CHROMA — Annual Report 2016

Nov 25, 2016

Chroma Ate Inc. and Subsidiaries

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

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2016 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

CHROMA ATE INC.

LEO HUANG Chairman February 21, 2017

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

Opinion

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

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2016 and 2015, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China (ROC).

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 (ROC). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China (ROC), 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 consolidated financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Key audit matters for the consolidated financial statements for the year ended December 31, 2016 are stated 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 an indication of impairment exists, management considers the usage of the asset and industry condition to determine the recoverable amount of the cash-generating unit to which the asset belongs based on subjective judgment. Since the management’s assessment of impairment and determination of the recoverable amount of an asset require management’s subjective judgments and assumptions, impairment of asset is deemed to be a key audit matter.

For no impairment indication property, plant and equipment, we reviewed and assessed rationale of the information used. For those property, plant and equipment with impairment indication, we evaluated the methodologies adopted, including the assumptions of the forecasted cash flows and discount rates, to estimate the recoverable amount of the cash-generating unit in order to assess the appropriateness of the management’s impairment evaluation performed.

Please refer to Notes 5 and 16 of the consolidated financial statements for the details of the information about property, plant and equipment.

Evaluation of Write-down of Inventories

The Group’s inventories are primarily test instruments, widely used in technology industries including power supply, passive components, semiconductor, LED, and solar energy. The Group 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 Group’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 13 of the consolidated financial statements for the details of the information about inventories.

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

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

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In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations, or has no realistic alternative but to do so.

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 (ROC) 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 consolidated financial statements.

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

1. Identify and assess the risks of material misstatement of the consolidated 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 Group’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 Group’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 consolidated 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 Group to cease to continue as a going concern.

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

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

7. 4 -

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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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 (ROC)

February 21, 2017

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China (ROC). 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 consolidated financial statements shall prevail.

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED 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 at fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Notes 4 and 8) Investments in bonds with no active market - current (Notes 4, 10 and 32) Notes receivable Accounts receivable, net (Notes 4 and 11) Accounts receivable - related parties (Notes 4, 11 and 31) Construction contracts receivable (Notes 4 and 12) Inventories (Notes 4 and 13) Prepayments Other current assets (Note 31) 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 15) Property, plant and equipment (Notes 4, 16, 24 , 31 and 32) Goodwill (Notes 4 and 17) Other intangible assets (Notes 4 and 18) Deferred tax assets (Notes 4 and 25) Prepayments for land and equipment (Notes 4 and 33) Refundable deposits Prepayments for investments Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 19 and 32) Financial liability at fair value through profit or loss - current (Notes 4 and 7) Notes payable Notes payable - related parties (Note 31) Accounts payable Accounts payable - related parties (Note 31) Construction contracts payable (Notes 4 and 12) Dividends payable (Note 23) Other payables (Note 21) Current tax liabilities (Note 25) Receipts in advance (Note 12) Current portion of long-term liabilities (Notes 19 and 32) Other current liabilities - other Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Notes 4 and 20) Long-term borrowings (Notes 19 and 32) Deferred tax liabilities (Notes 4 and 25) Net defined benefit liabilities (Notes 4 and 22) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 4, 23 and 27) Common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity attributable to owners of the Corporation NON-CONTROLLING INTERESTS Total equity TOTAL		2016 Amount % $ 3,149,970 17 9,161 - 2,291,504 12 378,515 2 61,769 - 2,988,773 16 7,890 - 214,816 1 1,906,496 10 76,076 1 127,722 1 11,212,692 60 314,233 2 198,649 1 641,497 4 2,714,127 15 220,236 1 7,267 - 220,064 1 3,035,154 16 20,045 - 20,000 - 28,814 - 7,420,086 40 $ 18,632,778 100 $ 196,705 1 - - 55,511 - 2,595 - 1,976,229 11 11,813 - 229,858 1 4,838 - 848,232 5 264,461 1 290,774 2 815,317 4 27,078 - 4,723,411 25 1,397,140 8 1,368,085 7 187,170 1 168,266 1 855 - 3,121,516 17 7,844,927 42 3,898,872 21 1,960,159 11 1,724,576 9 86,888 - 2,923,811 16 4,735,275 25 58,035 - (35,714) - 10,616,627 57 171,224 1 10,787,851 58 $ 18,632,778 100		2015
				Amount % $ 2,489,289 16 8,872 - 2,057,476 13 559,958 3 81,021 - 2,422,708 15 11,650 - 175,863 1 1,635,947 10 83,437 1 106,379 1 9,632,600 60 359,543 2 208,400 2 553,139 4 2,767,608 17 196,052 1 4,524 - 156,651 1 2,097,344 13 39,036 - - - 45,542 - 6,427,839 40 $ 16,060,439 100 $ 301,303 2 1,483 - 19,173 - 3,311 - 1,348,781 9 5,789 - 255,218 2 2,298 - 665,640 4 208,745 1 229,955 2 30,083 - 40,875 - 3,112,654 20 1,758,093 11 1,384,040 8 123,827 1 149,691 1 838 - 3,416,489 21 6,529,143 41 3,791,699 24 1,302,269 8 1,600,920 10 86,888 - 2,264,377 14 3,952,185 24 399,665 2 (35,714) - 9,410,104 58 121,192 1 9,531,296 59 $ 16,060,439 100

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

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CHROMA ATE INC. AND SUBSIDIARIES

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

SALES REVENUES (Notes 4, 12 and 31) Sales revenues Less: Sales returns Sales allowances Net sales revenues OPERATING COSTS (Notes 4, 13, 24 and 31) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 24 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Dividend income (Note 4) Rental income (Note 31) Interest income (Note 4) Subsidy income Other income - other Share of profits of associates and joint ventures, net (Notes 4 and 15) Exchange loss, net (Notes 4 and 34) Gain on disposal of investments, net Foreign currency exchange gain, net (Notes 4 and 34) Impairment loss on financial assets (Notes 4 and 9)		2016 Amount % $ 11,761,604 101 (14,550) - (122,685) (1) 11,624,369 100 6,196,250 53 5,428,119 47 - - 203 - 5,428,322 47 1,619,664 14 760,936 6 1,034,541 9 3,415,141 29 2,013,181 18 52,101 - 22,487 - 19,323 - 3,384 - 19,504 - 61,979 1 (110,497) (1) 2,442 - - - - -		2015
				Amount % $ 9,782,005 101 (74,896) (1) (14,744) - 9,692,365 100 5,470,761 57 4,221,604 43 (264) - - - 4,221,340 43 1,421,138 15 707,237 7 872,966 9 3,001,341 31 1,219,999 12 35,620 - 26,538 - 28,503 - 18,302 - 69,806 1 76,166 1 - - 381 - 61,260 1 (14,674) - (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

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

Valuation gain on financial assets (liabilities) at fair value through profit, net (Note 4) Gain on disposal of property, plant and equipment, net (Note 4) Valuation loss on financial assets (liabilities) at fair value through loss, net (Note 4) Other expenses Finance costs (Notes 4 and 24) Total non-operating income and expenses CONSOLIDATED INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 25) CONSOLIDATED NET INCOME OTHER COMPREHENSIVE INCOME (LOSS), NET (Note 23) Items that will not be reclassified subsequently to profit or loss Remeasurement of defined benefit plans Share of other comprehensive income of associates accounted for using the equity method Items 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 associates and joint ventures accounted for using the equity method Total other comprehensive income (loss), net of tax TOTAL COMPREHENSIVE INCOME		2016 Amount % $ 2,219 - 1,126 - - - (3,140) - (42,052) - 28,876 - 2,042,057 18 346,491 3 1,695,566 15 (25,981) - (736) - (132,555) (1) (38,796) (1) (25,084) - (223,152) (2) $ 1,472,414 13		2015
				Amount % $ - - 3,605 - (322) - (3,518) - (38,994) - 262,673 3 1,482,672 15 288,130 3 1,194,542 12 (27,368) - 732 - (14,736) - (98,651) (1) 8,283 - (131,740) (1) $ 1,062,802 11 (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

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

NET INCOME ATTRIBUTED TO Owners of the Corporation Non-controlling interests COMPREHENSIVE INCOME ATTRIBUTED TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (Note 26) From continuing operating segment Basic Diluted		2016 Amount % $ 1,719,935 15 (24,369) - $ 1,695,566 15 $ 1,501,612 13 (29,198) - $ 1,472,414 13 $4.53 $4.23		2015
				Amount % $ 1,236,557 13 (42,015) (1) $ 1,194,542 12 $ 1,102,621 11 (39,819) - $ 1,062,802 11 $3.28 $3.10

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

(Concluded)

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					Total Equity	$ 9,373,088		-	(987,433 )				-		1,194,542		(131,740 )	(131,740 )		1,062,802	1,062,802	281		4,994	44,909		32,655	32,655	9,531,296		-	(910,200 )				27,978		1,695,566		(223,152 )	(223,152 )		1,472,414	1,472,414	386,028	196,883		4,545		78,907	78,907	$ 10,787,851
				Non-controlling	Interests	$ 120,140		-	-				7,525		(42,015 )		2,196			(39,819 )		-		-	691		32,655		121,192		-	-				-		(24,369 )		(4,829 )			(29,198 )		-	323		-		78,907		$ 171,224
					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	196,560		4,545		-		$ 10,616,627
					Treasury Stock	$ (35,714 )		-	-				-		-		-			-		-		-	-		-		(35,714 )		-	-				-		-		-			-		-	-		-		-		$ (35,714 )
					Total	507,104		-	-				-		-		(107,439 )			(107,439 )		-		-	-		-		399,665		-	-				-		-		(191,678 )			(191,678 )		-	(149,952 )		-		-		58,035
Equity Attributable toOwners of the Corporation	Other Equity	Exchange Unrealized Gain	Differences on (Loss) from	Translating Available-for- sale Unearned	Total Foreign Operations Financial Assets Employee Benefit	$ 3,737,083 $ 136,756 $ 370,348 $ - $		- - - -	(987,433 ) - - -				(7,525 ) - - -		1,236,557 - - -		(26,497 ) (8,788 ) (98,651 ) -			1,210,060 (8,788 ) (98,651 ) -		- - - -		- - - -	- - - -		- - - -		3,952,185 127,968 271,697 -		- - - -	(910,200 ) - - -				- - - -		1,719,935 - - -		(26,645 ) (152,882 ) (38,796 ) -			1,693,290 (152,882 ) (38,796 ) -		- - - -	- - - (149,952 )		- - - -		- - - -		$ 4,735,275 $ (24,914 ) $ 232,901 $ (149,952 ) $
			Retained Earnings	Unappropriated	Special Reserve Earnings	$ 86,888 $ 2,180,919		- (131,644 )	- (987,433 )				- (7,525 )		- 1,236,557		- (26,497 )			- 1,210,060		- -		- -	- -		- -		86,888 2,264,377		- (123,656 )	- (910,200 )				- -		- 1,719,935		- (26,645 )			- 1,693,290		- -	- -		- -		- -		$ 86,888 $ 2,923,811
					Legal Reserve	$ 1,469,276		131,644	-				-		-		-			-		-		-	-		-		1,600,920		123,656	-				-		-		-			-		-	-		-		-		$ 1,724,576
					Issued Capital Capital Surplus	BALANCE, JANUARY 1, 2015 $ 3,787,821 $ 1,256,654	Appropriation of the 2014 earnings	Legal reserve - -	Cash dividends - NT$2.6 per share - -	Other changes in capital surplus	Change in capital surplus from investments in	associates and joint ventures accounted for	using the equity method - -	Consolidated net income (loss) for the year	ended December 31, 2015 - -	Other comprehensive income (loss) for the year	ended December 31, 2015 - -		Consolidated comprehensive income (loss) for	the year ended December 31, 2015 - -		Conversion of convertible bonds 42 239	Adjustment of capital surplus for corporation's	cash dividends received by subsidiaries - 4,994	Share-based payment transaction 3,836 40,382	Increase in non-controlling interests for the year	ended December 31, 2015 - -		BALANCE, DECEMBER 31, 2015 3,791,699 1,302,269	Appropriation of the 2015 earnings	Legal reserve - -	Cash dividends - NT$2.4 per share - -	Other changes in capital surplus	Change in capital surplus from investments in	associates and joint ventures accounted for	using the equity method - 27,978	Consolidated net income (loss) for the year	ended December 31, 2016 - -	Other comprehensive income (loss) for the year	ended December 31, 2016 - -		Consolidated comprehensive income (loss) for	the year ended December 31, 2016 - -		Conversion of convertible bonds 59,823 326,205	Share-based payment transaction 47,350 299,162	Adjustments of capital surplus for corporation's	cash dividends received by subsidiaries - 4,545	Increase in non-controlling interests for the year	ended December 31, 2016 - -		BALANCE, DECEMBER 31, 2016 $ 3,898,872 $ 1,960,159	The accompanying notes are an integral part of the consolidated financial statements.

