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CHROMA Annual Report 2015

Jun 15, 2016

52029_rns_2016-06-15_90edcf5b-aa83-4387-b76e-5f0d1ec87f3b.pdf

Annual Report

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  1. Spokesperson of Chroma ATE Inc.

Name: Paul Ying

Position: Deputy General Manager - Finance & Administration Center

TEL: (03)327-9999 ext. 2001

Email: [email protected]

Deputy spokesperson of Chroma ATE Inc.

Name: Jennifer Chien

  • Position: Deputy director

TEL: (03)327-9999 ext. 2701

Email: [email protected]

  1. Addresses and telephone numbers of company headquarters and subsidiaries:

Company HQ address: No. 66, Huaya 1st Road, Guishan District, Taoyuan City 33383

TEL: (03)327-9999

Factory address: No. 68, Huaya 1st Road, Guishan District, Taoyuan City 33383

TEL: (03)327-9999

6F, No. 5, Technology Rd., Science Park, Hsinchu City 30078, Taiwan

TEL: (03)563-5788

Kaohsiung subsidiary address: No. 1, Beineihuan East Road, Nanzi District, Kaohsiung City 81170 TEL: (07)365-6188

  1. Stock transfer agent

Name: Share Administration Agency, Taishin International Bank

Address: B1, No. 96, Section 1, Jianguo North Road, Taipei City 10499 Website: http://www.taishinbank.com.tw

TEL: (02)2504-8125

  1. Certified Public Accountant (CPA) for the most recent financial report

Name: CPA Yi-Wen, Wang and CPA Wen-Chi, Kuo

Name of accounting firm: Deloitte and Touche

Address: 12F, 156 Min Sheng East Road, Sec. 3, Taipei, 10596, Taiwan

Website: http://www.deloitte.com.tw

TEL: (02)2545-9988

  1. Name of any overseas securities trading agency and search name in the said overseas securities trading agency: None

  2. Company website: http://www.chromaate.com

Critical financial indicators (integrated)

Unit: NT$ million

2013 2014 2015
Consolidated net operating revenues 10171 10307 9692
Net income 1205 1318 1237
Earnings per share (NT$) 3.21 3.51 3.28
Capital stock 3768 3788 3792
Total assets 12770 14970 16060
Total equity 8697 9373 9531
Return on total assets 10.11 9.69 8.18
Return on total equity 14.73 14.80 13.25

Consolidated revenue for the 5 most recent years

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15000 14148
14000
13000
11644
12000
11000 10171 [10307 ]
9692
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2011 2012 2013 2014 2015
Unit: million NT$
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Net income after tax for the 5 most recent years

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1900
1800
1700
1600 1523
1500
14001300 1205 1318 1237
1200
1100 945
1000
900
800
700
600
500
400
300
200
100
0
2011 2012 2013 2014 2015
Unit: million NT$
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Earnings per share for the 5 most recent years

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5.5
5.0
4.5
4.06
4.0
3.5 3.21 3.51 3.28
3.0
2.46
2.5
2.0
1.5
1.0
0.5
0.0
2011 2012 2013 2014 2015
Unit: NT$
----- End of picture text -----

Table of Contents

I. Letter to Shareholders ................................................................................................ 1

II. Company Introduction

  1. Date of founding ..................................................................................................................... 2 2. Company history ..................................................................................................................... 2 III. Corporate Governance Report 1. Organization ............................................................................................................................ 4 2. Board of directors, supervisors, general manager, deputy general managers, assistant managers, and directors of various departments and subsidiary agencies .......................... 6 3. Implementation of corporate governance ............................................................................. 17 4. Accounting expenses............................................................................................................. 38 5. Replacement of accountants.................................................................................................. 39 6. Company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise ............................................ 39 7. Equity transfer or changes to equity pledge of directors, supervisors, managerial officers, or shareholders holding more than 10% of company shares in the most recent year through the publication date of this report ..................................................... 39 8. Relationship information, if among the 10 largest shareholders anyone is a related party or is the spouse or a relative within the second degree of kinship of another. ...... 41 9. Number of shares held and percentage of stake of investment in other companies by the company, the company’s director, supervisor, managerial officer, or an entity directly or indirectly controlled by the company .............................................................. 43

IV. Financing 1. Capital and shares ................................................................................................................. 44 2. Corporate bond ...................................................................................................................... 50 3. Preferred shares ..................................................................................................................... 51 4. Overseas depositary receipt .................................................................................................. 51 5. Employee stock warrant ........................................................................................................ 51 6. New restricted employee shares ............................................................................................ 53 7. Issuance of new shares in connection with the merger or acquisition of other companies .. 53 8. Implementation of capital application plan ........................................................................... 53 V. Operation Summary

  1. Business content .................................................................................................................... 55 2. Market, production, and sales ............................................................................................... 64 3. Information of employees for the most recent 2 years through the date of the publication of this report ................................................................................................... 71 4. Environmental protection expenditures ................................................................................ 71 5. Labor relations ...................................................................................................................... 72 6. Important contracts ............................................................................................................... 73

VI. Financial Summary

  1. Condensed balance sheet and statement of comprehensive income for the most recent 5 years .................................................................................................................... 74 2. Financial analysis for the most recent 5 years ...................................................................... 80 3. Audit reports from supervisors of the financial report from the most recent year ................ 86 4. Financial report from the most recent year ........................................................................... 87 5. Company-only financial report audited and attested by a CPA from the most recent year .................................................................................................................................... 87 6. Financial condition of the company and affiliated businesses .............................................. 87

VII. Review, Analysis, and Risks of Financial Conditions and Performance

  1. Financial condition ................................................................................................................ 88 2. Financial performance ........................................................................................................... 89 3. Cash flow .............................................................................................................................. 90 4. Material expenditures of the most recent year and impact on the company's finances and operations ................................................................................................................... 90 5. Policy on investment in other companies, main reasons for profit / loss resulting therefrom, improvement plan, and investment plans for the upcoming fiscal year .......... 90 6. Risk analysis and assessment of the most recent year through the publication date of this report .......................................................................................................................... 92 7. Other important issues .......................................................................................................... 96

VIII. Special Items to Be Included

  1. Affiliated businesses ............................................................................................................. 97 2. Private placement of securities of the most recent year through the publication date of this report .................................................................................................................... 103 3. Holding or disposition of company shares of the most recent year through the publication date of this report ......................................................................................... 103 4. Other items that must be included....................................................................................... 103 5. Any event that results in substantial impact upon the shareholders’ equity or prices of the company’s securities as prescribed by Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act that have occurred in the most recent year through the publication date of this report ................................................................................. . 103

I. Letter to Shareholders

Business results

The performance of the global economy remained poor in 2015. The Chinese economy, which primarily focused upon manufacturing, also experienced significant slowing of growth. Excessive production capacity also led to significant reduction in capital expenditures, which inevitably impacted this company’s revenue. Last year’s revenue amounted to NT$ 4.539 billion, whereas group revenue amounted to NT$ 9.692 billion, providing net income after taxes (NIAT) of NT$ 1.237 billion and earnings per share (EPS) of NT$ 3.28. Relative to 2014, company revenue experienced negative growth of 12%, group revenue experienced negative growth of 6%, and NIAT experienced negative growth of 6%.

Relative to last year, company revenue shrank 12%. Revenue from Turnkey Solutions dropped 43% owing to oversupply of production capacity and slowdown of expansions to production capacity. Slow growth for IT-related products also led to acceleration of mergers and acquisitions in the semiconductor industry. Production capacity grew slowly, reducing this company’s revenue from semiconductor testing equipment by 30%. Demands for Clean Tech industries such as electric vehicles, lithium batteries for locomotion, and cloud servers remained strong, allowing stable growth of 4% for the sales of this company’s precision electronic measurement instruments and system products. The following lists other consolidated financial figures:

Analysis of financial income, expenditure, and profitability

Item 2015 2014
Capital Structure
Analysis		 Liabilityto asset ratio(%) 40.65 37.39
Proportion of long-term fund in
property, plant,and equipment(%)		 467.83 445.98
Liquidity Analysis Current ratio(%) 309.47 319.94
Quick ratio(%) 248.58 258.74
Profitability
Analysis		 Return on total assets(%) 8.18 9.69
Return on total equity (%) 13.25 14.80
Net Profit Margin (%) 12.76 12.79

Business plan, development strategies, external competition and environment, legal environment, and general business environment

The global economy still includes a great deal of uncertainties, and market forecasts remain unpredictable. However, the threat of global warming has continued to grow. Energy saving and carbon reduction measures have become global goals. Hence, accelerated development of related industries such as electric vehicles and alternative energy has become an inevitable trend. This company shall take advantage of this situation and focus on the following business plans to improve corporate revenue and profitability.

  1. Accelerate the development of instruments, systems, and turnkey solutions needed by new industries.

  2. Strengthen expansions in the European, American, and Japanese markets, and start investing in the Southeast Asian market.

  3. Improve R&D in innovative technologies, achieve lean business management, and provide added value to shareholders.

Finally, we would like to take this opportunity to express our gratitude for the long-term support and encouragement for all our shareholders. Best wishes and good health to you all.

Leo Huang, Chairman & CEO

  • 1 -

II. Company Introduction

1. Date founded: November 8, 1984

2. Company History:

November 1984 Company founded in Taipei City with a capital sum of NT$ 2 million. First indigenously manufactured programmable video signal generator (65 MHz) formally released to the market.

  • November 1986 World’s first automatic testing with simultaneous and parallel testing architecture for switched-mode power supplies was released.

  • February 1993 Invested in Chroma ATE Inc. subsidiary in the United States to provide a US sales location.

  • December 1993 Formal opening and operations of new plant in Wugu. February 1994 Invested in Neworld Electronics Ltd. subsidiary in Hong Kong to provide a location for expanding the Mainland Chinese market.

  • December 1994 Acquired ISO 9002 quality certification. November 1995 Successfully passed the Chinese National Laboratory Accreditation (CNLA).

  • December 1996 Stock market launch of the company’s shares on December 21 for public trading.

  • August 1997 Acquired ISO 9001 quality certification.

  • December 1997 9107 Uninterruptible Power Supply (UPS) and 3203 Memory IC became winners of the 6th Taiwan Excellence Award.

  • April 1998 Received the Outstanding Performance Award during the 6th Industrial Technology Development Award organized by the Ministry of Economic Affairs (MOEA).

  • Invested in DynaScan Technology Corp.

  • July 1998 7100 Color Analyzer achieved the Outstanding Photonics Product Award during the 2nd Photonics Festival in Taiwan.

  • September 1998 Invested in Adlink Technology Inc. December 1998 2225- and 2325-series Video Pattern Generator and 9105 UPS became winners of the 7th Taiwan Excellence Award.

  • May 1999 9105/9107 UPS won the Good Design Award. June 1999 Acquired Hita Technology Co., Ltd. September 1999 Chroma ATE Europe B.V. subsidiary established in the Netherlands to provide a European sales location.

  • November 1999 Formal opening and operations of anew plant in Linkou. June 2000 First issuance of unsecured convertible corporate bonds in Taiwan worth NT$ 1.5 billion.

  • August 2000 Invested in EVT Technology Co., Ltd. January 2001 Absorbed and acquired Zentech Technology Inc. March 2003 Established the Hsinchu Science and Industrial Park (HSP) subsidiary. September 2003 Established the global corporate HQ in Taiwan.

  • 2 -

March 2004 Donated a 360-degree LED display to National Chiao Tung University, the first of its kind in a Taiwanese university.

December 2004 20th Anniversary and completion of the Linkou Operational HQ. June 2005 Expiration and delisting of the 1st unsecured convertible corporate bonds issued in Taiwan.

Spun off Special Material Business Unit and formed a new subsidiary August 2006 Chroma New Material Corp.

  • September 2006 Completion and activation of Chroma ATE Suzhou plant. January 2007 Invested in Wei Kuang Automation (Nanjing) Co., Ltd., Mou Kuan Technologies (Nanjin) Co., Ltd., Sajet Technology Co., Ltd., and MAS Automation Corp.

  • February 2007 Invested in and founded Wei Kuang Automation (Xiamen) Co., Ltd. March 2007 Invested in and founded Testar Electronic Corporation Corp. April 2007 Established the MES business unit (BU). March 2008 Short form merger with subsidiary Silver Town Electronic Co., Ltd. May 2008 Invested and founded Chroma Japan Corp. March 2009 Successfully passed ISO 9001:2008 certification.

  • September 2009 Established the Kaohsiung branch.

  • September 2009 Invested in Chroma Systems Solutions, Inc. to provide a sales location in the US.

  • August 2010 Acquired many prestigious award from Finance Asia as Taiwan’s best managed company, best corporate governance, and best medium-sized enterprise for 2010.

  • October 2010 Successfully passed ISO/TS 16949 certification. August 2011 Acquired Wise Life Technology Co., Ltd. January 2012 Successfully acquired the tender for the industrial development zone (tender A) for Station A7 of the Airport Access MRT.

  • January 2012 High Precision LED Rapid 2D Light and Color Measurement Technology Development Project successfully won the Excellent Industrial Contribution Award at the 2011 Technical Excellence Program of the MOEA.

  • November 2012 Short form merger with subsidiary Nengmao Electronics Co., Ltd.

  • December 2012 Successfully acquired the world’s first SAE J1772 certification from UL for an automated communication protocol testing system.

  • February 2013 Successfully won the 1st Taiwan Mittelstand Award organized by the Industrial Development Bureau, MOEA.

  • February 2013 Invested in Adivic Technology Co. May 2014 Second issuance of unsecured convertible corporate bonds in Taiwan worth NT$ 2 billion.

  • January 2016 Invested in Quantel Pte. Ltd. in Singapore to establish a sales location in in Southeast Asia.

  • 3 -

III. Corporate Governance Report

1. Organization

(1) Organizational structure

CHROMA ATE INC. Organizational Chart

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Shareholders'
meeting
Supervisory
Board
Board of
Directors
Compensation
Internal Auditor
Committee
Chairman
Leo Huang
CEO
Leo Huang
CEO OFFICE
．
Corporate Marketing Dept.
． Chief Technology Officers ． Legal Affairs Dept.
．
Safety ＆ Health Center
Center
Test & Measurement BU
Corporate Manufacturing
Operation Management Center Finance & Administration Center Advanced Technology Research Manufacturing Execution System BU Integrated System Solution BU Semiconductor Test Equipment BU
----- End of picture text -----

  • 4 -

(2) Responsibilities and functions of major departments

Department Responsibilities
General Manager’s Office Establish Corporate Marketing Department, Legal Department, and
Center for Environmental Safety and Health. Formulate
companywide administrative and business objectives, implement
communication and coordination, product planning, new business
development and planning, patent management, contract review,
environmental protection, occupational safety and health (OSH)
management.
Internal Auditor Establish, update, and revise internal audit and control systems.
Review,revise,and audit internal control systems.
Semiconductor Test
Equipment BU		 Responsible for the planning, R&D, and marketing of
semiconductor testingequipment andproducts.
Test & Measurement BU Responsible for the R&D and marketing of measurement
instruments.
Calibration services and operations of calibration labs for
measurement instruments.
Integrated System Solution
BU		 R&D of automated mechatronic systems used for measurement
purposes.
Planning, R&D, and marketing of modular instruments and
products.
Planning,R&D,and marketingof system integration solutions.
MES BU
 R&D and marketingof MES systems.
Corporate Manufacturing Raw material purchasing and production for the entire company.
Planningand maintenance ofproductqualitysystem.
Advanced Technology
Research Center		 New technology planning and development, and supporting
various business units (BU) in comprehending the future
development of new industries.
Finance & Administration
Center		 Establish Financial Department, Accounting Department, HR
Department, General Affairs Department, and Facilities
Department.
Financial Department: Plan and utilize capital for the entire
company, assess investment plans, and provide support for
certain operations.
Accounting Department: Establish and implement an accounting
system and handle various taxation and accounting affairs.
HR Department: Plan HR resources, organizational development,
and training for the entire company.
General Affairs Department: Purchasing of routine equipment and
items as well as management of equipment and fixed assets
for the entire company.
Facilities Department: Factorymaintenance and safety.
Operation Management
Center		 Establish and manage the company's operations management
system. Establish the IT Department (including IT System
Development Section, IT System Management Section, and Data
Control Center), carry out planning and safety controls for IT
equipment and application systems throughout the entire company,
and issue and control rules and regulations.
  • 5 -

2. Board of directors, supervisors, general manager, deputy general managers, assistant managers, and directors of various departments and subsidiary agencies

(1) Directors and supervisors

April 9,2016 April 9,2016 April 9,2016
Title Nationality
or place of
registration		 Name Date
elected		 Final date
of term		 Date of
first
election		 Shares held
when elected		 Shares currently
held		 Shares held by
spouse or minor
children		 Number /
percentage
of shares
held in
the name
of other
persons
Major experience / academic
background		 Positions currently assumed in this
company
or other companies		 Any managerial
officer, director, or
supervisor who is a
spouse or relative
within the second
degree of kinship
Shares % Shares % Shares % Title Name Relations
Chairperson
of the Board		 Republic
of China		 Leo Huang 2014.06.11 2017.06.10 1984.10.23 23,419,897 6.22% 23,419,897 6.17% 9,185,362 2.42%
0
Department of Engineering,
National Chiao Tung University
General Manager, Chroma Inc.		 General Manager of this company
Director, I-Sheng Electric Wire &
Cable Co., Ltd.
Director, Leadtek Research Inc.
Director, DynaScan Technology
Corp.
Refer to Page 99 to 101 for details
onpositionsinaffiliated businesses.		 None None None
Independent
directors		 Republic
of China		 Quincy Lin 2014.06.11 2017.06.10 2005.05.18
0
0
0
0
0
0
0
PhD, Business Administration,
University of Kentucky
Senior Deputy General Manager,
TSMC		 Director, Neo Solar Power Corp
Independent director, Powertech
Technology Inc.
Director,RafaelMicro		 None None None
Independent
directors		 Republic
of China		 Tsung-
Ming
Chung		 2014.06.11 2017.06.10 2002.05.21
0
0
0
0
0
0
0
Master of Business Administration,
National Chengchi University
CPA, Republic of China
Licensed accountant, State of
Connecticut, USA
Accountant, Deloitte
Part-time instructor, Department of
Accounting, National Chengchi
University
Applied accounting instructor,
College of Management, National
TaiwanUniversity		 Director, Dynapack International
Technology Corporation .
Independent director, Taiwan Mobile
Director, Far Eastern International
Bank
Director, Unity Opto Technology
Co., Ltd.		 None None None
Director Republic
of China		 Fer Mo
Investment
Co.,Ltd.		 2014.06.11 2017.06.10 2005.05.18 1,250,505 0.33%
1,250,505		 0.33%
0
0
0
-		 - None None None
  • 6 -
Republic
of China		 Representative
:
Chung-Ju
Chang		 0
0
0
0
0
0
0
PhD, Department of Electrical
Engineering, National Taiwan
University
Director Research, Office of
Research and Development,
National Chiao Tung University
Dean and Director of the Institute
of Communications Engineering,
National Chiao Tung University
Chair Professor, Department of
Electrical and Computer
Engineering, National Chiao Tung
University		 Director, Ting-Shiun
Telecommunication Development
Foundation
Director, National Information
Infrastructure Enterprise Promotion
Association		 None None None
Director Republic
of China		 Chroma
Investment
Co.,Ltd.		 2014.06.11
 2017.06.10 2012.06.06 1,925,579 0.51%
1,915,579		 0.50%
0
0
0
-		 - None None None
Republic
of China		 Representative
:
I-Shih
Tseng
383,548		 0.10%
383,548		 0.10%
138,722		 0.04%
0
PhD, Mechanical Engineering,
University of Pennsylvania,
Senior Engineer, Institute for
Information Industry		 General Manager, Business
Department, Chroma ATE Inc.
Refer to Page 99 to 101 for details
onpositionsinaffiliated businesses.		 None None None
Supervisor Republic
of China		 Chi-Jen
Chou		 2014.06.11 2017.06.10 2008.06.13
0
0
0
0		 0
0
0
Institute of Management Science,
National Chiao Tung University
Director, HR Department,
Industrial Technology Research
Institute
Special Assistant to the Director of
the Electronic and Optoelectronic
System Research Laboratories		 Director, Spring Foundation of
NCTU
Supervisor, ProbeLeader
Member, Remuneration Committee,
Browave Corporation
Member, Remuneration Committee,
Fiber Optic Communications, Inc.		 None None None
Supervisor Republic
of China		 Kai Sun
Investment
Co.,Ltd.		 2014.06.11 2017.06.10 1999.05.13 3,380,922 0.90%
3,260,922		 0.86%
0
0
0
-		 - None None None
Republic
of China		 Representative
: Tsun-I,
Wang
19,339		 0.01%
19,339		 0.01%
936
0
0
PhD, Department of Photonics,
National Chiao Tung University
Deputy General Manager, Tailyn
Technologies,Inc.		 Chief Technical Supervisor,
DynaScan Technology Corp.		 None None None

Note: Representative Chung-Ju Chang of Fer Mo Investment Co., Ltd. resigned from his position on May 26, 2015, but was reappointed to the same position on August 19, 2015.

  • 7 -

Major artificial persons holding shares of the company (Table 1). April 9, 2016

Name of the artificial person Major shareholders of the artificial person
Fer Mo Investment Co., Ltd. Hong Ming Investment Limited (99% shares), Shu-fang Chen (1% shares)
Chroma Investment Co., Ltd. Chroma ATE Inc. (100% shares)
Kai Sun Investment Co.,Ltd. Yao-chung Chang (32.42% shares), Kai-chen Chang (24.42% shares), Chun-luan Chang-Lin
(13.34% shares), Ming-hsiung Chang (13.34% shares), Chung Sheng Investment Limited (8.31%
shares), Yen-cheng Chen (8% shares), Shih-tang Lin (0.05% shares), Chia-ming Chuang (0.04%
shares), Shih-jung Lin (0.04% shares), and Ming-i Chang (0.04% shares).
Table 1-Major shareholders that are artificial persons. April 9, 2016
Name of the artificialperson Major shareholders of the artificialperson
Hong Ming Investment Limited Yen-hsun Huang (40% shares), Yen-chun Huang (40% shares), Shu-chuan Chen (12% shares), and
Leo Huang (8% shares).
Chroma ATE Inc. Leo Huang (6.17% shares), Nanshan Life Insurance (4.53% shares), Cathay Life Insurance (4.48%
shares), Chun-sheng Chen (3.98% shares), JPMorgan Chase Bank N.A. Taipei Branch in custody
for MFS Series Trust V - MFS International New Discovery Fund (3.59% shares), Fidelity Fund
Investment Account entrusted to Standard Chartered Bank Taipei Branch (3.29% shares),
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 Emerging Stars Equity Fund
(3.00% shares), Yu-mei Hsueh (2.92% shares), JPMorgan Chase Bank N.A. Taipei Branch in
custody for Universities Superannuation Scheme Limited (2.89% shares), FS GLOBAL ASIA
PACIFIC FUND (2.42% shares).
Chung Sheng Investment
Limited		 Ming-hsiung Chang (26.8% shares), Yao-chung Chang (25.12% shares), Kai-chen Chang (25.12%
shares), Chun-luan Chang-Lin (22.8% shares), Shih-tang Lin (0.04% shares), Shih-jung Lin (0.04%
shares), Ming-i CHang (0.04% shares), and Ming-shun Chang (0.04% shares).
Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors Directors and supervisors
Condition
Name		 Does the individual have more than 5 years of professional
experience and thefollowing qualifications?		 Meets the criteria for independence (note 1) Currently
serving as
the
independe
nt director
of other
public
companies
Currently serving
as an instructor or
higher post in a
private or public
college or
university in the
field of business,
law, finance,
accounting, or the
business sector of
the company		 Currently serving as
a judge, prosecutor,
lawyer, accountant,
or other professional
practice or
technician that must
undergo national
examinations and
specialized license		 Work experience
necessary for
business
administration,
legal affairs,
finance,
accounting, or
business sector
of the company		 1 2 3 4 5 6 7 8 9 10
Leo Huang 0
QuincyLin 1
Tsung-
MingChung		 1
I-Shih Tseng 0
Chung-Ju
Chang		 0
Chi-Jen
Chou		 0
Tsun-I,Wang 0

Note 1: For any director or supervisor who fulfills the relevant condition(s) 2 years before being elected or during the term of office, please provide the [] sign in the field next to the corresponding condition(s).

  • （ 1 ） Not employed by the company or an affiliated business.

  • （ 2 ） Not serving as a director or supervisor of the company or any affiliated business (this does not apply in cases where the person is an independent director of the company, its parent company, or subsidiary where the company holds, directly and indirectly, more than 50% of the voting shares).

  • （ 3 ） Not a natural person shareholder who holds more than 1% of issued shares or is ranked in the top 10 in terms of the total quantity of shares held, including the shares held in the name of the person’s spouse, minor children, or in the names of others.

  • （ 4 ） Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the 3 preceding items.

  • （ 5 ） Not a director, supervisor, or employee of a corporate shareholder who directly holds more than 5% of the total number of issued shares of the company or is ranked in the top 5 in terms of quantity of shares held.

  • （ 6 ） Not a director (member of the governing board), supervisor (member of the supervising board), managerial officer, or shareholder holding more than 5% of shares of a specified company or institution that has a financial or business relationship with the company.

（ 7 ） Not a professional individual or owner, partner, director (member of the governing board), supervisor (member of the supervising board), or managerial officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting, or consultation services to the company or to any affiliated business, or spouse thereof. This restriction, however, does not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

  • （ 8 ） Not a spouse or a relative within the second degree of kinship with any director.

  • （ 9 ） Where none of the circumstances in the subparagraphs of Article 30 of the Company Act applies.

  • （ 10 ） Where the person is not elected in the capacity of the government, a juristic person, or a representative thereof as provided in Article 27 of the Company Act.

  • 8 -

(2) General manager, deputy general manager, assistant manager, and managerial officer of various departments or branches.

April 9,2016 April 9,2016 April 9,2016
Title Nationality
Name		 Date of
appointment		 Shares held Shares held by
spouse
or minor children		 Shares held in
the name of
other persons		 Major experience / academic background Positions currently assumed in
this company		 Any managerial officer
who is a spouse or a
relative within the
second degree of
kinship
Shares % Shares % Shares % Title Name Relations
General Manager Republic
of China		 Leo Huang 1984.11.08 23,419,897
6.17%		 9,185,362
2.42%
0
0
Department of Engineering, National Chiao
Tung University
General Manager, Chroma Inc.		 Director, I-Sheng Electric Wire &
Cable Co., Ltd.
Director, Leadtek Research Inc.
Director, DynaScan Technology
Corp.
Refer to Page 99 to 101 for details
on positions in affiliated
businesses.		 None None None
General Manager of
Test & Measurement
Business Unit		 Republic
of China		 David Yang 1992.08.14 15,352
0
120,002
0.03%
0
0
Department of Engineering, National Chiao
Tung University
Teaching Assistant, Department of Information
Technology, College of Engineering, Chung
Hua University		 Refer to Page 99 to 101 for details
on positions in affiliated
businesses.
None		 None None
General Manager of
Integrated System
Solution Business
Unit		 Republic
of China		 I-Shih Tseng 1998.07.16
383,548
0.10%
138,722
0.04%
0
0
Mechanical Engineering, University of
Pennsylvania
Senior Engineer, Institute for Information
Industry		 Refer to Page 99 to 101 for
details on positions in affiliated
businesses.		 None None None
General Manager of
Business Department		 Republic
of China		 C.C. Ho 2001.12.10 40,088
0.01%
0
0
0
0
Department of Electrical Engineering, Tatung
University
CEO, Global Operations Management
Department,TatungCompany		 Refer to Page 99 to 101 for details
on positions in affiliated
businesses.		 None None None
General Manager of
MES BU		 Republic
of China		 Joe Lin 2007.04.01 73,543
0.02%
0
0
0
0
Department of Information Sciences, Cal Poly
Pomona
General Manager,Sajet Technology		 Refer to Page 99 to 101 for details
on positions in affiliated
businesses.
None		 None None
General Manager,
Semiconductor Test
Equipment BU		 Republic
of China		 Georg Chang 2006.08.01
0
0
0
0
0
0
Institute of Electrical Control Engineering,
National Chiao Tung University
Manager, Business Department, Lian Li Co.,
Ltd.		 None None None None
Deputy General
Manager, Finance &
Administration
Center		 Republic
of China		 Paul Ying 1999.05.03 115,969
0.03%
0
0
0
0
School of Management, New York Institute of
Technology
Deputy General Manager of Finance, Hsin Yu
EnergyDevelopment Co.		 Refer to Page 99 to 101 for details
on positions in affiliated
businesses.
None		 None None
Deputy General
Manager, Advanced
Technology Research
Center		 Republic
of China		 Mark Fong 1990.05.02 749,108
0.20%
331,904
0.09%
0
0
Department of Electrical Engineering, National
Taiwan University
Deputy Manager of R&D, Sampo Corporation		 None None None None
  • 9 -
Deputy General
Manager of
Operation
Management Center		 Republic
of China		 Benjamin
Huang		 1992.06.22 156,723
0.04%
0
0
0
0
Department of Electrical Engineering, National
Taiwan University
Deputy General Manager, R&D Department,
Test & Measurement BU of this Company		 None None None None
Deputy General
Manager, Corporate
Manufacturing		 Republic
of China		 Steven Liu 1991.08.22 60,012
0.02%
738
0
0
0
Department of Information & Communications,
Chinese Culture University
Departmental Manager, Property and Product
Management Department of this Company		 None None None None
Deputy General
Manager, R&D
Department,
Semiconductor Test
Equipment BU		 Republic
of China		 Max Chang 2000.12.01 595
0
0
0
0
0
Department of Electrical Engineering, National
Cheng Kung University
Assistant Manager, R&D Department, QTS
Company		 None None None None
Deputy General
Manager, Sales
Department 1,
Integrated System
Solution BU		 Republic
of China		 Herbert Tsai 2005.07.01 24,474
0.01%
0
0
0
0
Machinery and Automation Engineering,
Nanya Institute of Technology
Deputy Manager, Dasike Technology Company		 None None None None
Deputy General
Manager, General
Manager’s Office		 Republic
of China		 C.C.Fan 2010.08.01 387,235
0.10%
0
0
0
0
Department and Institute of Industrial
Engineering and Management, Minghsin
University of Science and Technology
Deputy Manager, R&D Department, Wei
KuangAutomation Co.,Ltd.		 None None None None
Deputy General
Manager, Planning
Department, Test &
Measurement BU		 Republic
of China		 Bobby Tseng 2001.01.01
51,000
0.01%
33,000
0.01%
0
0
Electrical Engineering, Waseda University
Manager, Product Planning Department, Test &
Measurement BU of this Company		 None None None None
Deputy General
Manager, Greater
China Area Sales
Department, Test &
Measurement BU		 Republic
of China		 Vincent Chen 2001.01.01
260
0
0
0
0
0
Department of Electrical Engineering,
Lunghwa University of Science and
Technology
Department Manager, Greater China Area Sales
Department,Test & Measurement BU		 Refer to Page 99 to 101 for details
on positions in affiliated
businesses.
None		 None None
Deputy General
Manager, Technical
Service Department,
Test & Measurement
BU		 Republic
of China		 Tony Yang 2003.07.01 38,554
0.01%
0
0
0
0
Department of Electrical Engineering, National
Taitung Junior College
Manager, Engineering Department, Tiger
Power		 None None None None
Deputy General
Manager, R&D
Department, Test &
Measurement BU		 Republic
of China		 Vincent Wu 2003.07.16 101,465
0.03%
903
0
0
0
Institute of Electrical Control Engineering,
National Chiao Tung University
Department Manager, R&D Department, Test
& Measurement BU of this Company		 None None None None
Deputy General
Manager, R&D
Department 1,
Integrated System
Solution BU		 Republic
of China		 Lance
Ouyang		 2009.07.01 0
0
0
0
0
0
Institute of Mechanical Engineering, National
Chiao Tung University
Deputy General Manager, Global Target
Company		 None None None None
  • 10 -

(3) Remuneration paid out to directors, supervisors, general manager, and deputy general managers

1. Remuneration for the director (including independent directors)

Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000
Title Name
(note 1)		 Director’s remuneration Proportion of NIAT
after summing items A,
B, C, and D(note 4)		 Employee remuneration for other activities Proportion of NIAT
after summing items A,
B, C, D, E, and F
(note 4)		 Whether the
person receives
remuneration
from other
non-subsidiary
companies in
which this
company has
invested
(note 9)
Remuneration (A) Retirement pension (B) Director's remuneration
(C)(note 2)
Business execution fees
(D) (note 3)		 Salaries, bonuses, and
special expenses (E)
(note 5)		 Retirement pension (F) Employee remuneration (G)
(note 6)		 Amount of shares that
may be purchased
through the employee
stock warrant (H)
(note 7)		 New restricted
employee shares
acquired (I)
(note 8)
This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)
This Company		 All companies
listed in this
financial report
(note 10)		 This
company		 All
companies
listed in
this
financial
report
(note 10)		 This
company		 All
companies
listed in
this
financial
report
(note 10)		 This
company		 All
companies
listed in this
financial
report
(note 10)
Cash
sum		 Shares
sum		 Cash
sum		 Shares
sum
Chairperson
of the Board		 Leo Huang 0
0		 0
0
6,000
7,200
390
390
0.52%
0.61%
5,929
5,929
292
(note 11)		 292
(note 11)		 6,018
0
10,251
0
300
300
0
0
1.51%
1.95%
None
Independent
director		 Quincy Lin
Independent
director		 Tsung-ming Chung
Director Fer Mo Investment
Co., Ltd.
representative:
Chung-Ju Chang
Director Chroma
Investment
Company
representative:
I-Shih Tseng
Table of remuneration ranges
Remuneration range for each director in t his company Name of director
Sum of the first 4 items(A+B+C+D) Sum of the first 7 items(A+B+C+D+E+F+G)
This company All companies listed in this financial report(note 10) This company All companies listed in this financial report(note 10)
Less than NT$ 2,000,000 Quincy Lin, Tsung-ming Chung, representative Chung-Ju Chang of
Fer Mo Investment Co., Ltd., and representative I-Shih Tseng of
Chroma Investment Co.,Ltd.
Quincy Lin, Tsung-ming Chung, representative Chung-Ju Chang of
Fer Mo Investment Co., Ltd., and representative I-Shih Tseng of
Chroma Investment Co.,Ltd.		 Quincy Lin, Tsung-ming Chung, and representative Chung-ju Chang
of Fer Mo Investment Co., Ltd.		 Quincy Lin, Tsung-ming Chung, and representative Chung-ju Chang
of Fer Mo Investment Co., Ltd.
NT$2,000,000(inclusive)to 5,000,000(not i nclusive) Leo Huang Leo Huang
NT$ 5,000,000 (inclusive) to 10,000,000 (not inclusive) Leo Huang, representative I-Shih Tseng for Chroma Investment Co.,
Ltd.		 Representative I-Shih Tseng of Chroma Investment Co., Ltd.
NT$10,000,000(inclusive)to 15,000,000(not inclusive) Leo Huang
NT$15,000,000(inclusive)to 30,000,000(not inclusive)
NT$30,000,000(inclusive)to 50,000,000(not inclusive)
NT$50,000,000(inclusive)to 100,000,000(not inclusive)
More than NT$100,000,000
Total 5 5 5 5

Note 1: The names of directors shall be listed separately (for artificial persons, the names of the artificial person and the representative shall be listed separately) to disclose various payments accordingly. Note 2: Based upon the director's remuneration allocated by the Board of Directors in 2015.

Note 3: Business expenses paid out to directors in the most recent year (including transport, special expenses, various allowances, accommodation, vehicles, and provision of physical goods and services).

Note 4: NIAT refers to those acquired from recent years. According to the International Financial Reporting Standards employed for this report, NIAT shall refer to that of the most recent fiscal year of the entity.

Note 5: Remuneration for directors concurrently holding positions in the company (for positions that include the general manager, deputy general manager, other managerial officers, or employees) shall include salaries, job remuneration, severance, bonuses, performance fees, transport fees, special expenses, various subsidies, accommodation, vehicles, and provision of physical items and services.

Note 6: Employee's compensation for directors in 2015 shall be calculated as a proportion of the remuneration actually paid for in the previous year.

Note 7: Number of shares that may be purchased provided through employee stock warrant (not including those already executed) offered for directors concurrently holding positions in the company (including the general manager, deputy manager, other managerial officers, or employees) through the publication date of this report. Note 8: New restricted employee shares provided to directors concurrently holding other positions in the company (including the general manager, deputy manager, other managerial officers, or employees). Note 9: (a) If the director receives remuneration from investments in other companies that are not subsidiaries of this company, the said remuneration shall be included in the remuneration range table. The name of the column shall also be changed to “All investments in other companies”.

b. Remuneration in this case shall refer to remuneration, fees (including remuneration as a company employee, director, or supervisor), business expenses, and other related payments received by the director of this company for being a director, supervisor, or managerial officer of other non-subsidiary companies in which this company has invested.

Note 10: The total remuneration in various items paid to every director of this company by all companies (including this company) listed in the consolidated statement shall be disclosed. The name of the director shall also be disclosed in the proper remuneration range. Note 11: Amount of retirement pensions listed.

  • 11 -

2. Supervisor’s remuneration

Unit: NT$ 1,000

Unit: NT$1,000
Title Name (Note 1) Supervisor’s remuneration Proportion of NIAT after summing
items A, B, and C(note5)		 Whether the person receives remuneration from
other non-subsidiary companies in which this
company has invested (note 7)
Remuneration (A) (note 2) Compensation (B) (note 3) Business execution fees (C)
(note4)
This
company		 All companies listed
in this financial
report (note 6)		 This
company		 All companies listed
in this financial
report (note 6)		 This
company		 All companies listed
in this financial report
(note 6)		 This
company		 All companies listed in
this financial report
(note 6)
Supervisor Chi-Jen Chou 0 0 2,000 2,000 165 165 0.18% 0.18% 6,479
Supervisor Representative
Tsun-I,Wang of
Kai Sun Investment
Co.,Ltd.
Table of remuneration ranges
Remuneration range for each supervisor in this company Name of the supervisor
Sum of the first 3 items (A+B+C)
This company All other companies in which this company has invested (note 7)
Less than NT$2,000,000 Chi-Jen Chou and Representative Tsun-I,Wangof Kai Sun Investment Co.,Ltd. Chi-Jen Chou
NT$2,000,000(inclusive)to 5,000,000(not inclusive)
NT$5,000,000(inclusive)to 10,000,000(not inclusive) Representative Tsun-I,Wangof Kai Sun Investment Co.,Ltd.
NT$10,000,000(inclusive)to 15,000,000(not inclusive)
NT$15,000,000(inclusive)to 30,000,000(not inclusive)
NT$30,000,000(inclusive)to 50,000,000(not inclusive)
NT$50,000,000(inclusive)to 100,000,000(not inclusive)
More than NT$100,000,000
Total 2 2

Note 1: The names of supervisors shall be listed separately (for artificial persons, the names of the artificial person and the representative shall be listed separately). Note 2: Supervisor’s remuneration of the most recent year (including supervisor’s salary, position bonuses, retirement / resignation pensions, severance, various bonuses, and performance fees). Note 3: Based upon the supervisor's remuneration allocated by the Board of Directors in 2015. Note 4: Business expenses paid out for supervisors in the most recent year (including transport, special expenses, various allowances, accommodation, vehicles, and provision of physical goods and services) Note 5: NIAT refers to those acquired in recent years. According to the International Financial Reporting Standards employed for this report, NIAT shall refer to that of the most recent fiscal year of the entity. Note 6: Total remuneration in various items paid out to this company's supervisors by all companies (including this company) listed in the consolidated statement shall be disclosed. Note 7: (a) If the supervisor receives remuneration from investments in other companies that are not subsidiaries of this company, the said remuneration shall be included in the remuneration range table. The name of the column shall also be changed to “All investments in other companies”.

(b) Remuneration in this case shall refer to remuneration, compensation (including remuneration as a company employee, director, or supervisor), business expenses, and other related payments received by the supervisor of this company for being a director, supervisor, or managerial officer of other non-subsidiary companies in which this company has invested.

