonds were determined based on the observable closing price of the stocks at balance sheet date and risk-free interest rate with risk premium.

• 53 -

Categories of Financial Instruments

Financial assets Financial assets at fair value through profit or loss Loan and receivable (a) Available-for-sale financial assets (b) Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities at amortized cost (c)	December 31
	2016 2015 $ 725 $ - 4,185,570 2,819,015 2,516,768 2,365,824 - 1,483 5,208,564 4,116,916

• a. The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, other receivables and refundable deposits.

• b. The balances included the carrying amount of available-for-sale financial assets measured at cost.

• c. The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, short-term bills payable, notes payable, accounts payable, other payables, bonds payable and guarantee deposits received.

Since there is a wide range of estimated fair value of the Corporation’s investments in non-publicly traded-stocks, the Corporation concludes that fair value cannot be reliably measured and therefore should be measured at the cost less any impairment.

Financial Risk Management Objectives and Strategies

The Corporation’s major financial instruments consist of equity investment, cash and cash equivalents, accounts receivable, long-term and short-term borrowings, account payable and bonds payable. The Corporation’s financial risk management pertains to financial risks relating to the operations of the Corporation, including currency risk, interest rate risk, credit risk and liquidity risk. The Corporation seeks to identify, evaluate and hedge against market uncertainties to lower the effect of market changes on the Corporation’s financial performance.

The Corporation manages foreign exchange risk through setting up of foreign currency deposit bank accounts and through the use of foreign currency directly received from sale to pay for purchases in foreign currency to reduce the impact of foreign exchange fluctuation and to achieve a natural hedge effect. The Corporation actively observes the exchange rate information to fully control the foreign currency hedge.

a. Market risk

The Corporation’s activities expose it primarily to the financial risks of changes in exchange rates (see Item (1) below), interest rates (see Item (2) below) and price (see Item (3) below).

There has been no change to the Corporation’s exposure to market risks or the manner in which these risks are managed and measured.

• 54 -

The sensitivity analysis of exchange rates and interest rates is as follows:

1) Exchange rate sensitivity analysis

The Corporation is exposed to foreign currencies arising from engagement in foreign-currency sales and purchases. To avoid the decrease in foreign-currency assets and adverse fluctuations in future cash flow resulting from exchange rate changes, the Corporation used derivative financial instruments (forward exchange contracts) to hedge against adverse risks pertaining to exchange rates. The forward exchange contracts which the Corporation used were less than six months so they were not subject to hedge accounting.

Refer to Note 29 for information of the carrying value of the Corporation’s monetary assets and liabilities denominated in nonfunctional currency and of the derivatives exposing to foreign currency risk at the end of the reporting period.

Foreign currency sensitivity analysis

The Corporation was mainly exposed to USD, EUR, HKD, JPY and RMB.

Had the NTD strengthened/weakened by 5% against the relevant currency, the income before tax would have decreased/increased by $113,493 thousand and $65,104 thousand for the years ended December 31, 2016 and 2015, respectively. The 5% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency-denominated monetary items and their translation at period-end is adjusted for a 5% change in foreign-currency rates.

2) Interest rate risk

The Corporation is exposed to interest rate risk because entities in the Corporation borrow funds both at fixed and floated interest rates. The Corporation evaluates hedging activities regularly to align with interest rate views and defined risk appetite and ensures the most cost-effective hedging strategies are applied.

The carrying amounts of the financial assets and liabilities exposed to interest rates were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2016 2015 $ 210,074 $ - 1,397,140 1,758,093 1,412,419 876,077 2,000,000 1,330,000

Interest rate sensitivity analysis

The sensitivity analyses below have been determined on the basis of the exposure to interest rates for both derivative and nonderivative instruments at balance sheet dates. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the balance sheet dates outstanding for the entire period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

• 55 -

Had interest rates been 50 basis points higher/lower and all other variables been held constant, the income before tax would have decreased/increased by $2,938 thousand and $2,270 thousand for the years ended December 31, 2016 and 2015, respectively. These pretax income changes would be mainly due to the Corporation’s exposure to interest rates on its variable rate deposits and bank loans.

3) Price risk

The Corporation is exposed to equity price risks arising from investment in available-for-sale financial assets (mainly investment in open-end beneficial certificates and listed stocks in Taiwan), which are held for strategic rather than trading purposes. The Corporation does not actively trade these investments.

The Corporation manages the risk through holding various portfolios of investments and having every equity investment get prior approval from the Corporation’s management.

Price sensitivity analysis

Had equity prices been 5% higher/lower, the other comprehensive income would have increased/decreased by $117,230 thousand and $109,203 thousand because of changes in fair values of available-for-sale financial assets held by the Corporation for the years ended December 31, 2016 and 2015, respectively.

b. Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Corporation. As at the end of the reporting period, the Corporation’s maximum exposure to credit risk which will cause a financial loss to the Corporation due to failure of counterparties to discharge an obligation and financial guarantees provided by the Corporation could arise from:

• 1) The carrying amount of accounts receivables from operating activities; and

• 2) The amount of bank deposits, fixed-income and other financial instruments from investing activities.

The Corporation adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.