CHROMA ATE INC. AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated net income before income tax Adjustments for: Depreciation Compensation cost of shared-based payment Share of profits of associates and joint venture accounted for using the equity method, net Dividend income Finance costs Exchange loss (gain), net Interest income Impairment loss on nonfinancial assets (Reversal of) provision for bad debts expense Amortization Gain on disposal of investments, net Gain on disposal and retirement of property, plant and equipment, net Realized gain on transactions with associates and joint ventures Unrealized gain on transactions with associates and joint ventures Impairment loss on financial assets Net changes related to operating assets and liabilities Financial assets held for trading Notes receivable Accounts receivable Construction contracts receivable Inventories Prepayments Other current assets Financial liabilities held for trading Notes payable Accounts payable Construction contracts payable Other payables Receipts in advance Other current liabilities Net define benefit liabilities Cash generated from operations 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	2016 $ 2,042,057 336,514 86,941 (61,979) (52,101) 42,052 39,114 (19,323) 16,619 (4,675) 2,849 (2,442) (1,126) (203) - - (965) 19,252 (550,370) (38,953) (413,050) 7,361 (19,653) (1,483) 35,622 626,284 (25,360) 193,355 60,819 (13,817) (7,406) 2,295,933 (295,067) 2,000,866 (1,093,975) (650,000) 423,410	2015 $ 1,482,672 329,582 25,768 (76,166) (35,620) 38,994 (58,015) (28,503) 39,379 86,551 2,009 (381) (3,605) - 264 14,674 (234) (47,705) 676,838 (79,918) (160,642) (27,119) 3,417 556 (36,841) 66,726 251,422 (48,725) 145,634 (3,569) (5,379) 2,552,064 (283,511) 2,268,553 (960,436) (300,000) 127,020 (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

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

Proceeds from disposal of investment in bonds with no active market Dividend received Payments to acquire investment accounted for using the equity method Net cash (outflows) inflows from business combination Proceeds from disposal of property, plant and equipment Interest received Increase in prepayments for investments Decrease in refundable deposits Decrease in other non-current assets Cash returned of capital reduction of financial assets carried at cost Proceeds on sale of financial assets measured at cost Payment to acquire financial assets carried at cost Payment to acquire investment in bonds with no active market Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid Proceeds of the issue of long-term debts Decrease in short-term borrowings Exercise of employee stock options Increase in non-controlling interest Interest paid Repayment of long-term debts Exercise of employee restricted stock Increase in guarantee deposits Decrease in short-term bills payable Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR	2016 $ 163,274 110,904 (82,821) (56,249) 29,306 21,203 (20,000) 19,791 16,728 9,587 1,521 - - (1,107,321) (907,953) 770,000 (122,606) 80,049 53,225 (39,795) (14,951) 31,000 3 - (151,028) (81,836) 660,681 2,489,289 $ 3,149,970	2015 $ - 76,100 - 10,897 14,893 23,588 - 4,647 941 11,750 - (16,140) (160,965) (1,167,705) (982,439) 582,165 (84,000) 19,141 29,400 (24,064) (6,659) - - (16,000) (482,456) 23,249 641,641 1,847,648 $ 2,489,289

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

(Concluded)

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

CHROMA ATE INC. AND SUBSIDIARIES

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 the New Taiwan dollar (NTD).

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated 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 IFRSs Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Annual Improvements to IFRSs 2012-2014 Cycle Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” Amendment to IAS 1 “Disclosure Initiative” Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions”

Effective Date Announced by IASB (Note 1)

July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 3) January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 (Continued)

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New IFRSs 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, 2014 January 1, 2014 January 1, 2014 (Concluded)

• Note 1: Unless stated otherwise, the above New or amended 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 Group’s accounting policies, except for the following:

• 1) Annual Improvements to IFRS 2 “Share-based Payment”: 2010-2012 Cycle

The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “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 Group or another entity in the same group or the market price of the equity instruments of the Group or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group 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 Group, but also of other entities outside the Group. 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 Group 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 Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

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 consolidated financial statements were authorized for issue, the Group 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 Group’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 Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC. The FSC announced that IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

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” 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 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 Group’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 financial assets are measured at fair value through profit or loss. However, the Group 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 Group 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, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. 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 IFRS as endorsed and issued into effect by the FSC.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair values.

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

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

• 2) 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

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

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

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Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) 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 consolidated financial statements are authorized for issue; and

• 3) Liabilities for which the Group 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 non-current.

• d. Basis of consolidation

Principle of preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Corporation and entities controlled by the Corporation (its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Corporation.

Refer to Note 14 and Table 7 for the detail information of subsidiaries, including the equity interest and main business.

• e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

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

f. Foreign currencies

In preparing the financial statements of each individual group entity, 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 in which they arise.

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 from 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.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Corporation and the Group entities (including subsidiaries, associates, joint ventures and branches in other countries that use currency different from the currency of the Corporation) are translated into the presentation currency - the New Taiwan dollar as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Corporation and non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Corporation’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Corporation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

g. Inventories

Inventories consist of raw materials, supplies, semifinished goods, finished goods, work-in-process and inventory in transit, 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.

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• h. Investments in associates and joint ventures

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

The Group 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 Group’s share of the profit or loss and other comprehensive income of the associate and joint venture after the date of acquisition. Besides, the Group also recognizes the Group’s share of the changes in other equity of associates and joint venture.

Any excess of the cost of acquisition over the Group’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 Group’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 Group 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 Group’s proportionate interest in the associate and joint venture. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in the Group’s share of equity of associates and joint ventures. If the Group’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 using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’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 using the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate and joint venture), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group 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 Group 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 Group 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 Group continues to apply the equity method and does not remeasure the retained interest.

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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 Group’s consolidated financial statements only to the extent of interests in the associate and the joint venture that are not related to the Group.

• i. Property, plant and equipment

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

Properties, plant and equipment in the course of construction are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs 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 on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. 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.

• j. Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) 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 attributed 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 entity 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.

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• k. Intangible assets

• 1) 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 estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• 2) 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.

• 3) Derecognition of intangible assets

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

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

At the end of each reporting period, the Group 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 Group estimates the recoverable amount of the CGUs to which the asset belongs. Corporate assets are allocated to the smallest group of CGUs 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.

The 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.

• m. Financial instruments

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

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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 or deducted from 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.

1) Financial assets

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

a) Measurement category

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

• i. Financial assets at fair value through profit or loss

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

A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

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

• ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and has performance 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

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

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 30.

• ii. 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.

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.

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Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’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.

iii. Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalent, and 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 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) 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, as a result of one or more events that occurred after the initial recognition of the financial asset, that the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables 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 Group’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.

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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.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is 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 that are written off against the allowance account.

• c) Derecognition of financial assets

The Group 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 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.

2) Equity instruments

Debt and equity instruments issued by a group 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 a group entity 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.

• 25 -

3) Financial liabilities

• a) Subsequent measurement

Except the following situation, all 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 is 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. Fair value is determined in the manner described in Note 30.

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:

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

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

• iii. 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.

For a financial liability designated as at fair value through profit or loss, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income and will not be subsequently reclassified to profit or loss. The remaining amount of changes in the fair value of that liability which incorporates any interest or dividend paid on the financial liability is presented in profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liabilities are derecognized. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in fair value of the liability are presented in profit or loss. Fair value is determined in the manner described in Note 30.

• b) 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.

• 4) Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Group 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.

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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.

• n. Revenue recognition

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

1) Sale of goods

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

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

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

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

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

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

The Group 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.

• 2) 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 Group 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 Group 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 applicable effective interest rate.

• 27 -

o. Construction contracts

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by reference to the stage of completion of the contract activity at the end of the reporting period. The stage of completion of contract activity is expressed as the percentage of contract costs incurred for work performed as of the balance sheet date relative to the estimated total contract costs, except where this percentage would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be determined reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

When contract costs incurred to date plus recognized profits less recognized losses exceed progress billings, the surplus is presented as construction contracts receivable. For contracts where progress billings exceed contract costs incurred to date plus recognized profits less recognized losses, the surplus is presented as construction contracts payable. Amounts received before the related work is performed are recognized as advances received in the consolidated balance sheet. Amounts billed for work performed but not yet paid by the customer are recognized as accounts receivable in the consolidated balance sheet.

p. Borrowing costs

Borrowing costs directly attributable to an 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.

q. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached 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 Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

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

r. Employee benefits

1) 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.

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2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services 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 as well as past service cost, and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur, or when the plan amendment or curtailment occurs/when the settlement occurs. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. 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 Group’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.

s. Options Share-based payment arrangements

Equity-settled share-based payments arrangements and restricted shares for employees granted to employees and others providing 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 Group’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 Group 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.

t. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) 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 in the current year’s tax provision.

• 29 -

2) 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 deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment to the extent that it is probable 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 Group 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. A Previously unrecognized deferred tax assets are also reviewed at the end of each reporting period and recognized to the extent that it has become 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 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 that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) 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 business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’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.

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

In the valuation of assets for impairment on assets, the Group uses subjective judgment to determine the individual cash flows, useful lives and future revenues and expenses of specific asset groups based on the assets’ useful model and industrial characteristics. Any changes in estimation due to economic circumstances and the Group’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 AND CASH EQUIVALENTS
Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits with maturities less than 3 months from date of investments Repurchase agreements collateralized by bonds		December 31
		2016 $ 6,098 2,768,658 245,315 129,899 $ 3,149,970	2015 $ 4,547 2,206,259 278,483 - $ 2,489,289

Cash equivalents include time deposits with maturities less than three months from the date of acquisition are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value; these were held for the purpose of meeting short-term cash commitments.

As of December 31, 2016 and 2015, time deposits with maturities more than 3 months from date of investments were $378,515 thousand and $559,958 thousand, respectively, which is classified to investment in bonds with no active market (see Notes 10 and 32).

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Nonderivative financial assets Domestic listed stocks Open-beneficial certificates Investment in debt instrument Derivative instruments Call and put option of convertible bonds payable (Note 20) Financial assets at fair value through profit or loss		December	31
		2016 $ 7,453 983 8,436 725 $ 9,161	2015 $ 7,921 951 8,872 - $ 8,872 (Continued)

• 31 -

Financial liabilities at FVTPL-current Derivative instruments Call and put option of convertible bonds payable (Note 20)		December	31
		2016 $ -	2015 $ 1,483 (Concluded)

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
Domestic investments Listed stocks Open-end beneficial certificates Current Non-current		December 31
		2016 $ 314,233 2,291,504 $ 2,605,737 $ 2,291,504 314,233 $ 2,605,737	2015 $ 359,543 2,057,476 $ 2,417,019 $ 2,057,476 359,543 $ 2,417,019

9. FINANCIAL ASSETS CARRIED AT COST - NON-CURRENT

FINANCIAL ASSETS CARRIED AT COST - NON-CURRENT
Domestic unlisted common stocks Foreign unlisted common stocks Foreign open-end beneficial certificates Classification by measurement of financial instruments Available-for-sale financial assets		December 31
		2016 $ 162,131 26,366 10,152 $ 198,649 $ 198,649	2015 $ 171,718 26,530 10,152 $ 208,400 $ 208,400

The above unlisted stock investments were measured at cost less impairment at the balance sheet date. The Group 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 Group 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.