  • 12 -

3. Remuneration for the general manager and deputy general manager.

Unit: NT$1,000
Title Name Salary (A) Retirement pension (B) Bonuses and special
expenses (C)		 Employee’s remuneration (D)
(note 1)		 Proportion of NIAT after
summing the 4 items of A, B,
C, and D (%) (note 2)		 Amount of employee stock
warrant acquired (note 3)		 New restricted employee shares
acquired (note 4)		 Whether the person
receives
remuneration from
other non-subsidiary
companies in which
this company has
invested
(note 5)
This
company		 All companies
listed in this
financial report
(note 6)		 This
company		 All companies
listed in this
financial report
(note 6)
This
company		 All companies
listed in this
financial
report (note 6)
This company		 All companies listed in this
financial report (note 6)
This
company		 All companies
listed in this
financial report
(note 6)		 This
company		 All companies
listed in this
financial report
(note 6)		 This
company		 All companies listed
in this financial
report (note 6)
Cash
Sum		 Shares
Sum
Cash
Sum
Shares
Sum
General Manager Leo Huang 34,284 35,314 2,022
(note 7)		 2,022
(note 7)		 5,445 5,445 27,000 0 36,240 0 5.56% 6.39% 1,258 1,258 0 0 None
General Manager of Test &
Measurement Business Unit		 David Yang
General Manager of
Integrated System Solution
Business Unit		 I-Shih Tseng
General Manager of
Business Department		 C.C. Ho
General Manager of MES
BU		 Joe Lin
General Manager,
Semiconductor Test
Equipment BU		 George Chang
Deputy General Manager,
Finance & Administration
Center		 Paul Ying
Deputy General Manager,
Advanced Technology
Research Center		 Mark Fong
Deputy General Manager of
Operation Management
Center		 Benjamin Huang
Deputy General Manager,
Corporate Manufacturing		 Steven Liu
Deputy General Manager,
R&D Department,
Semiconductor Test
Equipment BU		 Max Chang
Deputy General Manager,
Sales Department 1,
Integrated System Solution
BU		 Herbert Tsai
Deputy General Manager,
General Manager’s Office		 C.C.Fan
Deputy General Manager,
Planning Department, Test
& Measurement BU		 Bobby Tseng
Deputy General Manager,
Greater China Area Sales
Department, Test &
Measurement BU		 Vincent Chen
Deputy General Manager,
Technical Service
Department, Test &
Measurement BU		 Tony Yang
Deputy General Manager,
R&D Department, Test &
MeasurementBU		 Vincent Wu
Deputy General Manager,
R&D Department 1,
Integrated System Solution
BU		 Lance Ouyang
  • 13 -

Table of remuneration ranges

Table of remuneration ranges Table of remuneration ranges
Remuneration range for each general manager and deputy general
manager in this company		 Name of the general manager and deputy general manager
This company All companies listed in this financial report (note 6)
Less than NT$ 2,000,000
NT$ 2,000,000 (inclusive) to 5,000,000 (not inclusive) David Yang, C.C. Ho, Joe Lin, Georg Chang, Paul Ying, Mark Fong, Benjamin Huang, Steven Liu,
Max Chang, Herbert Tsai, C.C.Fan, Bobby Tseng, Vincent Chen, Tony Yang, Vincent Wu, and
Lance Ouyang

David Yang, C.C. Ho, Joe Lin, Georg Chang, Paul Ying, Mark Fong, Benjamin Huang, Steven Liu, Max Chang, Herbert
Tsai, C.C.Fan, Bobby Tseng, Vincent Chen, Tony Yang, Vincent Wu, and Lance Ouyang
NT$ 5,000,000 (inclusive) to 10,000,000 (not inclusive) Leo Huang , I-Shih Tseng I-Shih Tseng
NT$ 10,000,000 (inclusive) to 15,000,000 (not inclusive) Leo Huang
NT$ 15,000,000 (inclusive) to 30,000,000 (not inclusive)
NT$ 30,000,000 (inclusive) to 50,000,000 (not inclusive)
NT$ 50,000,000 (inclusive) to 100,000,000 (not inclusive)
More than NT$ 100,000,000
Total 18 18

Note 1: Employee compensation for general manager and deputy general managers allocated by the Board of Directors in 2015 was calculated using the proportion of the remuneration actually paid for in the previous year.

Note 2: NIAT refers to those acquired from recent years. According to the International Financial Reporting Standards employed for this report, NIAT shall refer to that of the most recent fiscal year of the entity.

Note 7: Number of shares that may be purchased provided through employee stock warrant (not including those already executed) offered to the general managers and deputy general managers through the publication date of this report. Note 4: New restricted employee shares provided to directors concurrently holding other positions in the company (including the general manager, deputy manager, other managerial officers, or employees).

Note 5: (a) If this company's general managers or deputy general managers receive remuneration from investments in other companies that are not subsidiaries of this company, the said remuneration shall be included in the remuneration range table. The name of the column shall also be changed to “All investments in other companies”. b. Remuneration in this case shall refer to remuneration, compensation (including remuneration as a company employee, director, or supervisor), business expenses, and other related payments received by the general managers or deputy general managers of this company for being a director, supervisor, or managerial officer of other non-subsidiary companies in which this company has invested.

Note 6: Total remuneration in various items paid out to this company's general managers and deputy general managers by all companies (including this company) listed in the consolidated statement shall be disclosed. Note 7: Amount of retirement pensions listed.

  • 14 -

  • (4) Compare and analyze the total remuneration paid to each of this company's directors, supervisors, general managers, and deputy general managers in the most recent 2 years by all companies listed in this company's individual and consolidated financial statement as a percentage of NIAT listed in the individual financial report, and describe the policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its linkage to business performance and future risk exposure.

  • Analysis of total remuneration paid to this company’s directors, supervisors, general managers, and deputy general managers in the most recent 2 years as a percentage of NIAT:

managers, and deputy general managers in
NIAT:		 managers, and deputy general managers in
NIAT:		 the most recent 2 years as a percentage of the most recent 2 years as a percentage of
Total remuneration paid to directors,
supervisors, general managers, and
deputy general managers in 2014 and its
proportion to NIAT.		 Total remuneration paid to directors,
supervisors, general managers, and
deputy general managers in 2015 and its
proportion to NIAT.
This
company		 All companies listed in
the consolidated
statement		 This
company		 All companies listed in
the consolidated
statement
6.33% 6.80% 6.26% 7.18%

  1. The policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its linkage to business performance and future risk exposure.

  2. a) Directors and supervisors: Most remuneration paid by this company has been provided to its directors and supervisors. The directors’ and supervisors’ remunerations issued in the most recent 2 years were fixed. When holding the Directors’ Meeting, both directors and supervisors were provided with transport expenses.

  3. b) General managers and deputy general managers: This company has established Regulations for Top Management Remuneration, which provided that remuneration for general managers and deputy general managers during their term of service shall be based upon payment standards for similar positions in the same industry and shall be paid on a monthly basis as a fixed salary. Employee compensation is subject to change. Proposals shall be established according to the business performance and personal performance appraisal results of the year, submitted to this company’s Salary and Remuneration Committee, and resolved during the Directors’ Meeting.

  4. c) This company shall, at the end of the current year, generate a budget for the following year. The current state of economy and market environment as well as forecasts of overall business performance and risk exposure in the following year shall be referenced to make suitable adjustments to salaries paid to the managerial officers.

  5. 15 -

Names of managerial officers provided with employee compensation and state of payments

December 31, 2015 (Unit: NT$ 1,000) December 31, 2015 (Unit: NT$ 1,000) December 31, 2015 (Unit: NT$ 1,000) December 31, 2015 (Unit: NT$ 1,000) December 31, 2015 (Unit: NT$ 1,000)
Title Name Share
sum		 Cash
sum		 Total Total payment
as a proportion
of NIAT (%)
Managerial Officer General Manager Leo Huang 0 36,240 36,240 2.93%
General Manager ofTest &
Measurement Business Unit		 David Yang
General Manager of Integrated
System Solution Business Unit		 I-Shih Tseng
General Manager of Business
Department		 C.C. Ho
General Manager of MES BU Joe Lin
General Manager, Semiconductor Test
Equipment BU		 Georg Chang
Deputy General Manager, Finance &
Administration Center		 Paul Ying
Deputy General Manager, Advanced
Technology Research Center		 Mark Fong
Deputy General Manager of the
Operation Management Center		 Benjamin
Huang
Deputy General Manager, Corporate
Manufacturing		 Steven Liu
Deputy General Manager, R&D
Department, Semiconductor Test
Equipment BU		 Max Chang
Deputy General Manager, Sales
Department 1, Integrated System
Solution BU		 Herbert Tsai
Deputy General Manager, General
Manager’s Office		 C.C.Fan
Deputy General Manager, Planning
Department, Test & Measurement BU		 Bobby Tseng
Deputy General Manager, Greater
China Area Sales Department, Test &
Measurement BU		 Vincent Chen
Deputy General Manager, Technical
Service Department, Test &
Measurement BU		 Tony Yang
Deputy General Manager, R&D
Department, Test & Measurement BU		 Vincent Wu
Deputy General Manager, R&D
Department 1, Integrated System
Solution BU		 Lance Ouyang

Note: The sum of employee compensation (including shares and cash) for managerial officers allocated by the Board of Directors in 2015 was calculated using the proportion of the remuneration actually paid for in the previous year.

  • 16 -

3. Implementation of Corporate Governance

(1) Implementation of Directors’ Meetings

A total of 6 Directors’ Meetings were held in 2015. The following lists the attendance of directors and supervisors to these meetings:

Title Name (note 1) Actual
presence
(attendance)		 Delegated
attendance		 Rate of actual
presence
(attendance)
(%) (note 2)		 Notes
Chairperson
of the Board		 Leo Huang 6 - 100%
Independent
Director		 Quincy Lin 6 - 100%
Independent
Director		 Tsung-ming
Chung		 6 - 100%
Director Representative
Chung-ju
Chang of Fer
Mo Investment
Co., Ltd.		 2 - 33% Mr. Chung-ju Chang
resigned from his position
on May 26, 2015, but was
reappointed to the same
position on August 19,
2015.
Director Representative
I-Shih Tseng of
Chroma
Investment Co.,
Ltd.		 6 - 100%
Supervisor Chi-Jen Chou 6 - 100%
Supervisor Representative
Tsun-I,Wang of
Kai Sun
Investment
Co.,Ltd.		 5 - 83%
Other items that shall be recorded:
1. Any item listed in Article 14, Paragraph 3 of the Securities and Exchange Act as well as any other
issues in which an independent director expressed a dissenting or qualified opinion that has been
recorded or stated by writ and has been submitted to the Directors’ Meeting for resolution: None.
2. Incidents in which the director must implement recusal for conflicts of interest: None.
3. Goals for enhancing the functions of the Board of Directors (such as establishing an Audit Committee
or increasing information transparency) for the current and most recent year as well as assessments of
the actions implemented:
This company stipulated the Regulations for Conducting Directors’ Meeting according to the relevant
regulations and promptly disclosed major resolutions on the Market Observation Post System
(MOPS) after the Directors’ Meeting. Major resolutions of the most recent Directors’ Meeting were
also disclosed on this company's official website to safeguard the shareholders’ interests.
This company also referred to the relevant regulations to establish a Salary and Remuneration
Committee to evaluate the remuneration policy and system for its directors, supervisors, and
managerial officers. Proposals were submitted to the Board of Directors to provide a reference for
their decision making processes. For the state of implementation, please refer to State of Corporate
Governance (4) Salary and Remuneration Committee.

  • Note 1: For directors and supervisors that are artificial persons, the names of the shareholders and representative of the said artificial person shall be disclosed.

  • Note 2. (1)When directors or supervisors resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual presence (attendance) rate (%) shall be calculated using the number of Directors’ Meetings convened and actual presence (attendance) during the term of service.

  • (2)When directors and supervisors were reelected before the end of the year, both the incoming and outgoing directors and supervisors shall be listed accordingly. The Notes column shall be annotated regarding whether the director or supervisor was outgoing, incoming, or reelected as well as the date of reelection. Actual presence (attendance) rate (%) shall be calculated using the number of Directors’ Meetings convened and actual presence (attendance) during the term of service.

  • 17 -

  • (2) Operations of the Audit Committee or supervisors’ participation in the Directors’ Meeting

  • Operations of the Audit Committee: This company has yet to establish an Audit Committee.

  • Supervisors’ participation in the Directors’ Meeting

A total of 6 Directors’ Meetings were held in 2015. The following lists the attendance:

Title Name Actual presence
(attendance)		 Rate of actual presence
(attendance) (%) (note)		 Notes
Supervisor Chi-Jen Chou 6 100%
Supervisor Representative
Tsun-I,Wang of Kai
Sun Investment
Co.,Ltd.		 5 83%
Other items that shall be recorded:
1. Composition and responsibilities of the supervisors:
a) This company has 2 supervisors who are individuals elected by the Board of Shareholders
based on their capabilities.
b) The following lists the responsibilities of the supervisors: (1)Audit this company’s businesses
and financial conditions. (2) Audit various accounting books and documents. (3) Supervise
employees carrying out business activities, and investigate violations or nonfeasance.
(4)Review budgets and final account reports. (5)Appropriate net income or review proposals
to make up losses. (6)Other responsibilities empowered by other laws.
c) Communication with this company’s employees and shareholders: When the supervisor
believes it to be necessary, the supervisor may directly contact employees and shareholders,
attend shareholders’ meetings, and directly communicate with the shareholders.
d) Communication between the supervisor and the internal audit manager or CPA:
(1)The Audit Manager shall complete a monthly audit report at the end of every month and
submit the said report to the supervisors. The supervisors may request the Audit Manager
to clarify any doubts.
(2)The Audit Manager shall attend this company’s routine Directors’ Meeting to provide
internal audit reports. The supervisors may directly inquire and communicate with the
Audit Manager on auditing activities.
(3)During regular review of financial reports, the supervisors may request the Accounting
Manager to clarify any doubts encountered. All doubts have been clarified and agreed upon
by the supervisors.
2. If the supervisors stated any opinions while attending Directors’ Meetings, the date, session,
contents of the case discussed, and resolution of the Directors’ Meeting as well as this company’s
disposition of opinions stated by the supervisors shall be described: None.

  • Note: *When supervisors resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual attendance rate (%) shall be calculated using figures for actual attendance during the term of service.

  • *When supervisors were reelected before the end of the year, both the incoming and outgoing supervisors shall be listed accordingly. The Notes column shall be annotated regarding whether the supervisor was outgoing, incoming, or reelected as well as the date of reelection. Actual attendance rate (%) shall be calculated using the figures for actual attendance during the term of service.

  • 18 -

(3)State of corporate governance, gaps with the Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies, and the cause of the said gaps

Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Governance Best
Practice
Principles for
TWSE/GTSM
Listed
Companies, and
the cause of the
said gaps
Yes No Summary
1.Did the company stipulate and
disclose best practice principles
for corporate governance
according to the Corporate
Governance Best Practice
Principles for TWSE/GTSM
Listed Companies?		 ˇ This company has stipulated Best
Practice Principles for Corporate
Governance. Please visit the MOPS or
the official website of this company to
peruse the details.		 No gaps
2.Equity structure and shareholders’
rights of the company
(1) Did the company establish an
internal procedure for handling
shareholder proposals, inquiries,
disputes, and litigations? Are
such matters handled according
to the internal procedure?
(2) Did the company maintain a
register of major shareholders
with controlling power as well as
a register of persons exercising
ultimate control over those major
shareholders?
(3)Did the company establish and
enforce risk control and firewall
systems with its affiliated
businesses?
(4)Did the company stipulate
internal rules that prohibit
company insiders from trading
securities using information not
disclosed to the market?		 ˇ
ˇ
ˇ
ˇ		 (1)This company has established a
system of spokespersons and deputy
spokespersons for handling
shareholder proposals, inquiries, and
other relevant matters.
(2)This company has delegated a
dedicated person to manage relevant
information to effectively assess
shareholding by this company’s
directors, supervisors, managerial
officers, and major shareholders
holding more than 10% of its shares,
and disclose this information
according to the statutory regulations.
(3) This company has established
regulations to monitor the
subsidiaries and delegated personnel
to supervise the financial operations
of those subsidiaries.
(4)This company has stipulated
Regulations for Prohibiting Insider
Trade that prohibit this company’s
directors, supervisors, employees, and
other insiders from using information
not yet disclosed to the market for
trading shares. These Regulations
may be perused at this company’s
officialwebsite.		 No gaps
3.Composition and responsibilities
of the Board of Directors:
(1)Has a policy of diversity been
established and implemented for
the composition of the board of
directors?		 ˇ (1)This company has stipulated Best
Practice Principles for Corporate
Governance which provide that the
composition of the Board of Directors
must consider diversity as well as set
principles of diversity that include
basic criteria, professional knowledge,		 No gaps
  • 19 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Governance Best
Practice
Principles for
TWSE/GTSM
Listed
Companies, and
the cause of the
said gaps
Yes No Summary
(2) In addition to the Salary and
Remuneration Committee and
Audit Committee established
according to law, has the
company voluntarily established
other functional committees?
(3)Did the company stipulate
regulations for assessing the
performance of the board of
directors and the process of
assessment? Are these
performance assessments carried
out regularly every year?
(4)Did the company regularly
implement assessments on the
independence of the CPA?
ˇ
ˇ		 ˇ and skills that correspond to the
operations, business, and development
required by this company. The
composition of this company’s Board
of Directors shall consider the
members’ professional background,
skills and experiences required for
this company’s businesses, and
principles of diversity.
(2)This company has established a Salary
and Remuneration Committee and is
expected to establish an Audit
Committee in 2017.
(3) The Salary and Remuneration
Committee shall formulate and
regularly review the policy, system,
standards, and structure for the
performance assessment, salary, and
remuneration of directors,
supervisors, and managerial officers,
and shall submit the Committee's
recommendations to the Directors’
Meeting for discussion.
(4)In addition to acquiring a declaration
of independence from the CPA, this
company also conducts regular annual
reviews on the independence of the
CPA hired. Assessment indicators
include whether the CPA is a director
or supervisor of this company, is a
shareholder of this company, receives
salary from this company, has major
conflicts of interest with this
company, is a managerial officer
involved with this company’s decision
making process, and has served in this
company in the most recent 2 years
before providing accounting services.
Assessment results shall be submitted
to this company’sBoard of Directors.



Shall be
implemented
according to law
in the future.
-
No gaps
  • 20 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Governance Best
Practice
Principles for
TWSE/GTSM
Listed
Companies, and
the cause of the
said gaps
Yes No Summary
4. Has the company established a
communication channel with
stakeholders? Has a stakeholders’
area been established on the
company’s website? Are major
corporate social responsibility
(CSR) topics which the
stakeholders are concerned
addressed appropriately by the
company?
ˇ		 This company has established a CSR
area on its official website that provides
contact information, emails, and other
channels of communication to
stakeholders so that they may raise topics
which they are concerned. These
concerns would then be promptly
addressed by this company.
No gaps
5. Has the company delegated a
professional shareholder service
agent to handle the shareholders’
meeting?		 ˇ This company has delegated the share
administration agency of Taishin
International Bank to handle
shareholders’ meetings and various
services.		 No gaps
6. Information disclosure
(1) Did the company establish a
website to disclose information
on financial operations and
corporate governance?
(2) Did the company adopt other
means of information disclosure
(such as establishing an English
language website, delegating a
professional to collect and
disclose company information,
implement a spokesperson
system, and disclosing the
process of investor conferences
on the company website)?		 ˇ
ˇ		 (1)This company has established a
website with special pages on investor
services and regular updates on
financial operations and corporate
governance. Website:
(www.chromaate.com).
(2) This company has established
Chinese and English language
websites as well as a special area for
investor services. A professional has
been placed in charge of collecting
information and providing regular
updates for financial operations. This
company has delegated a
spokesperson and deputy
spokesperson. Investor conferences
are held on a regular basis, and
relevant information has been
disclosed using this company's official
website.
No gaps
7. Has the company revealed
important information to provide
better understanding of the state
of corporate governance
(including but not limited to
employees’ rights, employee
care, investor relations, supplier
relations, stakeholders’ rights,
progress of training of directors
and supervisors, risk
management policy, and risk
exposure)?
ˇ		 (1)Employees’ rights: Employee’s
rights are provided according to the
Labor Standards Act and HR
regulations established in this
company. An employee feedback
mailbox, communication channels,
and various discussion areas have
been established to provide a
comprehensive selection of channels
for employees to raise various issues
within the company.
(2)Employee care: In addition to
providing a good office environment,		 No gaps
  • 21 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Governance Best
Practice
Principles for
TWSE/GTSM
Listed
Companies, and
the cause of the
said gaps
Yes No Summary
employees also enjoy a diverse
selection of recreational facilities
such as swimming pools and gyms.
To help uphold family virtues and
promote harmony between parents
and their children, the recreational
facilities are also available for the
employees and their family members
during weekends and public holidays.
Various health seminars and
subsidies to societies and clubs are
also available to provide employees
with a selection of recreational
activities after work.
(3)Investor relations: This company has
established an investor's service area
in its official website as well as a
spokesperson and a deputy
spokesperson responsible for public
disclosure of company matters. This
company also convenes investor
conferences on a regular basis and
discloses relevant information
regarding company operations on its
official website.
(4)Supplier relations: The business
strategy adopted by this company
upholds trust as the highest guiding
principle and respects every
commitment made with both
suppliers and stakeholders. This
company aims at building positive
and interactive relationships with
suppliers and will not delay payments
without proper cause.
(5)Stakeholders’ rights: To provide
public investors with information
transparency and prompt notification,
financial and business information
posted on this company’s website
shall be regularly updated.
(6)Progress of training of directors and
supervisors: All directors and
supervisors within this company have
academic backgrounds and practical
experience in business management
applicable to the business scope of
this company. The following lists
financial, business, and professional
coursesrecently takenby this


  • 22 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Governance Best
Practice
Principles for
TWSE/GTSM
Listed
Companies, and
the cause of the
said gaps
Yes No Summary
company’s directors, supervisors, and
managerial officers (please refer to
note 1).
(7)Risk management policy and risk
exposure:The company do variety
risk management and assessment
according internal regulations
requirement .
(8)Execution of customer policies: This
company is involved in the sales of
instruments and equipment and
provides excellent product inquiry
response as well as rapid
maintenance and other post-sales
services to ensure that the clients’
production lines operate smoothly
while maintaining positive customer
relationships.
(9)Liability insurance for directors and
supervisors of this company:
Liability insurance policies have
been taken out for the directors,
supervisors, and other key employees
ofthis company.
8. Has the company used corporate
governance self-assessments or
commissioned other
professional agencies or
companies to assess the
company’s corporate
governance efforts and generate
relevant reports? (If yes, please
describe the opinions of the
company’s board of directors,
results of self-assessment or
commissioned assessments, as
well as major defects,
recommendations, and state of
improvements)
ˇ		 This company complies with relevant
laws and conducts corporate governance
assessments carried out by the Securities
and Futures Institute (SFI) on a regular
basis every year. This company also
carries out self-assessment of corporate
governance, with the results largely
demonstrating compliance with corporate
governance regulations. However, this
company has yet to commission other
professional agencies and institutions to
generate corporate governance
assessment reports.
No gaps
  • 23 -

Note 1: Progress of training of this company’s directors and supervisors in 2015 to the publication date of this report.

Title Name Training date
Organizer		 Course title
Conference for Directors and
Supervisors of Listed
Companies—New Visions
for Corporate Integrity, Risk
Control, and Social
Responsibility
Seminar on the Applied
Operations of the Board of
Directors and Supervisors
and Corporate Governance
Platform strategies
Conference on the Advanced
Practice of Corporate
Directors and Supervisors
(including Independent
Directors and Supervisors)
Corporate Governance
Forum—Robust Corporate
Governance and Succession
Planning
Conference for Directors and
Supervisors of Listed
Companies—New Visions
for Corporate Integrity, Risk
Control, and Social
Responsibility		 Course
hours
Chairperson of
the Board
Independent
director
Independent
director
Director
representative
of the
corporation
Supervisor
representative
of the
corporation		 Leo
Huang
Tsung-
ming
Chung
Quincy
Lin
I-Shih
Tseng
Tsun-I,
Wang
 August 27,
2015
September
22, 2015
November
17, 2015
December 3,
2015
July 21,
2015
August 27,
2015
 Securities and Futures Institute
Taiwan Academy of Banking and
Finance
Taiwan Corporate Governance
Association
Securities and Futures Institute
Taiwan Academy of Banking and
Finance
Securities and Futures Institute
 3
3
3
3
3
3

Corporate governance training for managerial officers of this company in 2015 through the publication date of this report:

Title Name Training date
Organizer
Accounting Research and
Development Foundation		 Course title Course hours
Deputy
General
Manager,
Finance &
Administra
tion Center
Paul
Ying
July 20, 2015
to
July 21, 2015		 Continuing Training Class for
Principal Accounting Officers
of Issuers, Securities Firms,
and Securities Exchanges		 12
  • 24 -

(4) Composition, duties, and operations of the Salary and Remuneration Committee

1. Information on the members of the Salary and Remuneration Committee

Identity
(note 1)		 Condition
Nane		 Has more than 5 years of work experience
and the following professional qualifications		 Has more than 5 years of work experience
and the following professional qualifications		 Has more than 5 years of work experience
and the following professional qualifications		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Compliant with the requirements
of independence (note 2)		 Number of
salary and
remuneration
committee
memberships
concurrently
held in other
public
companies		 Notes
Currently serving
as an instructor or
higher post in a
private or public
college or
university in the
field of business,
law, finance,
accounting, or the
business sector of
the company

Currently serving
as a judge,
prosecutor,
lawyer,
accountant, or
other professional
practice or
technician that
must undergo
national
examinations and
specialized
license
Has
professional
experience
necessary for
business
administration,
Legal affairs,
finance,
accounting, or
business sector
of the company.		 1 2 3 4 5 6 7 8
Independent
director		 Tsung-ming
Chung
1
Independent
director		 Quincy Lin 2
Others Chao-min
Yang		 0

Note 1: For identity, please annotate whether the person is a director, independent director, or other.

Note 2: For any committee member who fulfills the relevant condition(s) 2 years before being elected or during the term of office, please provide the [] sign in the field next to the corresponding condition(s).

  • (1) Not employed by the company or an affiliated business.

(2) Not a director or supervisor of the company or an affiliated business. This does not apply in cases where the person is an independent director of the company, its parent company, or subsidiary where the company holds, directly and indirectly, more than 50% of the voting shares.

(3) Not a natural person shareholder who holds more than 1% of issued shares or is ranked in the top 10 in terms of the total quantity of shares held, including the shares held in the name of the person’s spouse, minor children, or others.

(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the 3 preceding items.

(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds more than 5% of the total number of issued shares of the company or is ranked in the top 5 in terms of quantity of shares held.

(6) Not a director (member of the governing board), supervisor (member of the supervising board), managerial officer, or shareholder holding more than 5% of shares of a specified company or institution that has a financial or business relationship with the company.

(7) Not a professional individual or owner, partner, director (member of the governing board), supervisor (member of the supervising board), or managerial officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting, or consultation services to the company or to any affiliated business, or spouse thereof.

(8) Where none of the circumstances in the subparagraphs of Article 30 of the Company Act applies.

  1. Operations of the Salary and Remuneration Committee

(1)This company has a Salary and Remuneration Committee composed of 3 members.

(2)Duration of the current term of service: June 19, 2014 to June 10, 2017. In 2015, a total of 3 Salary and Remuneration Committee meetings (A) were held. The following lists member qualifications and presence at these meetings:

Title Name Actual
presence (B)		 Delegated
presence		 Rate of actual presence
(%) (Ｂ/Ａ) (note)		 Notes
Committee chair Tsung-ming Chung 3 - 100%
Member Quincy Lin 3 - 100%
Member
Chao-min Yang		 3 - 100%

Other items that shall be recorded:
(1)If the Board of Directors chooses not to adopt or revise recommendations proposed by the Salary and
Remuneration Committee, the date of the Directors’ Meeting, session, contents discussed, results of meeting
resolutions, and company’s disposition of opinions provided by the Salary and Remuneration Committee
shall be described in detail (also, when the salary and remuneration approved by the Directors’ Meeting is
higher than that recommended by the Salary and Remuneration Committee, the differences and the reason
for the approval shall be described in detail): None.
(2)When resolutions of the Salary and Remuneration Committee include dissenting or qualified opinion that is
on record or stated in a written statement, the date, session, contents discussed, opinions of every member,
and disposition of the members’opinions shall be described in detail: None.

(1)If the Board of Directors chooses not to adopt or revise recommendations proposed by the Salary and Remuneration Committee, the date of the Directors’ Meeting, session, contents discussed, results of meeting resolutions, and company’s disposition of opinions provided by the Salary and Remuneration Committee shall be described in detail (also, when the salary and remuneration approved by the Directors’ Meeting is higher than that recommended by the Salary and Remuneration Committee, the differences and the reason for the approval shall be described in detail): None.

(2)When resolutions of the Salary and Remuneration Committee include dissenting or qualified opinion that is on record or stated in a written statement, the date, session, contents discussed, opinions of every member, and disposition of the members’ opinions shall be described in detail: None.

Note:When members of the Salary and Remuneration Committee resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual presence rate (%) shall be calculated using the number of Salary and Remuneration Committee meetings convened and actual presence during the term of service.

  • 25 -

(5) Fulfillment of social responsibilities

Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Social
Responsibility
Best Practice
Principles for
TWSE/GTSM
Listed
Companies and
root causes
Yes No Summary
1.Implementation of corporate
governance
(1)Has the company stipulated
corporate social responsibility (CSR)
policies and systems and reviewed
the effectiveness of CSR actions?
(2)Has the company provided regular
training on CSR topics?
(3)Has the company established an
exclusively (or concurrently)
dedicated unit for promoting CSR?
Is the unit empowered by the Board
of Directors to implement CSR
activities at upper management
levels? Does the unit report the
progress of such activities to the
Board of Directors?
(4)Has the company established a
relevant salary and remuneration
policy and combined its employee
performance assessment system with
CSR policies? Has the company
established a clear reward and
penalty system?





(1)This company has established Best
Practices for Corporate Social
Responsibility and published its first CSR
report in 2015 to detail the principles of
sustainable development in economy,
environment, and communities supported
by this company. Data were also
compiled to disclose information within
this report.
(2)Environmental Safety and Health (ESH)
units organize seminars on safety, heath,
and healthcare. The Welfare Committee
also organized beach cleaning activities
and charity performances to encourage
employees to participate in social charity.
(3) The ESH unit shall concurrently
implement CSR activities, incorporate
various CSR efforts and results from
other departments, and report CSR
activities to upper management on a
regular basis.
(4)This company has established a
comprehensive performance assessment
system linked with regulations governing
employee rewards and penalties, which
were then implemented accordingly.		 No gaps
2.Developing a sustainable environment
(1)Is the company committed to
improving the usage efficiency of
various resources and utilizing
renewable resources with reduced
environmental impact?
(2)Has the company referred to the
nature of its industry to establish a
suitable environment management
system(EMS)?

(1)This company is dedicated to developing
green products, reducing the use of
hazardous substances (HS), and building
lead-free production processes. Specific
waste products and domestic wastes from
the employees undergo recycling and
reuse. Promotion of relevant policies and
garbage sorting reduce the generation of
wastes to properly fulfill this company’s
obligations in environmental protection.
(2)All environmental health and safety
(EHS) operations such as periodic
tracking of waste production, stipulating
wastereductiongoals, promoting		 No gaps
  • 26 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Social
Responsibility
Best Practice
Principles for
TWSE/GTSM
Listed
Companies and
root causes
Yes No Summary
(3)Is the company concerned with
changes to the global climate and
how it may affect business
activities? Has the company
implemented greenhouse gas (GHG)
inventory checks and stipulated
strategies for reducing energy
consumption, carbon emissions, and
greenhouse gas production?		 resource recycling, and establishing
various energy saving plans have been
implemented according to statutory
regulations to achieve the energy saving
and environmental conservation
objectives.
(3) As part of its continuing focus on climate
change, this company has invested in
various measures such as enhancing the
efficiency of air conditioning and ice
storage, removing and improving
energy-consuming hardware, promoting
proper air conditioning temperatures,
improving energy use monitoring, using
water saving washers, and replacing
public lighting equipment throughout the
entire facility with LED lights to achieve
energy saving and carbon reduction,
reduce energy consumption, and achieve
the aims ofenvironmentalprotection.
3. Sustaining community services
(1)Has the company referred to relevant
laws and international human rights
instruments to stipulate relevant
management policies and
procedures?
(2)Has the company established an
employee appeal system and
channels, and are employee appeals
handled appropriately?
(3)Has the company provided
employees with safe and healthy
work environments as well as
regular classes on health and safety?
(4)Has the company established a


(1)This company is compliant with the Labor
Standards Act, Employment Service Act,
Act of Gender Equality in Employment
and other relevant laws and has
referenced relevant labor laws to stipulate
various human resource regulations for
areas such as personnel employment,
working hours, and salaries to protect the
employees’ rights.
(2) To improve internal communication, this
company has established an employee
appeal helpline and email addresses. A
dedicated personnel has been assigned to
handle and file these appeals.
(3) To provide fellow employees with a
friendly, safe, and healthy work
environment, the following measures were
implemented: safety and health training
courses and healthcare seminars; regular
physician tours and fire safety drills;
establishment of dedicated safety and
health management unit and clinics with
resident traditional Chinese medical
doctors and western physicians providing
healthcare services; and provision of
various plant areas with automated
external defibrillators (AED).
(4)Toimprove the efficiency of internal


No gaps
No gaps
  • 27 -
Assessed items State of operations State of operations State of operations Gaps with the
Corporate
Social
Responsibility
Best Practice
Principles for
TWSE/GTSM
Listed
Companies and
root causes
Yes No Summary
system to regularly communicate
with its employees and used
appropriate means to notify
employees of operation changes that
may result in material impacts?
(5)Has the company established an
effective career competence training
plan for its employees?
(6)Has the company established relevant
policies and systems of appeal for
consumer rights for the processes of
research and development,
purchasing, production, operations,
and services?
(7)Is the company compliant with
relevant laws and international laws
governing the marketing and labeling
of its products and services?
(8)Has the company assessed any record
of a supplier’s impact on the
environment and society before
engaging in commercial dealings
with the said supplier?
(9)Do contracts between the company
and its major suppliers include terms
in which the company may terminate
or rescind the contract at any time if
the said supplier has violated the
company's corporate social
responsibility policy andhas caused





communication and encourage fellow
employees to provide recommendations,
this company has established various
communication channels such as
employee communication helpline,
emails, and physical opinion boxes.
Various activities and events have also
been announced through the electronic
bulletin board.
(5) This company has established the
Education and Training Management
Regulations, which were used with career
plans to implement employee training to
cultivate and develop professional
competences of employees.
(6) This company has stipulated internal
regulations on various processes such as
research and development, purchasing,
production, sales and services, and
customer complaint and feedback
management. A dedicated sales service
unit has been established to respond to
customer inquiries on post-sales services
and product use as well as customer
complaints and feedback.
(7) All marketing and labeling of this
company's products and services are
compliant with relevant laws and
international standards.
(8) This company has established the
Supplier Management Regulations that
stipulate supplier assessments before any
commercial dealings. The scope of the
said assessments included quality system
requirements, production control,
lead-free process management,
purchasing and incoming material
management, and training. Assessment
results were used as a basis for selecting
qualified suppliers. In 2015, more than
98% of products from this company's
suppliers have met environmental
protection and green regulations.
(9) Suppliers were required to sign a
Declaration for Environmental Protection,
which included terms stipulating that this
company may terminate contractual
agreements if the supplier violates
environmental protection laws and
requirements.
  • 28 -
State of operations State of operations Gaps with the
Corporate
Social
Responsibility
Assessed items Yes No Summary Best Practice
Principles for
TWSE/GTSM
Listed
Companies and
root causes
significant impact upon the
environment and society?
4.Improvement of information
disclosure
(1)Does the company disclose relevant This company has established an electronic No gaps
and reliable information relating to bulletin board to promptly report any of its
CSR on its official website or the activities. CSR reports and information
Market Observation Post System relating to social responsibility activities are
(MOPS)? also disclosed on this company’s official
website.
  1. Where the company has stipulated its own Best Practices on CSR according to the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, please describe any gaps between the prescribed best practices and actual activities taken by the company:

This company has stipulated Best Practices on Corporate Social Responsibility, which provided various specifications on environmental management, community services, human rights, stakeholders’ rights, and participation in community services. These Best Practices may be perused on this company's website. For the status of CSR operations of this company, please peruse the CSR reports compiled by this company.

  1. Any important information useful for understanding the state of CSR operations: (1) Environmental responsibility:

    • Increase responsibilities for environmental protection, actively promote clean energy technologies, and provide green companies with automated testing solutions.

    • • Actively introduce lead-free production processes and use of green materials to enhance the green supply chain.

    • • Actively reduce energy wastage in office environments. • Promote paper-free processes and waste paper recycling, and monitor and record the use of printer paper.

    • • Promote the elimination of disposable utensils during meals to reduce deforestation.

    • (2) CSR activities carried out in 2015 CSR activities in 2015 include the following: Participation in national beach cleaning activities organized by the Society of Wilderness (SOW), which encouraged fellow employees to participate in environmental protection to achieve the objectives of environmental friendliness. A business-education partnership was achieved by National Taiwan University of Science and Technology (NTUST) to establish the Chroma-NTUST R&D Center, using technological partnerships between the industry and academia to achieve the mutually beneficial result of improved professionalism and expanded research and development capacities. For social care, sponsorship was provided to Chiling Charity Foundation with the charity calendar project. This event was used to purchase equipment to help improve the safety of cardiotherapy amongst children so that sick children may regain their health with the help of professional medical teams and safe medical equipment. This company also places great importance on the development of local communities, and invited performers of the unicycle club of Da Gang Junior High School to perform during the year end party and offer them scholarships in return.

  2. Promote the elimination of disposable utensils during meals to reduce deforestation.

  3. (2) CSR activities carried out in 2015

  4. Any review standards of certification bodies for which the company’s CSR report have been qualified shall be described: None.

  5. 29 -

(6) Compliance with ethical corporate management and measures implemented

Items assessed State of operations State of operations State of operations Gaps with the
Ethical Corporate
Management Best
Practice Principles
for TWSE/GTSM
Listed Companies,
and the cause of the
said gaps
Yes No Summary
1. Stipulating policies and plans for
ethical corporate management
(1) Has the company clearly
indicated policies and activities
related to ethical corporate
management in its bylaws and
external documents, and are the
company’s directors and
management actively fulfilling
their commitment to corporate
policies?
(2) Has the company stipulated a
plan to forestall unethical
conduct? Has the company
clearly prescribed procedures,
best practices, and disciplinary
and appeal systems for
violations within the said plan?
Is the plan implemented
accordingly?
(3) Has the company established
preventive measures for the
items prescribed in Article 7,
Paragraph 2 of the Ethical
Corporate Management Best
Practice Principles for
TWSE/GTSM Listed
Companies or business activities
with a higher risk of being
involved in an unethical conduct
within the company’s scope of
business?



(1) This company has stipulated the Best
Practices for Ethical Corporate
Management, Standards for Ethical
Conduct, Regulations for Employee
Reward and Disciplinarian Actions,
Supplier Management Regulations,
and other relevant laws to actively
enforce its ethical corporate
management policies.
(2) This company has stipulated Best
Practices for Ethical Corporate
Management. This company’s
corporate management principles
and policies are also compliant with
the Company Act, Securities and
Exchange Act, and other laws
governing TWSE/GTSM listed
companies. This company has
stipulated the Regulations for
Employee Reward and
Disciplinarian Actions as the basis
for rewarding and penalizing
employee conduct. The rewarding
and penalizing of employee conduct,
disciplinarian actions taken against
violations, and handling of personal
appeals are implemented according
to these Regulations.
(3) This company requires suppliers to
sign a Supplier Commitment towards
Business Integrity, which clearly
prohibits any improper or unethical
conduct during the process of
business dealings. This company has
also stipulated and enforced internal
regulations linked to reward and
disciplinarian actions.