Accounts receivables involve a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable, including the evaluation of internal credits, historical transaction records, present economic circumstances, etc. which affect the customers’ payment ability.

The credit risk of bank deposits, fixed-income financial instruments and other financial instruments are evaluated, managed and controlled by the Corporation’s financial department. The Corporation’s exposure to credit risk was limited because the Corporation adopted a policy of only dealing with creditworthy counterparties.

• c. Liquidity risk

The Corporation manages liquidity risk by managing and maintaining sufficient cash and cash equivalents to supply the Corporation’s demand and lighten the effects of cash flow fluctuations. The Corporation continuously monitors the use of credit lines and conformity to loan terms.

• 56 -

Bank loans are a significant source of the Corporation’s liquidity risk. As of December 31, 2016 and 2015, the Corporation’s unused bank credit lines in bank were $2,540,250 thousand and $2,540,000 thousand, respectively.

Liquidity and interest risk tables

The following tables detail the Corporation’s remaining contractual maturity for its nonderivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Corporation can be required to pay.

The bank loans are listed on the earliest date on which the Corporation may be required to pay without considering the probability of the lending bank’s executing its rights; other nonderivative financial liabilities are listed at their contract repayment dates.

Nonderivative financial liabilities Notes payable (including related parties) Accounts payable (including related parties) Other payable Unsecured convertible bonds Floating interest rate instruments Nonderivative financial liabilities Notes payable (including related parties) Accounts payable (including related parties) Other payable Unsecured convertible bonds Floating interest rate instruments	December 31, 2016	December 31, 2016
	Within 1 Year Over 1 Year to 5 Years $ 510 $ - 1,152,225 - 658,120 - - 1,450,500 824,278 1,209,575 $ 2,635,133 $ 2,660,075 December 31, 2015		More Than 5 Years $ - - - - - $ -
	Within 1 Year $ 35 569,049 459,173 - 120,358 $ 1,148,615	Over 1 Year to 5 Years $ - - - 1,854,100 1,251,071 $ 3,105,171	More Than 5 Years $ - - - - - $ -

After considering the financial position of the Corporation, management does not think the banks will execute their rights of requiring the Corporation to repay the bank loans. In addition, management believes the operating funds of the Corporation and subsidiaries are sufficient to meet cash flow demand; thus, liquidity risk is not considered significant.

The Corporation’s operating funds are sufficient to meet the cash flow demand; the Corporation does not make use of its overdraft limit.

• 57 -

26. RELATED-PARTY TRANSACTIONS

The related parties and relationships with the Corporation were as follows:

Related Party Relationship with the Corporation Chroma Ate Inc. (“Chroma USA”) Subsidiary Neworld Electronics Ltd. (“Neworld Electronics”) Subsidiary Chroma Ate Europe B.V. (“Chroma Europe”) Subsidiary CHI Incorporation Ltd. (“CHI”) Subsidiary Chroma Investment Co., Ltd. (“Chroma Investment”) Subsidiary Chen Hwa Technology Inc. (“Chen Hwa”) Subsidiary Sensational Holding Ltd. (“Sensational”) Subsidiary Chroma New Material Corp. (“Chroma New Material”) Subsidiary Chroma Japan Corp. (“Chroma Japan”) Subsidiary Chroma System Solutions Inc. (“CSS”) Subsidiary Quantel Private Ltd. (“Quantel”) Subsidiary (the Corporation acquired control over the subsidiary since April 1, 2016, refer to Note 12) San Eagle Development Corp. (“San Eagle”) Subsidiary Wei Kuang Automatic Equipment Co., Ltd. (“Wei Kuang Subsidiary Automatic”) Testar Electronic Corp. (“Testar Electronic”) Subsidiary Deep Red Holding Co., Ltd. (“Deep Red”) Subsidiary Adivic Technology Co. (“Adivic Tech.”) Subsidiary Sajet System Technology (Suzhou) Co., Ltd. (“Sajet Suzhou”) Subsidiary Wei Kuang Mech Eng Inc. (“Wei Kuang”) Subsidiary Advic Holding Corp. (“Advic Holding”) Subsidiary Chroma Electronics (Shenzhen) Co., Ltd. (“Chroma Shenzhen”) Subsidiary Chroma Electronics (Shanghai) Co., Ltd. (“Chroma Shanghai”) Subsidiary Chroma (Shanghai) Trading Co., Ltd. (“Chroma Shanghai Subsidiary Trading”) Chroma Ate (Suzhou) Ltd. (“Chroma Suzhou”) Subsidiary Mou Kuan Technologies (Nanjin) Co., Ltd. (“Mou Kuan Nanjin”) Subsidiary Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. (“Wei Subsidiary Kuang Nanjin”) Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. (“Wei Subsidiary Kuang Xiamen”) EVT Technology Co., Ltd. (“EVT”) Subsidiary (the Corporation acquired control over the subsidiary since June 1, 2015, refer to Note 12) Wei Da Electric Vehicle Co., Ltd. (“Wei Da Electric”) Subsidiary (EVT’s subsidiary) DynaScan Technology Corp. (“DynaScan”) Associate Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”) Joint venture Adlink Technology Inc. (“Adlink”) Associate Mon Kuan Technologies Co., Ltd. (“Mon Kuan Tec.”) Other related party

• 58 -

The related-party transactions were conducted under normal terms unless specified otherwise.

a. Sales

Related Party Categories Subsidiaries Associates		**Years Ended December 31 **	**Years Ended December 31 **
		2016 $ 4,379,764 13,130 $ 4,392,894	2015 $ 2,741,461 18,761 $ 2,760,222

To raise market share and expand its market in the America, Europe and Mainland China, the Corporation set up Chroma USA, Chroma Ate Europe B.V. and Neworld Electronics Ltd. The selling prices for Chroma USA, CSS, Chroma Europe, Neworld Electronics, Chroma Suzhou, and Chroma Shenzhen were determined after taking the selling and post-sale service expenses into consideration.