For the year ended December 31, 2015, the Group 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.

• 32 -

In 2015, the Corporation acquired control over EVT Technology Co., Ltd.; EVT Technology Co., Ltd. was included in the consolidated financial statements since the day the Corporation acquired control over it.

The Group sold part of foreign unlisted common stocks and all preferred stock of financial assets carried at cost in 2016.

The Group did not sell financial assets carried at cost in 2015.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

DEBT INVESTMENTS WITH NO ACTIVE MARKET
Time deposits with maturities more than 3 months from date of investments		December 31
		2016 $ 378,515	2015 $ 559,958

As of December 31, 2016 and 2015, the amounts of the Group’s investment in bonds with no quoted price in active market which had been mortgaged or pledged as collaterals were $1,000 thousand and $14,985 thousand, respectively (refer to Note 32).

11. ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET
Accounts receivable Less: Allowance for doubtful accounts Accounts receivable - related parties		December 31
		2016 $ 3,159,134 (170,361) 2,988,773 7,890 $ 2,996,663	2015 $ 2,608,385 (185,677) 2,422,708 11,650 $ 2,434,358

The average credit period for sales of goods is 60 to 90 days after the goods were approved, and no interest was charged on accounts receivable. In determining the recoverability of a receivable, the Group considered any change in the credit quality of the accounts receivable since the date when credit was initially granted to the end of the reporting period. Allowances for doubtful accounts are based on estimated irrecoverable amounts determined by referring to the counterparty’s past default and an analysis of the counterparty’s current financial position.

The Group did not recognize an allowance account 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 Group did not hold any collateral or other credit enhancements for those accounts receivable.

The aging of receivables was as follows:

Less than 60 days 61-180 days Over 180 days		December 31	December 31
		2016 $ 2,536,446 396,642 226,046 $ 3,159,134	2015 $ 2,126,796 125,032 356,557 $ 2,608,385

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

Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Customers’ limits and scores are reviewed periodically every year. Most of the accounts receivable that are neither past due nor impaired have the best credit score under the external credit scoring system used by the Group.

Age of receivables that were past due but not impaired was as follows:

December 31 2016 2015 Less than 60 days $ 381,176 $ 313,015 61-180 days 385,443 114,727 Over 180 days 131,886 207,023 $ 898,505 $ 634,765 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: Individual Assessment of Impairment Loss Collective Assessment of Impairment Loss Total Balance at January 1, 2015 $ 30,924 $ 69,240 $ 100,164 Add: Bad debts expense recognized (reversed) on receivable 96,841 (10,290) 86,551 Deduct: Amounts written off as uncollectible (1,956) (200) (2,156) Reclassification of impairment loss from collective assessment to individual assessment 25,931 (25,931) - Foreign exchange translation losses 532 586 1,118 Balance at December 31, 2015 $ 152,272 $ 33,405 $ 185,677 Balance at January 1, 2016 $ 152,272 $ 33,405 $ 185,677 Add: Bad debts expense recognized (reversed) on receivable (18,529) 13,854 (4,675) Add: Addition through business combinations (Note 28) - 1 1 Deduct: Amounts written off as uncollectible (3,057) (2,261) (5,318) Reclassification of impairment loss from collective assessment to individual assessment 9,804 (9,804) - Foreign exchange translation losses (4,794) (530) (5,324) Balance at December 31, 2016 $ 135,696 $ 34,665 $ 170,361		December 31	December 31
			2015 $ 313,015 114,727 207,023 $ 634,765 Total $ 100,164 86,551 (2,156) - 1,118 $ 185,677 $ 185,677 (4,675) 1 (5,318) - (5,324) $ 170,361

The impairment recognized represent 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 assessed impairment of trade receivables in the amounts of $135,696 thousand and $152,272 thousand as of December 31, 2016 and 2015, respectively. The Group did not hold any collateral over these balances.

• 34 -

12. CONSTRUCTION CONTRACTS RECEIVABLE (PAYABLE)

CONSTRUCTION CONTRACTS RECEIVABLE (PAYABLE)
Construction contracts receivable Accumulated contract costs incurred to date plus recognized profits (less recognized losses) Less: Accumulated progress billings Due from customers for contract work Construction contracts payable Accumulated progress billings Less: Accumulated contract costs incurred to date plus recognized profits less recognized losses Due to customers for contract work Receipts in advance		December 31
		2016 $ 217,326 (2,510) $ 214,816 $ 346,218 (116,360) $ 229,858 $ -	2015 $ 178,277 (2,414) $ 175,863 $ 383,303 (128,085) $ 255,218 $ -

The Group recognized contract revenue of $382,288 thousand and $1,260,831 thousand for the years ended December 31, 2016 and 2015, respectively.

13. INVENTORIES

INVENTORIES
Finished goods Semifinished products Work in process Raw materials Inventory in transit		December 31
		2016 $ 494,715 342,056 472,453 597,017 255 $ 1,906,496	2015 $ 389,914 300,641 369,696 575,696 - $ 1,635,947

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2016 and 2015 was $6,196,250 thousand and $5,470,761 thousand, respectively.

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2016 and 2015 included $16,619 thousand and $39,379 thousand write-downs of inventories, respectively.

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14. SUBSIDIARIES

The following direct and indirect subsidiaries of the Corporation were all included in the consolidated financial statements:

Investor Investee Business The Corporation Neworld Electronics Ltd. Sale and maintenance of electronic test instruments, etc. Chroma Investment Co., Ltd. Investment. Sensational Holding Ltd. Investment. Chroma Ate Europe B.V. Sale and maintenance of electronic test instruments, etc. Chroma Ate Inc. (“Chroma USA”) Sale and maintenance of electronic test instruments, etc. Chen Hwa Technology Inc. Test of inductance, capacitance and resistance equipment and sale of parts. CHI Incorporation Ltd. Test of inductance, capacitance and resistance equipment and sale of parts. Chroma New Material Corporation Processing and sale of gold wire. San Eagle Development Corp. Investment. Wei Kuang Automatic Equipment Co., Ltd. Design, manufacturing, installment and testing of automated factory conveyor systems. Testar Electronic Corporation Testing of LED products. Deep Red Holding Co., Ltd. Investment. Chroma Japan Corp. Sale and maintenance of electronic test instruments, etc. Chroma Systems Solutions Inc. Sale and maintenance of electronic test instruments, etc. Adivic Technology Co. Sale and research of RF device. EVT Technology Co., Ltd. Manufacturing of motorcycles and its parts. Quantel Private Ltd. Sale and maintenance of test instruments, etc. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Sale of computerized automatic test systems, peripherals and electronic test instruments. Chroma Electronics (Shanghai) Co., Ltd. Sale of computerized automatic test systems, peripherals and electronic test instruments. Chroma Ate Inc. (Chroma USA) Chroma Systems Solutions Inc. Sale and maintenance of electronic test instruments, etc. Chen Hwa Technology Inc. Chroma (Shanghai) Trading Co., Ltd. International and transit trading, simple commercial processing, commercial consulting services, etc. CHI Incorporation Ltd. Chroma Ate (Suzhou) Co., Ltd. Sale of computerized automatic test systems, peripherals and electronic test instruments. San Eagle Development Corp. Wei Kuang Mech Eng Inc. Investment. Wei Kuang Mech Eng Inc. Mou Kuan Technologies (Nanjin) Co., Ltd. Assembly, sale and maintenance of factory conveyors and related systems and rendering after-sales services. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Sale and maintenance of electronic equipment and factory conveyor systems. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Sale and maintenance of electronic equipment and factory conveyor systems. Deep Red Holding Co., Ltd. Saject System Technology (Suzhou) Co., Ltd. Research, development and design of computer network security systems and information management. EVT Technology Co., Ltd. Wei Da Electric Vehicle Co., Ltd. Sale and lease of motorcycles. Adivic Technology Co. Advic Holding Corporation Sale and research of RF device.

Percentage of Ownership as of December 31 2016 2015 Explanation 100.0 100.0 100.0 100.0 Chroma Investment Co., Ltd. had 1,916 thousand shares of the Corporation’s common stock as of December 31, 2016, which accounted for 0.5% of the Corporation’s outstanding shares 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 67.2 67.2 100.0 100.0 100.0 100.0 25.0 25.0 Note 1 51.0 51.0 Note 2 53.2 53.2 Note 3 60.0 - Note 4 100.0 100.0 100.0 100.0 50.0 50.0 Note 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 75.0 Note 3 100.0 100.0 Note 5

• Note 1: The Corporation and the Corporation’s subsidiary, Chroma USA, held 75% equity interest in Chroma Systems Solutions Inc.

• Note 2: In April 2015 and May 2016, Advic Technology increased its capital by $60,000 thousand and $60,000 thousand, respectively, to strengthen its financial structure. The Corporation’s board of director resolved to participate proportionately in the capital increase. The Corporation’s equity interest in Advic was still 51%.

• Note 3: 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 but at a higher percentage than its previous equity interest; thus, the Corporation equity interest rose to 53.2% and acquired control over EVT.

• 36 -

• Note 4: To expand its market scale and lay out sales network in Southeast Asia, the Corporation’s board of directors resolved to acquire 60% equity interest of Quantel Private Ltd. 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. The Corporation’s equity interest in Quantel Private Ltd. remained the same.

• Note 5: In June 2015, Adivic Technology Co. (“Adivic”), the Corporation’s subsidiary set up Advic Holding Corporation to develop radio frequency identification (RFID) technology in USA.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Investments in joint ventures		December 31	December 31
		2016 $ 623,904 17,593 $ 641,497	2015 $ 535,634 17,505 $ 553,139

a. Investments in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2016 Amount Percentage of Equity Interest (%) $ 535,490 11.3 88,414 27.3 $ 623,904		2015
				Amount Percentage of Equity Interest (%) $ 457,674 11.6 77,960 27.3 $ 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		For the Years Ended December 31	For the 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.

The Group is able to exercise significant influence over Adlink Technology Inc. although the percentage of shares held is less than 20%. Therefore, the Group recognizes the gain and loss under the equity method.

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Fair values (Level 1) of investments in associates with available published price quotation are summarized as follows:

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

The investments in associates accounted for using 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 associates’ financial statements audited by the auditors for the same years.

b. Investment in joint venture

Joint venture that are not individually material Chih Ho Shun Development Co., Ltd.		December 31	December 31	December 31
		2016 Amount Percentage of Equity Interest (%) $ 17,593 35.0		2015
				Amount Percentage of Equity Interest (%) $ 17,505 35.0

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		For the Years Ended December 31	For the 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 associates.

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 using 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.