No gaps
2.Implementing ethical corporate
management
(1) Has the company evaluated
ethical records of its
counterparty? Does the contract
signed by the company and its
trading counterparty clearly
provide terms onethical		 (1)To ensure that mutual trust and
integrity form the basis of all
business dealings, this company’s
management regulations have
provided that suppliers must sign a
letterofcommitment to business		 No gaps
  • 30 -
Items assessed State of operations State of operations State of operations Gaps with the
Ethical Corporate
Management Best
Practice Principles
for TWSE/GTSM
Listed Companies,
and the cause of the
said gaps
Yes No Summary
conduct?
(2) Has the company established
an exclusively (or concurrently)
dedicated unit for promoting
ethical corporate management
that answers to the board of
directors? Does the said unit
regularly report to the board of
directors on the state of its
activities?
(3) Has the company established
policies preventing conflict of
interest, provided proper
channels of appeal, and
enforced these policies and
channels accordingly?
(4) Has the company established
effective accounting systems
and internal control systems for
enforcing ethical corporate
management? Are regular
audits carried out by the
company’s internal audit unit
or commissioned to a CPA?
(5) Does the company regularly
organize internal and external
training for ethical corporate
management?



integrity, which clearly prohibits any
improper or unethical conduct in
business activities and provides for
immediate blacklisting of any
violators. Standard purchasing / sales
contracts of this company also clearly
stipulate terms for business integrity
and prohibition of unethical dealings
and conduct.
(2)The audit unit shall be responsible for
these activities and provide regular
presentations to the Board of
Directors accordingly.
(3)This company has stipulated internal
specifications prohibiting improper
or unethical conduct of business and
has established stakeholders’ contact
information at this company's official
website as well as dedicated emails
as channels of appeal.
(4)To achieve ethical corporate
management, this company has
referred to key constituents of
internal systems to establish effective
accounting systems and internal
control systems. The internal audit
unit shall also conduct audits
according to the annual audit plan.
(5)Newly hired employees shall be
regularly provided with lectures on
this company’s organization, culture,
and important ethical conduct while
highlighting the importance of ethics
at both individual and professional
levels.

3.Status for enforcing
whistleblowing systems in the
company
(1) Has the company established
concrete whistleblowing and
reward systems and accessible
whistleblowing channels? Does
the company assign a suitable
and dedicated individual for the
case being exposed by the
whistleblower?		 (1)To achieve ethical corporate
management, the internal control
system of this company requires
qualified suppliers to sign the
Supplier Commitment towards
Business Integrity, which requires
suppliers to provide assurance that
they will not provideimproper		 No gaps
  • 31 -
Items assessed State of operations State of operations State of operations Gaps with the
Ethical Corporate
Management Best
Practice Principles
for TWSE/GTSM
Listed Companies,
and the cause of the
said gaps
Yes No Summary
(2) Has the company stipulated
standard operating procedures
(SOP) and relevant systems of
confidentiality for investigating
the case being exposed by the
whistleblower?
(3) Has the company adopted
protection against inappropriate
disciplinary actions for the
whistleblower?
benefits to the stakeholders and
provides that this company may
terminate or rescind the contract or
agreement for any unethical conduct.
This company has also established an
independent appeal mailbox and
delegated dedicated personnel in
charge of this mailbox. In 2015, the
supplier management process and
subcontracting process were audited
to review purchasing processes and
verify the suitability and promptness
of payment processes to maintain this
company's principles on ethical
payment to its suppliers.
(2)An independent appeal box has been
established and publicly announced
so that whistleblowers may contact
specified personnel upon discovery
of violations. The handling personnel
shall investigate the case being
exposed by the whistleblower,
generate records, submit a report, file
relevant documents, and ensure
confidentiality of the identity of the
whistleblower and the content of the
reported case.
(3)In addition to protecting the identity
of the whistleblower, this company
also specified a merit system for
rewarding internal personnel who
reportmajorviolations.
4. Improvement of information
disclosure
(1) Has the company disclosed the
contents of its best practices for
ethical corporate management
and the effectiveness of relevant
activities on its official website
or Market Observation Post
System (MOPS)?		 This company has established an
electronic bulletin board, providing
prompt announcements to relevant
regulations and activities. Any
regulations related to corporate
governance as well as compliance with
ethical conduct shall also be disclosed
onthis company’s officialwebsite.		 No gaps
5. Where the company has stipulated its own best practices on ethical corporate management according to the
Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please
describe any gaps between the prescribed best practices and actual activities taken by the company:
The Best Practices for Ethical Corporate Management of this company was promulgated on December
23, 2015, and specified that directors, supervisors, managerial officers, and employees may not directly or
indirectly offer, request, or accept any improper benefits for personal profit during business activities. This
company also stipulated Standards for Ethical Conduct and Regulations for Employee Reward and
Disciplinarian Actions. For details on the operations and enforcement of ethical corporate management in
this company, please refer toSection3: Status of corporategovernance(6) Compliancewith ethical
  1. Where the company has stipulated its own best practices on ethical corporate management according to the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any gaps between the prescribed best practices and actual activities taken by the company: The Best Practices for Ethical Corporate Management of this company was promulgated on December

23, 2015, and specified that directors, supervisors, managerial officers, and employees may not directly or indirectly offer, request, or accept any improper benefits for personal profit during business activities. This company also stipulated Standards for Ethical Conduct and Regulations for Employee Reward and Disciplinarian Actions. For details on the operations and enforcement of ethical corporate management in this company, please refer to Section 3: Status of corporate governance (6) Compliance with ethical

  • 32 -
Items assessed State of operations State of operations State of operations Gaps with the
Ethical Corporate
Management Best
Practice Principles
for TWSE/GTSM
Listed Companies,
and the cause of the
said gaps
Yes No Summary
corporate management and measures implemented in this report. For details on this company’s Best
Practices for Ethical Corporate Management and Standards for Ethical Conduct, please visit the MOPS or
this company's officialwebsite.
6. Any important information to better understand the company’s implementation of ethical corporate
management (for example, any review or amendment to best practices for ethical corporate management of
the company): None.

corporate management and measures implemented in this report. For details on this company’s Best Practices for Ethical Corporate Management and Standards for Ethical Conduct, please visit the MOPS or this company's official website.

  1. Any important information to better understand the company’s implementation of ethical corporate management (for example, any review or amendment to best practices for ethical corporate management of the company): None.

  2. (7) If the company has stipulated best practices for corporate governance and other relevant bylaws, the means to search for these bylaws shall be disclosed.

    • Please refer to the MOPS or this company’s official website for the Best Practice

    • Principles for Corporate Governance stipulated by this company and specifications provided by this Best Practice on protecting the shareholders’ rights, enhancing the functions of the Board of Directors, respecting the stakeholders’ rights, and improving information transparency.

  3. (8) Other important information to achieve better understanding on the state of corporate governance activities

    1. This company has stipulated Regulations for Prohibiting Insider Trade as the basis for the disclosure system of important news and information from this company. This company also conducts non-periodic inspections of these Regulations to ensure compliance to statutory regulations and has posted these Regulations upon the internal website of this company for inquiry.

    2. This company has stipulated Regulations for Directors’ Meetings, which clearly indicate that when a director or artificial person represented holds a stake in a proposal at the meeting, and there is a likelihood that the interests of this company would be prejudiced, the said director may represent his or her opinion and answer inquiries but may not participate in the discussion or vote on that proposal. The said director shall also recuse himself or herself from any discussion and voting and may not exercise voting rights as proxy on behalf of another director.

  4. (9) Protective measures for the safety of the work environment and personal safety of the employees

    1. Environmental protection: Implementation of and compliance with ISO 14001 Environmental management system (EMS), using ISO 14001 as the highest guiding principles for stipulating environmental protection policies:

    2. (1) Enforcement of environmental protection laws: Audits for relevant environmental protection laws were implemented to comply with the requirements of environmental protection laws stipulated by the competent authority.

    3. (2) Enacting resource innovation: Maximize the benefit of usable resources to reduce wasteful conduct, environmental pollution, and energy consumption.

    4. (3) Sustaining green production: Regular audits and reviews to ensure proper enforcement of environmental policies and achievement of continuous improvements to jointly safeguard an environmentally friendly global village.

    5. Safety and health: Implementation of and compliance with the Taiwan Occupational Safety & Health Management System (TOSHMS) to stipulate occupational safety and

  5. 33 -

health (OSH) policies and use TOSHMS as the highest guiding principles for OSH management and decision making within this company:

  • (1) Employee safety:

  • Employee fire safety teams shall work with local fire departments to conduct fire safety and evacuation, disaster prevention, and practical disaster response drills.

  • Established and enforced self-inspection plans to regularly inspect, maintain and repair high- and low-voltage electrical equipment, elevators, air conditioning, fire safety equipment, potable water, water towers, and other forms of machinery and equipment to safeguard employee safety.

  • Commissioned professional cleaning companies to maintain building sanitation and implement sterilization processes.

  • Commissioned qualified security firms to enforce access controls and security operations.

  • (2) Employee insurance:

  • Used relevant laws and table of insurance ranges as the basis to provide employees with labor and health insurance.

  • Provided social insurance for personnel stationed overseas in accordance with local laws.

  • Provided employees with regular life insurance, accidental injury insurance, accident and health insurance, hospitalization insurance, cancer healthcare insurance, and workplace accident insurance.

  • (3) Physical and mental health and healthcare for employees

  • Commissioned qualified medical institutions to provide regular employee health examinations, and implement healthcare management to safeguard employee health.

  • Included Sexual Harassment Prevention Act within the employees’ work regulations, established a Sexual Harassment Prevention Committee, and delegated dedicated personnel for handling such matters.

  • Established breastfeeding rooms and organized cervical smear screening, mammogram screening, and other female employee healthcare measures every year.

  • Established AED in every plant area and organized relevant training courses to improve workplace safety.

  • Established employee recreation centers with swimming pools, spas, gyms, dance classrooms, equipment and other materials for employee use.

  • Provided cancer screening to promote employee healthcare for early detection and prompt treatment of diseases

  • Provided courses on emotional management, interpersonal communication, and healthy diets.

  • Actively promoted smoke-free workplaces and activities, and prohibited smoking in all office areas.

  • Established an Occupational Welfare Committee to regularly organize various employee welfare activities. This company also established various societies and clubs to provide various recreational and health activities for employees.

  • Hosted health-promoting activities every year, promoted healthy meals, led aerobic exercises and health seminars, and reduced the prevalence of metabolic syndrome.

  • 34 -

(10) Internal Control System Execution Status

1. The Statement on the Internal Control System

Chroma ATE Inc.

The Statement on the Internal Control System

Date: February 23, 2016

This company makes the following statement according to the self-evaluation conducted of its internal control system.

  1. This company has achieved full understanding that the establishment, implementation, and maintenance of the internal control system (ICS) are the responsibilities of this company’s Board of Directors and managerial officers and have established the said system accordingly. The objectives of ICS include achieving various objectives in business benefits and efficiency (including profitability, performance, and protection of assets and safety); ensuring the reliability, timeliness, transparency, and regulatory compliance of reporting; and providing reasonable assurance.

  2. All ICS are bound by natural limitations and regardless of the robustness of designs, effective ICS can provide reasonable assurance for only the 3 objectives listed above. In addition, changes to the environment and situation may also affect the effectiveness of the ICS. However, this company’s ICS has been furnished with self-monitoring systems. This company shall also initiate corrective actions for any verified defects.

  3. This company shall refer to the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as “ICS Regulations”) to stipulate assessment items for determining the effectiveness of the ICS as well as the performance of the designs and implementation of the system. The ICS is divided into 5 key components according to the process of management control to generate ICS assessment items used by ICS Regulations—namely, 1. control environment; 2. risk assessment; 3. control activities; 4. information and communications and; 5. monitoring activities. Each key component also includes a number of sub-items. For the aforementioned items, please refer to the provisions provided in the ICS Regulations.

  4. This company has already adopted the aforementioned ICS assessment items to evaluate the effectiveness of ICS design and implementation.

  5. This company has referred to the results of the aforementioned assessments and determined that this company’s ICS (including monitoring and management of its subsidiaries), including this company’s understanding of the level of effectiveness and efficiency of business operations achieved; the reliability, timeliness, transparency, and regulatory compliance of reporting; and the compliance with applicable laws, regulations, and bylaws, are effectively designed and implemented and capable of reasonably ensuring the attainment of the aforementioned objectives.

  6. This Statement shall be a major component of this company’s annual report and prospectus and shall be publicly disclosed. Where any of the disclosed content contain misrepresentations, nondisclosures, or other illegal acts, this company shall be subject to legal responsibilities provided in Articles 20, 32, 171,a and 174 of the Securities and Exchange Act.

  7. We hereby declare that this Statement has been approved by the Board of Directors on February 23, 2016. Amongst the 5 Directors present in the meeting, none held dissenting opinions, and the remaining have all agreed with the contents of this Statement.

Chroma ATE Inc. Chairperson: Leo Huang Signature / stamp General Manager: Leo Huang Signature / stamp

  1. Any CPA commissioned to conduct a project review of the ICS shall disclose the CPA’s audit report: None.

  2. 35 -

  3. (11) Any legal penalty enacted upon this company and its personnel, or any penalty, major defects, and state of improvements enacted by this company upon its personnel for violating the rules of the ICS during the most recent year through the publication date of this report: None.

  4. (12) Major resolutions of the Board of Shareholders and Board of Directors in the most recent year through the publication date of this report

  5. Major resolutions of the Board of Shareholders and state of implementation

Date Annual Shareholders’ Meeting of 2015 convened 2015.06.10 1.Confirming the 2014 Business Report and Financial Statement of this company. State of implementation: Approved by resolution. 2.Approved the surplus allocation proposal of 2014 of this company. State of implementation: Approved by resolution. Ex-dividend date was set to July 28, 2015. Cash dividend for the shareholders was completely paid on August 18, 2015. (Dividend per share: NT$ 2.60683543). 3.Approved of the amendments to the articles of association of this company. State of implementation: Approved by resolution. Amendments were made to the articles of associations. 4.Approved of the amendments to this company’s Provision of Financial Loans to Other Parties. State of implementation: Approved by resolution. Amendments were made to the operation procedure.

2. Key resolutions of the Board of Directors

2015.02.12 1.Evaluated the report concerning the independence of this company’s CPA. 2.Approved the 2014 Business Report and Financial Statement of this company. 3. Approved the surplus allocation proposal of 2014 of this company. 4. Approved amendments to the articles of association of this company. 5. Approved amendments to this company’s Provision of Financial Loans to Other Parties. 6. Formulated the schedule and cause for convening annual shareholders’ meetings for 2015. 7. Composed the Statement on Internal Control System of 2014 of this company. 8. Approved the Business Plan of 2015 for this company. 9.Approved the capital increase for Adivic Technology Co. 10. Approved the capital increase for Chroma (Shanghai) Trading Co., Ltd. 11. Approved financial loans for Chroma Japan Corp. 12. Approved the amendments to the Provision of Financial Loans to Other Parties of this company's subsidiaries. 13. Approved capital loans to overseas subsidiaries 100% owned by this company. 14. Approved the fixed salary payment proposal for managerial officers of 2015 of this company. 15. Approved remuneration for directors and supervisors as well as transport fees for presence at the Directors’ Meeting for this company. 2015.04.30 1. Business Performance Report—First Quarter 2015 2. Formulated this company's capital increase date for the second issuance of new shares of unsecured convertible corporate bonds. 3. Approved endorsements and guarantees for Chroma ATE Inc. (USA). 4. Approved line of credit extension proposal for financial institutions of this company. 2015.06.23 1. Stipulated the proposal for record date, suspension of conversion of convertible corporate bonds, adjustments to the prices of convertible bonds, and adjustments to the prices of employee stock warrants of 2015 for this company.

  • 36 -

  • Approved the proposal for managerial allocation of employee cash bonus of 2014 for this company. 3. Ratified the investment plan for EVT Technology. 2015.07.31 1. Financial Report of second quarter, 2015 2. Approved the capital loan proposal to Chroma Systems Solutions, Inc. 3. Approved endorsements and guarantees for Chroma Japan Corp. 4. Approved endorsements and guarantees for Chroma ATE Inc. (USA). 5. Approved capital loans to overseas subsidiaries 100% owned by this company. 6. Ratified the investment plan to the WK Technology Fund. 7. Approved the issuance of employee stock warrants. 2015.10.30 1. Financial Report of third quarter, 2015 2. Approved capital loans to Chroma Japan Corp. 3. Scheduled capital increase date for employee stock warrants in this company. 4. Ratified amendments to the issuance and stock subscription of employee stock warrants of 2015 of this company. 2015.12.23 1. Approved the 2016 audit plan. 2. Approved this company’s accounting system, internal control system, and guidelines for implementing internal audits. 3. Approved capital loans to Chroma Systems Solutions, Inc. 4. Scheduled capital increase date for employee stock warrants in this company. 5. Approved amendments to this company’s bylaws. 6. Approved the CPA replacement and independence assessment. 7. Approved the Application Procedure for Temporary Suspension and Resumption of Trading of this company. 8. Approved Best Practices for Ethical Corporate Management stipulated for this company. 9. Approved the Quantel Private Limited (Singapore) equity investment plan. 2016.02.23 1. Approved the employee's compensation issuance proposal of 2015 for this company. 2. Approved remuneration for directors and supervisors as well as transport fees for presence at the Directors’ Meeting for this company. 3. Approved the 2015 Business Report and Financial Statement of this company. 4. Approved the surplus allocation proposal of 2015 of this company. 5. Approved the scheduling for the annual shareholders’ meeting for 2016 and items raised by the shareholders to be reviewed. 6. Approved the Business Plan of 2016 for this company. 7. Ratified the investment plan for ADLINK Technology Inc. 8. Approved capital loans to Chroma Japan Corp. 9. Approved capital loans to overseas subsidiaries 100% owned by this company. 10. Composed the Statement on Internal Control System of 2015 of this company. 11. Approved the assessment results on this company's capability to generate financial reports independently. 12. Approved the stipulation of Best Practices for Corporate Governance and Best Practices for Corporate Social Responsibility of this company. 13. Approved salary adjustments for managerial officers for 2016. 14. Approved amendments to the Regulations for Top Management Remuneration of this company. 15. Approved the issuance of this company’s new restricted employee shares. 2016.03.24 Approved a list of stock subscriptions for employee stock warrants issued by this company in 2015.

  • (13) Major contents of any dissenting opinions on record or stated in a written statement by directors or supervisors regarding key resolutions of the Directors’ Meeting in the most recent year through the publication date of this report: None.

  • (14) Any resignation or dismissal of the company's chairperson of the board, general manager, accounting manager, financial executive, internal audit manager, or research and

  • 37 -

development executive in the most recent year through the publication date of this report: None.

4. Accounting Expenses

  • (1) Payments to CPA, accounting firm and affiliated businesses of the CPA, professional charges for accounting and non-accounting services, and contents of non-accounting services provided

Table on the range of professional charge of the CPA

Name of the
accounting
firm		 Name of the CPA Audit period Notes
Deloitte and
Touche		 Cheng-Ming
Lee		 Li-Wen Kuo 2015.01.01~2015.09.30 To ensure the
independence of
the CPA and
internal rotation
system of
Deloitte.
Yi-Wen ,Wang Wen-Chi,Kuo 2015.10.01~2015.12.31

Note: When this company replaces the CPA or accounting firm, the auditing periods of the former and successor CPA or firm shall be annotated separately. The reason for the replacement shall be provided in the Notes section accordingly.


section accordingly.
section accordingly.
Unit: NT$1,000
Professional charge
Fee range		 Accounting charge Non-accounting
charge		 Total
1 Less than NT$ 2,000,000 1,300 1,300
2 NT$ 2,000,000 (inclusive) to
NT$ 4,000,000
3 NT$ 4,000,000 (inclusive) to
NT$ 6,000,000		 5,840 5,840
4 NT$ 6,000,000 (inclusive) to
NT$ 8,000,000
5 NT$ 8,000,000 (inclusive) to
NT$ 10,000,000
6 More than NT$ 10,000,000
(inclusive)

Information on the CPA’s professional charge

Unit: NT$1,000 Unit: NT$1,000
Name of
the
accounti
ng firm		 Name of the
CPA
(note 1)		 Accounting
charges		 Non-accounting charge Period of
CPA audit
 Notes

System
design
Commercial
registration		 Personnel
resources		 Others
(note 2)		 Subtotal
Deloitte
and
Touche		 Cheng-Ming
Lee
Li-Wen Kuo

4,670
-		 - - 1,162 1,162 2015.01.01
~
2015.09.30
Yi-Wen ,
Wang
Wen-Chi,
Kuo		 1,170
-		 - - 138 138 2015.10.01
~
2015.12.31

Note 1: When this company replaces the CPA or accounting firm, the auditing periods of the former and successor CPA or firm shall be annotated separately. The accounting and non-accounting fees paid to the former and successor CPA or firm shall also be disclosed. Note 2: Refers to disbursement fees, English report fees, and professional charges for the issuance of employee stock warrants, and professional charges for employing the direct deduction method.

  • (2) Where the accounting firm was replaced and the accounting fee paid for the year was less than that of the previous year, the sum, proportion, and cause of the reduction shall be disclosed: None.

  • (3) Where the accounting fee paid for the year was more than 15% less than that of the previous year, the sum, proportion, and cause of the reduction shall be disclosed: None.

  • 38 -

5. Replacement of Accountants

(1) Information on the previous CPA

Date of replacement Approved bythe Board of Directors on December 23, 2015 Approved bythe Board of Directors on December 23, 2015 Approved bythe Board of Directors on December 23, 2015 Approved bythe Board of Directors on December 23, 2015 Approved bythe Board of Directors on December 23, 2015 Approved bythe Board of Directors on December 23, 2015
Cause and details of the
replacement		 To ensure the independence of the CPA and internal rotation system of
Deloitte and Touche , the original CPA of this company (CPAs
Cheng-Ming Lee and Li-Wen Kuo) shall be replaced by CPAs
Yi-Wen,WangandWen-Chi,Kuo effective from the 4thQuarter of 2015.
Any details on the
termination or rejection of
the commissioner or CPA		 Party
Status
CPA		 Commissioner
Active termination of the
commission		 Not applicable Not applicable
Rejection (of continuing)
commission		 Not applicable Not applicable
Opinion and reason for
audit report issued during
the most recent 2 years
containing an opinion
other than an unqualified
opinion		 None
Any disagreement with
the issuer		 Yes Generallyaccepted accounting principles(GAAP)or activities
Disclosure of financial reports
Scope orprocedure of audits
Others
None
Details
Other items to be
disclosed (items that shall
be disclosed as prescribed
by Article 10, Paragraph
5,Item 1,Point 4)		 Not applicable
(2) About the successor CPA
Name of the accountingform Deloitte and Touche
Name of theCPA Yi-Wen,Wang, Wen-Chi,Kuo
Date of commission Approved bythe Board of Directors on December 23,2015
Accounting treatment or accounting
principle for specific transactions as
well as consultation items and results
on audit opinions that might be
rendered on the financial report prior
to formal engagement		 None
Successor CPA to former CPA
writtenviews on disagreements		 None

(3) Reply letters on the provisions prescribed in Article 10, Paragraph 5, Item 1 and Item 2, Point 3 of these Regulations from the former CPA: None.

6. Company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise: None.

7. Equity transfer or changes to equity pledge of directors, supervisors, managerial officers, or shareholders holding more than 10% of company shares in the most recent year through the publication date of this report

  • (1) Changes to the equity of directors, supervisors, managerial officers, and major shareholders

  • 39 -

Title Name 2015 2015 From the current year to
April 9, 2016		 From the current year to
April 9, 2016
Addition
(reduction)
of shares
held		 Addition
(reduction) of
hypothecation
Addition
(reduction)
of shares
held
Addition
(reduction) of
hypothecation
Chairperson and General
Manager		 Leo Huang 0
0
0
0
Independent Director QuincyLin 0
0
0
0
Independent Director Tsung-ming
Chung		 0
0
0
0
Corporate Director Fer Mo
Investment Co.,
Ltd.		 0
0
0
0
Director Representative of the
Corporation		 Chung-ju Chang 0
0
0
0
Corporate Director Chroma
Investment Co.,
Ltd.		 0
0
0
0
Corporate Representative of the
Board of Directors and General
Manager of the Integrated
System Solution BU		 I-Shih Tseng 0
0
0
0
Supervisor Chi-Jen Chou 0
0
0
0
Corporate Supervisor Kai Sun
Investment
Co.,Ltd.		 (80,000)
0
0
0
Supervisor Representative of the
Corporation
Tsun-I,Wang		 0
0
0
0
General Manager of Test &
Measurement Business Unit		 David Yang 0
0
0
0
General Manager of Business
Department		 C.C. Ho (10,000)
0
(51,000)
0
General Manager of MES BU Joe Lin 0
0
0
0
General Manager,
Semiconductor Test
Equipment BU		 Georg Chang 0
0
0
0
Deputy General Manager,
Finance & Administration
Center		 Paul Ying 0
0
0
0
Deputy General Manager,
Advanced Technology
Research Center		 Mark Fong 0
0
0
0
Deputy General Manager,
Corporate Manufacturing		 Steven Liu (5,000)
0
0
0
Deputy General Manager of the
Operation Management Center		 Benjamin Huang 0
0
0
0
Deputy General Manager, R&D
Department, Semiconductor
Test Equipment BU		 Max Chang (70,120)
0
0
0
Deputy General Manager, Sales
Department 1, Integrated
System Solution BU		 Herbert Tsai 20,000
0
0
0
Deputy General Manager,
General Manager’s Office		 C.C.Fan 0
0
0
0
Deputy General Manager,
Planning Department, Test &
Measurement BU		 Bobby Tseng 16,000
0
0
0
Deputy General Manager,
Greater China Area Sales
Department, Test &
Measurement BU		 Vincent Chen 0
0
0
0
  • 40 -
Title Name 2015 2015 From the current year to
April 9, 2016		 From the current year to
April 9, 2016
Addition
(reduction)
of shares
held
Addition
(reduction) of
hypothecation
Addition
(reduction)
of shares
held		 Addition
(reduction) of
hypothecation
Deputy General Manager,
Technical Service Department,
Test & Measurement BU		 Tony Yang 0
0
0
0
Deputy General Manager, R&D
Department, Test &
Measurement BU		 Vincent Wu 0
0
16,000
0
Deputy General Manager, R&D
Department 1, Integrated
System Solution BU		 Lance Ouyang 0
0
0
0

(2) Where the counterparty of equity transfer is a related party: None.

(3) Where the counterparty of equity pledge is a related party: None.

8. Relationship information, if among the 10 largest shareholders anyone is a related party or is the spouse or a relative within the second degree of kinship of another.

Relationship information among 10 largest shareholders

Name
(note 1)		 Shares held by the person Shares held by the person Shares held by spouse
or minor children		 Shares held by spouse
or minor children		 Shares held in the
name of other
persons		 Shares held in the
name of other
persons		 Title or name and
relationship of the
10 largest
shareholders when
they are related
parties, spouses, or
relatives within the
second degree of
kinship (note 2)		 Title or name and
relationship of the
10 largest
shareholders when
they are related
parties, spouses, or
relatives within the
second degree of
kinship (note 2)		 Notes
Number of
shares		 Percentage
ofshares		 Number of
shares		 Percentage
ofshares
Number
ofshares		 Percentage
ofshares		 Title Relations
Leo Huang 23,419,897
6.17%
9,185,362
2.42%		 0 0
None		 None
Nanshan Life
Insurance
Representative:
Ying-tsungTu		 17,197,000
4.53%
0
0		 0 0
None		 None
Cathay Life
Insurance
Representative:
Hung-tu Tsai		 17,016,000
4.48%
0
0		 0 0
None		 None
Chun-sheng Chen 15,113,308
3.98%		 11,074,646
2.92%		 0 0 Yu-mei
Hsueh		 Spouse
JPMorgan Chase
Bank N.A. Taipei
Branch in custody
for MFS Series
Trust V - MFS
International New
DiscoveryFund		 13,613,000
3.59%
0
0		 0 0
None		 None
Fidelity Fund
Investment
Account entrusted
to Standard
Chartered Bank
Taipei Branch		 12,509,000
3.29%
0
0		 0 0
None		 None
JPMorgan Chase
Bank, N.A.,
Taipei Branch in
Custody for
Nordea 1		 11,379,000
3.00%
0
0		 0 0
None		 None
  • 41 -
Name
(note 1)		 Shares held by the person Shares held by the person Shares held by spouse
or minor children		 Shares held by spouse
or minor children		 Shares held in the
name of other
persons		 Shares held in the
name of other
persons		 Title or name and
relationship of the
10 largest
shareholders when
they are related
parties, spouses, or
relatives within the
second degree of
kinship (note 2)
 Title or name and
relationship of the
10 largest
shareholders when
they are related
parties, spouses, or
relatives within the
second degree of
kinship (note 2)
 Notes
Number of
shares		 Percentage
of shares		 Number of
shares		 Percentage
of shares
Number
of shares
Percentage
of shares		 Title Relations
Emerging Stars
EquityFund
Yu-mei Hsueh 11,074,646
2.92%		 15,113,308
3.98%		 0 0 Chun-she
ngChen		 Spouse
JPMorgan Chase
Bank N.A. Taipei
Branch in custody
for Universities
Superannuation
Scheme Limited		 10,981,724
2.89%
0
0		 0 0
None		 None
FS GLOBAL
ASIA PACIFIC
FUND		 9,202,000
2.42%
0
0		 0 0
None		 None

Note 1: The 10 largest shareholders shall be listed. For corporate shareholders, the title of the corporate shareholder as well as the name of the representative shall be indicated.

Note 2: Shareholders to be disclosed in the preceding item shall include artificial persons and natural persons. Relationships between shareholders shall be disclosed according to the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  • 42 -

9. Number of shares held and percentage of stake of investment in other companies by the company, the company’s director, supervisor, managerial officer, or an entity directly or indirectly controlled by the company, and calculations for the consolidated shareholding percentage of the above categories.

Consolidated shareholding percentage

Unit: 1000 shares / 1,000 dollars of foreign currency Unit: 1000 shares / 1,000 dollars of foreign currency Unit: 1000 shares / 1,000 dollars of foreign currency Unit: 1000 shares / 1,000 dollars of foreign currency Unit: 1000 shares / 1,000 dollars of foreign currency Unit: 1000 shares / 1,000 dollars of foreign currency
Other companies invested by this company
(note 1)		 Investments by this
company		 Investments by the
directors, supervisors,
managerial officers,
and companies
directly or indirectly
controlled by this
company		 Total investments
Number
ofshares		 Percentage
ofshares
Number
ofshares		 Percentage
ofshares		 Number
ofshares		 Percentage
ofshares
NeworldElectronicsLtd. 64,013 100.0% 0 0 64,013 100.0%
Adlink TechnologyInc. 23,208 11.5% 8,001
3.9%		 31,209 15.4%
Chroma NewMaterialCorp. 25,000 100.0% 0 0 25,000 100.0%
ChromaInvestment Co.,Ltd. 14,000 100.0% 0 0 14,000 100.0%
DynaScan Technology Corp. 9,841
27.3%		 14,964
41.5%		 24,805 68.8%
SENSATIONAL HOLDINGLTD. 1,200 100.0% 0 0 1,200 100.0%
CHROMA ATE EUROPE B.V. 1
100.0%
0
0
1
100.0%
CHROMA ATE INC. 1,000 100.0% 0 0 1,000 100.0%
CHROMA SYSTEMS SOLUTIONS, INC.
(note 2)		 120
25.0%
240
50.0%
360
75.0%
CHENHWA TECHNOLOGY INC. 3,085 100.0% 0 0 3,085 100.0%
CHI INCORPORATION LTD. 3,830
100.0%
0
0
3,830
100.0%
SAN EAGLE DEVELOPMENT CORP 2,050 100.0% 0 0 2,050 100.0%
Testar Electronic Corporation 20,160
67.2%
2,514
8.4%
22,674
75.6%
MAS Automation Corp. 10,000 100.0% 0 0 10,000 100.0%
DeepRed HoldingCo.,Ltd. 215
100.0%
0
0
215
100.0%
CHROMA JAPAN CORP . 9 100.0% 0 0 9 100.0%
Chih Ho Shun Development Co.,Ltd. 1,750
35.0%
0
0
1,750
35.0%
Adivic TechnologyCo. 11,220 51.0% 0 0 11,220 51.0%
EVT TechnologyCo.,Ltd. 2,658
53.2%
1,907
38.1%
4,565
91.3%
ADVIC HOLDING CORPORATION 0 0 500 100.0% 500 100.0%
Weida Electric Vehicle Co.,Ltd. 0 0 375 75.0% 375 75.0%
WEI KUANG MECH.ENG.INC. 0 0 4,475 100.0% 4,475 100.0%
Sajet System Technology (Suzhou)Co.,Ltd.
(note 3)
0
US210
100.0%
US210
100.0%
Chroma Electronics(Shenzhen)Co.,Ltd. (note 3) 0 HK30,000 100.0% HK30,000
100.0%
Chroma Electronics(Shanghai)Co.,Ltd. (note 3) 0 US3,000 100.0% US3,000 100.0%
Chroma(Shanghai)TradingCo.,Ltd. (note 3) 0 US2,700 100.0% US2,700 100.0%
Chroma ATE(Suzhou)Co.,Ltd. (note 3)
0		 US3,800
100.0%		 US3,800
100.0%
Mou Kuan Technologies(Nanjin)Co.,Ltd. (note 3) 0 US2,836 100.0% US2,836 100.0%
Wei KuangAutomation(Nanjing)Co.,Ltd. (note 3) 0 US1,338 100.0% US1,338 100.0%
Wei KuangAutomation(Xiamen)Co., Ltd. (note 3) 0 US1,500
100.0%		 US1,500
100.0%

Note 1: The equity method was employed for this company's investments. Note 2: The consolidated shareholding percentage of this company and its subsidiary CHROMA ATE INC. was 75%. Note 3: The investee is a limited company; hence, only the sum and proportion of capital contribution are shown here.

  • 43 -

IV. Financing

1. Capital and shares

(1) Source of shares

Year and
month
Price at
issuance		 Authorized stock Authorized stock Paid-in capital Paid-in capital Notes Notes

Number
of shares
(thousand
shares)
Sum
(thousand
dollars)		 Number
of shares
(thousand
shares)
Sum
(thousand
dollars)		 Source of shares Equity
contributions
made in the
form of assets
other than cash		 Others
1996.08 10 70,000
700,000
54,365
543,650		 Recapitalization of retained earnings None Note (1)
1997.08 10 100,000
1,000,000
79,300
793,000
Recapitalization of retained earnings:
NT$ 149,350,000
Cash capital increase: NT$ 100,000,000		 None Note (2)
1998.06 10 150,000
1,500,000		 115,200
1,152,000
Recapitalization of retained earnings:
NT$ 259,000,000
Cash capital increase: NT$ 100,000,000		 None Note (3)
1999.05 10 200,000
2,000,000		 152,160
1,521,600
Recapitalization of retained earnings:
NT$ 312,000,000
Recapitalization of Capital surplus:
NT$ 57,600,000		 None Note (4)
2000.06 10 250,000
2,500,000		 201,300
2,013,000
Recapitalization of retained earnings:
NT$ 415,320,000
Recapitalization of Capital surplus:
NT$ 76,080,000		 None Note (5)
2001.01 10 250,000
2,500,000		 208,358
2,083,588		 Capital increase in connection with
merger: NT$ 70,580,000		 None Note (6)
2001.03 10 250,000
2,500,000		 201,358
2,013,588		 Treasury stock extinguished: NT$ 70,000,000 None Note (7)
2001.07 10 320,000
3,200,000		 234,300
2,343,000
Recapitalization of retained earnings:
NT$ 269,000,000
Recapitalization of Capital surplus:
NT$ 60,400,000		 None Note (8)
2002.07 10 320,000
3,200,000		 252,690
2,526,900
Recapitalization of retained earnings:
NT$ 19,890,000
Recapitalization of Capital surplus:
NT$ 164,010,000

None		 Note (9)
2003.07 10 360,000
3,600,000		 272,289
2,722,892		 Recapitalization of retained earnings:
NT$ 195,990,000
None		 Note (10)
2004.03 10 360,000
3,600,000		 252,579
2,525,787
Treasury stock extinguished: NT$ 200,000,000
Stocks converted from stock warrants:
NT$ 2,890,000

None		 Note (11)
2004.07 10 360,000
3,600,000		 262,705
2,627,052
Recapitalization of retained earnings
and Capital surplus: NT$ 96,520,000
Stocks converted from stock warrants:
NT$ 4,750,000		 None Note (12)
2004.10 10 360,000
3,600,000		 263,405
2,634,047		 Stocks converted from stock warrants:
NT$ 7,000,000
None		 Note (13)
2005.01 10 360,000
3,600,000		 263,882
2,638,819		 Stocks converted from stock warrants:
NT$ 4,770,000
None		 Note (13)
2005.03 10 360,000
3,600,000		 264,171
2,641,709		 Stocks converted from stock warrants:
NT$ 2,890,000
None		 Note (13)
2005.07 10 360,000
3,600,000		 272,374
2,723,744
Recapitalization of retained earnings:
NT$ 75,130,000
Stocks converted from stock warrants:
NT$ 6,910,000

None		 Note (14)
2005.10 10 360,000
3,600,000		 272,693
2,726,929		 Stocks converted from stock warrants:
NT$ 3,190,000
None		 Note (15)
2006.01 10 360,000
3,600,000		 274,258
2,742,584		 Stocks converted from stock warrants:
NT$ 15,660,000
None		 Note (15)
2006.03 10 360,000
3,600,000		 274,932
2,749,317		 Stocks converted from stock warrants:
NT$ 6,730,000
None		 Note (15)
2006.06 10 360,000
3,600,000		 284,344
2,843,442
Recapitalization of retained earnings:
NT$ 81,370,000
Stocks converted from stock warrants:
NT$ 12,760,000

None		 Note (16)
2006.10 10 360,000
3,600,000		 285,154
2,851,542		 Stocks converted from stock warrants:
NT$ 8,100,000
None		 Note (15)
2007.01 10 360,000
3,600,000		 286,378
2,863,779		 Stocks converted from stock warrants:
NT$ 12,240,000
None		 Note (15)
2007.03 10 360,000
3,600,000		 287,410
2,874,099		 Stocks converted from stock warrants:
NT$ 10,320,000
None		 Note (15)
2007.08 10 400,000
4,000,000		 302,311
3,023,114		 Recapitalization of retained earnings:
None		 Note (17)
  • 44 -
NT$ 142,490,000
Stocks converted from stock warrants:
NT$ 6,520,000
2007.10 10 400,000
4,000,000		 302,713
3,027,134		 Stocks converted from stock warrants:
NT$ 4,020,000
None		 Note (15)
2008.01 10 400,000
4,000,000		 304,244
3,042,441		 Stocks converted from stock warrants:
NT$ 15,310,000
None		 Note (15)
2008.03 10 400,000
4,000,000		 305,058
3,050,581		 Stocks converted from stock warrants:
NT$ 8,140,000
None		 Note (15)
2008.08 10 400,000
4,000,000		 329,542
3,295,419
Recapitalization of retained earnings:
NT$ 234,820,000
Stocks converted from stock warrants:
NT$ 10,020,000

None		 Note (18)
2008.10 10 400,000
4,000,000		 329,664
3,296,644		 Stocks converted from stock warrants:
NT$ 1,230,000
None		 Note (15)
2009.01 10 400,000
4,000,000		 329,915
3,299,151		 Stocks converted from stock warrants:
NT$ 2,510,000
None		 Note (15)
2009.03 10 400,000
4,000,000		 331,600
3,316,004		 Stocks converted from stock warrants:
NT$ 16,850,000
None		 Note (15)
2009.07 10 450,000
4,500,000		 348,909
3,489,089
Recapitalization of retained earnings:
NT$ 166,100,000
Stocks converted from stock warrants:
NT$ 6,990,000

None		 Note (19)
2009.10 10 450,000
4,500,000		 349,598
3,495,984		 Stocks converted from stock warrants:
NT$ 6,900,000
None		 Note (15)
2010.01 10 450,000
4,500,000		 349,767
3,497,674		 Stocks converted from stock warrants:
NT$ 1,690,000
None		 Note (15)
2010.03 10 450,000
4,500,000		 350,076
3,500,756		 Stocks converted from stock warrants:
NT$ 3,080,000
None		 Note (15)
2010.07 10 450,000
4,500,000		 362,077
3,620,771
Recapitalization of retained earnings:
NT$ 105,500,000
Stocks converted from stock warrants:
NT$ 14,520,000

None		 Note (20)
2010.10 10 450,000
4,500,000		 362,144
3,621,441		 Stocks converted from stock warrants:
NT$ 670,000
None		 Note (15)
2011.01 10 450,000
4,500,000		 362,269
3,622,691		 Stocks converted from stock warrants:
NT$ 1,250,000
None		 Note (15)
2011.07 10 450,000
4,500,000		 376,760
3,767,599		 Recapitalization of retained earnings:
NT$ 144,910,000
None		 Note (21)
2014.12 10 450,000
4,500,000		 378,086
3,780,862		 Stocks converted from convertible
corporate bonds: NT$ 13,260,000
None		 Note (22)
2015.01 10 450,000
4,500,000		 378,782
3,787,821		 Stocks converted from convertible
corporate bonds: NT$ 6,960,000
None		 Note (22)
2015.05 10 450,000
4,500,000		 378,786
3,787,862		 Stocks converted from convertible
corporate bonds: NT$ 420,000
None		 Note (22)
2015.11 10 450,000
4,500,000		 379,030
3,790,300		 Stocks converted from stock warrants:
NT$ 2,440,000
None		 Note (23)
2016.01 10 450,000
4,500,000		 379,170
3,791,698		 Stocks converted from stock warrants:
NT$ 1,400,000
None		 Note (23)
2016.03 10 450,000
4,500,000		 379,693
3,796,934
Stocks converted from convertible
corporate bonds: NT$ 2,890,000
Stocks converted from stock warrants:
NT$ 2,350,000

None		 Note (24)

Notes:

  1. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (85) Taiwan-Finance-Securities (I) 41514 of July 8, 1996

  2. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (86) Taiwan-Finance-Securities (I) 45915 of June 25, 1997

  3. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (87) Taiwan-Finance-Securities (I) 46094 of June 8, 1998

  4. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (88) Taiwan-Finance-Securities (I) 48548 of May 24, 1999

  5. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (89) Taiwan-Finance-Securities (I) 49542 of June 8, 2000

  6. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (89) Taiwan-Finance-Securities (I) 83405 of December 18, 2000

  7. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (89) Taiwan-Finance-Securities (III) 102418 of December 22, 2000

  8. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (90) Taiwan-Finance-Securities (I) 137773 of June 13, 2001

  9. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. Taiwan-Finance-Securities (I) 0910132477 of June 14, 2002

  10. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. Taiwan-Finance-Securities (I) 0920125022 of June 9, 2003

  11. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. No. Taiwan-Finance-Securities (III) 0920162383 of January 2, 2004, and (90) Taiwan-Finance-Securities (I) 143348 of July 16, 2001.