• b. Purchase

Related Party Categories Subsidiaries Associates Other related party		Years Ended December 31	Years Ended December 31
		2016 $ 362,846 17,582 18 $ 380,446	2015 $ 29,971 12,889 107 $ 42,967

• c. Notes receivable

Related Party Categories Subsidiaries		**December 31 **	**December 31 **
		2016 $ 354	2015 $ 3,920

• d. Accounts receivable (without loans to related parties)

Related Party Categories Subsidiaries Associates		**December 31 **	**December 31 **
		2016 $ 1,596,371 7,891 $ 1,604,262	2015 $ 1,051,854 11,649 $ 1,063,503

• e. Notes payable

Related Party Categories Other related parties		December 31	December 31
		2016 $ 90	2015 $ -

• 59 -

• f. Accounts payable (without borrowing to related parties)

Related Party Categories Subsidiaries Associates Loans to related parties Related Party Categories 1) Other receivable - financing provided Subsidiaries (Note) 2) Interest receivables Subsidiaries (Note) 3) Interest revenue Subsidiaries (Note)		December 31	December 31
		2016 2015 $ 73,114 $ 28,858 8,496 5,789 $ 81,610 $ 34,647 Years Ended December 31
		2016 $ 161,874 $ 675 $ 4,071	2015 $ 168,854 $ 373 $ 5,067

g. Loans to related parties

Note: Other information related to financing provided is shown in Table 1 (attached).

• h. Endorsement guarantees provided

Related Party Categories Subsidiaries (Note)		December 31	December 31
		2016 $ 143,180	2015 $ 164,580

Note: Other information related to endorsement guarantees provided is shown in Table 2 (attached).

• i. Others

• 1) Commission expense

Related Party Categories Subsidiaries		**Years Ended December 31 **	**Years Ended December 31 **
		2016 $ 46,616	2015 $ 31,878

Commission expense refers to the disbursements made for business introduction activities.

• 60 -

• 2) Rental income

Related Party Categories Subsidiaries Associates Other related parties		Years Ended December 31	Years Ended December 31
		2016 $ 15,117 1,260 - $ 16,377	2015 $ 15,026 1,260 218 $ 16,504

The Corporation leased out some floors of the buildings in Hwa-Ya Technical Park in Lin-Kou to the above related parties under operating lease contracts, and these leases were based on market prices. Rents were paid and collected monthly.

• 3) Management service income

Related Party Categories Subsidiaries		Years Ended December 31	Years Ended December 31
		2016 $ 6,600	2015 $ 6,650

Management service income was from the Corporation’s provision of administrative services.

• 4) Other income

Related Party Categories Subsidiaries		Years Ended December 31	Years Ended December 31
		2016 $ 14,495	2015 $ 14,701

Other income is the earnings on repairs and maintenance.

• 5) Other current assets - other receivable

Related Party Categories Subsidiaries Associates		December 31	December 31
		2016 $ 76,993 552 $ 77,545	2015 $ 93,039 136 $ 93,175

There were allowances for receivables on managerial services and building rentals.

• 6) Receipts in advance and other current liabilities

Related Party Categories Subsidiaries There were receipts in advance from selling.		December 31	December 31
		2016 $ 702	2015 $ 3,909

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• j. Compensation of key management personnel

Short-term employee benefits Post-employment benefits		Years Ended December 31	Years Ended December 31
		2016 $ 111,365 2,096 $ 113,461	2015 $ 61,687 2,022 $ 63,709

27. ASSETS PLEDGED

The assets pledged as collaterals for bank loans (unused) were as follows:

Property, plant and equipment, net		**December 31 **	**December 31 **
		2016 $ 715,395	2015 $ 723,040

28. SIGNIFICANT EVENTS

On January 17, 2012, the Corporation, Dynapack International Corporation and Heran Tech. Co., Ltd. won a bid for the ownership of land and the building and related facilities to be built on the land pertaining to “The Action Plan for Developing Land Surrounding the MRT Airport Station to Improve Civilians’ Life,” which had been reviewed and approved by the Ministry of the Interior (MOI).

The total bid price was $10,088,890 thousand, covering land with an area of 222,300 square meters. As a result of winning the above bid, the Corporation acquired 35%, or 77,805 square meters, of a certain piece of land for $3,531,112 thousand. On April 18, 2012, the Corporation signed the land purchase contract with the MOI; the payment schedule for this purchase is as follows:

• a. The first installment of the bid amount (10% of the total bid amount, or $353,111 thousand) should be paid within 10 days from the contract date. The Corporation paid the first installment using the bid deposit ($353,040 thousand) and by adding cash.