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16. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2015 Addition Disposals Acquisition through business combinations (refer to Note 28) Transferred from inventories Reclassification Net effect of exchange differences Balance, December 31, 2015 Accumulated depreciation and impairment Balance, January 1, 2015 Depreciation Disposals Acquisition through business combinations (refer to Note 28) Reclassification Net effect of exchange differences Balance, December 31, 2015 Net amounts on December 31, 2015 Cost Balance, January 1, 2016 Addition Disposals Acquisition through business combinations (refer to Note 28) Transferred from inventories Reclassification Net effect of exchange differences Balance, December 31, 2016 Accumulated depreciation and impairment Balance, January 1, 2016 Depreciation Disposals Acquisition through business combinations (refer to Note 28) Reclassification Net effect of exchange differences Balance, December 31, 2016 Net amounts on December 31, 2016	Land $ 508,932 14,787 - - - - 2,787 $ 526,506 $ - - - - - - $ - $ 526,506 $ 526,506 - - - - - (891) $ 525,615 $ - - - - - - $ - $ 525,615	Buildings $ 2,318,626 142,853 (307) 126 - - 5,775 $ 2,467,073 $ (791,499) (96,262) 304 (37) - (2,388) $ (889,882) $ 1,577,191 $ 2,467,073 60,023 (6,387) 40,960 - - (27,405) $ 2,534,264 $ (889,882) (96,891) 3,455 (3,923) - 3,498 $ (983,743) $ 1,550,521	Machinery Miscellaneous Equipment $ 987,837 $ 1,253,410 38,641 84,799 (13,924) (44,656) 13,024 20,948 47,535 62,524 (5,222) 5,222 1,690 (39,475) $ 1,069,581 $ 1,342,772 $ (668,423) $ (895,921) (122,024) (111,296) 13,485 33,810 (9,222) (16,708) 2,063 (2,063) 123 27,734 $ (783,998) $ (964,444) $ 285,583 $ 378,328 $ 1,069,581 $ 1,342,772 14,486 112,000 (167,185) (64,985) 2,777 18,129 20,483 100,964 (6,723) 6,723 (2,756) (30,199) $ 930,663 $ 1,485,404 $ (783,998) $ (964,444) (120,458) (119,165) 156,935 49,987 (2,777) (15,037) 4,632 (4,632) 2,083 18,798 $ (743,583) $ (1,034,493) $ 187,080 $ 450,911	Total $ 5,068,805 281,080 (58,887) 34,098 110,059 - (29,223) $ 5,405,932 $ (2,355,843) (329,582) 47,599 (25,967) - 25,469 $ (2,638,324) $ 2,767,608 $ 5,405,932 186,509 (238,557) 61,866 121,447 - (61,251) $ 5,475,946 $ (2,638,324) (336,514) 210,377 (21,737) - 24,379 $ (2,761,819) $ 2,714,127

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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 32 for property, plant and equipment have been pledged to secure borrowings of the Group.

17. GOODWILL

GOODWILL
Cost Balance, beginning of the year Acquisition through business combination (refer to Note 28) Net effect of exchange differences Balance, end of the year		For the Years Ended December 31
		2016 $ 196,052 25,219 (1,035) $ 220,236	2015 $ 193,939 - 2,113 $ 196,052

For assessing goodwill for impairment at the end of reporting period, the Group took value in use as basis for calculating the recoverable amount of goodwill. The Group 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 this evaluation, the Group did not recognize any impairment loss on goodwill for the years ended December 31, 2016 and 2015.

18. OTHER INTANGIBLE ASSETS

Core Technology Customer Relationships Cost Balance, January 1 and December 31, 2015 $ 317,931 $ - Accumulated amortization and impairment losses Balance, January 1, 2015 $ (311,398) $ - Amortization (2,009) - Balance, December 31, 2015 $ (313,407) $ - Net amounts on December 31, 2015 $ 4,524 $ -	Total $ 317,931 $ (311,398) (2,009) $ (313,407) $ 4,524 (Continued)

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Core Technology Customer Relationships Cost Balance, January 1 2016 $ 317,931 $ - Acquisition through business combination - 5,592 Balance, December 31, 2016 $ 317,931 $ 5,592 Accumulated amortization and impairment losses Balance, January 1, 2016 $ (313,407) $ - Amortization (2,010) (839) Balance, December 31, 2016 $ (315,417) $ (839) Net amounts on December 31, 2016 $ 2,514 $ 4,753	Total $ 317,931 5,592 $ 323,523 $ (313,407) (2,849) $ (316,256) $ 7,267 (Concluded)

Other intangible assets are depreciated on a straight-line basis over the estimated useful lives as follows:

Core technology	5 years
Customer relationships	5 years

19. BORROWINGS

Short-term Borrowings

Short-term Borrowings
Secured borrowings Bank loans (a) Unsecured borrowings Bank loans (b)		December 31
		2016 $ 25,000 171,705 $ 196,705	2015 $ 5,600 295,703 $ 301,303

• a. Secured by Testar Electronic Corporation’s Machinery (refer to Note 32). As of December 31, 2016 and 2015, the interest rate on the bank loans was 1.32% and 1.32%-1.35% per annum, respectively.

• b. As of December 31, 2016 and 2015, the interest rate on the bank loans was 1.23%-3.50% and 1.01%-3.25% per annum, respectively.

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Long-term Borrowings

Long-term Borrowings
Secured borrowings Bank loans (a) Bank loans (b) Bank loans (c) Bank loans (d) Unsecured borrowings Syndicated bank loans (e) Bank loans (f) Less: Discount on bonds payable Long-term borrowings		December 31
		2016 $ 103,894 49,093 11,261 11,810 176,058 2,000,000 7,344 2,183,402 (815,317) $ 1,368,085	2015 $ 108,886 52,964 12,481 - 174,331 1,230,000 9,792 1,414,123 (30,083) $ 1,384,040

• a. Secured by Chroma Systems Solutions Inc.’s land and buildings (refer to Note 32). The bank loan is due on November 16, 2019 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the bank loans was 4.00% per annum.

• b. Secured by Chroma USA’s buildings in California (refer to Note 32). The bank loan is due on June 8, 2023 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the bank loans was 0.90%-4.00% and 0.90%-4.25% per annum.

• c. Secured by Chroma Japan’s properties (refer to Note 32). The Bank loan is due on April 30, 2025 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the Bank loans was 2.25% per annum.

• d. Secured by Quantel Private Ltd.’s debt investments with no active market and properties (refer to Note 32). The bank loan is due on May 1, 2021, and repayable in equal monthly installments with additional interest. As of December 31, 2016, the effective interest rate on the bank loans was 2.87%-11% per annum.

• e. 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 33). The Corporation borrowed $700,000 thousand in September 2013 to pay the second installment, $530,000 thousand 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.

• f. EVT Technology Co., Ltd applied for the bank loan due to on December 16, 2019. As of December 31, 2016 and 2015, the interest rate on the bank loan was 1.72% and 1.43% per annum, respectively.

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20. BONDS PAYABLE

BONDS PAYABLE
Unsecured domestic convertible bonds Less: Current portion		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 period when books are closed for share transactions, 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 earnings approved at the annual shareholders meeting for 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 Group 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 nonderivative liability of $4,989 thousand and $1,849,108 thousand, respectively. 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

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21. OTHER PAYABLES - CURRENT

OTHER PAYABLES - CURRENT
Other payables Payable on construction and equipment Salaries payable and bonus payable (including employee compensations payable and remuneration to directors and supervisors) Other payables and accrued expense		December 31
		2016 $ 3,281 689,305 155,646 $ 848,232	2015 $ 18,771 532,015 114,854 $ 665,640

22. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

The Corporation and its ROC subsidiaries 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.

Employees of the Group’s subsidiaries in the USA, Europe, Singapore and Japan are under the retirement benefit plans operated by their respective local governments. Subsidiaries have to contribute amounts at certain percentages of salaries to retirement benefit plans to provide capital for the plans. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

Subsidiaries in the People’s Republic of China take part in the defined contribution pension plans established by the local governments, to which the subsidiaries make monthly contributions.

The Group recognized pension costs of $70,037 thousand and $65,349 thousand for the years ended December 31, 2016 and 2015, respectively.

Defined Benefit Plans

The Corporation and its subsidiaries, Chroma New Material Corp. and Adivic Technology Co., have defined benefit plans based on the Labor Standards Act (LSA) which is operated by government. Pension benefits are calculated on the basis of length of service and average monthly salaries of the six month before retirement. The Corporation and its ROC subsidiaries mentioned above 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 and its ROC subsidiaries assess the balance 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 and its ROC subsidiaries are 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.

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

Present value of defined benefit obligation Fair value of plan assets Deficit (surplus) Others Net defined benefit liability		December 31	December 31
		2016 $ 443,230 (274,964) 168,266 - $ 168,266	2015 $ 409,891 (260,200) 149,691 - $ 149,691

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	$ 372,684	$ (244,982)	$ 127,702
Service cost
Current service cost	4,217	-	4,217
Net interest expense (income)	6,923	(4,706)	2,217
Recognized in profit or loss	11,140	(4,706)	6,434
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(1,881)	(1,881)
Actuarial loss - changes in demographic
assumptions	10,148	-	10,148
Actuarial loss - changes in financial
assumptions	12,969	-	12,969
Actuarial loss - experience adjustments	6,132	-	6,132
Recognized in other comprehensive income	29,249	(1,881)	27,368
Contributions from the employer	-	(11,813)	(11,813)
Benefits paid	(3,182)	3,182	-
Balance at December 31, 2015	409,891	(260,200)	149,691
Service cost
Current service cost	4,359	-	4,359
Net interest expense (income)	6,667	(4,324)	2,343
Recognized in profit or loss	11,026	(4,324)	6,702
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	2,438	2,438
Actuarial loss - changes in demographic
assumptions	1,530	-	1,530
Actuarial loss - changes in financial
assumptions	14,121	-	14,121
Actuarial loss - experience adjustments	7,892	-	7,892
Recognized in other comprehensive income	23,543	2,438	25,981
Contributions from the employer	-	(14,108)	(14,108)
Benefits paid	(1,230)	1,230	-
Balance at December 31, 2016	$ 443,230	$ (274,964)	$ 168,266

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Through the defined benefit plans under the Labor Standards Law, the Group 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.

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%-1.50% 1.00%-1.75% 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
		2016 $ (14,234) $ 14,898 $ 14,490 $ (13,919)	2015 $ (13,511) $ 14,161 $ 13,805 $ (13,243)

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 $ 15,211 15.0 years	2015 $ 11,705 15.8 years

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23. 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 shares authorized were reserved for the employee share options.

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 Group has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Group’s capital surplus and once a year).

c. Retained 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.

• 47 -

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’s 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 24 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.

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:

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	Dividend 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	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.

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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 2) Unrealized gain (loss) on available-for-sale financial assets		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 127,968 (127,798) (25,084) $ (24,914)	2015 $ 136,756 (17,071) 8,283 $ 127,968

Balance, beginning of the year Unrealized loss arising on revaluation of available-for-sale financial assets Balance, end of the year		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 271,697 (38,796) $ 232,901	2015 $ 370,348 (98,651) $ 271,697

• 3) Employee unearned benefit

In the shareholders’ meeting on June 7, 2016, the shareholders approved a restricted share unit plan (“RSU” plan), please refer to Note 27.

	For the Year	For the Year
		Ended
	December 31,
		2016
Balance, beginning of the year	$	-
Issuance of shares		(188,311)
Share-based payment expenses recognized		38,359
Balance, end of the year	$	(149,952)

• e. Non-controlling interests

Balance, beginning of the year Share of non-controlling interests Capital increase of subsidiaries in cash Non-controlling interest arising from acquisition of subsidiaries	For the Years Ended December 31
	2016 2015 $ 121,192 $ 120,140 53,225 36,400 30,520 (1,447) (Continued)

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f.	Net loss Decrease in non-controlling interest - declaration of cash dividends Exchange differences on the translation of foreign financial statements Compensation cost of employee share options - subsidiaries (Note 27) Actuarial loss on defined benefit plans Share of changes of associates and joint ventures accounted for using the equity method Balance, end of the year Treasury stock Balance, January 1, 2015 Decrease during the year ended December 31, 2015 Balance, December 31, 2015 Balance, January 1, 2016 Decrease during the year ended December 31, 2016 Balance, December 31, 2016 Subsidiaries Shares Held (In Thousand Shares) December 31, 2016 Chroma Investment Co., Ltd. 1,916 December 31, 2015 Chroma Investment Co., Ltd. 1,916		For the Years Ended December 31
		2016 2015 $ (24,369) $ (42,015) (4,838) (2,298) (4,757) 2,335 323 691 (72) (139) - 7,525 $ 171,224 $ 121,192 (Concluded) Corporation’s Shares Held by Its Subsidiaries (In Thousand Shares) 1,916 - 1,916 1,916 - 1,916 Carrying Value Market Price $ 35,714 $ 144,435 $ 35,714 $ 122,405

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.