  12. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. No. (90) Taiwan-Finance-Securities (I) 143348 of July 16, 2001 and Taiwan-Finance-Securities (I) 0930128437 of June 28, 2004.

  13. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. No. (90)

  14. 45 -

Taiwan-Finance-Securities (I) 143348 of July 16, 2001 and Taiwan-Finance-Securities (I) 0910132478 of June 14, 2002.

  1. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0940122455 of June 3, 2005

  2. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. No. (90) Taiwan-Finance-Securities (I) 143348 of July 16, 2001; Taiwan-Finance-Securities (I) 0910132478 of June 14, 2002; and Taiwan-Finance-Securities (I) 0920127281 of June 19, 2003.

  3. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0950122451 of June 2, 2006.

  4. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0960030405 of June 14, 2007.

  5. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0970031743 of June 25, 2008.

  6. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities-Corporate-0980027677 of June 5, 2009.

  7. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities-Corporate-0990029749 of June 9, 2010.

  8. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities-Corporate-1000028222 of June 20, 2011.

  9. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1030012130 of April 17, 2014.

  10. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1010042558 of September 17, 2012.

  11. Approved by the Financial Supervisory Commission per letters Ref. No. Financial-Supervisory-Securities-Corporate-1030012130 of April 17, 2014 and Financial-Supervisory-Securities-Corporate-1010042558 of September 17, 2012. (changes to capital sum not yet implemented)


not yet implemented)
Unit: Shares,April9,2016
Category of
shares		 Authorized stock Notes
Outstanding
shares (listed)		 Unissued
shares		 Total
Common shares 379,699,820 70,300,180 450,000,000 30,000,000 shares were
reserved for employee
purchase ofstockwarrants.

Information on the shelf registration system: None.

  • (2) Shareholder structure
(2) Shareholder structure (2) Shareholder structure
April 9,2016
Shareholder
structure
Quantity

Governme
nt agencies
Financial
institutions		 Other
artificial
persons		 Individuals Overseas
institutions and
individuals		 Total
Number of
individuals		 4 33 41 9,077 271 9,426
Shares held 1,417,000 56,864,338 15,399,745 105,570,837
200,447,900		 379,699,820
Shareholding
percentage		 0.37% 14.98% 4.06% 27.80% 52.79% 100.00%
  • (3) Dispersion of equity ownership

1. Common shares

Shareholding
percentage
0.37%
14.98%
4.06%
27.80%
52.79%
100.00%
(3) Dispersion of equity ownership
1. Common shares		 Shareholding
percentage
0.37%
14.98%
4.06%
27.80%
52.79%
100.00%
(3) Dispersion of equity ownership
1. Common shares		 Shareholding
percentage
0.37%
14.98%
4.06%
27.80%
52.79%
100.00%
(3) Dispersion of equity ownership
1. Common shares		 Shareholding
percentage
0.37%
14.98%
4.06%
27.80%
52.79%
100.00%
(3) Dispersion of equity ownership
1. Common shares
April 9,2016
Shareholding range Number of shareholders Shares held Shareholding percentage
1 to 999 4,789 900,552 0.24%
1,000 to 5,000 3,260 6,829,088 1.80%
5,001 to 10,000 517 3,748,099 0.99%
10,001 to 15,000 200 2,445,340 0.64%
15,001 to 20,000 109 1,953,597 0.51%
20,001 to 30,000 119 2,848,602 0.75%
30,001 to 50,000 91 3,415,603 0.89%
50,001 to 100,000 99 6,971,173 1.84%
100,001 to 200,000 73 10,243,870 2.70%
200,001 to 400,000 47 13,582,292 3.58%
400,001 to 600,000 28 13,918,499 3.67%
600,001 to 800,000 14 10,014,182 2.64%
800,001 to 1,000,000 14 12,725,216 3.35%
1,000,001 or more 66 290,103,707 76.40%
Total 9,426 379,699,820 100.00%
  • 46 -

2. Preferred shares: None.

(4) List of major shareholders

Name, number of shares held, and shareholding percentage of shareholders who hold more than 5% of the shares or the 10 largest shareholders:

2. Preferred shares: None.
(4) List of major shareholders
Name, number of shares held, and shareholding percentage of shareholders who hold more
than 5% of the shares or the 10 largest shareholders:		 2. Preferred shares: None.
(4) List of major shareholders
Name, number of shares held, and shareholding percentage of shareholders who hold more
than 5% of the shares or the 10 largest shareholders:		 2. Preferred shares: None.
(4) List of major shareholders
Name, number of shares held, and shareholding percentage of shareholders who hold more
than 5% of the shares or the 10 largest shareholders:
April 9,2016
Shares
Name of major shareholder
Shares held		 Shareholding percentage
Leo Huang 23,419,897 6.17%
Nanshan Life Insurance 17,197,000 4.53%
Cathay Life Insurance 17,016,000 4.48%
Chun-sheng Chen 15,113,308 3.98%
JPMorgan Chase Bank N.A. Taipei Branch in
custody for MFS Series Trust V - MFS International
New Discovery Fund		 13,613,000 3.59%
Fidelity Fund Investment Account entrusted to
Standard Chartered Bank Taipei Branch		 12,509,000 3.29%
JPMorgan Chase Bank, N.A., Taipei Branch in
Custody for Nordea 1 Emerging Stars Equity Fund		 11,379,000 3.00%
Yu-mei Hsueh 11,074,646 2.92%
JPMorgan Chase Bank N.A. Taipei Branch in
custody for Universities Superannuation Scheme
Limited		 10,981,724 2.89%
FS GLOBAL ASIA PACIFICFUND 9,202,000 2.42%
  • (5) Prices, net asset value per share (NAVPS), earnings per share (EPS), and dividends per share (DPS), and related information of the most recent 2 years.
Item Year Year
2014		 2015 From the said year
to March 31, 2016
Price
per share
(note 1)		 Max 92.00 84.50 75.00
Min 61.20 47.50 58.40
Average 78.14 68.37 67.76
Net asset
value per
share
(NAVPS)		 Before issuance 24.43 24.82 -
After issuance 21.82 - -
Earnings
per share
(EPS)		 Weighted average 375,495,849 376,984,013 -
Earningsper share 3.51 3.28 -
Dividend
per share
(DPS)		 Cash dividend 2.6 2.4 (note 5) -
Free
allotment		 Surplus allotment - - -
Capital surplus
allotment		 - - -
Cumulative unpaid dividends - - -
Return on
investment
(ROI)
analysis		 Price-to-earnings (P/E) ratio
(note 2)
22.30		 20.84 -
Price-to-dividend (P/D) ratio
(note 3)
30.10		 28.49 -
Cash dividendyield(note 4) 3.32 3.51 -

Note 1: List the highest and lowest market prices of the common shares for each year, and refer to the transaction value and transaction volume to calculate the average market price for each year.

Note 2: P/E Ratio = Average closing price for each share of the year / Earnings per share

Note 3: P/D Ratio = Average closing price for each share of the year / Cash dividend per share Note 4: Cash dividend yield = Cash dividend per share / Average closing price per share of the year

Note5: The surplus allotment plan for 2015 shall be finalized according to the resolutions of the annual shareholders’ meeting of 2016.

  • (6) Dividend policy of the company and its implementation

  • Dividend policy stipulated within the articles of association

  • 47 -

When the annual general final accounts indicate a surplus, the said surplus shall be first used to pay taxes and cumulated losses (dues), and 10% of the said surplus shall then be set aside as legal reserve. When such a legal reserve amounts to the total authorized capital, this provision shall not apply. This company may review the business requirements or refer to statutory regulations to set aside or reverse the surplus as special reserves. Any remaining surplus shall then be combined with the cumulated undistributed earnings of the previous year, and the Board of Directors shall formulate a plan for distributing the earnings. The plan shall then be provided to the Board of Shareholders to resolve on the distribution of this sum. Share dividends and bonuses shall not be allotted if this company has no surplus.

When this company has incurred no loss, its legal reserve may be used to distribute new shares or cash for up to 25% of the sum of the said reserve in excess of the paid-in capital.

Dividend payout shall be implemented according to the business condition of this company considering both future capital budgets and capital requirements of future development plans of this company as well as the shareholders’ interests. The Board of Directors shall formulate the category and sum of dividend payout which shall, by principle, be no less than 60% of the net income after tax (NIAT) of the year. Dividend payout ratios of this company were 75% and 74% for the years 2014 and 2015, respectively.

Because this company is still in the growing phase, capital requirements of future development plans of this company shall be considered. The cash dividend distributed each year shall be no less than 20% of the total cash and stock dividends distributed for the year.

  1. Dividend payout plans proposed during the most recent shareholder's meeting The surplus distribution plan of 2015 for this company was reviewed by the Board

of Directors on February 23, 2016, to propose a shareholder cash bonus of NT$ 2.4 per share. This proposal will be distributed after approved by 2016 shareholders meeting. When conversion of convertible corporate bonds, provision of employee stock

options, or any other issues arise that may affect the quantity of outstanding shares and the payout ratio to the shareholders, the Board of Shareholders shall be requested to fully empower the Board of Directors to handle the relevant issue.

  • (7) Impact on the company's business performance and earnings per share (EPS) for free share allotment proposed by this shareholder's meeting: None.

  • (8) Compensation for employees, directors, and supervisors

  • The quantity or scope of compensation for employees, directors, and supervisors as prescribed by the articles of association

If this company has made a profit, 5% to 20% of the said profit shall be set aside for employee compensation. The Board of Directors shall determine whether to issue the compensation in stocks or cash. Recipients of the said compensation shall include company employees that satisfy specific criteria. This company permits the Board of Directors to set aside no more than 1.5% of the sum of the aforementioned profit as the directors’ and supervisors’ compensation. Proposals for the distribution of employee compensation as well as directors’ and supervisors’ compensation shall be submitted to the Board of Shareholders and presented accordingly.

  1. Accounting treatment for the basis of estimating the amount of the employees’, directors’ and supervisors’ compensations, the basis of calculating the number of shares to be distributed as employee compensation, and for any discrepancy between the actual amount distributed and the estimated figures

  2. a) Provisions of this company’s articles of association as well as past experience on the sum that may be distributed shall be used as the basis for estimates. In 2015, the sums of employee compensation and the directors’ and supervisors’ compensation

  3. 48 -

amounted to NT$ 135,000,000 and NT$ 8,000,000, respectively. These sums made up 8.9% and 0.5% of the net income before taxes (and before deducting the employee compensation as well as the directors’ and supervisors’ compensation), respectively, fulfilling the limits prescribed by the articles of association. 

  - b) Number of shares issued for employee compensation: 0.

  - c) Accounting treatment for any discrepancy between the actual amount distributed and the estimated figures: When the Board of Directors has resolved to enact major changes to the sum issued before the approval and issuance of the financial report, the said change shall be adjusted as annual expenses listed for the year. When changes were still made to the said sum after approval and issuance of the financial report, the changes shall be treated as changes to accounting estimates and be adjusted and entered into account for the following year.

  1. Status of compensation distribution as approved by the Board of Directors

    • a) When the value of employee compensation as well as the directors’ and supervisors’ compensation distributed in the form of cash or shares exhibit discrepancies with the recognized expenses and annual estimates, the sum, cause, and disposition of the discrepancy shall be disclosed: On February 23, 2016, the Board of Directors of this company approved cash distributions of NT$ 135,000,000 and NT$ 8,000,000 for employee compensation and the directors’ and supervisors’ compensation, respectively. There was no discrepancy with the recognized expense and annual estimates.

    • b) The sum of employee compensation provided in distributed shares and its proportion of the net income after tax (NIAT) provided in the individual financial report and the total sum of employee compensation: 0.

  2. The actual distribution of compensation for employees, directors, and supervisors (including the number, sum, and price of shares distributed), and where there were discrepancies with the recognized compensation for employees, directors, and supervisors, the sum, cause, and treatment of the discrepancy shall be described: The annual shareholders’ meeting of 2015 resolved to distribute an employee cash

bonus of NT$ 195,000,000 and directors’ and supervisors’ compensation of NT$ 8,000,000. There were no discrepancies between the actual sum distributed and the recognized sum.

  • (9) Repurchase by the company of its own shares: None.

  • 49 -

2. Corporate bond

(1) Unredeemed corporate bonds and corporate bonds undergoing private placement

Type of corporate bond Type of corporate bond Second issuance of unsecured convertible corporate bonds in
Taiwan
Date of issuance (placement) May 23, 2014
Par value One hundred thousand New Taiwan Dollars (NT$ 100,000)
Place of issuance and transaction
(note 1)		 Taiwan
Issuing price Issued at par value
Sum Two billion New Taiwan Dollars (NT$ 2,000,000,000)
Interest Par interest: 0%
Term 5-year bond Date of expiration: May 23, 2019
Guarantor Not applicable
Trustee Mega International Commercial Bank
Underwriter Taishin Securities Co., Ltd.
Certifying attorney Tai-yuan Huang, Hwecker Law
CPA Wen-chin Lin and Cheng-Ming Lee, Deloitte and Touche
Method of redemption Bond holders may refer to Article 10 of the regulations
governing the issuance and conversion for this issuance of
convertible corporate bonds to convert the bonds into common
shares of this company, or refer to Article 19 to exercise the right
to put the bond, or refer to Article 18 and request this company
to redeem the bond before expiration, or buy back canceled
bonds at security firms. This company shall, upon the expiration
of the convertible corporate bond, provide a single cash payment
at the par value of the bond.
Unredeemed principal NT$ 1,834,100,000 (as of March 31, 2016)
Articles for redemption or early
liquidation		 Please refer to the regulations governing the issuance and
conversion of the second unsecured convertible corporate bonds
of this company
Restricting provisions (note 2) None
Name of credit rating agency
(CRA), rating date, and results of
corporate bond ratings		 None
Other
rights		 Total value of bonds already
converted to common
shares, overseas depositary
receipt, or other marketable
securities through the
publication date of this
report		 From the issuing date to March 31, 2016, bond holders have
requested the conversion of corporate bonds into 2,314,956
common shares of this company.
Regulations for distribution
and conversion		 Please refer to the regulations governing the issuance and
conversion of the second unsecured convertible corporate bonds
of this company.
Possible dilution of equity or
impact on the shareholders’ equity
caused by regulations on the
issuance and conversion, exchange,
or subscription to stocks		 A total of two billion New Taiwan Dollars (NT$ 2,000,000,000)
was raised in this issuance of convertible corporate bonds.
Because the issuance of convertible corporate bond was a form
of debt financing, no dilution of this company’s shares will occur
if the bond holders do not request conversion. Bond holders shall
also select a more conducive timing during the conversion period
for converting their bonds, which would help delay equity
dilution and prevent immediate impact on this company’s
operation privileges and earnings per share (EPS).
Name of commissioned custodian
of exchangeable underlyings		 Not applicable

Note 1: Shall be completed for bonds of overseas corporations.

Note 2: For example, restrictions on the issuance of cash dividends, overseas investments, or requirements for maintaining a specific asset ratio.

  • 50 -

(2) Information of the convertible corporate bonds

Type of corporate bond Type of corporate bond Second issuance of unsecured convertible corporate bonds in
Taiwan		 Second issuance of unsecured convertible corporate bonds in
Taiwan		 Second issuance of unsecured convertible corporate bonds in
Taiwan
Item Year 2014 2015 From this year to
March 31, 2016
Market price of the
convertible
corporate bond		 Maximum 124.20 117.30 113.00
Minimum 100.00 100.00 104.00
Average 112.69 106.67 108.59
Conversion price 74.2–72.0 72.0–69.3 69.3
Conversion price at the date of issuance
(placement) and during issuance
2014.5.23
NT$ 74.2
Method for exercising conversion
obligations(note 1)		 Issuance of new shares

Note 1: Handover of issued shares or issuance of new shares.

3. Preferred shares: None.

4. Overseas depositary receipt: None.

5. Employee stock warrant

(1) Status of employee stock warrants of the company that have yet to mature

March 31, 2016

March 31,201
Category of employee stock
warrant		 Employee stock warrant for
2012		 Employee stock warrant for
2015
Date of effective registration September 17, 2012 September 7, 2015
Date of issuance July 8, 2013 March 25, 2016
Quantity issued 6,000,000 units 7,900,000 units
Ratio of subscribable shares to
total issued and outstanding shares		 1.58022% 2.08063%
Warrant exercise period 6 Years 6 Years
Method for exercising the warrant Issuance of new shares Issuance of new shares
Restrictions on the warrant
exercise period and exercise ratio
(%)		 Exercise period and ratio that
may be exercised
2 years 40%
3 years 70%
4 years 100%		 Exercise period and ratio that
may be exercised
2 years 40%
3 years 70%
4 years 100%
Number of shares already obtained
through exercise of warrant rights		 618,600 shares 0
Total value of shares already
obtained through exercise of
warrant rights		 NT$ 30,868,140 0
Number of unsubscribed shares 5,057,800 shares 7,900,000 shares
Subscription price per share of the
unsubscribed shares		 NT$ 49.9 NT$ 67.8
Proportion of unsubscribed shares
of total issued and outstanding
shares (%)		 1.33207% 2.08063%
Impact on shareholders’ equity This company may refer to the
period to issue new stock
warrants only 2 years after the
issuing date of these stock
warrants. The warrant exercise
period was also 6 years, which
meant that dilution effects upon
the shareholder equity would be
limited.		 This company may refer to the
period to issue new stock
warrants only 2 years after the
issuing date of these stock
warrants. The warrant exercise
period was also 6 years, which
meant that dilution effects upon
the shareholder equity would be
limited.

(2) Names, acquisition, and subscription of managerial officers who have obtained employee stock warrants as well as employees who rank among the top 10 in terms of the number of shares obtained via employee stock warrants, cumulative to the publication date of the prospectus

  • 51 -

March 31, 2016

March 31,2016 March 31,2016 March 31,2016 March 31,2016
Title Name Stock
subscriptions
obtained
(thousand
shares)
(note 1)		 Proportion
of
subscribed
shares
acquired of
total issued
and
outstanding
shares (%)
(note 2)		 Implemented Not yet implemented
Number of
subscribed
shares
(thousand
shares)		 Price of
subscribed
shares
(NT$)		 Total value
of
subscribed
shares
(thousand
NT$)		 Proportion of
the quantity
of subscribed
shares of
total issued
and
outstanding
shares (%)

Quantity of
unsubscrib
ed shares
(thousand
shares)		 Price of
unsubscribed
shares (NT$)		 Total value
of
unsubscrib
ed shares
(thousand
NT$)		 Proportion of
the quantity
of
unsubscribed
shares of
total issued
and
outstanding
shares (%)
Managerial officers General Manager Leo Huang 1,310 0.34 52 49.9 2,595 0.01 1,258 49.9 62,774 0.33
General Manager
of Business Unit
I-Shih
Tseng
General Manager
of Business Unit		 David
Yang
General Manager
of Business Unit		 C.C. Ho
General Manager
of Business Unit		 Joe Lin
General Manager
of Business Unit		 Georg
Chang
Vice President Paul Ying
Vice President Mark Fong
Vice President Steven Liu
Vice President Benjamin
Huang
Vice President Max Chang
Vice President Herbert
Tsai
Vice President C.C.Fan
Vice President Bobby
Tseng
Vice President Vincent
Chen
Vice President Tony Yang
Vice President Vincent
Wu
Vice President Lance
Ouyang
Employees Employee Cf Huang 993
 0.26 96 49.9 4,790 0.02 897 49.9–
67.8
54,033		 0.24
Employee Frank
Huang
Employee Chou-yu
Chuang
Employee Nick Wu
Employee Kevin
Weng
Employee Ethan Wu
Employee Emma
Chen
Employee Hans Yi
Employee Mark Chien
Employee James Lee
Employee Wen Shieh
Employee Bill Tsou
Employee John Lee
Employee Li-wei Liu
Employee Darto Chen

Note 1: Refers to the quantity of employee stock warrants obtained from 2012 to 2015. Note 2: Number of shares currently issued.

  • 52 -

6. Status of new restricted employee shares: None.

7. Status of mergers and acquisitions or issuance of new shares for the purpose of acquiring the shares of another company: None.

8. Implementation of capital application plan

(1) Contents of the plan

Where various issuance or private placement of securities has yet to be completed or have been completed in the most recent 3 years but where the benefits of the plan have yet to be realized:

Second issuance of unsecured convertible corporate bonds in Taiwan

  • a) Contents of this plan

Total capital required for this plan: NT$ 2,180,372,000

Source: Issuance of corporate bonds worth NT$ 2,000,000,000 with a bond duration of 5 years and interest of 0%.

Method for acquiring the remaining NT$ 180,372,000: Disposable funds or others. b) Capital utilization plan and expected progress

Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000 Unit: NT$1,000
Item Expected
date of
completion
Total
capital
required		 Expectedprogress of capital utilization
2014 2015 2016
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Construction
of factory
buildings		 Q4 2016 2,180,372 50,000 60,000 100,000 150,000 150,000 150,000 620,000 300,000 320,000 280,372
Total 2,180,372 50,000 60,000 100,000 150,000 150,000 150,000 620,000 300,000 320,000 280,372

c) Anticipated possible effects

The second issuance of unsecured convertible corporate bonds in Taiwan has raised a total of NT$ 2,000,000,000. This plan requires a total of NT$ 2,180,372,000 for the construction of new factory buildings. The remaining NT$ 180,372,000 shall be paid for using disposal funds or other methods. The construction of these factory buildings will increase usable space. Expected adjustments to spatial layouts and production line configurations would improve the production and sales of precision electronic measurement instruments and integrated automated measurement system, thereby benefiting future development plans and reducing business risks of this company. The expected increase in production volume, value, profitability, and net operating profit are provided in the following:

Unit: Unit, set; thousand NT$

Year Item Production
volume
Sales
volume		 Sales
value		 Gross
profit		 Net operating
profit
2017 Precision electronic
measurement instrument		 515
515
1,010,000
555,500
202,000
Integrated automatic
measurement systems		 20
20
600,000
240,000
90,000
2018 Precision electronic
measurement instrument		 725
725
1,371,000
740,340
274,200
Integrated automatic
measurement systems		 25
25
1,000,000
390,000
150,000
2019 Precision electronic
measurement instrument		 905
905
1,622,500
859,925
324,500
Integrated automatic
measurement systems		 28
28
1,120,000
442,400
168,000
2020 Precision electronic
measurement instrument		 1,080
1,080
1,804,500
956,385
360,900
Integrated automatic
measurement systems		 35
35
1,550,000
596,750
232,500
2021 Precision electronic
measurement instrument		 1,314
1,314
2,029,700
1,055,444
405,940
Integrated automatic
measurement systems		 40
40
1,520,000
577,600
228,000
  • 53 -

(2) Status of implementation

Unit: NT$ 1,000

Unit: NT$1,000
Project items Status of implementation Q4 2015 Through Q4,
2015		 Whether progress is ahead of
schedule or behind schedule,
and improvementplans
Construction
of factory
buildings		 Expenses Expected 150,000 660,000 Owing to delays in land
acquisition and transfer of the
government, negotiations were
carried out in Q3 2015 to
transfer the land by section to
begin factory construction. In
this quarter, expected fees were
paid to the architect,
measurement companies, and
factory building designs. In Q4
2015, applications were
submitted to the competent
authorities for construction
licenses and review. Work
completion has been scheduled
for 2019. No major
nonconformance has occurred
to date.
Actual 31,203 31,343
Progress Expected 6.88% 30.27%
Actual 1.43% 1.44%
Total Expenses Expected 150,000 660,000
Actual 31,203 31,343
Progress Expected 6.88% 30.27%
Actual 1.43% 1.44%

During the second issuance of unsecured convertible corporate bonds in Taiwan for the purpose of factory building construction, owing to delays in land collection and transfer by the Ministry of the Interior (MOI), negotiations were carried out to transfer the land by phases to initiate factory building construction in Q3 2015. By the end of Q4 2015, a total of NT$ 31,343,000 was paid for factory building design plans and submission of construction license for review, reaching capital utilization progress of 1.44%.

(3) Gap analysis for expected and actual benefits

Owing to delays in land transfer by the MOI, negotiations were carried out to transfer the land by phases. As of the end of this quarter, factory building construction has entered the initial design phase, and building construction license applications have been submitted to the competent authorities for review. No actual benefits have been generated, and the cause was regarded as reasonable.

  • 54 -

V. Operation summary

1. Business content

  • (1) Scope of business

  • Major functions of the businesses

This company and its subsidiaries are primarily engaged in designing, assembling, manufacturing, purchasing and selling, repairing, maintaining, calibrating, and agency services for computer hardware and software, s and related peripherals, computerized automatic testing systems, electronic testing instruments, signal generators, power supplies, and telecommunication power supplies. Current production lines include 1. Measurement instruments and equipment; 2. Special materials; 3. Automatic equipment.

  1. Proportion of each business Consolidated revenue:

Unit: Thousand NT$

Unit: Thousand NT$ Unit: Thousand NT$
Year
Product category
2014		 2015
Sum Proportion of
revenue(%)		 Sum Proportion of
revenue(%)
Measurement
instruments and
equipment		 6,175,051 59.91 5,666,173 58.46
Special materials 2,982,980 28.94 2,328,151 24.02
Automatic equipment
680,091		 6.60 1,260,831 13.01
Others 468,963 4.55 437,210 4.51
Total net operating
revenue

10,307,085		 100.00 9,692,365 100.00

  1. Current products of the company

  2. Power electronics test solutions

    1. Electronic Load DC Electronic Load

    2. Electronic Load AC Electronic Load

    3. AC Power Source

    4. DC Power Source

    5. Power Analyzer

    6. Automatic Test System (ATS)

    7. Electrical Safety Analyzer

  3. Video and color test solution

    1. Video Pattern Generator

    2. Color Analyzer

    3. LCM ATS

    4. Digital Power Meter

    5. OLED Shorting Bar Pattern Generator

    6. OLED Lifetime Test System

    7. Front Projector ATS

  4. Passive component test solutions

    1. LCR Meter / Automatic Transformer Test System

    2. Electrolytic Capacitor Analyzer

    3. HF AC Tester

    4. Milliohm Meter

    5. Component test scanner

    6. Component ATS

  5. 55 -

  6. Flat panel display test solutions

  7. OLED Test System

  8. LCM ATS

  9. LCM Aging Test Solutions

  10. Electrical Safety Analyzer

  11. Semiconductor / IC test solutions

  12. VLSI Test System

  13. SoC Test System

  14. IC Test handler

  15. Visual Inspection System

  16. LED / lighting test solutions

  17. ESD Test System

  18. LED Electrical Test Module

  19. LED Flip Chip Total Power Test System

  20. LED Mapping Probe Tester

  21. LED Chip High-speed Testing Handler

  22. LED Light Bar Test System

  23. Wafer Inspection System

  24. LED Burn-in Test System

  25. LED Luminaires In-line Test System

  26. LED Power Driver ATS

  27. Photovoltaic (PV) / inverter test and automation solutions

  28. Inspection System

  29. Automatic Optical Inspection System

  30. c-Si Solar Cell Tester

  31. Automatic Loading/Unloading System

  32. TEC Controller

  33. Thermal Data Logger

  34. PV Inverter ATS

  35. Battery test and automation solution

  36. Battery Pack/Module Test Solution

  37. Battery Cell Test Solution

  38. Automatic Battery Test Equipment

  39. Core voltage and temperature measurements

  40. Electrical Safety Test Solution

  41. Battery Pack Production Line Test Solution

  42. Electric vehicle testing solution

  43. Automatic diagnostic and testing system for power electronics and devices

  44. DC power supplies

  45. Electrical load

  46. Automatic transformer testing system / automatic part analyzer

  47. Battery testing system

  48. AC Power Source

  49. Motor Test Solution - Safety Test

  50. Smart factory solutions

  51. Sajet manufacturing execution system (MES) solution

  52. Automatic optical testing solution

  53. Optical profiler

  54. Automatic optical testing system

  55. Automatic optical testing system for LCD / display

  56. Automatic optical testing system for photovoltaic cells

  57. MEMS/CMOS AOI System

  58. 56 -

  59. Others

    1. Electric vehicle drive system solution

    2. General testing equipment

    3. Wireless testing solutions

    4. Instrument calibration services

  60. New products under development

  61. Next generation high power/high speed Solar Array Simulator

  62. High-bandwidth DC output power supply with input harmonic calibration

  63. High-bandwidth 1-phase / 3-phase AC Power Source

  64. Next generation high-power regenerative AC load

  65. R&D project for miniaturized common mode inductance testing and packager

  66. Hi-Pot analyzer with partial discharge measurement function.

  67. Next generation ultrahigh-precision multichannel bilinear power source with battery

  68. resistance simulation

  69. R&D project for high-speed, high-power-density, overlapping current generators

  70. R&D project for high-speed recoverable hybrid load

  71. Development of virtual reality (VR) and augmented reality (AR) devices and product

  72. quality optical testing systems

  73. Development of key dimension high-speed and automatic optical measurement

  74. system for metallic cellphone cases

  75. Next generation tester for 10K 5K flat panel display module

  76. 3[rd ] generation display standards DP 1.3 8.1G graphic generator

  77. Next generation tester for high-power bidirectional electrical power

  78. Next generation regenerative charge/discharge tester for public electrical equipment

  79. (2) State of the industry

  80. Current state and development of the industry

  81. A. Instrument business

Smartphone development reached a significant degree of maturation in 2015 with the information and communication technology (ICT) industry entering a temporary adjustment phase. The PC industry has continued to decline, with investments being directed to R&D of various electrical products such as wearable devices, virtual reality (VR), Internet of Things (IoT), and automotive electronics. Major electronics manufacturers are expecting to release the next breakthrough product and seize market initiative. Production line expansions for existing products remain conservative. Without the launch of any breakthrough product, the industry’s requirements for equipment also remain conservative. Fortunately, the current era is witnessing changes to the generation of production equipment. Industrial automation for various products to reduce labor costs and develop Industry 4.0 has helped accelerate the replacement of obsolete equipment in the manufacturing sector. For 2016, overall equipment development shall follow these observations and the trend of industrial automation. This, together with the emergence of electric vehicles, IoT, and other industries, is expected to offer additional opportunities for the development of precision instruments.

  • Power electronics testing solution

Power supplies represent a basic and core component of electronic equipment and are widely employed in various electronic products such as PCs, servers, rechargers, displays, and industrial power supplies.

The recent emergence of smartphones and cloud-based applications and IoT has led to the rapid development of mobile power, mobile rechargers, and batteries. In addition, LEDs, photovoltaics (PV), automotive electronics, and

  • 57 -

other emerging industries have expanded as well. The power supply remains a critical component for these products, leading to increased demand for various power supplies testing equipment. The power supply testing equipment provided by this company and its subsidiaries can be used for PC / servo / telecom power sources, rechargers, backlight inverters, LED lighting, photovoltaics, and electric vehicle rechargers. In response to the increasingly ubiquitous automation of manufacturing, this company also independently developed automatic testing systems for power supply as well as a software platform with powerful functions. These solutions built-in with common test items can be employed to create production lines with competitive advantages. This product is also widely utilized in various manufacturing lines to maintain stable development.

  • Video and color testing solutions

Establishment of digital environments and otaku economies have led to diversification of display applications and development towards better picture quality and higher resolutions that place greater demands on the clarity of dynamic videos and images. The maturation of 4K high picture quality television technology has led to a significant increase in the shipments of LCD TV. The development of ultrahigh picture quality technologies means that displays have become increasingly reliant upon testing equipment to ensure quality. Automatic testing was also developed to reduce labor costs and human negligence. Video signal multifunctional testing equipment and color analyzers developed by this company and its subsidiaries are capable of integrating with automated equipment to serve as a solution that meets the requirements of automated testing in the display industry.

  • Test solutions for passive components and regulatory testing

Labor costs are growing as price competition becomes increasingly stringent. This company provides new automatic testing technologies for passive components and safety testing to help customers reduce labor costs, lower incidence of human negligence or errors, improve data management, and enhance quality and efficiency. Separate sets of equipment for different tests are now integrated into a single device such as the 11022 LCR Meter with dual-channel testing functions. A single unit is sufficient for acquiring measurements at different frequencies for electrolytic capacitance and plastic film capacitance, allowing customers to reduce the number of testing stations required. The Model 8800 automatic component testing system provides a multistep, multichannel testing procedure for conducting a variety of testing applications. This solution can be used by customers who conduct tests for RJ-45 equipment, LCD glass substrates, glass printed circuits (including touch panels), circuit boards, ICT, and other applications. The Model 19020 multichannel high-potential (hipot) tester can be used to conduct testing on multiple channels simultaneously. The Model 1810 is capable of measuring power consumption and temperature change of magnetic components under different electrical environments, and it also includes software testing that can be used to provide a reference basis for product development. Electrical testing and high-potential testing for wound components were integrated into a single testing system to reduce the labor costs and improve the efficiency of testing processes.

  • Semiconductor / IC testing solutions

Increasing competition in the electronics industry has forced suppliers to adopt the most efficient means to produce and manufacture various electronic components and parts. The IC industry has invested greatly in identifying various production combinations. Cost control efforts have begun to shift from wafer foundry processes to the measures that reduce the proportion of testing expenses.

  • 58 -

Hence, the R&D trends for testing equipment suppliers are to focus on the development of multiple testing programs as well as high-volume parallel testing solutions for boosting throughput. Customized testing equipment capable of satisfying specific requirements may be directly used to replace experience general-purpose testers to achieve significant reduction in costs. Handlers used in backend production of ICs can also work with different IC packaging types to sort out defective products from conforming ones. After IC packaging and testing, automatic system function testers can be used to rapidly screen the completed IC packages, replacing simulated testing environments with actual usage environments for product testing to provide low-cost and high-coverage tests that will greatly improve the quality of the delivered product. In response to these trends of development, this company and its subsidiaries have increased efforts to integrate technologies from multiple industries such as electronics, electrical machinery, mechanics, software, information, and communication to provide well-rounded testing solutions for manufacturing and producing semiconductor products. These new units cover more functions, and automated testers will help achieve better testing economy through significant reduction of labor costs and great improvements in product quality. In this poor economy, IC designers have had to reduce costs and actively look for the most economic testing solution. These requirements offer this company and its subsidiaries the perfect demand for growth.

  • Battery testing and automation solutions

The popularization of mobile communication and mobile devices as well as advances in electric vehicle technology could only be achieved with the strides achieved in battery function. Battery reliability has become increasingly important, especially batteries for electric vehicles. Battery quality and reliability affect not only the range of electric vehicles but also their safety. Automated testing of batteries is currently held as an important link in the development of electric vehicles.

  • B. Special materials

With the increasing price of gold, the packaging processes of conventional semiconductor industries with gold wire bonding remain excruciatingly expensive. A number of IC packaging plants have thus replaced gold with copper or silver alloys for their wire bonding processes. Copper offers significant advantages in price as well as higher electrical conductivity, higher thermal conductivity, lower intermetallic compound (IMC) growth, and better reliability under high temperatures. However, copper is a harder material. Increasing complexity of circuitry and finer pitches will increase the difficulty of the wire bonding process during IC packaging. Technical challenges of copper wire bonding processes have been gradually solved or improved upon, accelerating the introduction and certification of copper wire packages for downstream packaging plants. Copper wire usage therefore grows every year. Chroma New Material Corp., a subsidiary of this company, has worked with technical services offered by NIPPON MICROMETAL CORPORATION to develop value-added products to provide competitive advantages for package products with high technical requirements, allowing Taiwanese firms to gradually improve their market share every year.

  1. Correlation with upstream, midstream, and downstream sections of the industry

  2. A. Measurement instrument and equipment

These products are part of the testing instrument industry of ICT and electronics. This company primarily purchases and acquires parts and components from upstream suppliers. The parts and components are then assembled by this company and its subsidiaries, and the final products are then marketed and sold to

  • 59 -

customers under this company’s brand name. This company and its subsidiaries offer an extensive selection of solutions for product testing and validation purposes to customers from many fields including video surveillance, passive components, LCD modules, LEDs, semiconductors, photovoltaics (PV), and electric vehicles.

The following diagram describes the relationship among the upstream, midstream, and downstream products in this industry:

Upstream Midstream Downstream
Boxes and
cases, Printed
circuit boards
(PCB),IC,Other
components		 Assembly
Testing
Sales		 Video surveillance,
power supply, passive
components, IC design,
IC testing, LEDs,
photovoltaics and solar
power cells, electric
vehicles

B. Special materials

Major products for the special material BU include gold wire, copper wire, and lead-free solder balls. Gold and copper wires are used during the IC packaging process of wire bonding to create bonding wires. The primary business engaged by Chroma New Material Corp., a subsidiary of this company, is the purchase and sale of special materials.

C. Automatic equipment

Measurement equipment, automation systems, and MES software capabilities provide clients with an integrated automation solution (Turnkey Solution). Various turnkey solutions such as photovoltaic (PV) automated production and system integration, TFT-LCD automated production and system integration, and cleanroom equipment planning and system integration are the primary products offered by this company and its subsidiary Wei Kuang Automation.

  1. Development trends and competition for various products

  2. A. Development trends of various products

    • (A) Instrument business

      • Power electronics testing industry

The following describes product development trends for power supply testing solutions in response to the aforementioned production, R&D, and quality requirements:

  • Low-voltage load characteristics and high-current switching technology in response to point-of-load converter power supply and fast switching properties.

  • Input distortion simulations and electrical grid distortion simulations in response to statutory requirements for the testing of power supplies.

  • Discontinuous, low-power measurements in response to energy saving requirements of power supplies in standby mode.

  • AC Power Source with high potential and high current to reduce the requirement for DC Power Source with DC/DC converter input, helping reduce testing costs.

  • High-potential, high-frequency testing technology and low parasitic capacitance testing fixtures for LCD inverter testing are capable of greatly improving testing speed and stability.

  • Network data capture functions so that manufacturers can promptly enact production capacity controls and analyze quality statistics.

  • Video testing

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The continuing developments in the IoT industry led to another wave of growing demands for video display applications in 2015. The industry is working hard to develop 3D virtual reality (VR) spaces, which lead to increasing importance of display resolutions and interactive functions as well as growing reliance on testing equipment to provide quality assurance. Manufacturing for key components is becoming more integrated. These key components determine the costs and realized properties of the final display panel. Expansion of production capacity is also a key element to ensure successful delivery of display products. In response to the rapid development of thinner televisions and displays, this company and its subsidiaries have released high-end testing equipment for HDTVs, LCD TVs, PDP TVs, multimedia TVs, and other display products. This testing equipment includes HDMI and HDCP, which can be used to satisfy both existing and future testing requirements of the video industry.

  • Passive components testing

Electronic products are becoming lighter, thinner, and smaller. As a result, the manufacturing, R&D, and quality of passive components within these products are also focused upon high efficiency and precision levels. The following describes the trends for developing testing equipment for passive components:

  • High-speed precision measurement, integrating equipment automation to improve production efficiency while reducing human negligence to boost reliability.