• b. To meet the schedule for zone expropriation, the Corporation should pay the second installment (30% of the total bid amount) within 10 days of receiving the payment notice from the MOI. The MOI will approve the Corporation’s land usage rights as the payment is made. On September 3, 2013, the Corporation has paid the second installment $1,059,333 thousand.

• c. To help the MOI provide the compensations for land expropriation and complete the demolition and relocation of structures on the land, the Corporation should pay the third installment (40% of the total bid amount) within 10 days of the payment notice from the MOI. The MOI will then check with the Corporation to see if the demolition and relocation are completed as the payment is made. In November 2015 and July 2016, the Corporation has paid the first part of the third installment $536,729 thousand and the remaining part of the third installment $875,716 thousand, respectively.

• d. The Corporation should accomplish the following things within four years from the time of obtaining the approval of the land usage rights:

• 1) Open up the main road system and build related public facilities.

• 2) Acquire the building license for 50% percent of all industrial land and register with the authorities to go into operation.

• 62 -

After completing the above requirements, the Corporation should apply to the MOI for the approval to acquire real property rights to the structures and facilities built. The Corporation should pay the fourth installment (20% of the total bid amount) within 10 days upon obtaining the approval and receipt of the payment notice from the MOI. The MOI will issue the transfer-certificate of property rights over the land.

The Corporation has agreed to comply with the MOI’s requirement for the MOI’s placing of caution on undeveloped land before ownership of real property is turned over to the Corporation. The MOI will cancel this caution once it determines that the Corporation has completed all the required land development, building and facility construction and land improvements.

29. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The monetary assets or liabilities denominated in foreign currencies have material effect on the Corporation and subsidiaries’ financial statements are as follows:

Financial assets Monetary items USD JPY EUR RMB HKD Non-monetary items Investments accounted for by the equity method USD HKD EUR JPY SGD Financial liabilities Monetary items USD	December 31, 2016
	Foreign Currencies (In Thousands) Exchange Rate Carrying Amount (In Thousands of Dollars) $ 51,400 32.250 $ 1,657,640 561,309 0.276 154,921 3,187 33.900 108,040 115,665 4.617 534,025 211 4.158 878 $ 2,455,504 35,362 32.250 $ 1,154,112 205,118 4.158 852,879 4,043 33.900 137,072 (103,228) 0.276 (28,491) 4,740 22.290 114,145 $ 2,229,717 5,756 32.250 $ 185,641

• 63 -

Financial assets Monetary items USD JPY EUR RMB HKD Non-monetary items Investments accounted for by the equity method USD HKD EUR JPY Financial liabilities Monetary items USD	December 31, 2015
	Foreign Currencies (In Thousands) Exchange Rate Carrying Amount (In Thousands of Dollars) $ 34,110 32.825 $ 1,119,645 560,341 0.273 153,127 1,461 35.880 52,436 28,037 4.995 140,052 169 4.235 715 $ 1,465,975 35,621 32.825 $ 1,137,655 191,695 4.235 811,830 3,799 35.880 136,318 (59,061) 0.273 (16,124) $ 2,069,679 4,988 32.825 $ 163,735

For the years ended December 31, 2016 and 2015, (including realized and unrealized) net foreign exchange losses were $57,580 thousand and net foreign exchange gains $52,536 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies.

30. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for the Corporation and its investees:

• a. Financing provided: Table 1 (attached).

• b. Endorsement/guarantee provided: Table 2 (attached).

• c. Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 3 (attached).

• d. Marketable securities acquired and disposed of at costs or prices of at least $300 million or 20% of the paid-in capital: None.

• e. Acquisition of individual real estate properties at costs of at least $300 million or 20% of the paid-in capital: Table 4 (attached).

• 64 -

• f. Disposal of individual real estate properties at prices of at least $300 million or 20% of the paid-in capital: None.

• g. Total purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Table 5 (attached).

• h. Receivable from related parties amounting to at least $100 million or 20% of the paid-in capital: Table 6 (attached).

• i. Derivative transactions: Note 7.

• j. Names, locations, and related information of investees on which the Corporation exercised significant influence: Table 7 (attached).

• k. Information on investment in Mainland China:

• 1) The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 8 (attached).

• 2) Significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 5.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 5.

  • c) The amount of property transactions and the amount of the resultant gains or losses: None.

  • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.

  • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: None.

  • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: None.