• 50 -

24. 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 was as follows: Capitalized interest Capitalization rate Depreciation and amortization expense Depreciation of property, plant and equipment Amortization of intangible assets Depreciation expense by function Operating cost Operating expense Amortization expense by function Operating expense Employee benefits expense Short-term employee benefits Share-based payments Equity-settled share-based payments Post-employment benefits (see Note 22) Defined contribution plans Defined benefit plans Other employee benefit Salaries and bonuses Summarized by function Operating cost Operating expense		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 41,056 25,751 66,807 (24,755) $ 42,052 $ 24,755 1.58%-1.60% $ 336,514 2,849 $ 339,363 $ 131,819 204,695 $ 336,514 $ 2,849 $ 2,647,345 86,941 70,037 6,702 59,001 $ 2,870,026 $ 516,029 2,353,997 $ 2,870,026	2015 $ 24,279 27,368 51,647 (12,653) $ 38,994 $ 12,653 1.60%-1.69% $ 329,582 2,009 $ 331,591 $ 132,784 196,798 $ 329,582 $ 2,009 $ 2,272,814 25,768 65,349 6,434 51,065 $ 2,421,430 $ 495,613 1,925,817 $ 2,421,430

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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 employee’s compensation 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 resolved in the shareholders’ meeting held on June 7, 2016, respectively.

Employee’s compensation Remuneration of directors and supervisors	For the Years Ended December 31	For the 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 2015 and 2014 have been approved in the shareholders’ meeting on June 7, 2016 and 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	For the Years Ended December 31	For the Years Ended December 31
	2015 Cash Dividends Share Dividends $ 135,000 $ - 8,000 -	2014
		Cash Dividends Share Dividends $ 195,000 $ - 8,000 -

There was no difference between 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’ meetings on June 10, 2015, and 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 Corporation’s board of directors in 2017 and 2016, and bonuses to employees, directors and supervisors for 2014 resolved in the shareholders’ meeting in 2015 are available at the Market Observation Post System website of the Taiwan Stock Exchange.

• 52 -

25. INCOME TAXES

• a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

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		For the Years Ended December 31
		2016 $ 358,555 17,620 (28,629) 347,546 (1,055) $ 346,491	2015 $ 268,077 17,147 (23,285) 261,939 26,191 $ 288,130

Reconciliation of accounting profit and income tax expense at 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 Other Effect of different tax rates on the Group entities Prior year’s adjustments Income tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 2,042,057 $ 347,150 (13,544) (6,215) (1,055) 17,620 (32,329) - 63,493 (28,629) $ 346,491	2015 $ 1,482,672 $ 252,054 (46,536) (12,201) 26,191 17,147 (23,182) 7,373 90,569 (23,285) $ 288,130

The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in the ROC, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other Group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

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

• 53 -

b. Deferred tax assets and liabilities

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

For the year ended December 31, 2016

	Balance,	Balance,			Exchange	Exchange
	Beginning of		Recognized in		Differences		Balance, End
Deferred Tax Assets	the Year		Profit or Loss		and	Other	of	the Year
Unrealized intercompany gain	$	42,287	$	28,133	$	-	$	70,420
Accrued pension liabilities		9,199		(168)		(31)		9,000
Allowance for reduction
inventory		23,154		10,167		-		33,321
Tax credit		10,779		5,676		(192)		16,263
Impairment loss		14,158		1,872		-		16,030
Unrealized loss on exchange
difference		-		4,367		-		4,367
Allowance for impaired
receivables		2,396		1,014		(8)		3,402
Tax losses		50,872		11,037		(702)		61,207
Others		3,806		2,303		(55)		6,054
	$	156,651	$	64,401	$	(988)	$	220,064
	Balance,				Exchange
	Beginning of		Recognized in		Differences		Balance, End
Deferred Tax Liabilities	the Year		Profit or Loss		and	Other	of	the Year
Investment income on foreign
investments accounted for
using the equity method	$	101,879	$	59,315	$	-	$	161,194
Unrealized gain on exchange
difference		3,777		(2,832)		-		945
Goodwill		10,096		5,863		-		15,959
Others		8,075		1,000		(3)		9,072
	$	123,827	$	63,346	$	(3)	$	187,170

For the year ended December 31, 2015

	Balance,	Balance,			Exchange	Exchange
	Beginning of		Recognized in		Differences		Balance, End
Deferred Tax Assets	the Year		Profit	or Loss	and	Other	of the Year
Unrealized intercompany gain	$	38,112	$	4,175	$	-	$	42,287
Accrued pension liabilities		9,856		(717)		60		9,199
Allowance for reduction
inventory		19,741		3,413		-		23,154
Tax credit		10,148		246		385		10,779
Impairment loss		12,691		1,467		-		14,158
Unrealized loss on exchange
difference		1,539		(1,539)		-		-
								(Continued)

• 54 -

	Balance,	Balance,			Exchange	Exchange
	Beginning of		Recognized in		Differences		Balance, End
Deferred Tax Assets	the Year		Profit or Loss		and	Other	of	the Year
Allowance for impaired
receivables	$	2,180	$	201	$	15	$	2,396
Tax losses		59,389		(21,409)		12,892		50,872
Others		1,191		2,565		50		3,806
	$	154,847	$	(11,598)	$	13,402	$	156,651
							(Concluded)
	Balance,				Exchange
	Beginning of		Recognized in		Differences		Balance, End
Deferred Tax Liabilities	the Year		Profit or Loss		and	Other	of	the Year
Investment income on foreign
investments accounted for
using the equity method	$	89,044	$	12,835	$	-	$	101,879
Unrealized gain on exchange
difference		6,137		(2,360)		-		3,777
Goodwill		8,794		1,302		-		10,096
Others		5,450		2,816		(191)		8,075
	$	109,425	$	14,593	$	(191)	$	123,827

c. Deductible temporary differences, unused loss carryforwards and unused investment credits for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expiry in 2017 Expiry in 2018 Expiry in 2019 Expiry in 2020 Expiry in 2021 Expiry after 2022 Investment credits Purchase of machinery and equipment Deductible temporary differences Impairment loss Valuation loss (gain) on financial assets		December 31	December 31
		2016 $ 8,881 33,277 47,723 45,690 68,584 342,472 $ 546,627 $ - $ 2,382 (776) $ 1,606	2015 $ 4,627 30,003 47,327 45,690 68,584 369,647 $ 565,878 $ 8,711 $ 2,382 (1,442) $ 940

• 55 -

• d. Information about unused investment credits, unused loss carryforward and tax-exemption

Loss carryforwards as of December 31, 2016 were as follows:

	Unused Amount Expiry Year $ 9,894 2016 1,510 2017 5,657 2018 8,455 2019 9,180 2020 10,031 2021 16,374 2022 5,876 2023 5,766 2024 8,921 2025 9,304 2026 4,567 2030 3,289 2031 24,504 2033 9,618 2034 9,338 2036 $ 142,284

As of December 31, 2016, profits attributable to the following expansion projects were exempted from income tax for a four- or five-year period:

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

• e. Integrated income tax information is as follows:

Balance of imputation credit account (ICA) The Corporation Chroma New Material Corp. Chroma Investment Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Creditable ratio for distribution of earnings The Corporation Chroma New Material Corp. Wei Kuang Automatic Equipment Co., Ltd.		December 31
		2016 2015 $ 302,877 $ 250,190 $ 499 $ 8,723 $ 11,885 $ 10,664 $ 35,605 $ 31,791 For the Years Ended December 31
		2016 (Expected) 2015 17.67% 17.10% 19.72% 20.77% 25.05% 22.75%

• 56 -

As of December 31, 2016 and 2015, Chroma Investment Co., Ltd., Adivic Technology Co., EVT Technology Co., Ltd. and Wei Da Electric Vehicle Co., Ltd. had no retained earnings to be distributed, so the creditable ratios were not calculated.

f. 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.

The tax returns through 2015 of the Corporation’s subsidiaries - Advic Technology Co. - had been examined and cleared by the tax authorities.

The tax returns through 2014 of the Corporation’s subsidiaries - Chroma New Material Corp., Wei Kuang Automatic Equipment Co., Testar Electronic Corp., Chroma Investment Co., EVT Technology Co., and Wei Da Electric Vehicle Co. - had been examined and cleared by the tax authorities.

26. EARNINGS PER SHARE

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

Net Income

Net Income
Income attributed to the parent 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		For the Years Ended December 31
		2016 $ 1,719,935 23,543 $ 1,743,478	2015 $ 1,236,557 27,924 $ 1,264,481

Shares

(In Thousands of Shares)

		(In Thousands of Shares)	(In Thousands of Shares)
Weighted average shares used to calculate basic earnings per share Dilutive effect of potential common shares: Convertible bonds Employee remuneration Employee stock option Weighted average shares used to calculate dilutive earnings per share		For the 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

Since the Group offered to settle compensation paid to employees by cash or shares, the Group assumed 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 in the following year.

• 57 -

27. SHARE-BASED PAYMENT ARRANGEMENTS

• a. Employee share option plan of Chroma Ate Inc.

The Corporation granted employee stock 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:

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 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, January 1 Options granted Options exercised Options forfeited Balance, December 31 Options exercisable, end of December 31 Weighted-average fair value of options granted (NT$)	For the Years Ended December 31	For the Years Ended December 31
	2016 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 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 $ -

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

For the 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 - -

• 58 -

• 3) The Group 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 Group 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 Group 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.

• 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.

• 59 -

• 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 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.

• c. Employee share option plan of Adivic Technology Co.

Adivic Technology Co. granted its employees stock options 1,360 thousand units in March 2014, with each option eligible to subscribe for one common share of Adivic Technology Co. when exercised. The options are valid for eight 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:

follows:
Number of options (in thousands of shares) Exercise price per share on grant date (market value on grant date) Exercise price per share (adjusted based on employee stock option plan)	Grant Date
	March 12, 2014 1,360 $10 $10

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

Balance, January 1 Options forfeited Balance, December 31 Options exercisable, end of year	For the Years Ended December 31	For the Years Ended December 31
	2016 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 930 $ 10.0 (145) - 785 10.0 -	2015
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 1,135 $ 10.0 (205) - 930 10.0 -

• 60 -

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

For the Years Ended December 31

2016 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) 10.0 5.20	2015
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) 10.0 6.20

• 3) Adivic Technology Co. 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
	March 12, 2014
	2 Years 3 Years 4 Years 38.75% 40.09% 40.40% 1.18% 1.24% 1.30% - - - 5 years 5.5 years 6 years

• 4) The Group used the fair value of stock option to calculate the compensation cost for employee stock options granted on March 12, 2014.

Vested Period Fair value of options (NT$ per share)	Grant Date
	March 12, 2014
	2 Years 3 Years 4 Years $2.27 $2.52 $2.69

Adivic Technology Co. recognized compensation cost of $323 thousand and $691 thousand for the years ended December 31, 2016 and 2015, respectively.

28. BUSINESS COMBINATION

• a. Subsidiary acquired

The Group bought 60% equity interest of Quantel Private Ltd. (“Quantel”) in April 2016. The Board of Directors resolved to participate in the capital increase of EVT Technology Co., Ltd. (“EVT”), which was originally recorded as financial asset carried at cost on June 2, 2015. The Group’s equity interest in EVT Technology Co., Ltd. rose to 53.2% and the Group acquired control over EVT Technology Co., Ltd.; EVT Technology Co., Ltd. was included in the consolidated financial statements since the day the Group acquired control over it.