  • Integrated testing of multiple parameters to reduce the amount of production equipment and length of working hours required, helping lower production costs.

  • Provision of comprehensive testing solutions for specific applications that help users quickly establish systems to fulfill their testing requirements, as well as provision of comprehensive technical support.

  • Provision of network data capture functions so that manufacturers can promptly enact production capacity controls and analyze quality statistics.

  • Electric vehicle / battery testing equipment

In response to environmental changes, issues such as energy savings, carbon reduction, air pollution and health hazards posed by exhaust gases and emissions have compelled many governments around the world to stipulate policies to reduce vehicle exhaust and encourage automobile manufacturers to develop electric vehicles. Batteries are key components of electric vehicles, so any development conducive to electric vehicle testing equipment will help support the development of battery testing equipment as well.

(B) Special materials

The following lists major development trends for gold wire products and technologies in response to changes in semiconductor packaging and product applications:

  • Gradual replacement of gold wire with copper wire for cost considerations.

  • Finer wire diameters and stronger wires in response to miniaturization, high frequency, and high speed requirements of the final product.

  • Bonding capability and precision of wire bonding process in response to ever-decreasing bonding pad areas on the die as a result of miniaturization requirements.

  • Increasing use of fine pitch and low-loop bonding profiles for stacked packaging with better ASP performance.

  • B. Product competition

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This company and its subsidiaries started working extensively with the electronics industry from its earliest stages of development. High barriers of entry in terms of products and techniques also allowed this company and its subsidiaries to achieve leading positions in various product technologies. However, as new products are constantly released, this company must also improve its R&D technologies for its instruments and products to maintain certain advantages for these products. However, many electronic industries have moved their bases overseas, and there is an increasingly severe issue of counterfeiting in the 3rd district. Products of this company and its subsidiaries have become subject to price competitions from these counterfeit goods. To maintain competitive advantages, this company and its subsidiaries invested significant efforts to apply for patents and safeguard the value of the brand. As production processes become increasingly automated, integrated testers and automatic equipment will provide instrumentation industries with high levels of competitive advantages.

  • (3) Technologies and recent R&D efforts

  • R&D expenses invested in the most recent 2 years

levels of competitive advantages.
nologies and recent R&D efforts
R&D expenses invested in the most
recent 2 years
Unit: Thousand NT$
Item/ year 2014 2015
R&D expenses 829,958 872,966
Net operatingrevenue 10,307,085 9,692,365
Proportion of R&D expenses of
net operatingrevenue
8% 9%

2. Major R&D outcomes

◎2235 Video Pattern Generator

◎2403 Video Pattern Generator

◎58173- TC LED Chip Level Tester

◎63110A / 63113A / 63115A DC Electronic Load LED Load Simulator

◎58158 LED Lighting Test System

◎61800 Regenerative Grid Simulator

  • ◎66200 Digital Power Meter

◎58212-C LED Mapping Probe Tester

◎63200A DC Electronic Load

◎58690 / 58691 TOSA / BOSA Thermal Control System

◎8000 Power Supply ATS for AC/DC Electric Vehicle Supply Equipment (EVSE)

◎8700 Battery Pack Functional ATS for Battery Management Systems (BMS)

◎11050 HF LCR Meter

◎19301A Impulse Winding Tester

◎17011 Battery Charge/Discharge Test System

◎17020/17030 Regenerative Battery Pack Test System

◎1870D Inductor Test & Packing Machine

◎3760 Solar Cell Inspection Test/Sorting System

◎7200 Automatic Optical Solar Wafer/Cell Inspection System

◎3380D VLSI Test System

◎3650-EX SoC/Analog Test System

◎3110-FT Full Range Active Thermal Control Handler

◎7925 TO-CAN Package Inspection System

◎3180 Octad-site FT Test Handler

◎52310e Device Power Supply

◎54100 series Advanced TEC Controller

  • 62 -

  • ◎Sajet Manufacturing Execution System (MES)

  • Future R&D plans

Trends of recent IT developments include smart communication, IoT, wireless communication functions in various equipment, electric vehicles, smart cities, Industry 4.0 for the manufacturing sector, and Finance 3.0 for the financial sector. Every business hopes to employ the latest technologies to improve performance and generate additional profits.

The R&D plans of this company shall refer to developments in various industries and develop automatic equipment as well as automatic production management systems (MES) needed by Industry 4.0. To respond to external pressures for energy savings and exhaust reduction, testing equipment related to electric vehicles, batteries, and wireless communication shall be developed. This company and its subsidiaries are also dedicated to the R&D of products related to clean technology with the aim of developing relevant automatic testing equipment.

  • (4) Long- and short-term business development plans

  • Short-term development plans

    • (1) Continue to develop more turnkey solutions for integrated testing, automation, and MES

This company and its subsidiaries have been developing integrated measurement techniques, automation, and MES for the LCD, semiconductor, and solar power industries. Labor costs have increased significantly in recent years, leading to increased requirements for automation. To reduce labor costs and improve product quality, the manufacturing sector has begun looking for automation solutions for production and testing. To take advantage of this critical trend, this company and its subsidiaries shall be committed to the development of turnkey solutions for product measurement and testing technologies, automation, and MES to achieve these opportunities.

  • (2) Improve the development of markets in Europe, America, Japan, and Southeast Asia to improve profitability.

The scope of the product catalog of this company and its subsidiaries has grown constantly. Production lines have become increasingly comprehensive to facilitate marketing expansion. Recent efforts shall continue to integrate various production lines while expanding the marketing network, identifying sales channels and agents, establishing strategic global partners, and building up agency collaboration models. Sales locations have been established in Europe, US, and Japan to promote products bearing this company’s brand name in developed countries. As a response to the growth of emerging markets such as India and Southeast Asia, efforts have been invested to expand the Southeast Asian market.

  • (3) Enhance R&D efforts for innovative technologies and implementing lean management

In response to the changes of external environment and to effectively achieve the strategies of lean management, this company has established human resource (HR) assessment, HR inventory checks, and HR databases to improve HR utilization. Additional e-Business conversion efforts have been invested to establish an IT platform to provide correct and comprehensive management data as a basis for business management and decision making processes to reduce business risk exposure in a rapidly changing environment.

2. Long-term development plans

  • (1) Marketing plans

Globalization of industries means that the production centers of IT industries have started to expand outwards. To provide customers with the services of the highest quality, this company and its subsidiaries also established a sales network

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composed of overseas subsidiaries as well as sales agents and dealers. Establishment of sales channels in various districts has been accelerated in key production areas in Mainland China to greatly promote this company's brand name products. Meanwhile, this company has also worked with sales networks and formed strategic alliances with renowned global brands to provide agency services and sales to professional equipment and improve overall resource efficiency.

  • (2) Human resource plans

This company and its subsidiaries have been developing niche products for its business development objectives and can thus be considered as a technically intensive business. Efforts have been invested to strengthen employee training and establish a knowledge management platform and learning database, sharing resources to help employees quickly gain competence in professional and technical fields, improve human resources, and reduce learning time.

  • (3) Product development plan

This company and its subsidiaries have worked extensively in the field of testing of electronic products for many years and provide stable product development strategies that are aligned with the development of the industry. In addition to testing products developed for semiconductors and flat panel displays, this company has also invested in modular instruments, system integration, and other automated and customized products. With growing labor costs and an aging population, smart networks, industrial automation, and healthcare industries are becoming increasingly important. This company's long-term product development plans shall therefore aim at the research and development of testing equipment related to products of smart network systems, industrial automation, and healthcare. This company shall also be actively integrating upstream and downstream industries and employ a strategy of mergers to generate opportunities for developing relevant product lines.

2. Market, production, and sales

  • (1) Market analysis

  • Major products by sales area

Area 2014 Unit: Thousand NT$ 2015
Proportion of net
operatingrevenue(%)
Sum Proportion of net
operatingrevenue(%)		 Sum
Internal sales
External sales
Total
4,802,029
5,505,056
10,307,085
47
53
100		 3,301,311
6,391,054
34

66

100

9,692,365
  1. State of the market

The global economy in 2015 witnessed excess production capacity in China, reduced demands, doubling of oil production, a drastic drop in crude oil prices, and falling commodity prices. To prevent deflation from leading to economic stagnation, various governments in the world have adopted quantitative easing (QE) policies. After the US unleashed its QE policies, Japan followed suit with its own QE measures. Switzerland also implemented a negative interest rate policy with the hopes of invigorating the economy. However, economic stagnation caused by falling oil prices and excess capacity is not something that could be reversed in the short term. In the ICT industry, after smartphones became ubiquitous, the lack of better products compelled the manufacturing sector to adopt a conservative policy to reduce capital expenses and reduce equipment requirements.

  1. State and growth of market supply and demand

Various developed countries have adopted QE policies to boost their economy.

  • 64 -

However, the poor economy predicted in 2015 is expected to last through 2016. Fortunately, oil prices may soon stabilize as petroleum exporting countries begin negotiating reduction, which may signal a bright future for the economy.

With the popularization of 4G LTE and smartphones, mobile payment and devices are expected to lead to the growth of IoT industries, which may lead to another revolutionary change in the mobile device industry. Advancements in wireless recharging technology will become a key factor in developing mobile devices, leading to increasing importance for power source and battery testing equipment. Global developments in MCU have driven the expansion of IoT. The advantages of smart, energy-saving, and automated processes continue to expand to the field of potential applications, leading to another major wave of development in retail services, smart cities, industry, medical care, and automotive industries. Forecasts offered by Gartner expect IoT-related semiconductor income to grow by nearly 30% before 2020. This trend would encourage willingness of supplier investments and increase equipment requirements. The automated production of Industry 4.0 will accelerate developments in the manufacturing sector, helping promote growth for automated testing equipment.

  1. Positive and negative factors affecting competitive niches and long-term development, as well as response strategies

  2. A. Instruments

  3. (A) Competitive niche and positive factors:

This company and its subsidiaries have been engaged in the instrument business since its founding. Positive interaction and relationships with customers allow this company and its subsidiaries to identify the latest trends in the industry and initiate relevant research and development (R&D), release new measurement and testing equipment at the proper opportunities, and provide solutions of the highest quality for its customers’ R&D and production efforts. Green industries will be undergoing large-scale expansion. This company and its subsidiaries have also applied key technologies acquired in other sectors in clean technologies and developed many leading products in many areas such as total power testing solutions for LEDs, automatic testers and efficiency sorting systems for solar cells, and formation systems for regenerative batteries to secure leading advantages in the testing market. Competitive niches of this company and its subsidiaries include effective control over sales channels, acquisition of the latest information about the industry, and ownership of key technologies. The business group has ample resources in the sectors of testing, automation, and factory management systems to provide customers with required turnkey solutions, in turn providing this company and its subsidiaries with various advantages to maintain market competitiveness.

  • (B) Disadvantages:

Instrument products are typically produced in small amount with large varieties that make mass production difficult. Production processes are often complicated and difficult to manage. Other negative factors include complexity of testing instruments, large number of material types required, and high warehousing costs that result from these requirements.

(C) Response strategies:

Because products are offered in many models and required in small quantities, this company and its subsidiaries have adopted modular designs during product research and development (R&D) phases. Differences in specifications were concentrated in a single module during the production process. Shared characteristics and designs were adopted into general modules to improve production volume for general modules while reducing the materials required for the unique parts. In addition, to improve production and

  • 65 -

warehousing management efficiencies, the MES BU and Information Center of this company and its subsidiaries also established comprehensive data management systems based upon the business properties of this company and its subsidiaries.

B. Special materials

  • (A) Competitive niche and positive factors:

Subsidiaries of this company are the largest suppliers in Taiwan, providing customers with competitive value in terms of overall services, including quality, price, delivery date, technical support, and other services. These offer important competitive niches and are responsible for helping this company and its subsidiaries secure a growing market share.

  • (B) Disadvantages:

Key materials must be imported, which results in a certain degree of uncertainty.

  • (C) Response strategies:

To safeguard business development, Chroma New Material Corp., a subsidiary of this Company, has built a long-term partnership with NIPPON MICROMETAL CORPORATION of Japan to supply materials to Chroma New Material Corp.

(2) Major uses and production process of the primary products

  1. Major uses of the primary products

  2. Power electronics testing solutions

In addition to applications in IT, communications, aerospace, defense, and other industries, well-developed and proven power supply testing solutions provided by Chroma ATE Inc. are also applied to hybrid vehicles, LED lighting, solar power, fuel cells, and other energy saving products that have been actively developed as natural resources become increasingly scarce. This company also provides various industries with customized testing solutions.

This company provides various testing equipment for programmable AC power supplies, programmable DC power sources, DC electronic loads, AC electronic loads, Digital Power Meters, and frequency-response analyzers, offering regulatory tests for both input and output terminals as well as satisfying the requirements of dynamic simulations. Softpanel (an exclusive graphical operating software) and NI Labview drivers are also provided to facilitate the operation.

This company and its subsidiaries independently developed an automatic testing system including a software platform that comes with powerful inbuilt functions and general tests that can then be integrated with a desired hardware instrument to independently edit the testing items and acquire and analyze vast amounts of test data. Analysis results can then be used as a basis for R&D or quality assurance (QA) to make changes to the product or improvements to factory processes. In addition to recent applications for PC / Servo / Telecom power sources, adapters, and chargers, other areas such as backlight inverters, LED drivers, ballasts of energy-saving lamps, UPS, PV inverters, and even electric vehicle supply equipment (EVSE) has been included within the scope of applications. In addition, this company and its subsidiaries have a global technical application support team and are capable of providing customized plans for automation systems as well as production of testing fixtures.

- Video and color testing solution

LCD modules are provided with different signal transforming panels. Once assembled, the final product can be adapted to different signal outputs in various products. These complex outputs and input interfaces require a video pattern generator to provide various international standard signal testing screens for testing

  • 66 -

purposes to analyze the performance of the display in processing video signals. Precision is a key requirement because output signals of the video pattern generator are the standard source.

Color analyzers use advanced digital signal processors and photoelectric conversion technology and combine them with precise optical components and circuit design to accurately measure the energy, calibrated color, brightness, and white balance of the light projected by the display.

For large-scale monitors and projectors, the optical color analysis probe can be used to achieve simultaneous measurements of multiple points. This can then be integrated with the video pattern generator as well as a software operation interface for video signal analysis. All programmed tests can be carried out quickly using single-button operations, making it the most competitive video and color testing solution available.

  • Test solutions for passive components and safety testing

Testing equipment for passive components includes tests for capacitors, inductors, resistors, and other basic passives as well as tests conducted for various electronic components that were assembled using these components (such as wound components, communication and power source filters) or have similar properties (such as switches, connectors, conducting wires, metallic materials, dielectric materials, magnetic materials, and semiconductor components). Tests can be used to analyze the properties of the tested objects and provide design optimization for integrated applications such as automated production inspection, incoming / outgoing inspection, QA verification, and R&D analysis to satisfy the customer’s requirements for cost reduction and achieving better efficiency.

Electrical safety testing equipment is widely used in various types of electronic components, electrical products, and healthcare products. Major tests include AC/DC withstanding voltage and insulation resistance testing for electronic components as well as earth connection and earth leakage current tests for electrical products or medical electronics. In addition to verifying product compliance with various safety specifications such as the UL (United States), CE (Europe), and TUV (Germany), the primary purpose of testing is to ensure personal safety of the users as well as long-term reliability of the products. To create an international sales channel, safety regulations must be regarded as a major topic.

Products that have been tested include multifunctional calibrators, resistors, and capacitor meters. In addition to single unit operations, these solutions can also be connected and used with other testers for R&D, design verification, and QA testing purposes. These testing solutions are capable of fulfilling basic testing requirements for different units.

  • Flat panel display testing solutions

LCD module testing solutions may be used in assembly phase, applying shorting-bar signals to testing various defects in the panel and initiate laser reparations. During module processing, the dimension of the panel as well as backlight properties (CCFL or LED BLU) are referenced. The source of the video signal and programmable power supply are then used to implement voltage, current, and power testing through an ergonomic testing interface on PC. An analysis application that uses both hardware and software features is then used to identify bright pixels, defective pixels, color, resolution and other properties. Production line designs with automated conveyor belts can also be used to engage system-based controls to provide integrated network management functions for data analysis. - Semiconductor / IC testing solutions

Cost control efforts have recently shifted from wafer to the proportion of testing expenses. The VLSI testing system provides accurate logic simulation for complex

  • 67 -

electrical signals of the IC as well as rapid assessment of test results. Test head functions were expanded to implement multiple tests and conduct massive multisite testing to improve throughput (production volume per unit time). Additionally, customized testing equipment capable of satisfying specific requirements may be directly employed to replace general-purpose testers to achieve significant reduction in testing costs.

The handlers used in the IC backend production can also work with different IC packaging types and sort out defective products from conforming ones. After the IC is packaged and tested, automatic system function testers can be used to rapidly screen the completed IC packages, replacing simulated test environments with actual usage environments for product testing to provide low cost and high coverage tests that will greatly improve the quality of the delivered product.

  • LED / illumination testing solutions

The LED testing equipment of this company can be employed during midstream processes before or after die singulation or die separation. Tests include electrical, optical, and electrostatic discharge (ESD) properties of a die. These solutions can be integrated with a user operation interface on the probe tester to achieve rapid LED testing. For downstream packaging processes, tests such as ESD, thermal resistance, and temperature control (tri-temperature) can be carried out with simulated changes of environmental temperature and humidity and measure the electrical and optical properties of the LED module. Test requirements for LED modules primarily include lifespan tests for LED flashlights, LED light bars, and OLEDs. Customized testing solutions for electrical properties of LEDs and optical testing are also provided to satisfy various types of testing requirements.

  • Solar cell testing solutions

Solar cell testing solutions include a number of different testers and equipment developed primarily for testing the solar cell during cell phase and module phase. I– V testers can be used to measure the cell conversion efficiency of solar cells and sort these cells according to conversion efficiency. Automatic optical testing can then be used to determine any color, top side, and back side printing defects of the solar cell. Finally, the category of the solar cell can then be used to implement relevant sorting. When assembling PV systems, system inverters convert DC currents into AC while controlling the direction of current flow and calculate the reverse current delivered. The AC/DC Power Source and electronic load tester of Chroma ATE can be used to simulate and measure output power supply to ensure its quality.

  • Manufacturing execution system (MES)

This solution provides an integrated system for collecting various manufacturing data from the production floor. Assorted electronic equipment can be used to automatically collect various production data and integrate data required by processes in various units (such as material, production, manufacturing, quality control (QC), and warehousing) so that every unit can rapidly acquire the needed information to boost production efficiency.

  • 68 -

2. Production process

==> picture [435 x 159] intentionally omitted <==

----- Start of picture text -----

Material Mounting Reflow Process
Material processing (automatic) oven Touch-Up inspection
After Prior Module Pre-warehouse
burning Burning burning assembly Inspection of PCB test
Semi-finished
assembly test
product
After Pre-warehouse Pre-warehouse Pre-delivery
burning inspection packing Warehousing inspection Delivery
test
----- End of picture text -----

  • (3) Supply of primary raw materials

This company and its subsidiaries manufacture a large variety of product types in small quantities. A large quantity of raw materials is required, with primary materials including programmable logic gate array ICs, converter ICs, memory, relays, structural materials, and PCBs. The following describes the state of the material supply.

Main material
category		 Main supplier State of supply
Programmable logic
gate array IC
Galaxy Far East
Corp., Weikeng, and
Answer Technology		 These 3 suppliers are product agents for
world-renowned manufacturers and have long-term
collaborative relationships with this company,
providing stable quality and supply volumes.
Inverter IC Answer Technology,
Promate, and Yosun		 These 3 suppliers are product agents for
world-renowned manufacturers and have long-term
collaborative relationships with this company,
providing stable quality and supply volumes.
Memory Weikeng, Sunjet
Components Corp.,		 These 3 suppliers are product agents for
world-renowned manufacturers and have long-term
collaborative relationships with this company,
providing stable quality and supply volumes.
Electric relay SUMCHIP, IC-Hi
Technology, Bright
Toward Industry		 These 3 suppliers are product agents for
world-renowned manufacturers and have long-term
collaborative relationships with this company,
providing stable quality and supply volumes.
Structural materials Giga Solution Tech.,
You-Sheng Precision
Industry, High
Accurate Metal		 Materials provided by these 3 suppliers offer good
manufacturing quality as well as steady supply
volumes. These suppliers also established positive
long-term collaborative relationships with this
company.
PCB Lin Genius
Enterprise Co.,
Speedy-Circuits,
Goldensum		 Materials provided by these 3 suppliers offer good
manufacturing quality as well as steady supply
volumes. These suppliers also established positive
long-term collaborative relationships with this
company.
Gold wire and
copper wire for IC		 NIPPON These materials are mainly supplied by NIPPON.
NIPPON has established a positive and long-term
collaborative partnership with Chroma New
Material Corp., a subsidiary of this company.

Given the large variety of raw materials and components needed by this company and its subsidiaries to manufacture precise instruments, all local and overseas purchases are handled by a single purchasing unit. When possible, 2 or more suppliers are selected to ensure supplier replaceability, acquire competitive pricing, diversify purchasing risks, achieve reasonable cost reductions, and provide better services. The purchasing unit shall

  • 69 -

regularly review quotations offered by the supplier. QC and purchasing personnel shall conduct audits at the supplier end to ensure the stability of product quality while assessing the production capability of the supplier.

  • (4) A list of any suppliers and customers accounting for 10 percent or more of the company’s total procurement (sales) in either of the most recent 2 years, the percentage of total procurement (sales), and an explanation of the reason for changes in these figures.

  • List of suppliers accounting for 10 percent or more of the company's total procurements in either of the most recent 2 years

Information on major suppliers in the most recent 2 years

Unit: Thousand NT$

Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$
Item 2014 2015

Name		 Sum Proportion
of total
procurement
value for the
entire year
(%)

Relationship
with the
issuer
Name		 Sum Proportion of
total
procurement
value for the
entire year
(%)
 Relationship
with the
issuer
1 NMC 1,641,218 29.08 None NMC 1,207,491
24.29		 None
2 NMC
(Philippines)		 1,200,747
21.28		 None NMC
(Philippines)		 940,421
18.92		 None
Others 2,801,432
49.64		 - Others 2,822,811
56.79		 -
Net
procurements		 5,643,397
100.00		 Net
procurements		 4,970,723
100.00

Explanation for any changes:

The reduced sum of procurements from NMC was a result of switching from gold wire to a cheaper copper wire for semiconductor packaging for processing. However, NMC remains the second-largest supplier of this company.

  1. List of customers accounting for 10 percent or more of the company's total sales in either of the most recent 2 years

Information of major customers for the most recent 2 years

Unit: Thousand NT$


Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
2014 2015
Item
Name		 Sum Proportion of
total sales
value for the
entire year
(%)
Relationship
with the
issuer
Name		 Sum Proportion
of total sales
value for the
entire year
(%)		 Relationship
with the
issuer
1 Customer A 1,102,384
10.70		 None Others 9,692,365 100.00 -
Others 9,204,701
89.30
-
Net sales 10,307,085
100.00		 Net sales 9,692,365
100.00

In 2015, no single customer accounted for more than 10% of the total sales value of this company.

(5) Table of production volume in the most recent 2 years

Unit: KM, M, feet, g, units, sets, thousand NT$

Year / production value
Primarycommodity		 2014 2014 2014 2015 2015 2015
Production
capacity
(note 1)		 Production
volume		 Production
value		 Production
capacity
(note 1)		 Production
volume
Production
value
Measurement instruments and
equipment
-
62,113
1,780,912
-
55,529		 1,496,685
Special materials(note 2) - 34,732,549
270,916
-
-
-
Automatic equipment -
225
458,674
-
228		 1,047,233
Others -
-
-
-
-
-
Total - 34,794,887
2,510,502
-
55,757		 2,543,918

  • 70 -

  • Note 1: This company and its subsidiaries adopted a production model to produce many product types in limited quantities instead of mass production using automated production lines. No single product has an exclusive product line. Hence, general assessments for capacity utilization rates cannot be used for such production models. Production processes were based upon the processes required and work hours provided by the testers. Machinery and equipment were then used to assemble a flexible manufacturing workstation. Production volume and capacity for various products shall be sequenced according to the product market or purchase order requirements. The expected production volume was used to flexibly adjust the production capacity to achieve maximum benefits using limited economic resources. Hence, all primary products listed above were capable of maintaining a stable capacity utilization rate. Products that proved to be competitive in the market could also utilize the most flexible production plan to achieve the optimal capacity utilization rate.

  • Note 2: As of April 2014, special materials were bought and sold instead. Hence, the statistic of production volume was no longer applicable.

(6) Sales volume in the most recent 2 years

Unit: KM, M, feet, g, units, sets, thousand NT$

Year 2014 2014 2014 2014 2015 2015 2015 2015
Sales value Internal sales External sales Internal sales External sales
Primary commodity
Volume		 Value Volume Value Volume Value Volume Value
Measurement
instruments and
equipment		 42,113 1,184,385
77,691		 4,990,666
6,848
899,741
43,694		 4,766,432
Special materials 2,046,552,329 2,937,031 1,583,013
45,949
136,210,314		 2,302,212 1,200,000
25,939
Automatic
equipment		 198
292,638
27
387,453
189
92,861
39		 1,167,970
Others -
387,975
-
80,988
-
6,497
-
430,713
Total 2,046,594,640 4,802,029 1,660,731 5,505,056
136,217,351		 3,301,311 1,243,733 6,391,054

3. Information of employees for the most recent 2 years through the publication date of this report

report
Year 2014 2015 The current year through
February 28, 2016
Number of
employees		 Sales management 974 1,008 1,010
Production 809 768 759
R&D 617 614 615
Total 2,400 2,390 2,384
Average age 34.08 35.18 35.28
Average work tenure 5.28 5.74 5.83
Proportion
for the
distribution
of academic
backgrounds		 PhD 0.53% 0.72% 0.76%
Masters 16.50% 17.66% 17.74%
University / college degree
68.23%		 65.27% 65.32%
High school diploma 11.73% 14.37% 14.28%
Below high school 3.01% 1.98% 1.90%

4. Environmental protection expenditures

  • (1) Total losses and fines for environmental pollution from the most recent year through the publication date of this report: None.

(2) Future response strategies

This company is situated at the Huaya Technology Park in Linkou and is in a high-tech and low-polluting industry in the IT sector. No public hazards or pollution issues are generated during the production process. Hence, no licenses for establishing polluting facilities are required by this company. For wastewater and sewage issues, this company generates only domestic sewage, which undergoes preliminary treatment in the factory before being discharged into the wastewater treatment system of the Technology

  • 71 -

Park. Domestic wastes are cleaned and disposed of by waste disposal and handling companies registered and approved by the state. This company and its subsidiaries place great importance on environmental issues and comply with relevant laws. Landscaping and aesthetics were considered when constructing factory buildings to provide green, spacious, clean, healthy, and comfortable areas for the employees.

This company and its subsidiaries are also currently active in activities related to green and environmental protection industries and have actively introduced or developed greener operations and products for processes, products, services, and principles to fulfill laws and requirements related to RoHS and toxic chemical substances of the customers and countries to which the products are being sold. These laws and requirements were also used as guidelines to achieve continuous improvements and sustainable management to achieve the final objective of green industries.

When pursuing and maintaining the overall ecology and sustainable development, this company and its subsidiaries were committed towards technical improvements and breakthrough while upholding corporate responsibilities such as compliance with the law, social duties, and environmental protection. Stringent approaches were adopted actively to promote environmental management systems (EMS), safety- and health-related activities, and pollution prevention measures to create an excellent, safe, and healthy work environment to safeguard the employees’ physical and mental health.

5. Labor relations

  • (1) Various employees benefit plans, continuing education, training, retirement systems, and the state of implementation as well as various employee–employer agreements and measures for maintaining employee rights and interests.

  • Employee benefit plans

This company has established an Occupational Welfare Committee in charge of coordinating and managing employee benefit funds, organizing employee social clubs and tours, ball games, social activities, and gifts for public holidays for fellow employees. The plan also includes subsidies for employee marriage, bereavement, and other celebrations and festivals; subsidies for employee tours, labor, health insurance, and group insurance; employee restaurants, employee dormitories and recreation centers, providing a diverse selection of recreational and entertainment facilities for employees; and employee parking spaces.

  1. Continuing education and training

To promote the employees’ competence, knowledge, and management skills required in their duties, this company stipulated the Education and Training Management Regulations. This company's business objectives as well as results of departmental surveys were compiled to formulate the annual training plan. Work orientation training will be provided to newly hired staffs. On-the-job training, specialization training, or professional external training are provided periodically for employees to train professional and talented personnel, improve business performance, and achieve effective utilization of human resources.

The following lists training results of the most recent year:

Number of employees trained Trainingexpenses(thousand NT$)
7,151 1,791

Training courses include training for newly hired staff, professional specialization, language training, management duty training, and lifestyle seminars.

3. Retirement system

This company has stipulated the Employee Retirement Regulations based upon the Labor Standards Act. Four percent of the total monthly salary provided shall be deposited as a retirement reserve fund at the Department of Trusts of the Bank of Taiwan, and an Employment Retirement Reserve Fund Supervision Committee was

  • 72 -

established for monitoring purposes. Once regulations for employee retirement funds enter into force, the monthly pension payments shall be deposited at the Employee's Pension Account established by the Bureau of Labor Insurance.

  • 4.Employee–employer agreements and various measures taken to safeguard the employees’ interests

    • This company and its subsidiaries place great importance on employee welfare

    • and have established a harmonious employee–employer relationship. In addition to complying with the Labor Standards Act and relevant laws, welfare measures considered superior to statutory regulations were also enacted. To promote the efficiency of internal communication and encourage fellow employees to propose various recommendations, in addition to regular internal communication meetings among various units, communication channels for employee relations have also been established. Any employee inquiry or recommendation could be communicated using the Employee Communication Helpline, Employee Communication Email, and Employee Communication Feedback Mailbox offered to prevent any possible employee–employer disputes.

  • Measures for safeguarding employee rights

    • To safeguard employee rights and improve the lifestyle of fellow employees,

    • additional employee–employer communication channels have been established. This company also established the Occupational Welfare Committee to plan the allocation, payment, preservation, and utilization of the welfare and to provide rules specified by relevant laws. Protection of employees’ rights and implementation of welfare systems shall be based upon statutory regulations.

  • (2) Any loss suffered because of employee-employer disputes, estimated loss for current or future incidents that may occur, and response measures from the most recent year through the publication date of this report, and explains the reasons why a reasonable estimate could not be made: None.

6. Important contracts

Important contracts
Nature of
contract		 Parties Starting and final
date of the contract		 Major contents Restrictive terms
Land
purchasing
/ sales
contract		 Ministry of
the Interior		 From April 18, 2012
(date of signing the
contract) until the
date when notice
registration of all
projected land have
been canceled.
This company entered a contract with
HERAN Co., Ltd. (originally Heyang
International Co., Ltd.) as well as Dynapack
Corp. to participate in the Tendering for the
Business Exclusive Zone in the Development
Area of the Taoyuan International Airport
Access MRT A7 Station. The total sum of
this contract was ten billion eighty eight
million eight hundred and eighty nine
thousand nine hundred and ninety New
Taiwan Dollars (NT$ 10,088,889,999) and
included a total land area of 222,300 square
meters. Shares held by each member of the
tender: Chroma ATE Inc. 35%, HERAN Co.,
Ltd. 35%, and Dynapack Corp. 30%.		 When
transferring land
property rights,
the seller
requested the
buyer to agree to
the condition of
providing notice
land registration
to this land as
undeveloped and
unused land.
Joint credit
extension
contract		 E. Sun
Commercial
Bank and 6
other
financial
institutions
Contract was signed
on August 28, 2012,
and shall enter into
force from the date
of first utilization
and end 5 years
after the date of first
utilization.
Mid-term loans for paying for developing the
Business Exclusive Zone of the development
area of the Taoyuan International Airport
Access MRT A7 Station.		 Financial ratios
must be
compliant with
the standards
stipulated within
the contract.
  • 73 -

VI. Financial summary

1. Condensed balance sheet and statement of comprehensive income for the most recent 5 years

(1)Condensed consolidated balance sheet and statement of comprehensive income— International Financial Reporting Standards

Unit: Thousand NT$


Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Unit: Thousand NT$
Year
Item
Financial information of the most recent 5 years
2011(note 1) 2012 2013(note 2) 2014(note 2) 2015(note 2)
Current assets ─
6,837,946
7,005,438
9,184,704
9,632,600
Property, plant, and equipment ─
2,794,253
2,695,664
2,712,962
2,767,608
Intangible assets ─
194,038
201,079
200,472
200,576
Other assets ─
1,481,131
2,868,238
2,871,838
3,459,655
Total assets ─
11,307,368
12,770,419
14,969,976
16,060,439
Current
liabilities		 Before allotment ─
3,112,588
3,052,669
2,870,775
3,112,654
After allotment ─
3,862,257
3,989,780
3,853,214
(note 3)
Non-current liabilities ─
291,495
1,021,103
2,726,113
3,416,489
Total
liabilities		 Before allotment ─
3,404,083
4,073,772
5,596,888
6,529,143
After allotment ─
4,153,752
5,010,883
6,579,327
(note 3)
Equity attributable to owner of
the parent company		 ─
7,796,606
8,557,696
9,252,948
9,410,104
Capital stock ─
3,767,599
3,767,599
3,787,821
3,791,699
Capital surplus ─
917,062
960,198
1,256,654
1,302,269
Retained
earnings		 Before allotment ─
2,961,545
3,386,999
3,737,083
3,952,185
After allotment ─
2,211,876
2,449,888
2,754,644
(note 3)
Other equity ─
186,300
478,800
507,104
399,665
Treasury stock ─
(35,900)		 (35,900) (35,714) (35,714)
Noncontrolling interests ─
106,679
138,951
120,140
121,192
Total equity Before allotment ─
7,903,285
8,696,647
9,373,088
9,531,296
After allotment ─
7,153,616
7,759,536
8,390,649
(note 3)
Item Year Financial information of the most recent 5years
2011(note 1) 2012 2013 2014(note 2) 2015(note 2)
Operating revenue ─ 11,643,508 10,170,631
10,307,085
9,692,365
Gross profit (note 4) ─ 3,389,640 3,750,820
4,046,270
4,221,340
Operating income ─ 1,073,932 1,168,499
1,221,400
1,219,999
Non-operating income and expenses ─ 64,426
248,537
302,113
262,673
Income before income tax ─ 1,138,358 1,417,036
1,523,513
1,482,672
Net income ─ 916,237 1,179,156
1,295,985
1,194,542
Other comprehensive income (loss)
(net value after tax) in this period		 ─
26,276
287,363
4,567
(131,740)
Total comprehensive income in this
period		 ─
942,513		 1,466,519
1,300,552
1,062,802
Net income attributable to owner of
the parent company		 ─
920,328		 1,204,892
1,318,373
1,236,557
Net income attributable to
Noncontrolling interests		 ─
(4,091)
(25,736)
(22,388)
(42,015)
Total comprehensive income
attributable to owner of the parent
company		 ─
947,956		 1,491,388
1,320,288
1,102,621
Total comprehensive income( loss)
attributable to Noncontrolling interests		 ─
(5,443)
(24,869)
(19,736)
(39,819)
Earningsper share(NT$) ─
2.46		 3.21
3.51
3.28

Note 1:In 2011, no financial reports reviewed by a CPA in compliance with International Financial Reporting Standards were available.

  • 74 -

  • Note 2:In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

  • Note 3:Distribution for the 2015 surplus have not been distributed by the annual shareholders’ meeting. These fields were left blank as a result.

Note 4:Values listed are net realized gross profit from which unrealized gross profit was deducted.

  • (2) Individual balance sheet and statement of comprehensive income—International Financial Reporting Standards

Unit: Thousand NT$

Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$
Year
Item
Financial information of the most recent 5 years
2011 (note 1)
2012		 2013 (note 2) 2014 (note 2) 2015 (note 2)
Current assets ─
3,469,952
3,607,432
6,015,641
5,999,691
Property, plant, and equipment ─
1,993,820
1,924,727
1,907,429
1,844,215
Intangible assets ─
94,424
94,424
94,424
94,424
Other assets ─
3,699,118
5,363,903
5,274,245
6,026,586
Total assets ─
9,257,314
10,990,486
13,291,739
13,964,916
Current
liabilities		 Before allotment ─
1,298,484
1,551,520
1,455,362
1,310,706
After allotment ─
2,052,004
2,493,420
2,442,795
(note 3)
Non-current liabilities ─
162,224
881,270
2,583,429
3,244,106
Total
liabilities		 Before allotment ─
1,460,708
2,432,790
4,038,791
4,554,812
After allotment ─
2,214,228
3,374,690
5,026,224
(note 3)
Equity attributable to owner of
the parent company		 ─
7,796,606
8,557,696
9,252,948
9,410,104
Capital stock ─
3,767,599
3,767,599
3,787,821
3,791,699
Capital surplus ─
917,062
960,198
1,256,654
1,302,269
Retained
earnings		 Before allotment 2,961,545
3,386,999
3,737,083
3,952,185
After allotment ─
2,208,025
2,445,099
2,749,650
(note 3)
Other equities ─
186,300
478,800
507,104
399,665
Treasury stock ─
(35,900)		 (35,900) (35,714) (35,714)
Total
equity		 Before allotment ─
7,796,606
8,557,696
9,252,948
9,410,104
After allotment ─
7,043,086
7,615,796
8,265,515
(note 3)
  • 75 -
Year
Item
Financial information of the most recent 5 years
Financial information of the most recent 5 years
Financial information of the most recent 5 years
Financial information of the most recent 5 years
Financial information of the most recent 5 years
2011 (note 1)
2012		 2013 2014 (note 2) 2015 (note 2)
Operating revenue ─ 4,173,732 3,926,480
5,135,199
4,539,441
Gross profit (note 4) ─ 2,269,354 2,153,911
2,752,917
2,519,834
Operating income ─
878,533
741,590
1,052,145
825,721
Non-operating income and expenses ─
191,716
563,197
431,832
548,464
Income before income tax ─ 1,070,249 1,304,787
1,483,977
1,374,185
Net income ─
920,328		 1,204,892
1,318,373
1,236,557
Other comprehensive income (net
value after tax) in this period		 ─
27,628
286,496
1,915
(133,936)
Total comprehensive income in this
period		 ─
947,956		 1,491,388
1,320,288
1,102,621
Net profit attributable to owner of
the parent company		 ─
920,328		 1,204,892
1,318,373
1,236,557
Total comprehensive income
attributable to owner of the parent
company		 ─
947,956		 1,491,388
1,320,288
1,102,621
Earnings per share (NT$) ─
2.46
3.21
3.51
3.28

Note 1: In 2011, no financial reports reviewed by a CPA in compliance with International Financial Reporting Standards were available.

Note 2: In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

Note 3: Distribution for the 2015 surplus have not been distributed by the annual shareholders’ meeting. These fields were left blank as a result.

Note 4: Unrealized profits from subsidiaries and related businesses were removed. The only values listed are realized gross profit.

  • 76 -

(3) Consolidated balance sheet and statement of income —R.O.C. GAAP

Unit: Thousand NT$

Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$
Year
Item		 Financial information of the most recent 5years(note 1)
2011 2012 Year
Year
Year
Current assets 7,730,719
6,888,849
─
─
─
Funds and investments 787,343
916,114
─
─
─
Fixed assets 2,793,484
3,151,132
─
─
─
Intangible assets 183,603
194,038
─
─
─
Other assets 157,140
141,754
─
─
─
Total assets 11,652,289
11,291,887
─
─
─
Current
liabilities		 Before allotment 3,625,615
3,130,394
─
─
─
After allotment 4,567,515
3,883,914
─
─
─
Long-term liabilities 34,808
119,415
─
─
─
Other liabilities 147,279
140,635
─
─
─
Total liabilities Before allotment 3,807,702
3,390,444
─
─
─
After allotment 4,749,602
4,143,964
─
─
─
Capital stock 3,767,599
3,767,599
─
─
─
Capital surplus 925,158
910,680
─
─
─
Retained
earnings		 Before allotment 2,875,983
2,879,197
─
─
─
After allotment 1,934,083
2,125,677
─
─
─
Unrealized gain
instruments		 from financial 139,609
227,382
─
─
─
Cumulative translation adjustment 86,888
40,144
─
─
─
Treasurystock (30,238) (30,238) ─
─
─
Minorityinterests 79,588
106,679
─
─
─
Total equity Before allotment 7,844,587
7,901,443
─
─
─
After allotment 6,902,687
7,147,923
─
─
─
Yea
Item		 r
Financial information of the most recent 5 years (note 1)
2011
2012
Year
Year
Year		 r
Financial information of the most recent 5 years (note 1)
2011
2012
Year
Year
Year		 r
Financial information of the most recent 5 years (note 1)
2011
2012
Year
Year
Year		 r
Financial information of the most recent 5 years (note 1)
2011
2012
Year
Year
Year		 r
Financial information of the most recent 5 years (note 1)
2011
2012
Year
Year
Year
2012 Year
Year
Year
Operatingrevenue 14,148,317
11,747,443
─
─
─
Grossprofit 3,917,137
3,418,513
─
─
─
Operatingincome 1,639,648
1,082,984
─
─
─
Non-operatingincome andgains 195,939
147,322
─
─
─
Non-operatingexpenses and loss 27,246
66,127
─
─
─
Income before income tax 1,808,341
1,164,179
─
─
─
Net Income 1,504,327
941,023
─		 ─ ─
Net Incomeattributable to shareholders of
theparent company
1,522,569
945,114
─		 ─ ─
Earnings per share (NT$) (note 2) 4.06
2.52
─		 ─ ─

Note 1: Based upon the 2011 to 2012 financial report reviewed and signed by the CPA. Note 2: Earnings per share are based upon recapitalization of traced and adjusted surplus, Capital surplus, and employee bonuses.