• 65 -

TABLE 1

CHROMA ATE INC. AND SUBSIDIARIES

FINANCING PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Financing Company Name	Counterparty	Financial Statement Account	Related Parties	Maximum Balance for the Period	Ending Balance	Balance Used	Interest Rate	Financing Provided (Note 7)	Transaction Amounts	Reasons for Short-term Financing	Allowance for Bad Debt	**Collateral **	**Collateral **	Financing Limit for Each Borrowing Company	Financing Company’s Financing Amount Limits
													Item	Value
0	Chroma Ate Inc. (the “Corporation”)	Chroma Systems Solutions Inc. Chroma Japan Corp.	Other receivable Other receivable	Y Y	$ 125,341 42,414	$ 125,341 40,847	$ 125,341 36,533	3.25% -	a a	$ 318,408 119,884	- -	$ - -	- -	$ - -	$ 1,061,663 (Note 1) 1,061,663 (Note 1)	$ 2,123,325 (Note 2) 2,123,325 (Note 2)
1	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma Ate (Suzhou) Ltd.	Other receivable	Y	15,421	15,421	-	-	a	38,948	-	-	-	-	45,437 (Note 3)	90,873 (Note 4)
2	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chroma (Shanghai) Trading Co., Ltd.	Other receivable	Y	3,694	-	-	2.60%	b	-	Purchase for PPE	-	-	-	175,882 (Note 5)	175,882 (Note 5)

Note 1: Based on 10% of the net value of the Corporation ($10,616,627 × 10% = $1,061,663).

Note 2: Based on 20% of the net value of the Corporation ($10,616,627 × 20% = $2,123,325).

Note 3: Based on 10% of the net value calculated on the latest financial statements of borrowing company that have been audited ($454,366 × 10% = $45,437).

Note 4: Based on 20% of the net value calculated on the latest financial statements of borrowing company that have been audited ($454,366 × 20% = $90,873).

Note 5: Based on 70% of the net value calculated on the latest financial statements of borrowing company that have been audited ($251,260 × 70% = $175,882).

Note 6: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.250, RMB1=NT$4.617 and JPY1 = NT$0.276 as of December 31, 2016.

Note 7: Financing provided:

• a. For transactions.

• b. For short-term financing.

• 66 -

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2016

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

No.	Endorsement/ Guarantee Provider	Counterparty	Counterparty	Limits on Each Counter-party’s Endorsement/ Guarantee Amount (Note 1)	Highest Amount of Guarantee Provided for the Year	Ending Balance	Amount of Guarantee Actually Used	Value of Collateral	Ratio of Accumulated Amount of Collateral to Net Equity Shown in the Latest Financial Statements	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsed/ Guaranteed to Subsidiaries by Parent Company	Endorsed/ Guaranteed to Parent Company by Subsidiaries	Endorsed/ Guaranteed to Investees in Mainland China
		Name	Nature of Relationship
0	Chroma Ate Inc.	Chroma USA Chroma Japan Corp. Quantel Private Ltd.	Subsidiary Subsidiary Subsidiary	$ 1,592,494 1,592,494 1,592,494	$ 129,000 34,100 44,580	$ 64,500 34,100 44,580	$ 64,500 22,080 -	$ - - -	0.61% 0.32% 0.42%	$ 3,184,988 3,184,988 3,184,988	Y Y Y	- - -	- - -

Note 1: According to Regulation of the “Procedures for Endorsement/Guarantee and lending of Funds”, the Corporation limits the endorsement/guarantee amount on each entity to (a) within 15% of the net value of the Corporation ($10,616,627 × 15% = $1,592,494) and (b) the capital issued of the entity endorsed/guaranteed, but 100% held subsidiary is not limited by the regulation.

Note 2: According to Regulation of the “Procedures for Endorsement/Guarantee and Lending of Funds”, the Corporation limits the endorsement/guarantee amount within the 30% of the net value of the Corporation ($10,616,627 × 30% = $3,184,988).

Note 3:

The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.250, JPY1 = NT$0.276 as of December 31, 2016.

• 67 -

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Marketable Securities Type and Issuer	Relationship with the Holding Company	Financial Statement Account		**December **	31, 2016		Note
				Shares/Units (Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Chroma Ate Inc. (the “Corporation”) Chroma New Material Corp. Chroma Investment Co., Ltd. Adivic Technology Co. Chen Hwa Technology Inc.	Fund The RSIT Enhanced Money Market Fund Paradigm Pion Money Market Yuanta Wan Tai Money Market Fuh Hwa You Li Money Market Fund Cathay Taiwan Money Market Mega Diamond Money Market Union Money Market Stocks DynaColor, Inc. Chunghwa Telecom Co., Ltd. China Communications Media Group Co., Ltd. WK Technology Fund IX Ltd. Twoway Catv Service Inc. Tian Zheng International Precision Machinery Co., Ltd. WK Technology Fund IV Ltd. WK Technology Fund VI Ltd. WI Harper INC Fund VII LP Fund Fuh Hwa You Li Money Market Fund The RSIT Enhanced Money Market Fund Paradigm Pion Money Market Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Adlink Technology Inc. ICHIA Tech. 2nd Unsecured Convertible Bond Chroma Ate Inc. Fei Hong Industrial Co., Ltd. Cosmactive Broadband Networks Co., Ltd. Prance System Technology Co., Ltd. Fund Cathay Taiwan Money Market Fund Stocks Hangzhou New Material Chroma Co., Ltd.	- - - - - - - - - - - - - - - - - - - - - - - The Corporation - - - - -	Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Available for sale financial assets - noncurrent Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Available for sale financial assets - current Financial assets carried at cost - non-current	24,722 24,732 18,863 21,184 21,282 36,520 13,098 6,050 412 26 4,614 3,561 2,300 2,560 1,806 - 6,829 4,525 2,642 5,768 85 68 10 1,916 4,174 26 111 1,419 -	$ 293,219 283,281 283,154 283,043 262,784 453,518 171,363 271,962 41,857 414 46,140 39,218 33,000 25,600 18,063 10,152 91,238 53,674 30,264 68,443 3,318 4,135 983 144,435 17,175 110 - 17,523 9,191	- - - - - - - 6.1 - - 4.6 4.4 9.7 1.9 1.4 - - - - - - - - - 10.3 1.5 5.1 - 19.0	$ 293,219 283,281 283,154 283,043 262,784 453,518 171,363 271,962 41,857 414 - - - - - - 91,238 53,674 30,264 68,443 3,318 4,135 983 144,435 - - - 17,523 -	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 - - - - - - Note 2 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 Note 1 - - - Note 2 -