• 61 -

b. Assets acquired and liabilities assumed at the date of acquisition

b.	Assets acquired and liabilities assumed at the date of acquisition
			EVT and its
		Quantel	Subsidiaries
	Current assets
	Cash (net of bank overdrafts of $16,733 thousand and $0
	thousand, respectively)	$ 20,341	$ 33,897
	Accounts receivable (net of allowance for doubtful accounts of
	$1 thousand and $0 thousand, respectively)	42,177	7,210
	Debt Investments with no active market	9,567	-
	Inventories	13,736	26,241
	Prepayments	-	140
	Other current assets	951	544
	Non-current assets
	Property, plant and equipment, net	40,129	8,131
	Refundable deposits	800	335
	Deferred tax assets	-	11,285
	Current liabilities
	Short-term borrowing	(19,601)	(49,000)
	Notes payable	-	(17)
	Accounts payable	(10,066)	(9,330)
	Other payables	(2,359)	(384)
	Income tax payable	(1,380)	-
	Receipts in advance	-	(90)
	Current portion of long-term borrowings	(6,259)	-
	Other current liabilities	(20)	(409)
	Non-current liabilities
	Long-term borrowings	(11,494)	-
	Deferred tax liabilities	(223)	-
		$ 76,299	$ 28,553
c.	Intangible assets arising on acquisition
			Quantel
	Consideration transferred		$ 76,590
	Plus: Non-controlling interest		30,520
	Less: Fair value of identifiable net assets acquired (refer to Notes 17 and 18)		(76,299)
			$ 30,811
	Goodwill		$ 25,219
	Customer relationships		5,592
			$ 30,811

• d. Net cash inflow (outflow) on acquisition of subsidiaries

Consideration paid in cash Less: Cash and cash equivalent balances acquired	Quantel EVT and its Subsidiaries $ (76,590) $ (23,000) 20,341 33,897 $ (56,249) $ 10,897

• 62 -

• e. Impact of acquisitions on the results of the Group

The results of acquired companies since the acquisition date included in the consolidated statements of comprehensive income were as follows:

Revenue Net Profit (loss)		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 195,293 $ 13,897	2015 $ 1,228 $ (13,435)

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s revenue from operations would have been $11,662,593 thousand, and the income from operations would have been $1,693,206 thousand for the year ended December 31, 2016, and the Group’s revenue from operations would have been $9,693,239 thousand, and the income from operations would have been $1,186,661 thousand for the year ended December 31, 2015. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on January 1 of the acquisition year, nor is it intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Group had Quantel and EVT been acquired at the beginning of the current reporting period, the management:

• 1) Calculated depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements; and

• 2) Calculated borrowing costs on the funding levels, credit ratings and debt/equity position of the Group after the business combination.

29. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group’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.

30. FINANCIAL INSTRUMENTS

Information for Fair Value

• a. Fair value of financial instrument 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.

• 63 -

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

• 1) Fair value hierarchy:

December 31, 2016 Financial assets at FVTPL Domestic listed market securities Equity securities Investment in debt instrument Call and put option of convertible bonds payable Available-for-sale financial assets Domestic listed market securities Equity securities Open-end beneficial certificate December 31, 2015 Financial assets at FVTPL Domestic listed market securities Equity securities Debt securities Available-for-sale financial assets Domestic listed market securities Equity securities Open-end beneficial certificate Financial liability at value through profit or loss	Level 1 $ 7,453 983 - $ 8,436 $ 314,233 2,291,504 $ 2,605,737 $ 7,921 951 $ 8,872 $ 359,543 2,057,476 $ 2,417,019 $ -	Level 2 $ - - 725 $ 725 $ - - $ - $ - - $ - $ - - $ - $ 1,483	Level 3 $ - - - $ - $ - - $ - $ - - $ - $ - - $ - $ -	Total $ 7,453 983 725
				$ 9,161
				$ 314,233 2,291,504
				$ 2,605,737
				$ 7,921 951
				$ 8,872
				$ 359,543 2,057,476
				$ 2,417,019
				$ 1,483

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

• 64 -

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

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

Categories of Financial Instruments

Financial assets Financial assets at fair value through profit or loss Loans and receivables (a) Available-for-sale financial assets (b) Financial liabilities Financial liabilities at fair value through profit or loss Amortized cost (c)	December 31
	2016 2015 $ 9,161 $ 8,872 6,701,119 5,681,793 2,804,386 2,625,419 - 1,483 6,672,482 5,517,051

• a. The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, accounts receivable, other receivable (other current asset) and refundable deposits, and trade and other receivables.

• 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, trade and other payables, bonds issued and guarantee deposits received.

Financial Risk Management Objectives and Strategies

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

The Group 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 Group actively observes the exchange rate information to fully control the foreign currency hedge.

a. Market risk

The Group’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 Group’s exposure to market risks or the manner in which these risks are managed and measured.

• 65 -

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

1) Exchange rate sensitivity analysis

The Group 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 Group used derivative financial instruments (forward exchange contracts) to hedge against adverse risks pertaining to exchange rates. The forward exchange contracts which the Group used were less than six months so they were not subject to hedge accounting.

The carrying values of the Group’s monetary assets and liabilities denominated in nonfunctional currency (including the monetary items denominated in nonfunctional currency and had been excluded from consolidated financial statements) were as follows:

Assets USD JPY RMB EUR HKD Liabilities USD RMB EUR	December 31
	2016 2015 $ 3,330,406 $ 2,720,899 168,499 111,698 970,216 889,238 108,760 53,300 927 18,136 1,482,824 1,029,054 270,634 405,923 2,780 -

Foreign currency sensitivity analysis

The Group 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 $141,129 thousand and $117,915 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 Group is exposed to interest rate risk because entities in the Group borrowed funds both at fixed and floated interest rates. The Group evaluates hedging activities regularly to align with interest rate views and defined risk appetite and ensures that the most cost-effective hedging strategies are applied.

• 66 -

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 $ 753,729 $ 838,441 1,765,437 2,133,726 2,768,557 2,191,155 2,011,810 1,339,793

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.

If interest rates been 50 basis points higher/lower and all other variables been held constant, the Group’s pre-tax profit for the years ended December 31, 2016 and 2015 would decreased/increased by $3,784 thousand and $4,257 thousand, respectively. These pre-tax profit changes would be mainly due to the Group’s exposure to interest rates on its variable rate deposits and bank loans.

3) Price risk

The Group is exposed to equity price risks arising from the following:

• a) 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 Group does not actively trade these investments.

• b) Financial assets at fair value through profit or loss (mainly investment in open-end beneficial certificates and listed stocks in Taiwan)

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

Price sensitivity analysis

Had equity prices been 5% higher/lower, the income before tax would have increased/decreased by $422 thousand and $444 thousand as a result of the changes in fair values of financial assets held by the Group for trading purposes for the years ended December 31, 2016 and 2015, respectively; and other comprehensive income would have increased/decreased by $130,287 thousand and $120,851 thousand because of changes in fair values of available-for-sale financial assets held by the Group for the years ended December 31, 2016 and 2015, respectively.

• 67 -

b. Credit risk

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

Except for the major customers of the Group, Company A and Company B, the Group does not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities.

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

• c. Liquidity risk

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

Bank loans are a significant source of the Group’s liquidity risk. As of December 31, 2016 and 2015, the Group’s unused bank credit lines in bank were $3,332,475 thousand and $3,505,123 thousand, respectively.

Liquidity and interest risk tables

The following tables detail the Group’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 Group can be required to pay.

The bank loans are listed on the earliest date on which the Group 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.

• 68 -

Nonderivative financial liabilities Notes payable (including related parties) Accounts payable (including related parties) Dividends payable Other payable Unsecured convertible bonds Fixed interest rate instruments Floating interest rate instruments Nonderivative financial liabilities Notes payable (including related parties) Accounts payable (including related parties) Dividends payable Other payable Unsecured convertible bonds Fixed interest rate instruments Floating interest rate instruments	December 31, 2016
	Within 1 Year Over 1 Year to 5 Years $ 58,106 $ - 1,988,042 - 4,838 - 848,232 - - 1,450,500 211,758 138,855 829,937 1,216,579 $ 3,940,913 $ 2,805,934 December 31, 2015	More Than 5 Years $ - - - - - 40,023 - $ 40,023
	Within 1 Year Over 1 Year to 5 Years $ 22,484 $ - 1,354,570 - 2,298 - 665,640 - - 1,854,100 233,620 124,095 122,945 1,258,831 $ 2,401,557 $ 3,237,026	More Than 5 Years $ - - - - - 33,079 - $ 33,079

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

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

31. RELATED-PARTY TRANSACTIONS

a. The related parties and relationships with the Group were as follows:

Related Party Dynascan Technology Corp. (“Dynascan Technology”) Adlink Technology Inc. (“Adlink”) Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”) Dynascan Electronics (Shanghai) Co., Ltd. (“Dynascan Shanghai”) Dynascan Technology Inc. (“Dynascan USA”) Dynascan Japan Inc. Mou Kuan Industry Co., Ltd. (“Mou Kuan”)	Relationship with the Group
	Associate Associate Joint venture Associate Associate Associate Other related party

• 69 -

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and its related parties are disclosed below.

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

b. Sales Associates c. Purchase Associates Other related parties		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 19,056 $ 35,600 9,525 $ 45,125	2015 $ 19,363 $ 20,721 37,932 $ 58,653

d. The balances of accounts receivable at balance sheet date were as follows:

Associates Outstanding trade receivables from related parties are unsecured.		December 31	December 31
		2016 $ 7,890	2015 $ 11,650

• e. The balances of notes payable at the balance sheet date were as follows:

Other related parties		December 31	December 31
		2016 $ 2,595	2015 $ 3,311

• f. The balances of accounts payable at balance sheet date were as follows:

Associates Other related parties		December 31	December 31
		2016 $ 11,753 60 $ 11,813	2015 $ 5,789 - $ 5,789

The outstanding trade payables from related parties are unsecured.

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g. Others

1) Rental income Associates Other related parties 2) Rental cost Other related parties		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 1,260 - $ 1,260 $ 12,600	2015 $ 1,260 218 $ 1,478 $ -

• 3) The balances of other current assets - other at balance sheet date were as follows:

Associates		December 31	December 31
		2016 $ 552	2015 $ 136

• h. Compensation of key management personnel

The remunerations of directors and other members of key management personnel for the years ended December 31, 2016 and 2015 and were as follows:

Short-term employee benefits Post-employment benefits		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 116,282 2,096 $ 118,378	2015 $ 86,891 2,022 $ 88,913

The remuneration of directors and key executives is determined by the remuneration committee on the basis of the performance of individuals and market trends.

32. ASSETS PLEDGED

The assets pledged as collaterals for bank loans and for product warranty were as follows:

Property, plant and equipment, net Used bank loans Unused bank loans Debt investments with no active market Restricted time deposit		December 31	December 31
		2016 $ 359,796 715,395 5,078 1,000 $ 1,081,269	2015 $ 293,492 723,040 - 14,985 $ 1,031,517

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33. OTHER 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 installments $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 over 50% percent of all industrial land and register with the authorities to go into operation.

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.

• 72 -

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY

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

Financial assets Monetary items USD JPY RMB EUR HKD Financial liabilities Monetary items USD RMB EUR	December 31	December 31
	2016 Foreign Currencies Exchange Rate (In Thousands) (Note) $ 103,269 32.250 610,502 0.276 210,140 4.617 3,208 33.900 223 4.158 45,979 32.250 58,617 4.617 82 33.900	2015
		Foreign Currencies Exchange Rate (In Thousands) (Note) $ 82,891 32.825 409,149 0.273 178,026 4.995 1,486 35.88 4,282 4.235 31,350 32.825 81,266 4.955 - -

• Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

For the years ended December 31, 2016 and 2015, (realized and unrealized) net foreign exchange (losses) gains were $(110,497) thousand and $61,260 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.

35. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for the Group 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).