  • 77 -

(4) Individual balance sheet and statement of income —R.O.C. GAAP

Unit: Thousand NT$

Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$ Unit: Thousand NT$
Year
Item
Financial information of the most recent 5years(note 1)
2011 2012 Year
Year
Year
Current assets 3,923,597
3,515,055
─
─
─
Funds and investments 3,345,714
3,531,509
─
─
─
Fixed assets 2,055,291
2,350,699
─
─
─
Intangible assets 133,384
94,424
─
─
─
Other assets 88,629
66,966
─
─
─
Total assets 9,546,615
9,558,653
─
─
─
Current
liabilities		 Before allotment 1,359,702
1,298,484
─
─
─
After allotment 2,301,602
2,052,004
─
─
─
Long-term liabilities ─
─
─
─
─
Other liabilities 421,914
465,405
─
─
─
Total liabilities Before allotment 1,781,616
1,763,889
─
─
─
After allotment 2,723,516
2,517,409
─
─
─
Capital stock 3,767,599
3,767,599
─
─
─
Capital surplus 925,158
910,680
─
─
─
Retained
earnings		 Before allotment 2,875,983
2,879,197
─
─
─
After allotment 1,934,083
2,125,677
─
─
─
Unrealized gain from financial
instruments		 139,609
227,382
─
─
─
Cumulative translation adjustment 86,888
40,144
─
─
─
Treasurystock (30,238) (30,238) ─
─
─
Total equity Before allotment 7,764,999
7,794,764
─
─
─
After allotment 6,823,099
7,041,244
─
─
─
Item Year
Financial information of the most recent 5years(note 1)
2011 2012 Year
Year
Year
Operatingrevenue 5,338,376
4,173,732
─
─
─
Grossprofit (note 2) 2,775,985
2,269,354
─
─
─
Operatingincome 1,318,778
875,487
─
─
─
Non- operatingincome andgains 412,636
261,122
─
─
─
Non- operatingexpenses and loss 13,939
40,495
─
─
─
Income before income tax 1,717,475
1,096,114
─
─
─
Net Income 1,522,569
945,114
─
─
─
Earnings per share (NT$) (note 3) 4.06
2.52
─		 ─ ─

Note 1: Based upon the 2011 to 2012 financial report reviewed and signed by the CPA. Note 2: Values listed are net realized gross sales profit from which unrealized gross sales profit were deducted. Note 3: Earnings per share are based upon recapitalization of traced and adjusted surplus, Capital surplus, and employee bonuses.

  • 78 -

(5) Name of the CPA for the most recent 5 years and audit opinions a) Name of the CPA for the most recent 5 years and audit opinions

Year Accountingfirms Name of the CPA Audit opinions
2011 Deloitte and Touche Wen-chin Lin, Cheng-Ming Lee Unqualified opinion
2012 Deloitte and Touche Wen-chin Lin, Cheng-Ming Lee Unqualified opinion
2013 Deloitte and Touche Wen-chin Lin, Cheng-Ming Lee Unqualified opinion
2014 Deloitte and Touche Cheng-Ming Lee, Li-Wen Kuo Unqualified opinion
2015 Deloitte and Touche Yi-Wen ,Wang, Wen-Chi,Kuo Unqualified opinion

  • b) Accounting firms, former and successor CPAs, and reasons for the replacement of any CPAs in the most recent 5 years

  • ① Reasons for changing the CPAs in 2014

    • a. Names of former and successor CPAs:

    • Former: CPA Wen-chin Lin and CPA Cheng-Ming Lee Successor: CPA Cheng-Ming Lee and CPA Li-Wen Kuo

    • b. Reason for replacement: Internal rotation of duties of the accounting firm.

    • c. Date of incident: April 30, 2014

    • d. Any disagreement relating to accounting principles or auditing items between the former and successor CPAs: None.

  • ② Reasons for changing the CPAs in 2015

    • a.Names of former and successor CPAs:

    • Former: CPA Cheng-Ming Lee and CPA Li-Wen Kuo Successor: CPA Yi-Wen, Wang and CPA Wen-Chi, Kuo

    • b.Reason for change: To ensure the independence of the CPA and in compliance with the internal rotation system of Deloitte.

    • c. Date of incident: December 23, 2015.

    • d. Any disagreement relating to accounting principles or auditing items between the former and successor CPAs: None.

  • 79 -

2. Financial analysis for the most recent 5 years

(1)Consolidated financial analysis—International Financial Reporting Standards

Year
Item analyzed (note 3)		 Year
Item analyzed (note 3)		 Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years
2011 (note 1) 2012 2013 (note 2) 2014 (note 2) 2015 (note 2)
Financial
structure		 Liability to asset ratio (%) ─
30.10		 31.90 37.39 40.65
Proportion of long-term
fund in property, plant,
and equipment (%)		 ─
293.27		 360.50 445.98 467.83
Liquidity
Analysis
Current ratio (%)		 ─
219.69		 229.49 319.94 309.47

Quick ratio (%)		 ─
167.06		 177.19 258.74 248.58
Interest coverage ratio (%)
─
114.59		 100.66 49.67 39.02
Operating
ability		 AR turnover (times) ─
3.65		 3.41 3.25 3.23
Average collection days ─
100		 107 112 113
Inventory turnover (times)
─
4.28		 3.79 3.46 2.73
AP turnover (times) ─
4.09		 4.14 4.77 4.02
Average inventory
turnover days		 ─
85		 96 105 134
Property, plant, and
equipment (PP&E)
turnover (times)		 ─
4.18		 3.71 3.81 3.54
Total asset turnover
(times)		 ─
1.01		 0.84 0.74 0.62
Profitability Return on assets (%) ─
8.07		 10.11 9.69 8.18
Return on equity (%) ─
11.80		 14.73 14.80 13.25

Ratio of pre-tax income to
paid-in capital (%)		 ─
30.21		 37.61 40.22 39.10
Net Profit margin (%) ─
7.90		 11.85 12.79 12.76
Earnings per share (NT$) ─
2.46		 3.21 3.51 3.28
Cash
flow		 Cash flow ratio (%) ─
47.22		 30.80 42.76 72.88
Cash flow adequacy ratio
(%)		 ─
118.95		 100.44 103.43 89.78
Cash reinvestment ratio
(%)		 ─
5.26		 1.91 2.31 9.82
Leverage Degree of operating
leverage (DOL)		 ─
1.33		 1.27 1.25 1.27
Degree of financial
leverage (DFL)		 ─
1.01		 1.01 1.03 1.03

Description of causes for changes to various financial ratios in the most recent 2 years (analysis would not be
required if the change is within 20%).
The following describes the causes for changes to financial ratios that exceed 20% in the most recent 2 years:
1. Reduced interest coverage ratio: The main reasons for this were increased interest expenses for the
amortization of corporate bond discounts as well as reduced earnings before tax (EBT) compared to the
previous period.
2. Reduced inventory turnover rate and increased average inventory turnover days: The main causes for this
were reduced operating revenue in 2015 as well as stockpiling of inventory in preparation for exports for
the first quarter of 2016. Both of these led to reduced inventory turnover as well as increased average
inventory turnover days.
3. Increases in cash flow ratio and cash reinvestment ratio: Net cash inflow of business activities in 2015 was
increased by NT$ 1,040,896,000 compared to the previous period, leading to corresponding increases in
these ratios.

Note 1: In 2011, no financial reports reviewed by a CPA in compliance with International Financial Reporting Standards were available.

Note 2: In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable

  • 80 -

items in previous financial reports to adjust those items that may be affected by these adoptions. Note 3: The following lists the formulas used to perform the financial analysis:

  1. Financial structure

  2. (1) Liability to asset ratio = Total liabilities / total assets

  3. (2) Proportion of long-term fund in property, plant, and equipment = (Total equities + non-current liabilities) / (Total net value of property, plant, and equipment).

  4. Liquidity Analysis

  5. (1) Current ratio = Current assets / Current liabilities.

  6. (2) Quick ratio = (Current asset – inventories) / Current liabilities

  7. (3) Interest coverage ratio = Earnings before interest and taxes (EBIT) / Interest expenses over this period.

  8. Operating ability

  9. (1) AR turnover rate (including bills receivable resulting from accounts receivable and business operations) = Net sales / Average accounts receivable in various periods (including bills receivable resulting from accounts receivable and business operations).

  10. (2) Average collection days = 365 / Receivables turnover ratio.

  11. (3) Inventory turnover ratio = Cost of sales / Average inventory value

  12. (4) AP turnover rate (including bills payable resulting from accounts payable and business operations) = Cost of sales / Average accounts payable in various periods (including bills payable resulting from accounts payable and business operations).

  13. (5) Average inventory turnover days = 365 / Inventory turnover ratio.

  14. (6) Property, plant, and equipment (PP&E) turnover ratio = Net sales / Average value of PP&E

  15. (7) Total inventory turnover rate = Net sales / Average total asset value.

  16. Profitability

  17. (1) Return on assets (ROA) = [Gain (loss) after tax + Interest expenses × (1 – interest rates)] / Average total asset value. (2) Return on equity (ROE) = Gain (loss) after tax / Average total equity value.

  18. (3) Net Profit margin = Gain (loss) after tax / Net sales

  19. (4) Earnings per share (EPS) = (Gain (loss) attributable to the owner of the parent company – dividends of preferred shares) / Weighted average of outstanding shares.

  20. Cash flow

  21. (1) Cash flow ratio = Net cash flow of business activities / Current liabilities.

  22. (2) Net cash flow adequacy ratio = Net cash flow for business activities in the most recent 5 years / (capital expenditure + inventory increase + cash dividends) for the most recent 5 years.

  23. (3) Cash reinvestment ratio = (Net cash flow for business activities – cash dividends) / (Gross value of PP&E + Long-term investments + Other non-current assets + business capital).

    1. Leverage

  25. (1) Degree of operating leverage (DOL) = (Net operating revenue – operating change costs and expenses) / Operation profit.

  26. (2) Degree of financial leverage (DFL) = Operating profit / (Operating profit – interest expenses).

  27. Note 4: The formula listed above for calculating EPS shall be

  28. Based upon the weighted average of common shares and not the number of issued shares at the end of the year. 2. Any cash capital increase or transaction of treasury stock shall be used to calculate the weighted average of the number of shares based upon the period of circulation.

  29. Any recapitalization of retained earnings or recapitalization of Capital surplus shall be traced and adjusted according to the proportion of recapitalization when calculating the EPS for the previous year or every 6 (six) months. There is no need to consider the period of issuance for the said recapitalization.

  30. If the preferred shares cannot be converted into cumulative preferred shares, then the dividend of the year (regardless of whether it has been issued) shall be deducted from the net income after tax (NIAT) or included as a net loss after tax. If the preferred share is non-cumulative, dividends for the preferred share shall be deducted from any NIAT resulting from this period. No readjustments would be required for losses.

Note 5: Cash flow analysis shall take note of the following: 1. Net cash flow of business activities shall refer to the amount of net cash inflow for business activities indicated in the cash flow statement.

  1. Capital expenditure shall refer to cash outflow for annual capital investments.

  2. Increase in inventory shall be included only when the final value at the end of the period is greater than the sum at the beginning of the period. For any decrease in inventory of the year, the inventory increase shall be equated to zero.

  3. Cash dividends include those for common shares as well as preferred shares.

  4. Gross value of PP&E shall refer to the total value of PP&E minus accumulated depreciation. Note 6: Issuers shall refer to various business costs and expenses and categorize them as fixed or variable according to their relevant properties. Where estimates or subjective judgments must be made, care must be taken to ensure their validity and consistency. Note 7: When company shares have no par value or the par value per share is not NT$ 10, any calculations that involve paid-in capital and its ratio shall be replaced with the equity ratio belonging to the owner of the parent company of the asset balance sheet.

  5. 81 -

(2) Individual financial analysis—International Financial Reporting Standards

Year
Item analyzed		 Year
Item analyzed		 Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years Financial analysis for the most recent 5years
2011 (note 1)
2012		 2013 (note 2) 2014 (note 2) 2015 (note 2)
Financial
structure		 Liability to asset ratio (%) ─
15.78		 22.14 30.39 32.62
Proportion of long-term fund
in property, plant, and
equipment (PP&E) (%)		 ─
399.17		 490.41 620.54 686.16
Liquidity
Analysis		 Current ratio (%) ─
267.23		 232.51 413.34 457.74
Quick ratio (%) ─
182.57		 155.16 325.04 354.57
Interest coverage ratio (%) ─
401.69		 263.22 69.62 48.66
Operating
ability		 AR turnover (times) ─
2.56		 2.41 2.54 2.25
Average collection days ─
143		 151 144 162
Inventory turnover (times) ─
1.43		 1.42 1.73 1.34
AP turnover (times) ─
4.01		 4.30 5.07 3.55
Average inventory turnover
days		 ─
255		 257 211 272
Property, plant, and
equipment (PP&E) turnover
(times)		 ─
2.07		 2.00 2.68 2.42
Total asset turnover (times) ─
0.45		 0.39 0.42 0.33
Profitability Return on assets (%) ─
9.93		 11.94 11.01 9.25
Return on equity (%) ─
11.80		 14.73 14.80 13.89

Ratio of pre-tax income to
paid-in capital (%)		 ─
28.41		 34.63 39.18 36.24
Net Profit margin (%) ─
22.05		 30.69 25.67 27.24
Earnings per share (NT$) ─
2.46		 3.21 3.51 3.28
Cash
flow		 Cash flow ratio (%) ─
81.78		 39.92 56.54 116.19
Cash flow adequacy ratio (%) ─
112.99		 87.62 82.31 74.59
Cash reinvestment ratio (%) ─
1.38		 (note 3) (note 3) 4.46
Leverage Degree of operating leverage
(DOL)		 ─
1.26		 1.23 1.16 1.24
Degree of financial leverage
(DFL)		 ─
1.00		 1.01 1.02 1.04
Description of causes for changes to various financial ratios in the most recent 2 years (analysis would not be
required if the change is within 20%).
The following describes the causes for changes to financial ratios that exceed 20% in the most recent 2 years:
1. Reduced interest coverage ratio: The main reasons for this were increased interest expenses for the
amortization of corporate bond discounts as well as reduced earnings before tax (EBT) compared to the
previous period.
2. Reduced inventory turnover rate and increased average inventory turnover days: The main causes for this
were the reduced operating revenue in 2015 as well as stockpiling of inventory in preparation for exports for
the first quarter of 2016. Both of these led to reduced inventory turnover as well as increased average
inventory turnover days.
3. Reduced payables turnover ratio: Mainly caused by a reduction in operating income and in cost of sales in
2015 as well as growth in amount of payables in the end of 2015.
4. Increases in cash flow ratio and cash reinvestment ratio: Net cash inflow of business activities in 2015 was
increased by NT$ 700,017,000 compared to the previous period, leading to corresponding increases in these
ratios.

Description of causes for changes to various financial ratios in the most recent 2 years (analysis would not be required if the change is within 20%). The following describes the causes for changes to financial ratios that exceed 20% in the most recent 2 years: 1. Reduced interest coverage ratio: The main reasons for this were increased interest expenses for the amortization of corporate bond discounts as well as reduced earnings before tax (EBT) compared to the previous period.

  1. Reduced inventory turnover rate and increased average inventory turnover days: The main causes for this were the reduced operating revenue in 2015 as well as stockpiling of inventory in preparation for exports for the first quarter of 2016. Both of these led to reduced inventory turnover as well as increased average inventory turnover days.

  2. Reduced payables turnover ratio: Mainly caused by a reduction in operating income and in cost of sales in 2015 as well as growth in amount of payables in the end of 2015.

Note 1: In 2011, no financial reports compliant with the Financial Reporting Standards was available.

Note 2: In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

Note 3: The total sum of net cash flow for the most recent 5 years was a negative value, or that net cash flow resulting from business

  • 82 -

activities were net cash outflow. Relevant ratios would not be applicable in such circumstances. Note 4: The following lists the formulas used for performing the financial analysis:

  1. Financial structure

    • (1) Liability to asset ratio = Total liabilities / total assets

    • (2) Proportion of long-term fund in property, plant, and equipment = (Total equities + non-current liabilities) / (Total net value of property, plant, and equipment).

  2. Liquidity Analysis

    • (1) Current ratio = Current assets / Current liabilities.

    • (2) Quick ratio = (Current asset—inventories) / Current liabilities

    • (3) Interest coverage ratio = Earnings before interest and taxes (EBIT) / Interest expenses over this period.

  3. Operating ability

    • (1) AR turnover (including bills receivable resulting from accounts receivable and business operations) = Net sales / Average accounts receivable in various periods (including bills receivable resulting from accounts receivable and business operations).

    • (2) Average collection days = 365 / Receivables turnover ratio.

    • (3) Inventory turnover ratio = Cost of sales / Average inventory value

    • (1) AP turnover (including bills payable resulting from accounts payable and business operations) = Cost of sales / Average accounts payable in various periods (including bills payable resulting from accounts payable and business operations).

    • (5) Average inventory turnover days = 365 / Inventory turnover ratio.

    • (6) Property, plant, and equipment (PP&E) turnover ratio = Net sales / Average value of PP&E

    • (7) Total inventory turnover rate = Net sales / Average total asset value.

  4. Profitability

    • (1) Return on assets (ROA) = [Gain (loss) after tax + Interest expenses × (1 – interest rates)] / Average total asset value. (2) Return on Equity (ROE) = Gain (loss) after tax / Average total equity value.

    • (3) Net Profit margin = Gain (loss) after tax / Net sales

    • (4) Earnings per share (EPS) = (Gain (loss) attributable to the owner of the parent company—dividends of preferred shares) / Weighted average of outstanding shares.

  5. Cash flow

    • (1) Cash flow ratio = Net cash flow of business activities / Current liabilities.

    • (2) Net cash flow adequacy ratio = Net cash flow for business activities in the most recent 5 years / (capital expenditure + inventory increase + cash dividends) for the most recent 5 years.

    • (3) Cash reinvestment ratio = (Net cash flow for business activities – cash dividends) / (Gross value of PP&E + Long-term investments + Other non-current assets + business capital).

  6. Leverage

    • (1) Degree of operating leverage (DOL) = (Net operating revenue – operating change costs and expenses) / Operating profit.

    • (2) Degree of financial leverage (DFL) = Operating profit / (Operating profit – interest expenses).

  7. Note 5: The formula listed above for calculating EPS shall be

  8. Based upon the weighted average of common shares and not the number of issued shares at the end of the year.

  9. Any cash capital increase or transaction of treasury stock shall be used to calculate the weighted average of the number of shares based upon the period of circulation.

  10. Any recapitalization of retained earnings or recapitalization of Capital surplus shall be traced and adjusted according to the proportion of recapitalization when calculating the EPS for the previous year or every 6 (six) months. There is no need to consider the period of issuance for the said recapitalization.

  11. If the preferred shares cannot be converted into cumulative preferred shares, then the dividend of the year (regardless of whether it has been issued) shall be deducted from the net income after tax (NIAT) or included as a net loss after tax. If the preferred share is non-cumulative, dividends for the preferred share shall be deducted from any NIAT resulting from this period. No readjustments would be required for losses.

Note 6: Cash flow analysis shall take note of the following:

  1. Net cash flow of business activities shall refer to the amount of net cash inflow for business activities indicated in the cash flow statement.

  2. Capital expenditure shall refer to cash outflow for annual capital investments.

  3. Increase in inventory shall be included only when the final value at the end of the period is greater than the sum at the beginning of the period. For any decrease in inventory of the year, inventory increase shall be equated to zero.

  4. Cash dividends include those for common shares as well as preferred shares.

  5. Gross value of PP&E shall refer to the total value of PP&E minus accumulated depreciation.

Note 7: Issuers shall refer to various business costs and expenses and categorize them as fixed or variable according to their relevant properties. Where estimates or subjective judgments must be made, care must be taken to ensure their validity and consistency. Note 8: When company shares have no par value or where the par value per share is not NT$ 10, any calculations that involve paid-in capital and its ratio shall be replaced with the equity ratio belonging to the owner of the parent company of the asset balance sheet.

  • 83 -
(3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP
Year
Item analyzed		 Financial analysis for the most recent 5years
2011 2012 Year
Year
Year
Financial
structure		 Liability to assetratio (%) 32.68 30.03 ─
─
─
Long-term fund as a proportion
of fixed assets (%)
282.06
254.54
─
─
─
Liquidity
Analysis		 Currentratio (%) 213.23 220.06 ─
─
─
Quick ratio (%) 152.08 165.13 ─
─
─
Interest coverageratio (%) 216.90 117.16 ─
─
─
Operating
ability		 ARturnover(times) 4.10 3.80 ─
─
─
Average collection days 89 96 ─
─
─
Inventory turnover(times) 4.59 4.14
─
─
─
APturnover(times) 4.72
4.30		 ─
─
─
Average inventory turnover
days		 80
88
─
─
─
Fixed asset turnover(times) 5.14
3.95		 ─
─
─
Totalasset turnover(times) 1.21
1.04
─
─
─
Profitability Returnonassets (%) 13.12
8.31
─
─
─
Return on shareholders’ equity
(%)		 19.87
12.15
─
─
─

As a
proportion
of paid-in
capital (%)		 Operating income 43.52
28.74
─		 ─ ─

Earnings before
tax (EBT)		 48.00
30.90
─
─
─
Net Profit margin(%) 10.76 8.05 ─
─
─
Earnings per share (NT$) 4.06
2.52
─		 ─ ─
Cash flow Cash flowratio (%) 51.24
48.60		 ─
─
─
Cash flow adequacyratio (%) 117.01
119.13		 ─
─
─
Cash reinvestment ratio (%) 5.04
5.86
─		 ─ ─
Leverage Degree of operating leverage
(DOL)		 1.20
1.34
─
─
─
Degree of financial leverage
(DFL)		 1.01
1.01
─
─
─
Description of causes for changes to various financial ratios in the most recent 2 years: Not applicable.
(3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP (3) Consolidatedfinancialanalysis—R.O.C. GAAP
Year
Item analyzed		 Financial analysis for the most recent 5years
2011 2012 Year
Year
Year
Financial
structure		 Liability to assetratio (%) 32.68 30.03 ─
─
─
Long-term fund as a proportion
of fixed assets (%)
282.06
254.54
─
─
─
Liquidity
Analysis		 Currentratio (%) 213.23 220.06 ─
─
─
Quick ratio (%) 152.08 165.13 ─
─
─
Interest coverageratio (%) 216.90 117.16 ─
─
─
Operating
ability		 ARturnover(times) 4.10 3.80 ─
─
─
Average collection days 89 96 ─
─
─
Inventory turnover(times) 4.59 4.14
─
─
─
APturnover(times) 4.72
4.30		 ─
─
─
Average inventory turnover
days		 80
88
─
─
─
Fixed asset turnover(times) 5.14
3.95		 ─
─
─
Totalasset turnover(times) 1.21
1.04
─
─
─
Profitability Returnonassets (%) 13.12
8.31
─
─
─
Return on shareholders’ equity
(%)		 19.87
12.15
─
─
─

As a
proportion
of paid-in
capital (%)		 Operating income 43.52
28.74
─		 ─ ─

Earnings before
tax (EBT)		 48.00
30.90
─
─
─
Net Profit margin(%) 10.76 8.05 ─
─
─
Earnings per share (NT$) 4.06
2.52
─		 ─ ─
Cash flow Cash flowratio (%) 51.24
48.60		 ─
─
─
Cash flow adequacyratio (%) 117.01
119.13		 ─
─
─
Cash reinvestment ratio (%) 5.04
5.86
─		 ─ ─
Leverage Degree of operating leverage
(DOL)		 1.20
1.34
─
─
─
Degree of financial leverage
(DFL)		 1.01
1.01
─
─
─
Description of causes for changes to various financial ratios in the most recent 2 years: Not applicable.
  • 84 -

(4) Individual financial analysis—R.O.C. GAAP

Year
Item analyzed		 Year
Item analyzed		 Year
Item analyzed
Financial analysis for the most recent5 years
Financial analysis for the most recent5 years
Financial analysis for the most recent5 years
Financial analysis for the most recent5 years
Financial analysis for the most recent5 years
2011 2012 Year Year Year
Financial
structure		 Liability to assetratio (%) 18.66 18.45 ─
─
─
Long-term fund as a
proportion of fixed assets (%)		 377.81
331.59
─
─
─
Liquidity
Analysis		 Currentratio (%) 288.56 270.70 ─
─
─
Quick ratio(%) 186.19 186.04
─
─
─
Interest coverageratio (%) 1197.01
411.38		 ─
─
─
Operating
ability		 ARturnover(times) 2.94
2.59		 ─
─
─
Average collectiondays 124
141
─
─
─
Inventory turnover(times) 1.82
1.52
─
─
─
APturnover(times) 4.36 4.01
─
─
─
Average inventory turnover
days		 201
241
─
─
─
Fixed asset turnover(times) 2.60 1.78 ─
─
─
Totalasset turnover(times) 0.56 0.44
─
─
─
Profitability Returnonassets (%) 15.89 9.92
─
─
─
Return on shareholders’ equity
(%)		 19.87
12.15
─
─
─
As a
proportion
of paid-in
capital (%)		 Operating income 35.00
23.24
─		 ─ ─

Earnings before
tax (EBT)		 45.59
29.09
─
─
─
NetProfitmargin(%) 28.52
22.64
─
─
─
Earnings pershare (NT$) 4.06 2.52
─
─
─
Cash flow Cash flowratio (%) 126.99 93.38 ─
─
─
Cash flowadequacyratio(%) 122.28 115.36 ─
─
─
Cash reinvestmentratio (%) 3.79 2.98 ─
─
─
Leverages Degree of operating leverage
(DOL)		 1.19
1.29
─
─
─
Degree of financial leverage
(DFL)		 1.00
1.00
─
─
─
Description of causes for changes to various financial ratios in the most recent 2 years: Not applicable.
  • 85 -

3. Audit reports from supervisors of the financial report from the most recent year

Chroma ATE Inc.

Supervisor’s Review Report

This review report was generated after a complete review of this company's business report, individual and consolidated financial statements, and surplus distribution proposal for 2015 submitted by the Board of Directors, where the individual and consolidated financial statements have been completely audited by CPAs Yi-Wen ,Wang and Wen-Chi, Kuo of Deloitte and Touche. Various forms and statements submitted by the Board of Directors have been completely reviewed by us, the supervisors. We believe that the said reports, forms, and statements contain no nonconformities and have generated this report in compliance with Article 219 of the Company Act for your review.

Sincerely,

Chroma ATE Inc.

Annual shareholders’ meeting 2016

Supervisor Chi-Jen Chou

KAI SUN INVESTMENT CO.,LTD.

Representative: Tsun-I,Wang

March 8, 2016

  • 86 -

4. Financial report from the most recent year: Please peruse pages 104 to 189 of this Report.

5. Company-only financial report audited and attested by a CPA from the most recent year: Please peruse pages 190 to 261 of this Report.

6. Any financial difficulties experienced by the company and its affiliated businesses during the most recent year through the publication date of this report as well as the impact of the said difficulties on the financial condition of this company: None.

  • 87 -

VII. Review, analysis, and risks of financial conditions and performance

1. Financial condition

Comparative analysis of financial conditions

Units: Thousand NT$;% Units: Thousand NT$;%
Years (note) Differences
31 December 2015 31 December 2014
Item Sum %
Current assets 9,632,600 9,184,704 447,896 5
Property, plant, and
2,767,608 2,712,962 54,646 2

equipment
Intangible assets 200,576 200,472 104 -
Other assets 3,459,655 2,871,838 587,817 20
Total assets 16,060,439 14,969,976 1,090,463 7
Current liabilities 3,112,654 2,870,775 241,879 8
Non-current liabilities 3,416,489 2,726,113 690,376 25
Total liabilities 6,529,143 5,596,888 932,255 17
Capital stock 3,791,699 3,787,821 3,878 -
Capital surplus 1,302,269 1,256,654 45,615 4
Retained earnings 3,952,185 3,737,083 215,102 6
Other equities 399,665 507,104 (107,439) (21)
Treasury stock (35,714) (35,714) - -
Noncontrolling interests 121,192 120,140 1,052 1
Total equity 9,531,296 9,373,088 158,208 2
1. Any material change to the company's assets, liabilities, or equity in the most recent 2 years
as well as the major causes and impacts of these changes: (provide analysis where the
difference between the original and changed states were more than 20% and the sum of the
change reached NT$ 10 million)
(1) Increases in other assets and non-current liabilities: Primarily caused by long-term loans
raised to pay for Phase 1 land transfers for Phase 3 of the A7 Business Exclusive Zone.
(2) Reduction in other equities: Reductions were mainly caused by financial assets available
for sale, where these said assets have not been subjected to benefit evaluation.
2. Future plans for responding to the impact: These changes were considered part of normal
business operations and would not lead to severe negative impacts upon overall financial
operations of this company and its subsidiaries.
3.Future responseplans: Not applicable.

Note: In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

  • 88 -

2. Financial performance

Financial performance analysis

Units: Thousand NT$;% Units: Thousand NT$;%
Year (note 1) Sum of the Proportion of

2015		 2014
Item changes
the changes (%)
Operating revenue 9,692,365 10,307,085 (614,720) (6)
Gross profit (note 2) 4,221,340 4,046,270 175,070 4
Operating income 1,219,999 1,221,400 (1,401) -
Non-operating income
262,673 302,113 (39,440) (13)

and expenses
Income before income
1,482,672 1,523,513 (40,841) (3)
tax
Net income 1,194,542 1,295,985 (101,443) (8)
Other comprehensive

income or loss (net value		 (131,740) 4,567 (136,307) -
after tax)
Total comprehensive
1,062,802 1,300,552 (237,750) (18)

income
Net income attributable
to owner of the parent 1,236,557 1,318,373 (81,816) (6)
company
Total comprehensive

income attributable to
1,102,621 1,320,288 (217,667) (16)
owner of the parent

company
1. Any material change to operating revenue, operating profit, and earnings before tax (EBT) in
the most recent 2 years as well as the major causes and impacts of these changes: (provide
analysis where the difference between the original and changed states were more than 20%
and the sum of the change reached NT$ 10 million)
(1) Reduction of other comprehensive income or loss in this period: Changes in currency
exchange rates have led to significant reductions when converting financial statements
of overseas business operations at the end of 2015.
2. Expected sales volume and relevant data, possible impact on the company’s financial
operations, and response plans:
This company has invested in integrated testing technology and automation equipment
for many years. The effectiveness of the automation equipment produced by this company
has been proved in an increasing number of sectors, establishing new sales performance.
Despite being applied in different sectors, these solutions have been qualified and employed
by many leading manufacturers. After consolidating years of experience, this company
expects that automationproducts willprovide better businessperformance in 2016.

  1. Any material change to operating revenue, operating profit, and earnings before tax (EBT) in the most recent 2 years as well as the major causes and impacts of these changes: (provide analysis where the difference between the original and changed states were more than 20% and the sum of the change reached NT$ 10 million)

  2. (1) Reduction of other comprehensive income or loss in this period: Changes in currency exchange rates have led to significant reductions when converting financial statements of overseas business operations at the end of 2015.

  3. Expected sales volume and relevant data, possible impact on the company’s financial operations, and response plans:

This company has invested in integrated testing technology and automation equipment for many years. The effectiveness of the automation equipment produced by this company has been proved in an increasing number of sectors, establishing new sales performance. Despite being applied in different sectors, these solutions have been qualified and employed by many leading manufacturers. After consolidating years of experience, this company expects that automation products will provide better business performance in 2016.

  • Note 1: In 2015, this company began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the International Financial Reporting Standards, international accounting standards, interpretations, and official interpretations approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

  • Note 2: Values listed are net realized gross profit from which unrealized gross profit were deducted.

  • 89 -

3. Cash flow

Cash liquidity analysis

  • (1) Analysis and explanations of changes in cash flow in the most recent year

Unit: Thousand NT$

Cash at
the
beginning of
the year
remaining sum
Net cash
inflow
resulting
from business
activities
throughout the
year		 Total net cash
inflow (outflow)
from investment
and capitalization
activities
throughout the
year(note)
Sum of cash
surplus
(inadequacy)		 Remedial measures for cash
inadequacy		 Remedial measures for cash
inadequacy
Investment
plan		 Financing
plan
1,847,648
 2,268,553
 (1,626,912)
 2,489,289
 -
 -
~~Note: Includes net capital outflow from investment and capitalization activities of NT$~~
1,650,161,000 and impact of currency exchange rate amounting to NT$ 23,249,000.
1. Analysis of changes in cash flow in the most recent year:
(1) Business activities: Net cash inflow resulting from business activities since 2015
amounted to NT$ 2,268,553,000, mainly from business profits and collection of
accounts receivable.
(2) Investing activities: Net cash outflow resulting from investing activities since 2015
amounted to NT$ 1,167,705,000, mainly from payment for land of the A7 project
as well as acquisition of financial assets available for sale.
(3) Financing activities: Net cash outflow resulting from financing activities since 2015
amounted to NT$ 482,456,000, mainly from the issuance of cash dividends and
raising of long-term loans.
2. Remedial measures and liquidityanalysis for cash inadequacy: Not applicable.

  • ~~Note: Includes net capital outflow from investment and capitalization activities of NT$~~ 1,650,161,000 and impact of currency exchange rate amounting to NT$ 23,249,000.

    1. Analysis of changes in cash flow in the most recent year:

  • (2) Cash liquidity analysis for the following year

) Cash liquidity analysis for the following year ) Cash liquidity analysis for the following year ) Cash liquidity analysis for the following year ) Cash liquidity analysis for the following year
Unit: Thousand NT$
Initial cash
balance		 Expected net
cash inflow
resulting from
business
activities
throughout the
year		 Expected total
net cash inflow
(outflow) from
investment and
capitalization
activities
throughout the
year		 Expected sum
of cash surplus
(inadequacy)		 Remedial measures for
expected cash inadequacy

Investment
plan		 Financing
plan
2,489,289
1,690,246
(1,825,596)
2,353,939
─		 ─
~~1. Analysis of changes to cash flow in the most recent year~~
(1)Business activities: Mainly refer to cash inflow generated by business profits.
(2)Investing activities: Mainly refer to cash outflow caused by long-term equity
investments, expansion of factory buildings, and land payments for the A7 project.
(3)Financing activities: Mainly refers to cash outflow caused by the issuance of cash
dividends.
2. Remedial measures and liquidityanalysis for expected cash inadequacy: Not applicable.

  • (2)Investing activities: Mainly refer to cash outflow caused by long-term equity investments, expansion of factory buildings, and land payments for the A7 project.

  • (3)Financing activities: Mainly refers to cash outflow caused by the issuance of cash dividends.

4. Material expenditures of the most recent year and impact on the company's finances and operations

This company has allocated an investment of NT$ 2.18 billion to enlarge the A7 plant to expand this company's future operations. This company’s plants in Hua Ya Technology Park (HYTP) have all become operational, and the production capacity is no longer adequate. As a response, this company submitted a bid and purchased land at the A7 Business Exclusive Zone of the Ministry of the Interior in 2012 to construct new factory buildings for future business expansions, improve its corporate competitive niche, and support sustainable business development.

5. Policy on investment in other companies, main reasons for profit / losses resulting

  • 90 -

therefrom, improvement plan, and investment plans for the upcoming fiscal year

  • (1) Major investments made in the most recent year focused largely on raising capital for the target company. Additional investments were provided for Quantel Company, an investment agent, to help establish a sales network in Southeast Asia and increase market share.

  • (2) Profitability or loss analysis of invested companies

Major investments made in the most recent year focused largely on raising capital for the
target company. Additional investments were provided for Quantel Company, an
investment agent, to help establish a sales network in Southeast Asia and increase market
share.
) Profitability or loss analysis of invested companies		 Major investments made in the most recent year focused largely on raising capital for the
target company. Additional investments were provided for Quantel Company, an
investment agent, to help establish a sales network in Southeast Asia and increase market
share.
) Profitability or loss analysis of invested companies		 Major investments made in the most recent year focused largely on raising capital for the
target company. Additional investments were provided for Quantel Company, an
investment agent, to help establish a sales network in Southeast Asia and increase market
share.
) Profitability or loss analysis of invested companies		 Major investments made in the most recent year focused largely on raising capital for the
target company. Additional investments were provided for Quantel Company, an
investment agent, to help establish a sales network in Southeast Asia and increase market
share.
) Profitability or loss analysis of invested companies
December 31,2015. Unit: Thousand NT$
Company name Shareholding
percentage
Investment
gain (loss)		 Details
Neworld Electronics Ltd. 100.0%
85,873		 Profits resulting from excellent sales.
Chroma New Material Corp. 100.0%
49,527		 Profits resulting from excellent sales.
Chroma Investment Co., Ltd. 100.0%
365		 Mainly due to dividend income.
Adlink Technology Inc. 11.5%
70,124		 Good R&D capabilities and business
performance.
San Eagle Development Corp. 100.0%
11,571		 Mainly derived from investment profits
calculated using the recognized equity
method.
Mas Automation Corp. 100.0%
222,533		 Profits resulting from excellent sales.
CHI Incorporation Ltd. 100.0%
(19,416)		 Mainly derived from investment losses
calculated using the recognized equity
method.
Testar Electronic Corporation 67.2%
(32,541)		 The LED industry has been impacted
by large-scale expansion and price
competition from Mainland Chinese
firms. Losses were incurred as the
company was unable to effectively
reduce its expenses.
Chroma Ate Inc. (USA) 100.0%
31,090		 Establishment of a comprehensive sales
network with good business
performance.
Sensational Holding Ltd. 100.0%
1,165		 Primarily derived from rental income.
Chroma Systems Solutions, Inc. 25.0%
10,255		 Establishment of a comprehensive sales
network with good business
performance.
Chroma Ate Europe B.V. 100.0%
20,710		 Establishment of a comprehensive sales
network with good business
performance.
Chen Hwa Technology Inc. 100.0%
4,173		 Mainly due to dividend income.
DynaScan Technology Corp. 27.3%
5,948		 Profits resulting from excellent sales.
Deep Red Holding Co., Ltd. 100.0%
961		 Mainly derived from investment profits
calculated using the recognized equity
method.
Chroma Japan Corp. 100.0%
(5,965)		 Market expansion has yet to reach
economies of scale, resulting in
relatively high costs and expenses.
Chih Ho Shun Development
Co., Ltd.		 35.0%
94		 Mainly derived from recognized
interest income.
Adivic Technology Co. 51.0%
(32,621)		 R&D for new products is not yet
completed. High R&D costs have led to
operational loss.
EVT Technology Co., Ltd. 53.2%
(7,200)		 Losses were resulted due to products
conversion and new products validation
hasyet to be completed.

(3)Improvement plans

  1. Testar Electronic Corporation: Testar is an LED testing subcontractor. As the Chinese LED sector continues to engage in price competition, negotiable sales prices remain limited. This company shall thus invest in the R&D of automated production equipment

  2. 91 -

to reduce costs and achieve profit.

  1. Chroma Japan Corp.: Net losses in 2014 and 2015 amounted to NT$ 9,865,000 and NT$ 5,965,000, respectively, which showed a trend of decreasing losses and gradual improvement. Efforts to establish a sales network shall be improved to achieve economies of scale, which would improve upon the losses.