Note 1: Based on the closing price as of December 31, 2016.

Note 2: Based on the net asset value of the fund as of December 31, 2016.

• 68 -

TABLE 4

CHROMA ATE INC. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COST OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITA L FOR THE YEAR ENDED DECEMBER 31, 2016

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

Company Name	Type of Property	Transaction Date	Transaction Amount	Payment Term	Counter-party	Nature of Relationship	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Price Reference	Purpose of **Acquisition **	Other Terms
							Owner	Relationship	Transfer Date	Amount
Chroma Ate Inc.	Construction in progress and prepayments for equipment.	2016.07.25	$ 875,716	Based on a contract; third installment had been paid.	Ministry of the Interior, Republic of China	-	-	-	-	$ -	Public bidding	Manufacturing, R&D, operating and building employee dormitories	Note

Note: Please see Note 28 to the financial statements for related information.

• 69 -

TABLE 5

CHROMA ATE INC. AND SUBSIDIARIES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

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

Company Name	Related Party	Nature of Relationship		Transaction	Transaction	Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Chroma Ate Inc. (the “Corporation”) Neworld Electronics Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) Chroma Ate Inc. (the “Corporation”) Chroma Systems Solutions Inc. Chroma Ate Inc. (the “Corporation”) Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Europe B.V. Chroma Ate Inc. (the “Corporation”) Chroma Ate (Suzhou) Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Japan Corp. Chroma Ate Inc. (the “Corporation”) Quantel Private Ltd. Chroma Ate Inc. (the “Corporation”) Wei Kuang Automatic Equipment Co., Ltd.	Neworld Electronics Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) Chroma Ate Inc. (the “Corporation”) Chroma Systems Solutions Inc. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (Shenzhen) Co., Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Europe B.V. Chroma Ate Inc. (the “Corporation”) Chroma Ate (Suzhou) Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Japan Corp. Chroma Ate Inc. (the “Corporation”) Quantel Private Ltd. Chroma Ate Inc. (the “Corporation”) Wei Kuang Automatic Equipment Co., Ltd. Chroma Ate Inc. (the “Corporation”)	Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase Purchase (Sale)	$ (2,495,216) 2,495,216 (503,795) 503,795 (318,408) 318,408 (296,132) 296,132 (238,759) 238,759 (183,621) 183,621 (119,884) 119,884 (110,939) 110,939 313,453 (313,453)	(34) 100 (7) 100 (4) 100 (4) 100 (3) 100 (3) 100 (2) 100 (2) 100 9 (50)	Net 90 days after delivery Net 90 days after delivery Net 180 days after delivery Net 180 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 90 days after delivery Net 90 days after delivery Net 120 days after delivery Net 120 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing	- - - - - - - - - - - - - - - - - -	- - Note 1 Note 1 - - - - - - Note 1 Note 1 - - - - - -	$ 672,460 (672,460) 208,527 (208,527) 154,742 (154,742) 65,194 (65,194) 122,469 (122,469) 92,500 (92,500) 119,209 (119,209) 33,567 (33,567) (53,261) 53,261	29 (100) 9 (100) 7 (100) 3 (100) 5 (100) 4 (100) 5 (100) 1 (100) (5) 32	- - - - - - - - - - - - - - - - - -

Note 1: The actual credit period longer than other customers, approximately 12 months.

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TABLE 6

CHROMA ATE INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

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

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period (Note)	Allowance for Bad Debts
					Amount	Action Taken
Chroma Ate Inc. (the “Corporation”)	Neworld Electronics Ltd. Chroma Ate Inc. (USA) Testar Electronic Corporation Chroma Ate Europe B.V. Chroma System Solutions Inc. Chroma Japan Corp.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	Accounts receivable $ 672,460 Accounts receivable 208,527 Accounts receivable 124,435 Accounts receivable 122,469 Accounts receivable 154,742 Other receivable - financing provided 125,341 Accounts receivable 119,209 Other receivable - financing provided 36,533	5.65 1.88 0.34 2.74 2.26 - 1.06 -	$ - - - - - - - -	- - - - - - - -	$ 307,072 83,283 16,837 57,297 62,126 - 9,597 -	$ - - - - - - - -

Note: The amounts had been accrued as of February 21, 2017.