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

• 73 -

• 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. Information about derivative instrument transactions: Note 7.

• j. Others: Business relationships and significant intercompany transactions: Table 9 (attached).

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

• l. 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: None.

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

  • 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.

36. SEGMENT INFORMATION

The information provided to the Group’s chief operating decision maker to allocate resources to the segments and assess their performance focuses on types of products delivered or services provided. The Group’s reportable segments are as follows:

• a. Special materials department.

• b. Test instrument department.

• c. Automatic equipment department.

• 74 -

d. Other

1) Segment revenues and results

For the year ended December 31, 2016 Revenues from external customers Intersegment revenues Segment revenues Consolidated revenues Segment income Share of profits of associates accounted for using the equity method Rental income Interest income Dividend income Gain on disposal of property, plant and equipment, net Gain on disposal of investments, net Exchange loss, net Valuation loss on financial assets (liabilities) at fair value through profit or loss, net Other revenue and expense, net Financial cost Operating income before tax For the year ended December 31, 2015 Revenues from external customers Intersegment revenues Segment revenues Consolidated revenues Segment income Share of profits of associates accounted for using the equity method Rental income Interest income Dividend income Gain on disposal of property, plant and equipment, net Impairment losses on financial assets Gain on disposal of investments, net Exchange gain, net Valuation loss on financial assets (liabilities) at fair value through profit or loss, net Other revenue and expense, net Interest expense Operating income before tax	Special Materials Department $ 2,269,057 - $ 2,269,057 $ 58,350 $ 2,328,151 - $ 2,328,151 $ 58,639	Test Instrument Department $ 8,587,377 5,690,600 $ 14,277,977 $ 1,944,817 $ 5,666,173 3,539,092 $ 9,205,265 $ 973,445	Automatic Equipment Department $ 382,288 325,332 $ 707,620 $ 75,074 $ 1,260,831 90,468 $ 1,351,299 $ 258,246	Other $ 385,647 7,495 $ 393,142 $ (115,729) $ 437,210 5,723 $ 442,933 $ (125,825)	Elimination $ - (6,023,427) $ (6,023,427) $ 50,669 $ - (3,635,283) $ (3,635,283) $ 55,494	Total $ 11,624,369 - 11,624,369 $ 11,624,369 $ 2,013,181 61,979 22,487 19,323 52,101 1,126 2,442 (110,497 ) 2,219 19,748 (42,052) $ 2,042,057 $ 9,692,365 - 9,692,365 $ 9,692,365 $ 1,219,999 76,166 26,538 28,503 35,620 3,605 (14,674 ) 381 61,260 (322 ) 84,590 (38,994) $ 1,482,672

The sales between segments are based on fair value.

The above revenues were generated through transactions with external customers and among segments. The intersegment revenues for the years ended December 31, 2016 and 2015 had been adjusted and eliminated from the consolidated financial statements.

Segment operating income refers to profits earned by each segment, excluding remuneration to directors, share of profits or loss of associates and joint venture, gain (loss) on disposal of investment, rental income, interest income, gain (loss) on disposal and retirement of property, plant and equipment, gain (loss) on disposal of investment, foreign exchange gain (loss), valuation gain (loss) on financial instrument and interest expense. This is the measure reported to the Group’s chief operating decision maker to allocate resources to each segment and evaluate its performance.

• 75 -

2) Segment assets

Segment assets Special materials department Test instrument department Automatic equipment department Other Adjustments and eliminations Total segment assets Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Investment in bonds with no active market Available-for-sale financial assets - non-current Financial assets carried at cost - non-current Investments accounted for using the equity method Prepayments for investments Deferred tax assets Total segment assets Segment liabilities Special material departments Test instrument departments Automatic equipment department Other Adjustments and eliminations Total segment liabilities Short-term borrowings Financial liabilities at fair value through profit or loss - current Long-term borrowings and current portion of long-term liabilities Bonds payable Deferred income tax liabilities Consolidated total liabilities		December 31	December 31
		2016 $ 1,004,283 15,208,838 956,187 544,420 (3,154,573) 14,559,155 9,161 2,291,504 378,515 314,233 198,649 641,497 20,000 220,064 $ 18,632,778 $ 739,152 5,163,648 448,542 268,292 (2,739,124) 3,880,510 196,705 - 2,183,402 1,397,140 187,170 $ 7,844,927	2015 $ 958,336 11,904,615 1,052,305 641,493 (2,400,349) 12,156,400 8,872 2,057,476 559,958 359,543 208,400 553,139 - 156,651 $ 16,060,439 $ 694,925 3,454,229 505,502 318,419 (2,042,761) 2,930,314 301,303 1,483 1,414,123 1,758,093 123,827 $ 6,529,143

For the purpose of monitoring segment performance and allocating resources between segments:

• a) All assets were allocated to reportable segments other than interests in associates accounted for using the equity method, other financial assets, and current and deferred tax assets. Goodwill was allocated to reportable segments. Assets used jointly by reportable segments were allocated on the basis of the revenues earned by individual reportable segments; and

• b) All liabilities were allocated to reportable segments other than borrowings, other financial liabilities, current and deferred tax liabilities. Liabilities for which reportable segments are jointly liable were allocated in proportion to segment assets.

• 76 -

3) Revenue from major product

The following is an analysis of the Group’s revenue from continuing operations from its major products and services:

Special material equipment Test instrument equipment Automatic equipment		December 31	December 31
		2016 $ 2,269,057 8,587,377 382,288 $ 11,238,722	2015 $ 2,328,151 5,666,173 1,260,831 $ 9,255,155

4) Geographical information

The Group operates in three principal geographical areas - Republic of China, other Asia countries, and other.

The Group’s revenue from continuing operations from external customers and information on its non-current assets by geographical location are shown below.

Republic of China Asia Other		Revenue from External Customers	Revenue from External Customers		Non-current Assets	Non-current Assets
		December 31			December 31
		2016 $ 5,956,132 3,823,634 1,844,603 $ 11,624,369	2015 $ 5,542,291 2,423,594 1,726,480 $ 9,692,365		2016 $ 5,179,471 469,353 376,819 $ 6,025,643	2015 $ 4,298,284 457,730 394,092 $ 5,150,106

Non-current assets exclude non-current assets classified as financial instruments, investments accounted for using the equity method, and deferred tax assets.

5) Information about major customers

There were no revenue from any individual customer exceeded 10% of the Group’s revenue for the years ended December 31, 2016 and 2015.

• 77 -

Financing Company’s Financing Amount Limits	Financing Company’s Financing Amount Limits	$ 2,123,325 (Note 2) 2,123,325 (Note 2)	90,873 (Note 4)	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.
Financing Limit for Each Borrowing Company		$ 1,061,663 (Note 1) 1,061,663 (Note 1)	45,437 (Note 3)	175,882 (Note 5)
Collateral	Value	$ - -	-	-
	Item	- -	-	-
	Allowance for Bad Debt	$ - -	-	-
	Reasons for Short-term Financing	- -	-	Purchase for PPE
	Transaction Amounts	$ 318,408 119,884	38,948	-
	Financing Provided (Note 7)	a a	a	b
	Interest Rate	3.25% -	-	2.6%
	Balance Used	$ 125,341 36,533	-	-
	Ending Balance	$ 125,341 40,847	15,421	-
	Maximum Balance for the Period	$ 125,341 42,414	15,421	3,694
	Related Parties	Y Y	Y	Y
	Financial Statement Account	Other receivable Other receivable	Other receivable	Other receivable
	Counterparty	Chroma Systems Solutions Inc. Chroma Japan Corp.	Chroma Ate (Suzhou) Ltd.	Chroma (Shanghai) Trading Co., Ltd.
	Financing Company Name	Chroma Ate Inc. (the “Corporation”)	Chroma Electronics (Shenzhen) Co., Ltd.	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.
	No.	0	1	2

ENDORSEMENT/GUARANTEE PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars or Foreign Currency, Unless Stated Otherwise)			Endorsed/ Guaranteed to Investees in Mainland China	- - -	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.
			Endorsed/ Guaranteed to Parent Company by Subsidiaries	- - -
			Endorsed/ Guaranteed to Subsidiaries by Parent Company	Y Y Y
			Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	$ 3,184,988 3,184,988 3,184,988
		Ratio of	Accumulated Amount of Collateral to Net Equity Shown in the Latest Financial Statements	0.61% 0.32% 0.42%
			Value of Collateral	$ - - -
			Amount of Guarantee Actually Used	$ 64,500 22,080 -
			Ending Balance	$ 64,500 34,100 44,580
			Highest Amount of Guarantee Provided for the Year	$ 129,000 34,100 44,580
			Limits on Each Counter-party’s Endorsement/ Guarantee Amount (Note 1)	$ 1,592,494 1,592,494 1,592,494
		Counterparty	Nature of Relationship	Subsidiary Subsidiary Subsidiary
			Name	Chroma USA Chroma Japan Corp. Quantel Private Ltd.
			Endorsement/ Guarantee Provider	Chroma Ate Inc.
			No.	0

	Note	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.
December31, 2016	Market Value or Net Asset Value	$ 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 -
	Percentage of Ownership	- - - - - - - 6.1 - - 4.6 4.4 9.7 1.9 1.4 - - - - - - - - - 10.3 1.5 5.1 - 19.0
	Carrying Value	$ 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
	Shares/Units (Thousands)	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 -
	Financial Statement Account	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 - 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 Financial assets carried at cost - non-current
Relationship with the Holding Company		- - - - - - - - - - - - - - - - - - - - - - - The Corporation - - - - -
Marketable Securities Type and Issuer		Fund The RSIT Enhanced Money Market Fund Paradigm Pion Money Market Fund Yuanta Wan Tai Money Market Fund Fuh Hwa You Li Money Market Fund Cathay Taiwan Money Market Fund Mega Diamond Money Market Fund Union Money Market Fund 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 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.
Holding Company Name		Chroma Ate Inc. (the “Corporation”) Chroma New Material Corp. Chroma Investment Co., Ltd. Adivic Technology Co. Chen Hwa Technology Inc.

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COST OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		Other Terms	Other Terms	Note
		Purpose of Acquisition		Manufacturing, R&D, operating and building employee dormitories
		Price	Reference	Public bidding
		PriorTransaction ofRelated Counter-party	Amount	$ -
			Transfer Date	-
			Relationship	-
			Owner	-
		Nature of	Relationship	-
		Counter-party		Ministry of the Interior, Republic of China
		Payment Term		Based on a contract; third installment had been paid.
		Transaction Amount		$ 875,716
		Transaction Date		2016.07.25
		Type of Property		Construction in progress and prepayments for equipment.
		Company Name		Chroma Ate Inc.

FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		Note	Note	- - - - - - - - - - - - - - - - - -
		Notes/Accounts Receivable (Payable)	% to Total	29 (100) 9 (100) 7 (100) 3 (100) 5 (100) 4 (100) 5 (100) 1 (100) (5) 32
			Ending Balance	$ 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
		Abnormal Transaction	Payment Terms	- - Note Note 1 - - - - - - Note Note - - - - - -
			Unit Price	- - - - - - - - - - - - - - - - - -
		Transaction Details	Payment Terms	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
			% to Total	(34) 100 (7) 100 (4) 100 (4) 100 (3) 100 (3) 100 (2) 100 (2) 100 9 (50)
			Amount	$ (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)
			Purchase (Sale)	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase Purchase (Sale)
		Nature of	Relationship	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
		Related Party		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. Chroma Ate Inc. (the “Corporation”)
		Company Name		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.