  2. Adivic Technology Co.: ADIVIC provides original audio recorder equipment and thus has a smaller market scale, making it difficult to improve revenue. In 2015, ADIVIC invested in the R&D of WiFi testers that could be integrated with product solutions offered by this company. These testers have been submitted to the customers for their verification. Once verified, the new products will be able to improve business volume and performance.

  3. EVT Technology Co., Ltd.: Costs for electric scooters remain prohibitively high, making it difficult to achieve higher profitability. EVT thus decided to collaborate with this company to invest in the R&D of electric vehicle components. Business performance should improve once R&D has been completed and new products are released.

  4. (4) Investment plans for the following year: By principle, this company shall continue to raise capital for other companies in which this company has already invested and establish new sales networks, and shall continue to carefully review plans in investing other companies..

6. Risk analysis and assessment of the most recent year through the publication date of this report

  • (1) Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact this company’s gain or loss as well as future response measures

  • a) Changes to interest rates and resulting impact on this company's gain or loss as well as future response measures

    • (1) Changes to interest rates and impact on the gain or loss of this company and its subsidiaries
ct this company’s gain or loss as well as future response measures
anges to interest rates and resulting impact on this company's gain or loss as well as
ture response measures
) Changes to interest rates and impact on the gain or loss of this company and its
subsidiaries		 ct this company’s gain or loss as well as future response measures
anges to interest rates and resulting impact on this company's gain or loss as well as
ture response measures
) Changes to interest rates and impact on the gain or loss of this company and its
subsidiaries		 ct this company’s gain or loss as well as future response measures
anges to interest rates and resulting impact on this company's gain or loss as well as
ture response measures
) Changes to interest rates and impact on the gain or loss of this company and its
subsidiaries
Unit: Thousand NT$
Item / year 2014 2015
Interest expense (A) 31,300 38,994
Net operating revenue (B) 10,307,085 9,692,365
Operating profit (C) 1,221,400 1,219,999
Interest expense / Net operating revenue (A)/(B) 0.30% 0.40%
Interest expense / Operating profit (A)/(C) 2.56% 3.20%

Interest expense and its proportion of operating profit in 2014 and 2015 were NT$ 31,300,000 (2.56%) and NT 38,994,000 (3.20%), respectively, for this company and its subsidiaries. Changes to interest expenses exerted no significant impact upon this company and its subsidiaries.

  • (2) Future response measures

The capital budgeting of this company and its subsidiaries shall continue to uphold the conservative principles of stability, focusing primarily on safety and liquidity. Measures undertaken by this company and its subsidiaries in response to the risk of changing interest rates include carrying out negotiations with various banks for loan interest based upon the state of QE policies upon the market and taking active steps to reduce short-term working capital expenses. Financial affairs personnel of this company and its subsidiaries shall also work closely with financial institutions to review trends and changes in interest rates in the market to reduce the impact upon this company’s profitability as a result of changing interest rates.

  • b) Currency exchange fluctuations and the resulting impact on this company's gain or loss as well as future response measures

  • 92 -

(1) Currency exchange fluctuations and its impact on the gain or loss of this company and its subsidiaries

) Currency exchange fluctuations and its impact on the gain or loss of this company
and its subsidiaries		 ) Currency exchange fluctuations and its impact on the gain or loss of this company
and its subsidiaries		 ) Currency exchange fluctuations and its impact on the gain or loss of this company
and its subsidiaries
Unit: Thousand NT$
Item / year 2014 2015
Net profit (loss) on exchange 94,921 61,260
Net operating revenue 10,307,085 9,692,365
Operating profit 1,221,400 1,219,999
Net profit (before tax) 1,523,513 1,482,672
Ratio of net profit (loss) on exchange net to
operating revenue		 0.92% 0.63%

Ratio of net profit (loss) on exchange to
operating profit		 7.77% 5.02%
Ratio of net profit (loss) on exchange to
earnings before tax(EBT)		 6.23% 4.13%

This company and its subsidiaries have provided accounts payable and receivable calculated in US dollars. Hence, fluctuations in the US dollar exchange rate would be related to changes to profit (loss) on exchange of this company and its subsidiaries. The profit (loss) on exchange and proportion of earnings before tax (EBT) in 2014 and 2015 were NT$ 94,921,000 (6.23%) and NT$ 61,260,000 (4.13%), respectively.

  • (2) Future response measures

In response to fluctuations of currency exchange rates, any accounts payable in foreign currency from purchases shall be written off by additional accounts receivable in foreign currency resulting from a direct US dollar transactions or paid off using short-term foreign currency loans from banks to achieve natural hedging. The Financial Affairs Department also collects information on currency exchange rates every day to review trends and patterns of currency exchange rates to make prompt adjustments to foreign currency accounts. The Department shall also refer to the regulations prescribed in the Procedure for Handling Derivatives Trading to implement exchange rate hedging to reduce the impact on corporate gain or loss as a result of fluctuations in exchange rates.

  • c) Inflation and its impact on this company’s gain or loss as well as future response measures

  • (1) Inflation and its impact on the gain or loss of this company and its subsidiaries

This company and its subsidiaries have not been affected by inflation severe enough to result in a major impact on the gains or losses to this company and its subsidiaries during the period of the most recent year through the publication date of this report.

  • (2) Future response measures

This company and its subsidiaries are under limited influence of inflation but will continue to monitor changes to the prices of upstream and downstream commodities to reduce the impact on gains or losses as a result of changes in cost.

(2) Policies on high risk, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives trading, main reasons for the profits or losses generated thereby, and future response measures to be undertaken.

  • a) Main reasons for engaging in high-risk, highly leveraged investments and future response measures

(1) Main reasons for engaging in high-risk, highly leveraged investments

This company and its subsidiaries have not engaged in any high-risk, highly leveraged investment from the most recent year through the publication date of this report.

  • (2) Future response measures

  • 93 -

This company and its subsidiaries are focused upon specialized businesses and adopt a conservative and stable financial operation by principle. No capital is applied to high-risk, highly leveraged investments.

  • b) Loans to other parties, endorsements, and guarantees

  • (1) Reasons for providing loans to other parties, endorsements, and guarantees

Loans, endorsements, and guarantees shall be, by principle, provided to affiliated businesses or companies with which this company and its subsidiaries have business dealings. Interest rates of loans provided by this company and its subsidiaries shall be, by principle, higher than short-term loan interest rates provided by financial institutions to this company and its subsidiaries.

  • (2) Future response measures

This company has stipulated a Provision of Financial Loans to Other Parties as well as Endorsement and Guarantee Operations Procedure and refers to the relevant provisions to provide relevant public disclosures.

  • c) Policies on derivatives trading, major reasons for profits or losses as well as future response measures

  • (1) Policies when engaging in derivatives trading and major reasons for profits or losses

This company and its subsidiaries engage in holding derivatives only for non-trading purposes, and any derivatives trading shall be implemented in a way to hedge foreign exchange risks generated by assets or liabilities.

  • (2) Future response measures

This company and its subsidiaries shall adopt a conservative business principle and seek stable growth and shall continue to assess impacts on profits or losses resulting from exchange rate fluctuations. To manage transaction risks, this company and its subsidiaries shall refer to regulations prescribed in the Procedure for Handling Derivatives Trading and activate foreign exchange risk avoidance tools and avoid improper and high-risk transactions.

(3)Future R&D plans and expected investments in R&D

R&D plans Current progress Expected
completion
time		 Additional
investments
required		 Problem
Next generation high-power and rapid
photovoltaic cellsimulator		 System planning
and design		 Q2, 2017 8 million
High-bandwidth DC output power supply with
input harmonics calibration		 Complete
verifications of the
entire system		 Q2, 2016 3.5 million
High-bandwidth 1-phase / 3-phase AC Power
Source		 System planning
and design		 Q4, 2016 2 million
Next generation high-power regenerative AC
load		 System planning
and design		 Q2, 2016 1.5 million
R&D project for miniaturized common mode
inductance testing and packager		 System planning
and design		 Q3, 2016 1.5 million
High-voltage regulatory testing analyzer with
high-frequency localized discharge voltage
testingfunctions		 System planning
and design		 Q4, 2016 10 million
Next generation ultrahigh-precision
multichannel bilinear power source with battery
resistance simulation
Complete
verifications of the
entire system		 Q3, 2016 3 million
R&D project for high-speed,
high-power-density, overlapping current
generators		 System planning
and design		 Q4, 2016 2.5 million
R&D project for high-speed recoverable hybrid
load		 System planning
and design		 Q1, 2017 5 million
  • 94 -
Development of virtual reality (VR) and
augmented reality (AR) devices and product
qualityoptical testingsystems		 Complete
verifications of the
entire system		 Q2, 2016 5 million
Development of key dimension high-speed and
automatic optical measurement system for
metallic cellphone cases		 Complete
verifications of the
entire system		 Q2, 2016 5 million
Next generation tester for 10K 5K flat panel
displaymodules		 System planning
and design		 Q2, 2017 3 million
3rdgeneration display standards DP 1.3 8.1G
graphic generator		 System planning
and design		 Q4, 2016 2.5 million
Next generation tester for high-power
bidirectional electrical power		 Complete
verifications of the
entire system		 Q4, 2016 10 million
Next generation regenerative charge/discharge
tester forpublic electrical equipment		 System planning
and design		 Q4, 2016 4 million

(4) Changes to local and overseas policies and laws that impact the company’s financial operations, and response measures

No changes to local and overseas policies and laws have resulted in a major impact on the financial operations of this company and its subsidiaries.

(5) Changes to technology and industry that impact the company’s financial operations, and response measures

This company produces instruments for the technology sector that enjoy longer lifecycles. This company also has a wide selection of product lines and would not be easily affected by changes to the technology or industry.

  • (6) Changes to the corporate image that impact the company’s risk management, and response measures

This company and its subsidiaries enjoy good business images and would not be subject to changes that negatively affect their corporate images.

(7) Expected benefits and possible risks of mergers and response measures

To expand the scale of its market, this company has established sales networks in Southeast Asia. In December 2015, the Board of Directors passed the decision to invest and acquire 60% of the shares of Quantel Private Limited. Quantel Private Limited is this company’s agent in Singapore and has established locations in Thailand, Malaysia, the Philippines, Indonesia, India, and Vietnam. This company therefore invested in Quantel to extend its reach more rapidly into various Southeast Asian countries. It is hoped that this bilateral partnership will improve the market share of this company’s products in Southeast Asia.

(8) Expected benefits and possible risks of expanding factory buildings and response risks

Factory building expansions allow this company and its subsidiaries to increase their productivity, gain the ability to receive more purchase orders, improve revenue and profitability, and increase market share. Factory building expansion undertaken by this company and its subsidiaries has been carefully reviewed to ensure that customers’ requirements are met while achieving optimal use of corporate capital.

  • (9) Risks resulting from consolidation of purchasing or sales operations and response measures a) Purchasing risks

Purchases from NMC by this company and its subsidiaries amounted to 50.36% and 43.21% of total purchases in 2014 and 2015, respectively, showing that there was a consolidation of purchasing from NMC. The major reason was that gold wire, copper wire, and other specialized products provided by NMC offered higher quality compared to those provided by Japanese or Korean companies such as Tanaka, NKE, and Heesung to better meet the product quality requirements of downstream semiconductor packaging customers. The purchasing values of this company and its

  • 95 -

subsidiaries may increase or decrease in response to changes in profitability of relevant products. Given the large variety of raw materials and components needed by this company and its subsidiaries to produce their products, all local and overseas purchases were handled by a single purchasing unit. Wherever possible, 2 or more suppliers were selected to ensure supplier replaceability, acquire competitive pricing, distribute purchasing risks, achieve reasonable cost reductions, and provide better services. In addition, this company and its subsidiaries have established positive partnerships with external suppliers to eliminate any concerns of material shortage. Material preparation for special materials and automated conveying and engineering equipment of this company and its subsidiaries are initiated only after receiving a purchase order to establish inventory levels for raw materials. Positive relationships have been established with upstream suppliers to reduce purchasing risks. Given the long-term partnerships and positive collaboration between this company and its subsidiaries and their main suppliers, no major nonconformities have been identified thus far. Since its establishment, this company and its subsidiaries have achieved positive interaction with their main suppliers. Hence, no material shortage or supply interruption has yet to occur.

b) Sales risks

This company and its subsidiaries offer a large variety of product categories. Product sales were mainly based upon the state of the industry, customer requirements, as well as changes to marketing strategies adopted by this company and its subsidiaries. Hence, this company and its subsidiaries are actively developing new customers to achieve business stability and growth. Currently, most customers are listed companies or renowned companies in Taiwan and other countries. From the consolidated statements of 2015, no single customer was responsible for more than 10% of the total income of this corporation. In 2014, the largest proportion of sales from a single customer occupied 10.70% of consolidated sales revenue. No single customer was responsible for more than 20% of total sales, meaning that there is no risk of consolidated sales.

  • (10) Impacts, risks, and response measures resulting from major equity transfer or replacement of directors, supervisors, or shareholders holding more than 10% of the company's shares

This company and its subsidiaries did not encounter any major equity transfer or replacement of directors, supervisors, or shareholders holding more than 10% of the company’s shares from 2015 through the publication date of this report.

  • (11) Impact, risk, and response measures related to any change in governance rights in the company

This company and its subsidiaries did not undertake any major change to their governance teams and did not undertake any major change to business strategies or guidelines. Hence, this company and its subsidiaries did not experience any changes their governance rights.

  • (12) Any litigious or non-litigious matters or administrative disputes through the publication date of this report in which the company or company directors, supervisors, general managers, persons with actual responsibility in the company, or major shareholders holding more than 10% of the company's shares who have been concluded through final judgment or still under litigation, to be a party thereof, and for which the results thereof could materially affect the shareholders’ equity or prices of the company’s securities, as well as the facts of the dispute, amount of money at stake, date of litigation commencement, and main parties to the litigation: None.

  • (13) Other material risks and response measures: None.

7. Other important issues: None

  • 96 -

VIII. Special items to be included

1. Affiliated businesses

(1) Consolidated Business Report through December 31, 2015 a) Diagram of affiliated businesses

==> picture [537 x 633] intentionally omitted <==

----- Start of picture text -----

Neworld Electronics Ltd. Chroma Electronics (Shenzhen)
Shares held: 100% Co., Ltd. Shares held: 100%
Chroma ATE Inc. (USA) Chroma Electronics Co., Ltd.
Shares held: 100% (Shanghai) Shares held: 100%
Chroma ATE Europe B.V.
Shares held: 100%
Chroma New Material Corp.
Shares held: 100%
Shareholding
Chroma Investment Co., Ltd. percentage 50 %
Shares held: 100%
Chroma Japan Corp.
Shares held: 100%
Sensational Holding Ltd.
Shares held: 100%
Chroma Systems Solutions ,Inc.
Shares held: 25%
Chroma
Ate Inc.
Testar Electronic Corporation.
Shares held: 67.2%
MAS Automation Corp.
Shares held: 100%
CHI Incorporation Ltd.
Chroma ATE (Suzhou) Co., Ltd.
Shares held: 100%
Shares held: 100%
Chen Hwa Technology Inc. Chroma (Shanghai) Trading Co., Mou Kuan Technologies (Nanjin)
Shares held: 100% Ltd. Shares held: 100% Co., Ltd. Shares held: 100%
San Eagle Development Corp. Wei Kuang Mech Eng Inc . Wei Kuang Automation (Nanjing)
Shares held: 100% Shares held: 100% Co., Ltd. Shares held: 100%
Deep Red Holding Co., Ltd. Sajet System Technology (Suzhou)
Wei Kuang Automation (Xiamen)
Shares held: 100% Co., Ltd. Shares held100%
Co., Ltd. Shares held: 100%
Adivic Technology Co. Advic Holding Corporation
Shares held: 51% Shares held: 100%
EVT Technology Co., Ltd. Weida Electric Vehicle Co., Ltd.
Shares held: 53.2% Shares held: 75%
----- End of picture text -----

  • 97 -

b) Basic information on various affiliated businesses

December 31, 2015. Unit: Thousand NT$ or
other foreign currency		 December 31, 2015. Unit: Thousand NT$ or
other foreign currency		 December 31, 2015. Unit: Thousand NT$ or
other foreign currency		 December 31, 2015. Unit: Thousand NT$ or
other foreign currency
Name of business Date
established		 Address Actual paid-in
capital
Primary business or
products
Neworld Electronics
Ltd.		 1994.02.17 Unit 606, 6F, Shui Hing Centre, No.13,
Sheung Yuet Rd., Kowloon Bay, Kowloon,
H.K.		 HK$ 64,013 Sales and maintenance of
electronic maintenance
instruments
Chroma Electronics
(Shenzhen) Co., Ltd.		 1998.03.10 8F, No.4, Nanyou Tian An Industrial Estate,
Shenzhen, China		 HK$30,000 Sales of computerized
automation and peripheral
equipment as well as
electronic measurement
instruments
Chroma Electronics
(Shanghai) Co., Ltd.		 2000.11.10 3F Building 40, No.333, Qin Jiang Rd.,
Shanghai,
China		 US$3,000 Sales of computerized
automation and peripheral
equipment as well as
electronic measurement
instruments
Chroma ATE Inc.
(USA)		 1993.02.18 7 Chrysler Irvine CA92618 US$1,000 Sales and maintenance of
electronic maintenance
instruments
Chroma ATE Europe
B.V.		 1999.09.17 Morsestraat 32, 6716 AH Ede, The
Netherlands		 EUR$45 Sales and maintenance of
electronic maintenance
instruments
Chroma Investment
Co., Ltd.		 1997.01.14 4F, No. 7, Yinghua Street, Taishan District,
New Taipei City
NT$140,000		 General investments
Chroma New Material
Corp.		 2006.08.11
4F, No. 68, Huaya 1st Road, Guishan
District, Taoyuan City		 NT$250,000 Gold wire processing and
sales
Testar Electronic
Corporation		 2007.03.09 4F, No. 68, Huaya 1st Road, Guishan
District, Taoyuan City		 NT$300,000 LED product testing
Sensational Holding
Ltd.		 1997.07.11 Citco Buildings P.O.Box 662, Road Town,
Tortola, British Virgin Island		 US$1,200 General investments
Chroma Systems
Solutions, Inc		 2001.04.01
19772 Pauling, Foothill Ranch, CA 92610		 US$5 Sales and maintenance of
electronic maintenance
instruments
CHI Incorporation Ltd. 1998.04.03 P.O.Box 957 Offshore Incorporations
Centre,
Road Town,Tortola,British Virgin Islands		 US$3,830 Purchasing and sales of
inductor, capacitor, and
resistor testing and parts
Chroma ATE (Suzhou)
Co., Ltd.
2006.03.15		 Building 7, No.855, Zhujiang Rd., Suzhou
New
District, Jiang Su, China
US$3,800		 Sales of computerized
automation and peripheral
equipment as well as
electronic measurement
instruments
Chen Hwa Technology
Inc.
1998.04.03		 P.O.Box 957 Offshore Incorporations
Centre,
Road Town, Tortola, British Virgin Islands		 US$3,085 Purchasing and sales of
inductor, capacitor, and
resistor testing and parts
Chroma (Shanghai)
Trading Co., Ltd.		 2004.01.05 Rm 1102B, Building 1, No.18, Tai Gu Rd.,
Waigaoqiao Free Trade Zone, Shanghai		 US$2,700 International trade,
intermediary trade, simple
processing for trade
purposes, and trade inquiry
services
San Eagle
Development Corp.		 2006.07.04 Drake Chambers, Road Town, Tortola,
British Virgin Islands		 USD2,050 General investments

Wei Kuang Mech Eng
Inc.		 2002.01.10
Drake Chambers, Road Town, Tortola,
British Virgin Islands		 USD4,475 General investments
Mou Kuan
Technologies (Nanjin)
Co., Ltd.		 1997.09.27
No 811, Hushan Road, Jiangning District,
Nanjing City, China		 RMB$1,737 Assembly and sales of
equipment systems,
purchasing and sales of
equipment system
components, and the
installation, repairs, and
post-sales service of
equipment
Wei Kuang
Automation (Nanjing)
Co., Ltd.		 2005.06.30 No 811, Hushan Road, Jiangning District,
Nanjing City, China		 RMB$11,871 Assembly, sales, and
post-sale services of
electronic production
equipment and conveying
systems
Wei Kuang
Automation (Xiamen)		 2007.02.01 Floor 1, Building A4, No. 20, Jinhui Road,
Houxi,		 RMB$11,417 Assembly, sales, and
post-sales service of
  • 98 -
Co., Ltd. Jimei District, Xiamen electronic production
equipment and conveying
systems
MAS Automation
Corp.		 1975.11.26 No. 6, Lane 17, Niupu South Road, Puqian
Village, Hsinchu City		 NT$100,000 Design, manufacturing,
installation, and testing of
automated conveying and
engineering systems
Chroma Japan Corp. 2008.05.30 888 Nippa-cho, Kouhoku-ku,
Yokohama-shi, Kanagawa, 223-0057 Japan		 JPY99,500
Sales and maintenance of
electronic maintenance
instruments
Deep Red Holding
Co., Ltd.		 2004.04.29 2F, Felix House, 24 Dr.Joseph Riviere
Street, Port
Louis, Republic of Mauritius		 USD215 General investments
Sajet System
Technology (Suzhou)
Co., Ltd.		 2004.08.24
503-1, 4th Floor Genway LOHASTOWN,
88 Building, 999 Xinghu Road, SIP Suzhou		 RMB$1,736 R&D and design of
computer network safety
systems and data
management systems
ADIVIC Technology
Co.		 2009.04.07 6F, No. 345, Xinhu 2nd Road, Neihu
District, Taipei City		 NT$220,000
R&D and sales of RF
equipment
Advic Holding
Corporation		 2015.01.15 Offshore Chambers, P.O.Box 217, Apia,
Samoa.		 USD500 R&D and sales of RF
equipment
EVT Technology Co.,
Ltd.		 1999.10.26 No. 68, Huaya 1st Road, Guishan District,
Taoyuan City		 NT$50,000 Manufacturing of vehicles
and parts
Weida Electric Vehicle
Co., Ltd.
2012.02.14
No. 5, Gongye 5th Road, Pingtung City		 NT$5,000
Distribution and rental
services of scooters
  • c) Information on shareholders with corporate governance power while working in the company: None.

d) Overall business scope of every affiliated business

The overall business scope of all affiliated businesses of this company primarily focuses upon specialized manufacturing services for measurement instruments. A small number of affiliated businesses also focus on investments in their scope of business. In general, specialization of work amongst affiliated businesses focuses on mutual support in technology, production capacity, sales, and services to maximize synergy so that this company can continue to provide the best manufacturing services for professional measurement instruments for customers throughout the world and ensure this company’s leadership in the global market.

e) Directors, supervisors, and general managers of Chroma ATE Inc. and affiliated businesses

31 December 2015 31 December 2015
Name of business Title Name or representative Shares held
Number of shares Shareholding
percentage
Neworld Electronics Ltd. Director Chroma ATE Inc. (representative:
Leo Huang)
Chroma ATE Inc. (representative:
Ming-hsiung Chang)

64,012,816 shares		 100%
Chroma Electronics
(Shenzhen) Co., Ltd.		 Director
General
Manager
Neworld Electronics
(representative: Leo Huang)
Vincent Chen
Chih-hsin Liao
Vincent Chen		 (note 1)
-
-
-		 100%
-
-
-
Chroma Electronics
(Shanghai) Co., Ltd.
Director
General
Manager		 Neworld Electronics
(representative:LeoHuang)
PaulYing
Vincent Chen
Paul Ying		 (note 1)
-
-
-		 100%
-
-
-
Chroma ATE Inc. (USA) Director
General
Manager		 Chroma ATE Inc. (representative:
Ming-hsiung Chang)
Scott Wang
1,000,000 shares
-		 100%
-
Chroma ATE Europe B.V.
Director		 Chroma (representative:David
Yang)
Chroma (representative: Paul Ying)
Chroma(representative:I-Shih
Tseng)
1,000 shares		 100%
  • 99 -
Name of business Title Name or representative Shares held Shares held
Number of shares Shareholding
percentage
Chroma Investment Co., Ltd. Director
Supervisor		 Chroma(representative:
Ming-hsiung Chang)
Chroma (representative: Paul Ying)
Chroma(representative:Amy
Huang)
Leo Huang
13,999,994 shares
-		 100%
-
Chroma New Material Corp.
Director
Supervisor
General
Manager
Chroma(representative:Leo Huang)
Chroma (representative: C.C. Ho)
Chroma(representative: Amy
Huang)
Chroma (representative: Paul Ying)
C.C. Ho
25,000,000 shares
-		 100%
-
Testar Electronic Corporation
Director
Supervisor
General
Manager		 Chroma(representative:Leo Huang)
Chroma (representative: C.C. Ho)
WI HARPER(representative:
Yung-kuang Chu)
I-Shih Tseng
C.C. Ho		 20,159,600 shares
4,500,000 shares
-
-		 67.2%
15.0%
-
-
Sensational Holding Ltd.
Director		 Chroma(representative:Leo Huang) 1,200,000 shares 100%

Chroma Systems Solutions,
Inc.		 Director
Fred Sabatine
Chroma(representative:
Ming-hsiung Chang)
120,000 shares
Chroma holds
120,000 shares
CHROMA USA
holds 240,000 shares		 25%
25%
50%
CHI Incorporation Ltd. Director Leo Huang -
(Chroma holds
3,830,000 shares)		 -
100%
Chroma ATE (Suzhou) Co.,
Ltd.
Director
General
Manager		 CHI (representative: Leo Huang)
Paul Ying
Emma Chen
Vincent Chen		 (note 1)
-
-
-		 100%
-
-
-
Chen Hwa Technology Inc.
Director		 Leo Huang -
(Chroma holds
3,085,000 shares)		 -
100%
Chroma (Shanghai) Trading
Co., Ltd.		 Director Chen Hwa (representative: Leo
Huang)		 (note 1) 100%
San Eagle Development Corp. Director
Chroma(representative:Leo Huang)		 2,050,000 shares 100%
Wei Kuang Mech Eng Inc. Director San Eagle (representative: Leo
Huang)		 4,475,000 shares 100%
Mou Kuan Technologies
(Nanjin) Co., Ltd.		 Director Wei Kuang (representative: Leo
Huang)
Cf Huang
Amy Huang		 (note 1)
-
-		 100%
-
-
Wei Kuang Automation
(Nanjing) Co., Ltd.		 Director
Wei Kuang (representative: Leo
Huang)
Cf Huang
Amy Huang		 (note 1)
-
-		 100%
-
-
Wei Kuang Automation
(Xiamen) Co., Ltd.		 Director Wei Kuang (representative: Leo
Huang)
Cf Huang
Amy Huang		 (note 1)
-
-		 100%
-
-
MAS Automation Corp. Director
Supervisor
General
Manager
Chroma(representative:Leo Huang)
Chroma(representative: Cf Huang)
Chroma(representative:I-Shih
Tseng)
Chroma(representative:Amy
Huang)
Cf Huang		 10,000,000 shares 100%
Chroma Japan Corp.
Director		 Leo Huang, Sheng-hui Peng -
(Chroma holds 8,980
shares)
-
100%
Deep Red Holding Co., Ltd. Director Leo Huang -
(Chroma holds
215,000 shares)		 -
100%
  • 100 -
Name of business Title Name or representative Shares held Shares held
Number of shares Shareholding
percentage
Sajet System Technology
(Suzhou) Co., Ltd.		 Director
General
Manager		 Shenhong Holding Co.
(Representative: Joe Lin)
Shu-chun Wu
Paul Ying
Joe Lin		 (note 1)
-
-
-		 100%
-
-
-
ADIVIC Technology Co.
Director
Supervisor
General
Manager		 Chroma(representative:I-Shih
Tseng)
Chroma(representative:Leo Huang)
AIT group (representative: Fu-hai
Yeh)
Ming-jen Hsu
Hsieh-sheng Huang

11,220,000 shares
10,780,000 shares
-
-		 51%
49%
-
-
Advic Holding Corporation Director ADIVIC Technology
(representative: I-Shih Tseng)		 500,000 shares 100%
EVT Technology Co., Ltd. Director
Supervisor
General
Manager		 Leo Huang
Hsiu-chou Chang
Tsun-I,Wang
Chroma (representative: Paul Ying)
Leo Huang
81,034 shares
667 shares
17,361 shares
2,658,219 shares
81,034 shares		 2%
-
-
53%
2%
Weida Electric Vehicle Co.,
Ltd.
Director
Supervisor
General
Manager		 EVT (representative: Leo Huang)
EVT(representative:Kun-chi
Huang)
EVT(representative:Hsiu-chou
Chang)
Bill Hsiao
Leo Huang		 375,000 shares
-
-		 75%
-
-

Note 1: Limited liability company

  • 101 -

f) Business operating conditions of Chroma ATE Inc. and its affiliated businesses

December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$ December 31,2015. Unit: Thousand NT$
Name of business paid-in
capital		 Total
assets		 Total
liabilities		 Net
worth		 Operating
revenue
Operating
income		 Net
income		 Earnings per
share(NT$)
Neworld Electronics Ltd.(note 1) 271,094 1,872,924 1,061,094 811,830 2,500,077
72,216
85,873
1.34
Chroma Electronics (Shenzhen)
Co.,Ltd.		 127,050
745,752
320,084		 425,668
877,185
45,350
35,684
NA
Chroma Electronics (Shanghai)
Co.,Ltd.		 98,475
128,946
69,609		 59,337
106,799
395
1,132
NA
Chroma ATE Inc.(USA) 32,825
615,496
497,457		 118,039
690,396
11,864
31,094
31.09
Chroma Systems Solutions, Inc. 158
639,920
430,431		 209,489
753,605
68,604
41,021
NA
Chroma Investment Co., Ltd. 140,000
224,554
120		 224,434
7,078
15
5,358
0.38
Chroma New Material Corp. 250,000 1,133,017
695,334		 437,683 2,328,151
58,639		 49,527
1.98
Chroma ATE Europe B.V. 1,628
218,766
82,448		 136,318
315,012
26,661
20,710
NA
Chroma (Shanghai) Trading Co.,
Ltd.		 88,628
105,441
10,240
95,201
0
(3,635)		 (710) NA
Chroma ATE(Suzhou)Co., Ltd. 124,735
277,849
115,569		 162,280
247,419		 (23,935) (19,105) NA
MAS Automation Corp. 100,000
769,381
322,775		 446,606 1,047,233
254,388
220,615
22.06
Mou Kuan Technologies (Nanjin)
Co.,Ltd.		 8,676
14,972
1,665		 13,307
7,994
(349)		 35
NA
Wei Kuang Automation (Nanjing)
Co.,Ltd.		 59,296
398,275
161,396		 236,879
114,673
(1,596)		 1,923
NA
Wei Kuang Automation (Xiamen)
Co.,Ltd.		 57,028
303,183
19,839		 283,344
181,400
5,803
9,880
NA
Sajet System Technology
(Suzhou)Co.,Ltd.		 8,671
47,443
2,586		 44,857
43,245
(3,208)		 946
NA
Testar Electronic Corporation 300,000
452,396
358,664		 93,732
384,082		 (38,560) (48,424) (1.61)
Chroma Japan Corp. 27,164
184,446
200,570		 (16,124) 159,387
(4,052)		 (5,965) NA
Sensational HoldingLtd. 39,390
52,989
290		 52,699
0
(852)		 1,165
0.97
Chen Hwa TechnologyInc. 101,265
111,675
21		 111,654
0
(657)		 4,173
1.35
CHI Incorporation Ltd. 125,720
164,348
21		 164,327
0
(70)		 (19,416) (5.07)
San Eagle Development Corp. 67,291
624,789		 20 624,769 0
(71)		 11,571
5.64
Wei KuangMech. Eng. Inc. 146,892
616,694
20		 616,674
0
(64)		 11,648
2.60
DeepRed HoldingCo., Ltd. 7,057
45,409
0		 45,409
0
0
961
4.47
ADIVIC TechnologyCo. 220,000
80,430
16,862		 63,568
14,306		 (49,490) (60,023) (2.73)
Advic HoldingCorporation 16,413
8,893
3,397
5,496
0		 (10,557) (10,556) (21.11)
EVT TechnologyCo., Ltd. 50,000
50,301
34,735		 15,566
1,187		 (16,937) (20,756) (4.15)
Weida Electric Vehicle Co., Ltd. 5,000
2,062
5,104		 (3,042) 987
(4,926)		 (3,251) (6.50)

Note 1: Expressed per the consolidated financial statement.

Note 2: The following lists the exchange rates for the statement of assets and liabilities: US$ 1 = NT$32.825; HKD$1 = NT$ 4.235; EUR$ 1 = NT$ 35.880; RMB$ 1 = NT$ 4.995; JPY $1 = NT$ 0.273 The following lists the exchange rates for the profit and loss statement: US$ 1 = NT$31.739; HKD$1 = NT$ 4.094; EUR$ 1 = NT$ 35.240; RMB $1 = NT$ 5.033; JPY $1 = NT$ 0.262

  • 102 -

  • (2) Consolidated financial statements of affiliated businesses

For 2015 (January 1 to December 31, 2015), affiliated businesses of this company that shall be included according to the rules prescribed by the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises were the same as those companies that shall be included in the parent and subsidiary consolidated financial statement as prescribed by International Financial Reporting Standards No. 10 (IFRS 10). All information to be disclosed in the consolidated financial statements of affiliated enterprises has already been disclosed in the consolidated financial statement of the parent company and subsidiaries. Hence, consolidated financial statements of affiliated businesses were not generated separately.

  • (3) Affiliation report

According to Article 369-12 of the Company Act, separate affiliation reports were not required for subsidiaries of this company that have not been publicly listed.

2. Private placement of securities of the most recent year through the publication date of this report: None.

3. Holding or disposition of company shares of the most recent year through the publication date of this report

Unit: Thousand NT$;shares;% Unit: Thousand NT$;shares;% Unit: Thousand NT$;shares;%
Subsidiary
Title		 Actual
paid-in
capital		 Source
of
capital		 Shareholding
of this
company		 Date of
acquisition
or disposal		 Quantity
and
value of
shares
acquired		 Quantity
and value
of shares
disposed
of		 Investment
gain (loss)		 Quantity and
value of
shares through
the
publication
date of this
report (note 1)
Status
and
settings
for the
pledge		 Value of
endorsements
and
guarantees
provided to
subsidiaries
by this
company		 Loans
provided to
subsidiaries
by this
company
Chroma
Investment
Co., Ltd.		 140,000 Own
capital		 100% 2015 0 0 0 1,915,579
shares
NT$ 132,558,000		 None 0 0
In the
current year
through the
publication
date of this
report
0		 0 0 None 0 0

Note 1: The sum held is calculated using the closing price of NT$ 69.20 from March 31, 2016.

4. Other items that must be included: None.

5. Any event that results in substantial impact upon the shareholders’ equity or prices of the company’s securities as prescribed by Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act that have occurred in the most recent year through the publication date of this report: None.

  • 103 -

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, 2015 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 23, 2016

104

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

We have audited the accompanying consolidated balance sheets of Chroma Ate Inc. (the “Corporation”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the Regulations Governing Auditing and Attention of Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chroma Ate Inc. and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended, in conformity 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 by the Financial Supervisory Commission of the Republic of China.

As stated in Note 3 to the consolidated financial statements, effective January 1, 2015, the Group adopted the amended Regulations Governing the Preparation of Financial Reports by Securities Issuers and 2013 IFRSs, which were endorsed by the FSC of the ROC and had taken effect on January 1, 2015, and had adjusted the consolidated financial statements as of and for the year ended December 31, 2014 for the Effects of the retrospective application of the amended Regulations Governing the Preparation of Financial Reports by Securities Issuers and 2013 IFRSs.

We have also audited the financial statements of the parent company, Chroma Ate Inc., as of and for the years ended December 31, 2015 and 2014 on which we have issued an unqualified report.

February 23, 2016

Notice to Readers

The accompanying consolidated 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 and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

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. 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 auditors’ report and consolidated financial statements shall prevail.