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TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2016

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

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance	as of December 31, 2016	as of December 31, 2016	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2016	December 31, 2015	Shares (Thousands)	Percentage of Ownership	Carrying Value
Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) San Eagle Development Corp. EVT Technology Co., Ltd. Advic Technology Co., Ltd.	Neworld Electronics Ltd. San Eagle Development Corp. Adlink Technology Inc. Chroma New Material Corporation Wei Kuang Automatic Equipment Co., Ltd. CHI Incorporation Ltd. Quantel Private Ltd. Chen Hwa Technology Inc. Chroma Investment Co., Ltd. Chroma Ate Europe B.V. DynaScan Technology Corp. Chroma Ate Inc. (USA) Sensational Holding Ltd. Adivic Technology Co. Chroma Japan Corp. Chroma Systems Solutions, Inc. Deep Red Holding Co., Ltd. Chih Ho Shun Development Co., Ltd. Testar Electronic Corporation EVT Technology Co., Ltd. Chroma Systems Solutions Inc. Wei Kuang Mech Eng Inc. Wei Da Electric Vehicle Co., Ltd. Advic Holding Corporation	Hong Kong British Virgin Islands New Taipei, Taiwan Taoyuan, Taiwan Hsinchu, Taiwan British Virgin Islands Singapore British Virgin Islands New Taipei, Taiwan The Netherlands Taoyuan, Taiwan U.S.A. British Virgin Islands Taipei, Taiwan Japan U.S.A. Mauritius Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan U.S.A. Mauritius Pingtung, Taiwan Samoa	Sale and maintenance of electronic test instruments, etc. Investment Manufacturing, processing and retailing of software/hardware of computers and peripherals Sale and processing of gold wire Design, manufacturing, installment and testing of automated factory conveyor systems Test of inductance, capacitance and resistance, and sale of parts Sale and maintenance of test instruments, etc. Test of inductance, capacitance and resistance, and sale of parts Investment Sale and maintenance of electronic test instruments etc. Research and manufacture of LED generators Sale and maintenance of electronic test instruments, etc. Investment Sale and research of RF device Sale and maintenance of electronic test instruments, etc. Sale and maintenance of electronic test instruments, etc. Investment Construction and development of residence, buildings and specialized field; construction and investment of public works Testing of LED products Manufacturing of motorcycles and its parts Sale and maintenance of electronic test instruments, etc. Investments Sale and lease of motorcycles Sale and research of RF device	$ 271,873 186,514 165,146 480,715 533,000 122,884 112,328 98,217 80,000 54,026 238,746 29,895 38,301 142,800 147,125 29,628 12,217 17,500 247,096 27,623 64 185,686 3,750 15,223	$ 271,873 186,514 82,325 480,715 533,000 122,884 - 98,217 80,000 54,026 238,746 29,895 38,301 112,200 147,125 29,628 12,217 17,500 247,096 27,623 64 185,686 3,750 15,223	64,013 2,050 24,502 25,000 10,000 3,830 1,914 3,085 14,000 1 9,841 1,000 1,200 14,280 9 120 215 1,750 20,160 2,658 240 4,475 375 500	100.0 100.0 11.3 100.0 100.0 100.0 60.0 100.0 100.0 100.0 27.3 100.0 100.0 51.0 100.0 25.0 100.0 35.0 67.2 53.2 50.0 100.0 75.0 100.0	$ 696,690 567,548 535,490 439,369 316,050 109,043 108,073 106,449 106,210 85,621 88,414 70,824 53,358 35,298 (36,904) (43,893) 49,021 17,593 (5,545) 2,396 129,226 559,634 (3,926) (10,776)	$ 81,411 (12,895) 438,783 47,089 69,445 21,946 13,897 2,928 4,011 8,716 45,140 11,343 1,583 (57,450) (13,118) 72,010 7,587 251 (44,227) (11,002) 72,010 (12,841) 3,078 (16,181)	$ 81,411 (12,895) 49,568 47,089 69,459 21,946 7,500 2,928 (534) 8,716 12,323 11,231 1,583 (31,309) (13,118) 18,002 7,587 88 (29,720) (5,848) NA NA NA NA	Subsidiary Subsidiary Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Joint venture Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