Allowance for Bad Debts	Allowance for Bad Debts	$ - - - - - - - -	Note: The amounts had been accrued as of February 21, 2017.
Amount Received in	Subsequent Period (Note)	$ 307,072 83,283 16,837 57,297 62,126 - 9,597 -
Overdue	Action Taken	- - - - - - - -
	Amount	$ - - - - - - - -
	Turnover Rate	5.65 1.88 0.34 2.74 2.26 - 1.06 -
	Ending Balance	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
Nature of Relationship		Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary
Related Party		Neworld Electronics Ltd. Chroma Ate Inc. (USA) Testar Electronic Corporation Chroma Ate Europe B.V. Chroma System Solutions Inc. Chroma Japan Corp.
Company Name		Chroma Ate Inc. (the “Corporation”)

FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		Note	Note	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
		Investment Gain (Loss)		$ 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
		Net Income (Loss) of the Investee		$ 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)
		Balanceas of December 31, 2016	Carrying Value	$ 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)
			Percentage of Ownership	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
			Shares (Thousands)	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
		Investment Amount	December 31, 2015	$ 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
			December 31, 2016	$ 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
			Main Businesses and Products	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
			Location	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
			Investee	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
			Investor	Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) San Eagle Development Corp. EVT Technology Co., Ltd. Advic Technology Co., Ltd.

Accumulated Inward Remittance of Earnings as of December 31, 2016	Accumulated Inward Remittance of Earnings as of December 31, 2016	$ - - - - - - - - -
	Carrying Value as of December 31, 2016 (Note 2)	$ 454,207 67,900 90,042 9,191 172,118 217,623 253,001 47,311 49,020
	Investment Gain (Loss) (Notes 4 and 5)	$ 63,973 13,732 (1,266) - 21,976 (1,949) (11,177) 984 7,569
	Percentage of Ownership in Investment	100 100 100 19 100 100 100 100 100
	Net Income (Loss) of the Investee	$ 63,973 13,732 (1,266) 20,608 21,976 (1,949) (11,177) 984 7,569
Accumulated	Outflow of Investment from Taiwan as of December 31, 2016 (Note 3)	$ 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)
Investment Flows	Inflow	$ - - - - - - - - -
	Outflow	$ - - - - - - - - -
				Upper Limit on Investment	$6,369,976 (Note 7)
Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (Note 3)		$ 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)
Method of Investment (Note 1)		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.
Total Amount of Paid-in Capital (Note 2)		$ 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)		Investment Amounts Authorized by the Investment Commission, MOEA	$695,162 (HK$1,400, US$21,086) (Note 6)
Main Businesses and Products		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
				Accumulated Investment in Mainland China as of December 31, 2016	$635,051 (HK$1,200, US$19,312)
Investee Company		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.

a. Direct investment in mainland China.	b. Indirect investment in the Company of Mainland China through a third place.	c. Other	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 vailing on December 31, 2016.	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.	Based on audited financial statements.	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$4.849 for the year ended December 31, 2016.		Approval Letter Approved Amount	a. Letter (1998) II-87710585 of Investment Commission of MOEA NT$ 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)	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.	Chroma Ate Inc. invested accounts receivable amounting to US$853 thousand in Chroma Electronics (Shenzhen) Co., Ltd. through Neworld Electronics Ltd.	The investment in Sajet Technology Inc. (liquidated on September 15, 2008) was authorized by the Investment Commission in 2004.
			Note 2:	Note 3:	Note 4:	Note 5:	Note 6:																																		Note 7:	Note 8:	Note 9:

Percentage to Consolidated Total Operating Revenues or Total Assets	Percentage to Consolidated Total Operating Revenues or Total Assets	21 4 3 3 2 2 1 1 1 - - 3 - - - - - - - - - - - - - - - - - - - - - - - -	(Continued)
Transaction Details	Transaction Terms	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms
	Amount	$ 2,495,216 503,795 318,408 296,132 238,759 183,621 119,884 110,939 67,929 44,923 158 313,453 27,482 14,751 4,978 796 559 344 204 141 72 66 14,042 672 403 32,461 5,557 645 4,504 3,283 166 23 3,333 3,063 2,522 2,173
	Account	Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Rental income Rental income Rental income Commissions expense Commissions expense Commissions expense Commissions expense Commissions expense Commissions expense Rental cost Operating expense Operating expense Operating expense Operating expense
	Flow of Transactions (Note 1)	a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a
	Counterparty	Neworld Electronics Ltd. Chroma USA Chroma Systems Solutions Inc. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Europe Chroma Ate (Suzhou) Ltd. Chroma Japan Quantel Private Ltd. Chroma Electronics (Shanghai) Co., Ltd. Testar Electronic Co. EVT Technology Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Testar Electronic Co. Chroma Ate Europe B.V. Adivic Technology Co. Neworld Electronics Ltd. Chroma Systems Solutions Inc. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Japan Testar Electronic Co. Chroma New Material Corporation EVT Technology Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Quantel Private Ltd. Chroma Systems Solutions Inc. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Testar Electronic Co. Quantel Private Ltd. Chroma USA
	Company Name	Chroma Ate. Inc. (the “Corporation”)
	Number	0

Percentage to Consolidated Total Operating Revenues or Total Assets	Percentage to Consolidated Total Operating Revenues or Total Assets	- - - - - - - - - - 4 1 1 1 1 1 - - - - - - - 1 - - - - - - - - - - - - - - - - - - - - - - -	(Continued)
Transaction Details	Transaction Terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Note 3 Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms
	Amount	$ 771 211 4,071 14,146 6,000 600 337 9 3 354 672,460 208,527 154,742 124,435 122,469 119,209 92,500 65,194 33,567 3,101 166 675 4,838 125,341 36,533 66,542 3,727 1,780 106 53,261 14,646 4,471 455 202 46 33 989 723 384 239 156 75 50 14 2 654 48
	Account	Operating expense Operating expense Interest revenue Non-operating income Non-operating income Non-operating income Non-operating income Non-operating income Non-operating income Notes receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Accounts receivable Interest receivable Dividends receivable Other receivable - financing provided Other receivable - financing provided Other receivable Other receivable Other receivable Other receivable Account payable Account payable Account payable Account payable Account payable Account payable Account payable Accrued expense Accrued expense Accrued expense Accrued expense Accrued expense Accrued expense Accrued expense Accrued expense Accrued expense Receipts in advance Temporary receipts
	Flow of Transactions (Note 1)	a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a
	Counterparty	Wei Kuang Automatic Equipment Co., Ltd. Adivic Technology Co. Chroma Systems Solutions Inc. Neworld Electronics Ltd. Chroma New Material Corporation Testar Electronic Co. Wei Kuang Automatic Equipment Co., Ltd. Chroma Systems Solutions Inc. Chroma Ate Europe B.V. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Chroma USA Chroma Systems Solutions Inc. Testar Electronic Co. Chroma Europe Chroma Japan Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Quantel Private Ltd. Chroma Electronics (Shanghai) Co., Ltd. EVT Technology Co., Ltd. Chroma Systems Solutions Inc. Chroma Systems Solutions Inc. Chroma Systems Solutions Inc. Chroma Japan Testar Electronic Co. Neworld Electronics Ltd. Chroma New Material Corporation EVT Technology Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma USA Adivic Technology Co. Chroma Systems Solutions Inc. Chroma Japan Chroma Ate Europe B.V. Testar Electronic Co. Chroma USA Chroma Electronics (Shanghai) Co., Ltd. Quantel Private Ltd. Chroma Japan Adivic Technology Co. Chroma Ate (Suzhou) Ltd. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Chroma USA Chroma Ate Europe B.V.
	Company Name
	Number

Percentage to Consolidated Total Operating Revenues or Total Assets	Percentage to Consolidated Total Operating Revenues or Total Assets	- - - - - - - - - -	- - -	7 1 - - - 1 - - - 2 - - 1 1 - - - - 1	- - - - - - - - - - -	(Continued)
Transaction Details	Transaction Terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms
	Amount	$ 16,180 3,651 145 1,633 444 11,584 3,559 53 9,675 431	48 9 8	801,605 123,405 53,859 3,094 116 62,346 56,983 19,041 369 282,743 36,944 14,514 119,686 121,826 2,465 5,486 2,213 705 121,889	38,948 7,176 553 1,159 3,737 92 2,511 291 2,859 811 59
	Account	Operating revenue Operating revenue Operating revenue Operating costs Operating costs Accounts receivable Accounts receivable Accounts receivable Dividends receivable Account payable	Operating revenue Operating revenue Accounts receivable	Operating revenue Operating revenue Operating revenue Operating costs Operating costs Commissions expense Commissions expense Commissions expense Commissions expense Accounts receivable Accounts receivable Accounts receivable Other receivable Prepayments Account payable Other payable Other payable Other payable Receipts in advance	Operating revenue Operating revenue Operating revenue Operating revenue Operating costs Operating costs Rent expense Rent expense Commissions expense Commissions expense Commissions expense
	Flow of Transactions (Note 1)	b b b b b b b b a b	b b b	a b a b a b a a b a b a a b b b a a b	b b b b b b b b b b b
	Counterparty	Advic Holding Corp. Chroma Japan Testar Electronic Co. Quantel Private Ltd. Adivic Technology Co. Advic Holding Corp. Chroma Japan Testar Electronic Co. Chroma Systems Solutions Inc. Adivic Technology Co.	Quantel Private Ltd. Chroma Ate Europe B.V. Chroma Ate Europe B.V.	Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Adivic Technology Co. Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Sensational Chroma Electronics (Shanghai) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Chroma Ate (Suzhou) Ltd.
	Company Name	Chroma USA	Chroma Systems Solutions Inc.	Neworld Electronics Ltd.	Chroma Electronics (Shenzhen) Co., Ltd.
	Number	1	2	3	4

Percentage to Consolidated Total Operating Revenues or Total Assets	Percentage to Consolidated Total Operating Revenues or Total Assets	- - - - - -	- - - - -	- - - - - - - - - - - -	- - - - - - - -	- - - -	-	- -	(Continued)
Transaction Details	Transaction Terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms Based on regular terms Based on regular terms Based on regular terms	Based on regular terms	Based on regular terms Based on regular terms
	Amount	$ 43,352 7,479 2 2,468 2,576 997	6,107 11,432 275 997 10,711	1,869 31 3,322 1,577 236 58 5,396 2,082 2 355 179 16,206	1,606 390 595 76 566 417 313 76	56 526 6 531	1,219	107 83
	Account	Accounts receivable Accounts receivable Accounts receivable Other receivable Account payable Account payable	Operating revenue Operating costs Commissions expense Accounts receivable Account payable	Operating revenue Operating revenue Operating costs Operating costs Operating costs Operating costs Operating expense Accounts receivable Accounts receivable Account payable Account payable Receipts in advance	Operating revenue Operating revenue Operating costs Operating costs Operating expense Accounts receivable Account payable Account payable	Operating revenue Commissions expense Accounts receivable Account payable	Accounts receivable	Operating revenue Accounts receivable
	Flow of Transactions (Note 1)	b b b b b b	b b b b b	b b b b b b b b b b b b	b b b b b b b b	b b b b	a	b b
	Counterparty	Chroma Ate (Suzhou) Ltd. Chroma Electronics (Shanghai) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Ate (Suzhou) Ltd.	Chroma Ate (Suzhou) Ltd. Chroma Ate (Suzhou) Ltd. Sajet System Technology (Suzhou) Co., Ltd. Chroma Ate (Suzhou) Ltd. Chroma Ate (Suzhou) Ltd.	Chroma Ate (Suzhou) Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma Ate (Suzhou) Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	Mou Kuan Technologies (Nanjin) Co., Ltd. Chroma Ate (Suzhou) Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd.	Chroma Japan Sajet System Technology (Suzhou) Co., Ltd. Chroma Japan Sajet System Technology (Suzhou) Co., Ltd.	Wei Da Electric Vehicle Co., Ltd.	Chroma Japan Chroma Japan
	Company Name		Chroma Electronics (Shanghai) Co., Ltd.	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	Chroma Ate (Suzhou) Ltd.	EVT Technology Co., Ltd.	Testar Electronic Co.
	Number		5	6	7	8	9	10