• 72 -

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars or Foreign Currency, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital (Note 2)	Method of Investment (Note 1)	Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (Note 3)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016 (Note 3)	Net Income (Loss) of the Investee	Percentage of Ownership in Investment	Investment Gain (Loss) (Notes 4 and 5)	Carrying Value as of December 31, 2016 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2016
						Outflow	Inflow
Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Hangzhou New Material Chroma Co., Ltd. Chroma Ate (Suzhou) Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd.	Sale of power supplies automatic test systems, signal generators, DC electronic load, color analyzer, uninterruptible power supply, switching mode rectifier and etc. Sale of power supplies automatic test systems, signal generators, DC electronic load, uninterruptible power supply, switching mode rectifier and etc. International and transit trading, commercial simple processing and commercial consulting service and etc. Production and sale of semiconductor connecting materials Sale of power supplies automatic test systems, signal generators, DC electronic load, uninterruptible power supply, switching mode rectifier and etc. Sale and maintenance of electronic equipment and factory conveyor systems Sale and maintenance of electronic equipment and factory conveyor systems Assembly, sale and maintenance of factory conveyors and related systems and renders related after-sales services Research, development and design of computer network security systems and information management		$ 124,740 (HK$ 30,000) 96,750 (US$ 3,000) 87,075 (US$ 2,700) 48,375 (US$ 1,500) 122,550 (US$ 3,800) 54,808 (RMB 11,871) 52,712 (RMB 11,417) 8,020 (RMB 1,737) 8,015 (RMB 1,736)	b. Subsidiary of Neworld Electronics Ltd. b. Subsidiary of Neworld Electronics Ltd. b. Subsidiary of Chen Hwa Technology Inc. b. Subsidiary of Chen Hwa Technology Inc. b. Subsidiary of CHI Incorporation Ltd. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Deep Red Holding Co., Ltd.	$ 132,178 (HK$ 1,200 US$ 3,853) 101,993 (US$ 3,000) 84,988 (US$ 2,700) 9,091 (US$ 285) 121,115 (US$ 3,800) 43,751 (US$ 1,338) 49,935 (US$ 1,500) 92,000 (US$ 2,836) (Note 9)	$ - - - - - - - - -	$ - - - - - - - - -	$ 132,178 (HK$ 1,200 US$ 3,853) 101,993 (US$ 3,000) 84,988 (US$ 2,700) 9,091 (US$ 285) 121,115 (US$ 3,800) 43,751 (US$ 1,338) 49,935 (US$ 1,500) 92,000 (US$ 2,836) (Note 9)	$ 63,973 13,732 (1,266) 20,608 21,976 (1,949) (11,177) 984 7,569	100 100 100 19 100 100 100 100 100	$ 63,973 13,732 (1,266) - 21,976 (1,949) (11,177) 984 7,569	$ 454,207 67,900 90,042 9,191 172,118 217,623 253,001 47,311 49,020	$ - - - - - - - - -
Accumulated Investment in Mainland China as of December 31, 2016		Investment Amounts Authorized by the Investment Commission, MOEA		Upper Limit on Investment
$635,051 (HK$1,200, US$19,312)		$695,162 (HK$1,400, US$21,086) (Note 6)		$6,369,976 (Note 7)

(Continued)

• 73 -

Note 1: Methods of investment have following types:

• a. Direct investment in mainland China.

• b. Indirect investment in the Company of Mainland China through a third place. c. Other

Note 2: The amounts of paid-in capital and carrying value as of December 31, 2016 were translated into New Taiwan dollars at the rates of HK$1=NT$4.158, US$1=NT$32.250, RMB1=NT$4.617 prevailing on December 31, 2016. Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2016 and December 31, 2016 were translated into New Taiwan dollars on the original outflow day.

• Note 4: Based on audited financial statements.

Note 5: Investment income (loss) was translated into New Taiwan dollars at the average rate of HK$1=NT$4.156, US$1=NT$32.263, RMB1=NT$4.849 for the year ended December 31, 2016.

Note 6:

	Approval Letter	Approved Amount	Approved Amount
a.	Letter (1998) II-87710585 of Investment Commission of MOEA	NT$	5,852
		(HK$	1,400)
b.	Letter (2000) II-89014726 and 89037430 of Investment Commission of MOEA	NT$	63,180
		(US$	2,000)
c.	Letter (2001) II-89037430 of Investment Commission of MOEA	NT$	33,160
		(US$	1,000)
d.	Letter II-91048640 of Investment Commission of MOEA	NT$	63,984
		(US$	1,853) (Note 8)
e.	Letter II-90025170 of Investment Commission of MOEA	NT$	60,240
		(US$	1,750)
f.	Letter II-092020235 of Investment Commission of MOEA	NT$	19,230
		(US$	560)
g.	Letter II-092043358 of Investment Commission of MOEA	NT$	6,748
		(US$	200)
h.	Letter II-093004076 of Investment Commission of MOEA	NT$	3,158
		(US$	95)
i.	Letter II-094006092 of Investment Commission of MOEA	NT$	6,896
		(US$	219)
j.	Letter II-09500052120 of Investment Commission of MOEA	NT$	81,528
		(US$	2,500)
k.	Letter II-09600175700 of Investment Commission of MOEA	NT$	120,000
		(US$	3,699)
l.	Letter II-096000006020 of Investment Commission of MOEA	NT$	66,580
		(US$	2,000)
m.	Letter II-09600310110 of Investment Commission of MOEA	NT$	33,160
		(US$	1,000)
n.	Letter II-09700186010 of Investment Commission of MOEA	NT$	46,110
		(US$	1,500)
o.	Letter II-09700403210 of Investment Commission of MOEA	NT$	7,096
		(US$	210) (Note 9)
p.	Letter II-10400042770 of Investment Commission of MOEA	NT$	78,240
		(US$	2,500)

Note 7: The upper limit on investment was calculated in accordance with the regulations of the Investment Commission of the Ministry of Economic Affairs for 60% of the net equity or consolidated net equity.

Note 8: Chroma Ate Inc. invested accounts receivable amounting to US$853 thousand in Chroma Electronics (Shenzhen) Co., Ltd. through Neworld Electronics Ltd.

Note 9: The investment in Sajet Technology Inc. (liquidated on September 15, 2008) was authorized by the Investment Commission in 2004.

(Concluded)

• 74 -