105

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(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
NONCURRENT ASSETS
Available-for-sale financial assets - noncurrent (Notes 4 and 8)
Financial assets carried at cost - noncurrent (Notes 4 and 9)
Investments accounted for using equity method (Notes 4 and 15)
Property, plant and equipment (Notes 4, 16, 24 and 32)
Goodwill (Notes 4 and 17)
Other intangible assets (Notes 4 and 18)
Deferred tax assets (Notes 4 and 25)
Prepayments for equipment (Notes 4 and 33)
Refundable deposits
Prepayments for investments
Other noncurrent assets
Total noncurrent assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes19 and 32)
Short-term bills payable (Note 19)
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
NONCURRENT LIABILITIES
Bonds payable (Notes 4 and 20)
Long-term borrowings (Notes 19 and 32)
Deferred income tax liabilities (Notes 4 and 25)
Net defined benefit liabilities - noncurrent (Notes 4 and 22)
Guarantee deposits received
Total noncurrent 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 equities
Treasury stock
Total equity attributable to owners of the Corporation
NON-CONTROLLING INTERESTS
Total equity
TOTAL		 December 31, 2015
(Audited)
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		 December 31, 2014
(Audited after Restated)
Amount
%
$ 1,847,648
12
8,638
-
1,873,734
12
398,993
3
33,316
-
3,152,006
21
9,950
-
95,945
1
1,604,773
11
56,178
-

103,523

1

9,184,704

61
468,575
3
185,349
1
508,702
4
2,712,962
18
193,939
1
6,533
-
154,847
1
1,431,534
10
43,348
-
33,000
-

46,483

1

5,785,272

39
$ 14,969,976
100
$ 332,725
2
16,000
-
927
-
44,029
-
15,279
-
1,277,344
9
2,377
-
3,796
-
-
-
745,593
5
229,301
2
84,231
1
75,138
-

44,035

-

2,870,775

19
1,731,006
11
757,200
5
109,425
1
127,702
1

780

-

2,726,113

18

5,596,888

37

3,787,821

25

1,256,654

9
1,469,276
10
86,888
1

2,180,919

14

3,737,083

25

507,104

3

(35,714)

-
9,252,948
62

120,140

1

9,373,088

63
$ 14,969,976
100		 January 1, 2014
(Audited after Restated)












































































































































Amount
%
$ 1,619,532
13
45,635
-
250,700
2
448,600
3
18,556
-
2,901,386
23
4,580
-
43,890
-
1,530,689
12
65,650
1

76,220

1

7,005,438

55
534,668
4
167,555
1
454,677
4
2,695,664
21
190,618
2
10,461
-
123,134
1
1,503,327
12
29,199
-
2,767
-

52,911

-

5,764,981

45
$ 12,770,419
100
$ 710,233
6
80,000
1
-
-
68,461
1
5,644
-
1,194,722
9
2,591
-
13,154
-
-
-
695,157
5
201,524
2
47,638
-
4,217
-

29,328

-

3,052,669

24
-
-
819,160
6
91,608
1
109,129
1

1,206

-

1,021,103

8

4,073,772

32

3,767,599

29

960,198

7
1,348,787
11
86,888
1

1,951,324

15

3,386,999

27

478,800

4

(35,900)

-
8,557,696
67

138,951

1

8,696,647

68
$ 12,770,419
100

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

106

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUES (Notes 4, 12 and 31)
Sales revenues

Less:
Sales returns
Sales allowances

Net operating revenues
OPERATING COSTS (Notes 4, 12, 13, 24 and 31)

GROSS PROFIT
UNREALIZED GROSS PROFIT

EARNED OPERATING PROFIT

OPERATING EXPENSES (Note 24)
Selling
General administrative
Research and development

Total operating expenses

OPERATING INCOME

NONOPERATING INCOME AND EXPENSE
Interest income (Note 4)
Rental income (Note 31)
Dividend income (Note 4)
Subsidy income
Other income - other
Share of profits of associates and joint ventures, net
(Notes 4 and 15)
Gain on disposal of investments, net
Exchange gain, net (Notes 4 and 34)
Impairment loss on financial assets (Notes 4 and 9)
Valuation loss on financial assets (liabilities) at fair
value through profit or loss, net (Note 4)
Valuation gain on financial assets (liabilities) at fair
value through profit or loss, net (Note 4)
Gain on disposal of property, plant and equipment
(Note 4)		 For the Years Ended December 31 For the Years Ended December 31 For the Years Ended December 31
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

28,503
-
26,538
-
35,620
-
18,302
-
69,806
1
76,166
1
381
-
61,260
1
(14,674)
-
(322)
-
-
-
3,605
-		 2014































Amount
%
$ 10,374,332 101

(22,007)
-

(45,240)
(1)

10,307,085 100

6,260,815
61

4,046,270 39

-

-

4,046,270
39

1,288,660 12

706,252
7

829,958

8

2,824,870
27

1,221,400
12

24,192
-

27,497
-

34,325
-

37,840
-

46,432
1

82,578
1

17,325
-

94,921
1

(15,500)
-

-
-

5,455
-

2,852
-
(Continued)
  • 107 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Other expenses

Interest expense (Notes 4 and 24)

Total nonoperating income and expense

CONSOLIDATED INCOME BEFORE INCOME
TAX
INCOME TAX EXPENSE (Notes 4 and 25)

CONSOLIDATED NET INCOME

OTHER COMPREHENSIVE INCOME, NET
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 by the equity-method
Items that will not be reclassified subsequently to
profit or loss
Exchange differences on translating foreign
operations
Unrealized loss on available-for-sale financial
assets
Share of other comprehensive income of
associates and joint ventures, net

Total other comprehensive income

TOTAL COMPREHENSIVE INCOME

NET INCOME ATTRIBUTED TO
Owner of the Corporation

Noncontrolling interests


COMPREHENSIVE INCOME ATTRIBUTED TO:
Owner of the Corporation

Noncontrolling interests

 **For the Years Ended December 31 ** **For the Years Ended December 31 ** **For the Years Ended December 31 **
2015
Amount
%
$ (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

$ 1,236,557 13

(42,015)
(1)

$ 1,194,542
12

$ 1,102,621 11

(39,819)

-

$ 1,062,802
11
 2014































Amount
%
$ (24,504)
-

(31,300)

-

302,113

3

1,523,513 15

227,528

2

1,295,985
13

(24,245)
-

(1,888)
-

92,057
1

(63,697) (1)

2,340

-

4,567

-
$ 1,300,552
13
$ 1,318,373 13

(22,388)

-
$ 1,295,985
13
$ 1,320,288 13

(19,736)

-
$ 1,300,552
13
(Continued)
  • 108 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

For the Years Ended For the Years Ended December 31
2015 2014
Amount % Amount
%
EARNINGS PER SHARE (Notes 4 and 26)
From continuing operating segment
Basic $3.28 $3.51
Diluted $3.10 $3.30
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)
  • 109 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE, JANUARY 1, 2014
Effect of retrospective application and retrospective restatement
BALANCE AT JANUARY 1, 2014 AS RESTATED
Appropriation of the 2013 earnings
Legal reserve
Cash dividends - NT$2.5 per share
Changes in other capital surplus
Equity component of convertible bonds issued by the Corporation
Change in associates and joint ventures
Consolidated net income (loss) for the year ended December 31, 2014
Other comprehensive income (loss) for the year ended December 31,
2014
Consolidated comprehensive income (loss) for the year ended
December 31, 2014
Convertible bonds converted to ordinary shares
Disposal of the Corporation's share held by subsidiaries
Compensation recognized on employee stock options
Adjustments of capital surplus for corporation's cash dividends received
by subsidiaries
BALANCE, DECEMBER 31, 2014
Appropriation of the 2014 earnings
Legal reserve
Cash dividends - NT$2.6 per share
Changes in other capital surplus
Change in associates and joint ventures
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
Adjustment of capital surplus for corporation's cash dividends received
by subsidiaries
Share-based payment transaction
Increase in non-controlling interests for the year ended December 31,
2015
BALANCE, DECEMBER 31, 2015		 Equity Attributab le to Owners of the Corporation Non-controlling
Total Equity
Interests
$ 8,577,610
$ 138,951


(19,914)

-


8,557,696

138,951

-
-
(941,900 )
-
141,487
-
1,064
-
1,318,373
(22,388 )

1,915

2,652


1,320,288

(19,736)

135,505
-
741
-
33,278
925

4,789

-

9,252,948
120,140
-
-
(987,433 )
-
(7,525 )
7,525
1,236,557
(42,015 )

(133,936)

2,196


1,102,621

(39,819)

281
-
4,994
-
44,218
691

-

32,655

$ 9,410,104
$ 121,192
 Total Equity
$ 8,716,561

(19,914)

8,696,647
-
(941,900 )
141,487
1,064
1,295,985

4,567

1,300,552
135,505
741
34,203

4,789
9,373,088
-
(987,433 )
-
1,194,542

(131,740)

1,062,802
281
4,994
44,909

32,655
$ 9,531,296










Share Capital
Capital Surplus
$ 3,767,599
$ 960,198

-

-

3,767,599

960,198
-
-
-
-
-
141,487
-
1,064
-
-

-

-

-

-
20,222
115,283
-
555
-
33,278

-

4,789
3,787,821
1,256,654
-
-
-
-
-
-
-
-

-

-

-

-
42
239
-
4,994
3,836
40,382

-

-
$ 3,791,699
$ 1,302,269		 Retained Earnings Total

$ 3,406,913

(19,914)

3,386,999
-
(941,900 )
-
-
1,318,373

(26,389)

1,291,984
-
-
-

-
3,737,083
-
(987,433 )
(7,525 )
1,236,557

(26,497)

1,210,060
-
-
-

-
$ 3,952,185		 Other Equity Total
Treasury Stock
$ 478,800
$ (35,900 )


-

-


478,800

(35,900)

-
-
-
-
-
-
-
-
-
-

28,304

-


28,304

-

-
-
-
186
-
-

-

-

507,104
(35,714 )
-
-
-
-
-
-
-
-

(107,439)

-


(107,439)

-

-
-
-
-
-
-

-

-

$ 399,665
$ (35,714)
Exchange
Differences on
G
Translating
A
Foreign Operations
F
$ 44,755


-


44,755

-
-
-
-
-

92,001


92,001

-
-
-

-

136,756
-
-
-
-

(8,788)


(8,788)

-
-
-

-

$ 127,968
 Unrealized
ain (Loss) from
vailable-for-sale
inancial Assets
$ 434,045


-


434,045

-
-
-
-
-

(63,697)


(63,697)

-
-
-

-

370,348
-
-
-
-

(98,651)


(98,651)

-
-
-

-

$ 271,697
Unappropriated
Legal Reserve
Special Reserve
Earnings
$ 1,348,787
$ 86,888
$ 1,971,238


-

-

(19,914)


1,348,787

86,888

1,951,324

120,489
-
(120,489 )
-
-
(941,900 )
-
-
-
-
-
-
-
-
1,318,373

-

-

(26,389)


-

-

1,291,984

-
-
-
-
-
-
-
-
-

-

-

-

1,469,276
86,888
2,180,919
131,644
-
(131,644 )
-
-
(987,433 )
-
-
(7,525 )
-
-
1,236,557

-

-

(26,497)


-

-

1,210,060

-
-
-
-
-
-
-
-
-

-

-

-

$ 1,600,920
$ 86,888
$ 2,264,377

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

  • 110 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income before income tax

Adjustments for:
Depreciation
Allowance for bad debts
Share of profits of associates and joint venture, net
Exchange (gain) loss, net
Impairment loss on nonderivative financial assets
Interest expense
Dividend income
Interest income
Compensation cost of shared-based payment
Impairment loss on financial assets
Gain on disposal and retirement of property, plant and equipment, net
Amortization
Gain on disposal of available-for-sale financial assets, net
Unrealized gain on the transactions with associates and joint venture
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
Payment to acquire investment in bonds with no active market		 For the Years Ended
December 31		 For the Years Ended
December 31



2015
$ 1,482,672

329,582
86,551
(76,166)
(58,015)
39,379
38,994
(35,620)
(28,503)
25,768
14,674
(3,605)
2,009
(381)
264
(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)
(160,965)		 2014
$ 1,523,513
297,188
18,699

(82,578)

30,233
62,450
31,300

(34,325)

(24,192)
34,203
15,500

(2,852)
3,928

(17,325)
-

38,398

(14,760)
(271,946)

(52,055)

(253,889)

9,472
(30,267)
(3,933)

(14,797)
82,408
(9,358)

61,901
36,593

14,707

(5,672)
1,442,544

(214,887)

1,227,657

(118,170)

(2,351,975)

-
(Continued)
  • 111 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Proceeds of the disposal of available-for-sale financial assets

Dividend received
Interest received
Payment to acquire financial assets carried at cost
Proceeds of the disposal of property, plant and equipment
Cash returned of capital reduction of financial assets carried at cost
Net cash inflows from business combination
Decrease in refundable deposits
Decrease in other noncurrent assets
Proceeds of the disposal of investment in bonds with no quoted market
Increase in prepayments for investments
Increase in refundable deposits

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends
Proceeds of the issue of long-term debts
Decrease in short-term borrowings
Decrease in non-controlling interest
Interest paid
Employee stock options
Decrease in short-term bills payable
Repayment of long-term debts
Proceeds of the issuance of convertible bonds payable
Proceeds of disposal of treasury stock
Decrease in guarantee deposits

Net cash (used in) generated from 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
 For the Years Ended
December 31		 For the Years Ended
December 31







2015
$ 127,020

76,100
23,588
(16,140)
14,893
11,750
10,897
4,647
941
-
-

-


(1,167,705)

(982,439)
582,165
(84,000)
29,400
(24,064)
19,141
(16,000)
(6,659)
-
-

-


(482,456)


23,249

641,641

1,847,648

$ 2,489,289
 2014
$ 747,261
64,184
26,080

(30,000)
18,731
-
-
-
6,428
49,607
(33,000)

(14,149)

(1,635,003)

(937,111)
-

(374,416)
-

(26,186)
-

(64,000)

(4,970)
1,994,680
741

(426)

588,312

47,150
228,116

1,619,532
$ 1,847,648

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

(Concluded)

  • 112 -

CHROMA ATE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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 23, 2016.

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

  • a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC

Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC on April 3, 2014, stipulated that the Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015.

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version did not have any material impact on the Group’s accounting policies:

1) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required by the previous standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy previously required only for financial instruments will be extended by IFRS 13 to cover all assets and liabilities within its scope.

The fair value measurements under IFRS 13 are applied prospectively from January 1, 2015. Refer to Note 30 for related disclosures.

  • 113 -

  • 2) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

  • The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under previous IAS 1, there were no such requirements.

  • The Group retrospectively applied the above amendments starting in 2015. Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans and the share of the remeasurements of the defined benefit plans of associates and joint ventures accounted for using the equity method. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of associates and joint ventures accounted for using the equity method. The application of the above amendments did not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the year.

  • 3) Revision to IAS 19 “Employee Benefits”

  • Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under previous IAS 19 and accelerates the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus. Remeasurement of the defined benefit plans is presented separately as other equity.

  • Furthermore, the interest cost and expected return on plan assets used in previous IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. The revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures.

  • In addition, revised IAS 19 changes the definition of short-term employee benefits as “employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service”. The Group’s unused annual leave, which can be carried forward within 24 months after the end of the annual period in which the employee renders service previously classified as short-term employee benefits, will be classified as other long-term employee benefits under revised IAS 19. Related defined benefit obligation of such other long-term benefit is calculated using the Projected Unit Credit Method. However, this change did not affect unused annual leave presented as a current liability in the consolidated balance sheet.

  • On initial application of the revised IAS 19, as a result of the retrospective application, the changes in cumulative employee benefit costs as of December 31, 2013 are adjusted to net defined benefit liabilities, deferred tax assets and retained earnings; as of January 1, 2014 the carrying amounts of inventories are not adjusted. In addition, in preparing the consolidated financial statements for the year ended December 31, 2015, the Group elected not to present 2014 comparative information about the sensitivity of the defined benefit obligation.

  • 114 -

The impact on the prior reporting periods is set out below:

Impact on Assets, Liabilities and Equity
December 31, 2014
Deferred tax assets

Net defined benefit liabilities

Retained earnings


January 1, 2014
Deferred tax assets

Net defined benefit liabilities

Retained earnings

Impact on Total Comprehensive Income
For the year ended December 31, 2014
Operating cost

Operating expense
Income tax expense
Total effect on net income for the year
Item that will not be reclassified to profit or
loss:
Remeasurement of defined benefit plan
Share of the other comprehensive income
of associates adjust ventures
Total effect on other comprehensive income
for the year
Total effect on comprehensive income for the
year
Impact on earnings per share
Basic
Diluted		 As
$		 Originally
Stated
152,883

108,061

2,198,596

120,960

87,041

1,971,238

Originally
Stated
(6,261,181)
(2,826,643)
(227,318)

(27,360)
(1,888)


$ 3.51
$ 3.30		 Adjustments
Arising from
Initial
Application
$ 1,964

$ 19,641

$ (17,677)

$ 2,174

$ 22,088

$ (19,914)

Adjustments
Arising from
Initial
Application
$ 366


1,773

(210)

1,929

3,115

-

3,115
$ 5,044
$ -
$ -		 Restated
$ 154,847
$ 127,702
$ 2,180,919
$ 123,134
$ 109,129
$ 1,951,324
Restated
$ (6,260,815)
(2,824,870)
(227,528)
(24,245)
(1,888)
$ 3.51
$ 3.30
$
$
$
$
$
As
$



$

  • 115 -

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

The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates.

New IFRSs
Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2012-2014 Cycle

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”

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”

IFRS 15 “Revenue from Contracts with Customers”

IFRS 16 “Leases”

Amendment to IAS 1 “Disclosure Initiative”

Amendment to IAS 7 “Disclosure Initiative”

Amendments to IAS 12“Recognition of Deferred Tax Assets for
Unrealized Losses”

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”

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)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2018
January 1, 2018
To be determined by IASB
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014

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

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

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

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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.

2) IFRS 15 “Revenue from Contracts with Customers”

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

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 contracts; and

  • Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 is 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.

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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

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 by the FSC.

Basis of Preparation

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

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

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

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

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

Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

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

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

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

Current liabilities include:

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

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

  • c. 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 noncurrent.

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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.

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.

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.

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.

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

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

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Corporation) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising 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.

Inventories

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

Investments 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. 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.

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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 by 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 by 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 forms part of 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.

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

Property, Plant and Equipment

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

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

Goodwill

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 for 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.

Intangible Assets

  • a. Intangible assets acquired separately

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

  • b. Intangible assets acquired in a business combination

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

  • c. Derecognition of intangible assets

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

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Impairment of Tangible and Intangible Assets Other Than Goodwill

At the end of each reporting period, the 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 cash-generating units on a reasonable and consistent basis of allocation.

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

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

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

Financial Instruments

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

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

  • a. Financial assets

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

  • 1) Measurement category

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

  • a) 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 held for trading.

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.

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b)Available-for-sale financial assets

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

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

Dividends on available-for-sale equity instruments are recognized in profit or loss when the 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 profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

c)Loans and receivables

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

2) Impairment of financial assets

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

For financial assets carried at amortized cost, such as trade receivables and other receivables assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the 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.

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

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

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

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

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

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

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.

3) 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.

b. 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.

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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.

  • c. Financial liabilities

  • 1) Subsequent measurement

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

Financial liabilities at fair value through profit or loss

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

Financial 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:

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

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

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

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 it 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.

  • 2) Derecognition of financial liabilities

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

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d. 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.

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

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

Revenue Recognition

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

  • a. Sale of goods

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

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

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

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

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

  • 5) 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.

  • b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the 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 effective interest rate applicable.

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Construction Contracts

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by referring 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.

Borrowing Costs

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

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

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

Government Grants

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

Government grants are recognized in profit or loss on a systematic basis over the periods in which the 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 noncurrent 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 to give the Group immediate financial support with no future related costs are recognized in profit or loss in the period in which they become receivable.

Employee Benefits

  • a. Short-term employee benefits

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

  • 128 -

  • b. Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost 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.

Employee Stock Options

Equity-settled share-based payments arrangements 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 determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately.

At the end of each reporting period, the Group revises its estimate of the number of employee share options 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.

Taxation

Income tax expense represents the sum of the current tax payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period pretax income the tax rate that would be applicable to expected total annual earnings.

  • a. Current tax

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

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

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

  • 129 -

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all (deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and research and development expenditures 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. Previously unrecognized deferred tax assets are also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply 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.

c. Current and deferred taxes for the period

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.

Key Sources of Estimation and Uncertainty

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

  • 130 -

  • 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 subjective judgment, the assets’ useful model and industrial specific. Any changes in estimation due to economic circumstances and the Group’s strategies could result in significant impairment of tangible and intangible assets.

  • b. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. The information on the measurement of goodwill impairment is show in Note 17.

c. Impairment of investments in associates and joint ventures

The Group immediately recognizes impairment loss on its net investment in associates and joint ventures when there is any indication that the investment may be impaired and the carrying amount may not be recoverable. The Group’s management evaluates the impairment based on the estimated future cash flow expected to be generated by the associate and joint ventures, including the assumptions about the growth rate of sale and capacity of production facilities estimated by the associate’s management, etc. The Group also takes into consideration the market conditions and industry development to evaluate the appropriateness of assumptions.

  • d. Reliability of deferred tax assets

Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be used. The management’s significant accounting judgment and estimation should be taken into consideration when measuring the reliability of deferred tax assets, including assumptions on the predicted growth rate of sales and gross profit rate, tax-exempt period, unused tax credits and tax planning, etc. Any changes in industrial circumstances and tax laws could result in significant adjustments to deferred tax assets.

e. 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.

  • f. Recognition and measurement of defined benefit plans

Net defined benefit liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

  • 131 -

  • g. Impairment of accounts receivable

When there is objective indication of impairment, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred, discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. 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


 December 31





2015
2014
$ 4,547
$ 4,253

2,206,259
1,437,592

278,483

405,803
$ 2,489,289
$ 1,847,648

The market rate intervals of cash in bank and time deposits with maturities less than 3 months from date of investments at the balance sheet were as follows:

Bank deposits
Time deposits with maturities less than 3 months from date of investments		 December 31
2015
2014
0.001%-0.65%
0.01%-1.50%
0.58%-4.00%
0.05%-3.25%

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, 2015 and 2014, time deposits with maturities more than 3 months from date of investments were $559,958 thousand and $398,993 thousand, respectively, which is classified to investment in bonds with no active market (see Notes 10 and 30).

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current
Nonderivative financial assets
Domestic listed stocks
Investment in debt instrument
Financial assets at fair value through profit or loss		 December 31


2015
2014
$ 7,921
$ 7,663

951

975
$ 8,872
$ 8,638
(Continued)
  • 132 -
Financial liabilities at FVTPL-current
Derivative instruments
Call and put option of convertible bonds payable (Note 20)		 December 31
2015
2014
$ 1,483
$ 927
(Concluded)

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Domestic investments
Listed stocks

Open-end beneficial certificates


Current

Noncurrent

 December 31 December 31





2015
$ 359,543

2,057,476

$ 2,417,019

$ 2,057,476

359,543

$ 2,417,019
 2014
$ 468,575
1,873,734
$ 2,342,309
$ 1,873,734
468,575
$ 2,342,309

9. FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

Domestic unlisted common stocks
Foreign unlisted common stocks
Foreign open-end beneficial certificates
Foreign unlisted preferred stock
Classification by measurement of financial instruments
Available-for-sale financial assets		 December 31
2015
$ 171,718
26,530
10,152

-
$ 208,400
$ 208,400		 2014
$ 134,328
28,606
10,152

12,263
$ 185,349
$ 185,349

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 years ended December 31, 2015 and 2014, the Group recognized impairment losses of $2,411 thousand and $2,410 thousand, respectively, on Qualitysource S.A.S. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments.

  • 133 -

For the year ended December 31, 2014, the Group recognized an impairment loss of $3,090 thousand on EVT Technology Co., Ltd. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments. In 2015, the Corporation acquired control over EVT Technology Co., Ltd.; EVT Technology Co., Ltd. was included in the consolidate financial statement since the day the Corporation acquired control over it.

For the years ended December 31, 2015 and 2014, the Group recognized impairment losses of $12,263 thousand and $10,000 thousand on Lasfocus Corporation. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments.

The Group did not sell financial assets carried at cost for the years ended December 31, 2015 and 2014.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

Time deposits with maturities more than 3 months from date of investments
Interest rate		 December 31
2015
2014

$ 559,958
$ 398,993
0.45%-5.00%
0.50%-3.75%

As of December 31, 2015 and 2014, 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 $14,985 thousand and $24,442 thousand, respectively (refer to Note 32).

11. ACCOUNTS RECEIVABLE, NET - THIRD PARTIES

Accounts receivable

Less: Allowance for doubtful accounts

Accounts receivable - related parties

 December 31 December 31



2015
$ 2,608,385


(185,677)

2,422,708

11,650

$ 2,434,358
 2014
$ 3,252,170

(100,164)
3,152,006

9,950
$ 3,161,956

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

  • 134 -

The aging of receivables was as follows:

The aging of receivables was as follows:
0-60 days

61-180 days
Over 180 days

 December 31


2015
$ 2,126,796

125,032

356,557

$ 2,608,385
 2014
$ 2,711,073
289,726

251,371
$ 3,252,170

The above aging analysis was based on the past due date.

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 a 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:

1-60 days
61-180 days
Over 180 days		 December 31


2015
$ 313,015

114,727

207,023

$ 634,765
 2014
$ 537,127
252,580

136,149
$ 925,856

The above aging schedule was based on the past due date.

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

Individual
Assessment of
Impairment Loss
Collective
Assessment of
Impairment Loss
Balance at January 1, 2014
$ 33,477
$ 47,634

Add: Bad debts expense recognized (reversed) on
accounts receivable
(3,530)

22,229
Deduct: Amounts written off as uncollectible
(1,766)

(623)

Reclassification of impairment loss from collective
assessment to individual assessment
1,153
(1,153)
Foreign exchange translation gains and losses

1,590

1,153

Balance at December 31, 2014
$ 30,924
$ 69,240

Balance at January 1, 2015
$ 30,924

$ 69,240


Add: Bad debts expense recognized (reversed) on
receivable
96,841

(10,290)

Deduct: Amounts written off as uncollectible
(1,956)

(200)

Reclassification of impairment loss from collective
assessment to individual assessment
25,931
(25,931)
Foreign exchange translation losses

532


586




Balance at December 31, 2015
$ 152,272

$ 33,405

 Total
$ 81,111
18,699
(2,389)
-

2,743
$ 100,164
$ 100,164
86,551
(2,156)
-

1,118
$ 185,677
  • 135 -

The impairment recognized represent the difference between the carrying amount of these trade receivables and the present value of the expected proceeds received from liquidation. Included in the allowance for impairment loss were individually impaired trade receivable amount to $152,272 thousand and $30,924 thousand as of December 31, 2015 and 2014, respectively. The Group did not hold any collateral over these balances.

12. 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






2015
$ 178,277


(2,414)

$ 175,863

$ 383,303


(128,085)

$ 255,218

$ -
 2014
$ 95,954

(9)
$ 95,945
$ 15,883

(12,087)
$ 3,796
$ 980

The Group recognized contract revenue of $1,260,831 thousand and $680,091 thousand for the years ended December 31, 2015 and 2014, respectively.

13. INVENTORIES

Finished goods

Semifinished products
Work in process
Raw materials

 December 31 December 31


2015
$ 389,914

300,641
369,696

575,696

$ 1,635,947
 2014
$ 434,242
248,444
448,897

473,190
$ 1,604,773

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2015 and 2014 was $5,470,761 thousand and $6,260,815 thousand, respectively.

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2015 and 2014 were $39,379 thousand and $62,450 thousand due to write-downs of inventories, respectively.

  • 136 -

14. SUBSIDIARIES

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

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.
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
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 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
2015
2014
Explanation
100.0
100.0
Chroma Investment Co., Ltd.
had 1,916 thousand shares of
the Corporation’s common
stock as of December 31,
2015, 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
Note 5
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
Note 3
25.0
25.0
Note 1
51.0
51.0
Note 2
53.2
17.9
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 4
100.0
-
Note 6

  • Note 1: The Corporation acquired 25% equity interest in Chroma Systems Solutions Inc. for US$900 thousand on September 1, 2009. The Corporation’s subsidiary, Chroma Ate Inc. (U.S.A.), held 50% equity interest in Chroma Systems Solutions Inc.; thus, the Corporation directly and indirectly held 75% equity interest in Chroma Systems Solutions Inc. and controlled the investee.

  • Note 2: In April 2015, Advic Technology increased its capital by $60,000 thousand to strengthen its financial structure. The Corporation’s Board of Director resolved to participate proportionately in the capital increase by buying shares amounting to $30,600 thousand at the same percentage as its original equity interest in Advic Technology. The Corporation’s equity interest in Advic was still 51%.

  • Note 3: To enhance its financial structure and maintain the sufficiency of its operating capital, Chroma Japan reduced its capital by 100% to offset its deficit and increased its capital by ￥ 199,000 thousand in April 2014. The Corporation’s Board of Directors resolved to fully participate in the capital increase of Chroma Japan Corp. Chroma Japan Corp. is still a 100% held subsidiary of the Corporation.

  • 137 -

  • Note 4: 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.

  • Note 5: In February 2015, Chroma (Shanghai) Trading Co., Ltd., the Corporation’s grandson company increase its capital by US$2,500 thousand to purchase plants and expand its operating scale. The Corporation’s Board of Directors resolved to fully participate in the capital increase of Chroma (Shanghai) Trading Co., Ltd. through Chen Hwa Technology Inc. by buying shares. As of December 31, 2015, the investment amount has been fully paid.

  • Note 6: 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 **


2015
$ 535,634


17,505

$ 553,139
 2014
$ 491,291

17,411
$ 508,702
  • a. Investments in associates
Associates that are not individually material
Adlink Technology Inc.

Dynascan Technology Corp.


 **December ** **31 **






2015
$ 457,674


77,960

$ 535,634
 2014
$ 418,932

72,359
$ 491,291

Aggregate information of associates that are not individually material:

The Group’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
2015
$ 76,072

9,015
$ 85,087		 2014
$ 82,518

452
$ 82,970

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.

  • 138 -

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 **
2015
$ 1,763,821
 2014
$ 1,590,351

The investments in associates accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2015 and 2014 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 **
2015
$ 17,505
 2014
$ 17,411

Aggregate information of joint ventures that are not individually material:

The Group’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


2015
$ 94


-

$ 94
 2014
$ 60

-
$ 60

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. (originally named Heran Co., Ltd.) to set up Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”). The Corporation invested $17,500 thousand for a 35% entity interest in Chih Ho Shun but did not have control over this investee.

The investments in joint ventures accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2015 and 2014 was based on the joint ventures’ financial statements audited by the auditors for the same years.

  • 139 -

16. PROPERTY, PLANT AND EQUIPMENT

Land
Buildings

Cost


Balance, January 1, 2014
$ 505,530
$ 2,223,536

Addition
-
16,313
Disposals
-
(7,343)
Transferred from inventories
-
-
Reclassification
-
70,518
Net effect of exchange differences

3,402

15,602


Balance, December 31, 2014
$ 508,932
$ 2,318,626


Accumulated depreciation and
impairment

Balance, January 1, 2014
$ -
$ (700,021)
Disposals

-
(92,256)
Depreciation

-
2,970
Reclassification

-
-
Net effect of exchange differences

-

(2,192)


Balance, December 31, 2014
$ -
$ (791,499)


Net amounts on December 31, 2014$ 508,932
$ 1,527,127


Cost
Balance, January 1, 2015
$ 508,932
$ 2,318,626

Addition
14,787
142,853
Disposals
-
(307)
Acquisition through business
combinations (refer to Note 28)
-
126
Transferred from inventories
-
-
Reclassification
-
-
Net effect of exchange differences

2,787

5,775


Balance, December 31, 2015
$ 526,506
$ 2,467,073


Accumulated depreciation and
impairment


Balance, January 1, 2015
$ -
$ (791,499)
Depreciation

-
(96,262)
Disposals

-
304
Acquisition through business
combinations (refer to Note 28)

-
(37)
Reclassification

-
-
Net effect of exchange differences

-

(2,388)


Balance, December 31, 2015
$ -
$ (889,882)


Net amounts on December 31, 2015 $ 526,506
$ 1,577,191

The following useful lives are used in the calculation of depreciation:
Building
Primary buildings
Mechanical and electrical equipment
Duty-free rooms equipment
Others
Machinery
Miscellaneous equipment		 Machinery
Miscellaneou
s Equipment
$ 932,319
$ 1,154,198

52,281
78,031

(30,146)
(54,922)
27,641
61,949
(208)
2,885

5,950

11,269

$ 987,837
$ 1,253,410

$ (582,938) $ (836,960)

(110,571)
(94,361)
29,421
44,142
346
(2,879)

(4,681)

(5,863)

$ (668,423)
$ (895,921)

$ 319,414
$ 357,489

$ 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
 Total
$ 4,815,583
146,625

(92,411)
89,590
73,195

36,223
$ 5,068,805
$ (2,119,919)

(297,188)
76,533

(2,533)

(12,736)
$ (2,355,843)
$ 2,712,962
$ 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
55 years
10 years
10 years
6-50 years
2-12 years
3-15 years
  • 140 -

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

17. GOODWILL

Cost
Balance, beginning of the period
Net effect of exchange differences
Balance, end of the period		 For the Years
**December **		 Ended
**31 **


2015
$ 193,939


2,113

$ 196,052
 2014
$ 190,618

3,321
$ 193,939

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, 2015 and 2014.

18. OTHER INTANGIBLE ASSETS

Sales Channel
Core Technology
Cost
Balance, January 1 and December 31, 2014
$ 14,388
$ 317,931

Accumulated amortization and impairment losses
Balance, January 1, 2014
$ (12,469)
$ (309,389)

Amortization

(1,919)

(2,009)

Balance, December 31, 2014
$ (14,388)
$ (311,398)

Net amounts on December 31, 2014
$ -
$ 6,533

Cost
Balance, January 1 and December 31, 2015
$ 14,388
$ 317,931


Accumulated amortization and impairment losses
Balance, January 1, 2015
$ (14,388)
$ (311,398)

Amortization

-


(2,009)


Balance, December 31, 2015
$ (14,388)

$ (313,407)


Net amounts on December 31, 2015
$ -
$ 4,524
 Total
$ 332,319
$ (321,858)

(3,928)
$ (325,786)
$ 6,533
$ 332,319
$ (325,786)

(2,009)
$ (327,795)
$ 4,524
  • 141 -

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

Sales channel 5 years Core technology 5 years

19. BORROWINGS

Short-term Borrowings

Secured borrowings
Bank loans (a)
Unsecured borrowings
Bank loans (b)		 **December ** **31 **


2015
$ 78,400


222,903

$ 301,303
 2014
$ 82,400

250,325
$ 332,725

  • a. Secured by Testar Electronic Corporation’s Machinery (refer to Note 32). As of December 31, 2015 and 2014, the interest rate on the bank loans was 1.32%-1.35% and 1.32% per annum, respectively.

  • b. As of December 31, 2015 and 2014, the interest rate on the bank loans was 1.01%-3.25% and 1.15%-3.25% per annum, respectively.

Short-term Bills Payable

Commercial paper
Interest rate (%)
Due date		 December 31 December 31
2015
$ -
-
-		 2014
$ 16,000
1.39%
2015.03.25

Long-term Borrowings

Secured borrowings
Bank loans (a)

Bank loans (b)
Bank loans (c)

Unsecured borrowings
Syndicated bank loans (d)
Bank loans (e)

Less: Current portion

Long-term borrowings
 **December 31 ** **December 31 **




2015
$ 108,886

52,964

12,481

174,331
1,230,000

9,792

1,414,123

(30,083)

$ 1,384,040
 2014
$ 107,905
24,433

-
132,338
700,000

-
832,338

(75,138)
$ 757,200

  • 142 -

  • 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 from November 2012 to November 2019 in equal monthly installments with additional interest. As of December 31, 2015 and 2014, the effective interest rate on the bank loans was 4.00% per annum.

  • b. Secured by Chroma U.S.A.’s buildings in California (refer to Note 32). The bank loan is due on July 15, 2022 and repayable in equal monthly installments with additional interest. As of December 31, 2015 and 2014, the effective interest rate on the bank loans was 0.9%-4.25% and 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, 2015, the effective interest rate on the Bank loans was 2.25% per annum.

  • d. On August 30, 2012, the Corporation applied to E.SUN and other banks for syndicated bank loans with $2,000,000 thousand credit line. In September 2013, the Corporation borrowed $700,000 thousand to pay the second installment of “The Action Plan for Developing Land surrounding the MRT Airport Station to Improve Civilians Life” (refer to Note 33). The syndicated bank loan is due on September 3, 2018 and repayable from March 2017 to March 2018 in three equal semiannual installments ($246,000 thousand per one installment), the remaining $492,000 thousand will be paid on September 3, 2018 (which is the due date), and the interest is payable monthly. In November 2015, the Corporation acquired new borrowing in the amount of $530,000 thousand to pay the first part of the third installment of the land. As of December 31, 2015, the interest rate per annum was 1.60% and 1.69% (floating interest rate), respectively.

  • e. EVT Technology Co., Ltd applied for the bank loan due to on December 16, 2019. As of December 31, 2015, the interest rate on the bank loan was 1.4 per annum.

20. BONDS PAYABLE

Unsecured domestic convertible bonds

Less: Current portion

 **December 31 ** **December 31 **


2015
$ 1,854,100


96,007

$ 1,758,093
 2014
$ 1,854,400

123,394
$ 1,731,006

On May 23, 2014, the Corporation issued its second domestic unsecured 0% convertible bonds with aggregate par value of $2,000,000 thousand and face value of $100 thousand. These bonds were listed on the GreTai Securities Market at the same date. Except for the book closure period, bondholders are entitled to convert bonds into the Chroma Ate. Inc.’s common stock at $74.2 (conversion price) per share since June 24, 2014 to May 13, 2019. Due to the appropriation of 2015 and 2014 earnings approved at the annual shareholders meeting for 2016 and 2015, the shareholders approved to distribute dividend of NT$2.6 and NT$2.5 per share, respectively; thus, the conversion price was adjusted to NT$69.3 and NT$72 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 begin 1 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.

  • 143 -

The convertible bonds contain both liability and equity components. The equity components was presented in equity under the heading of “capital surplus - option” and recognized of $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 estimated fair value of derivative instruments as of December 31, 2015 was loss $556 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, 2015
 $ 1,994,680

(141,487)

904

(4,989)

1,849,108

44,642

(135,657)
$ 1,758,093

21. OTHER PAYABLES - CURRENT

Other payables
Payable on construction and equipment
Salaries payable and bonus payable (including employee bonus payable and
remuneration to directors and supervisors)
Other payables and accrued expense		 December 31


2015
$ 18,771

532,015

114,854

$ 665,640
 2014
$ 50,598
537,521

157,474
$ 745,593

22. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

The Labor Pension Act (LPA) provides for a defined contribution pension plan. Based on the LPA, the rate of the monthly contributions of the Corporation to the employees’ individual pension accounts is at 6% of monthly salaries and wages.

Employees of the Group’s subsidiaries in the U.S.A., Europe 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.

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 $65,258 thousand and $63,589 thousand for the years ended December 31, 2015 and 2014, respectively.

  • 144 -

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 assesses the balances in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation 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.

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 **



2015
$ 409,891


(260,200)

149,691

-

$ 149,691
 2014
$ 372,684

(244,982)
127,702

-
$ 127,702

Movements in net defined benefit liability were as follows:

Present Value of Present Value of
the Defined Net Defined
Benefit Fair Value of the Benefit Liability
Obligation Plan Assets (Asset)
Balance at January 1, 2014 $
350,604		 $ (241,475) $
109,129
Service cost
Current service cost 4,301 - 4,301
Net interest expense (income) 6,487
(4,638)		 1,849
Recognized in profit or loss 10,788
(4,638)		 6,150
Remeasurement
Return on plan assets (excluding amounts included
in net interest) - (1,183) (1,183)
Actuarial loss - changes in demographic
assumptions 5,020 - 5,020
Actuarial loss - changes in financial assumptions 10,694 - 10,694
Actuarial loss - experience adjustments 9,714
-		 9,714
Recognized in other comprehensive income 25,428
(1,183)		 24,245
Contributions from the employer - (11,822) (11,822)
Benefits paid (14,136)
14,136		 -
Balance at December 31, 2014 372,684
(244,982)		 127,702

(Continued)

  • 145 -
Present Value of Present Value of
the Defined
Benefit Fair Value of the Net Defined
Obligation Plan Assets Benefit Liability
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
(Concluded)

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
2015
2014
1.00%-1.75%
1.50%-2.00%
1.50%-2.50%
1.50%-2.50%
  • 146 -

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 (decrease/increase) as follows:

December 31,
2015
Discount rate(s)
0.25% increase $ (23,165)
0.25% decrease $ 24,610
Expected rate(s) of salary increase
0.25% increase $ 35,111
0.25% decrease $ (32,968)

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 December 31
2015
$ 11,705

15.8 years		 2014
$ 11,737
15.0 years

23. EQUITIES

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



2015

450,000

$ 4,500,000


379,170

$ 3,791,699
 2014

450,000
$ 4,500,000

378,782
$ 3,787,821

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		 **December 31 **
2015
2014
$ 769,143
$ 748,329
160,514
155,520
146,976
146,976
(Continued)
  • 147 -
Used to offset a deficit
Employee stock options expired

May not be used for any purpose
Share of changes of subsidiaries, associates or joint ventures’ capital
surplus
Convertible bonds payable options
Employee stock options

 **December 31 **


2015
2014
$ 1,640
$ -
24,725
24,725
131,166
131,187

68,105

49,917
$ 1,302,269
$ 1,256,654
(Concluded)

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. Appropriation of earnings and dividend policy

The Corporation’s Articles of Incorporation provide that a 10% legal reserve should be set aside from the annual net income less any deficit. The remainder, special reserve appropriation or reverse appropriation based on regulations or relevant laws, together with unappropriated earnings of prior years, should be distributed as follows:

1)Remuneration to directors and supervisors 2)Bonus to employees - 5%-20% 3)Dividends

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.

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 consequential amendments to the Corporation’s Articles of Incorporation had been proposed by the Corporation’s board of directors on December 23, 2015 and are subject to the resolution of the shareholders in their meeting to be held on June 7, 2016. For information about the accrual basis of the employees’ compensation and remuneration to directors and supervisors and the actual appropriations for the years ended December 31, 2015 and 2014, please refer to Note 24 employee benefits expense.

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 Group 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.

Legal reserve should be appropriated until the reserve equals the Corporation’s paid-in capital. The reserve may be used to offset a 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.

  • 148 -

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 Group.

The appropriations of earnings, including bonus to employees, and the remuneration to directors and supervisors for 2014 and 2013, have been approved at the annual shareholders’ meeting on June 10, 2015 and June 11, 2014, respectively. The appropriations and dividends per share were as follows:

Legal reserve

Cash dividends		 Appropriation of Earnings
For Fiscal Year
2014
For Fiscal Year
2013
$ 131,644
$ 120,489
987,433
941,900		 Dividend Per Share (NT$)
For Fiscal Year
2014
For Fiscal Year
2013
$ 2.6
$ 2.5

The appropriations of earnings for 2015 had been proposed by the Corporation’s board of directors on February 23, 2016. The appropriations and dividends per share were as follows:

Appropriation of Dividends Per Dividends Per
Earnings Share (NT$)
Legal reserve $ 123,656 $ -
Cash dividends 910,200 2.4

The appropriations of earnings for 2015 are subject to the resolution of the shareholders’ meeting to be held on June 7, 2016.

d. Non-controlling interests

Balance, beginning of the year
Share of non-controlling interests
Capital increase of subsidiaries in cash
Net loss
Exchange differences on the translation of foreign financial
statements
Compensation cost of employee share options - subsidiaries (Note
27)
Actuarial gains (loss) on defined benefit plans
Non-controlling interest arising from acquisition of subsidiaries
Share of changes of associates and joint ventures accounted for by
the equity method
Decrease in non-controlling interest - declaration of cash dividends
Balance, end of the year		 For the Years
**December **		 Ended
**31 **


2015
$ 120,140

36,400
(42,015)
2,335
691
(139)
(1,447)
7,525

(2,298)

$ 121,192
 2014
$ 138,951
-
(22,388)
2,396
925
256
-
-

-
$ 120,140
  • 149 -

e. Treasury stock

Corporation’s Corporation’s
Shares Held by
Its Subsidiaries
(In Thousand
Shares)
Balance, January 1, 2014 1,926
Decrease during the year ended December 31, 2014 (10)
Balance, December 31, 2014 1,916
Balance, January 1, 2015 1,916
Decrease during the year ended December 31, 2015
-
Balance, December 31, 2015


1,916
Shares Held
(In Thousand
Subsidiaries Shares) Carrying Value
Market Price
December 31, 2015
Chroma Investment Co., Ltd. 1,916 $ 35,714 $ 122,405
December 31, 2014
Chroma Investment Co., Ltd. 1,916 $ 35,714 $ 157,627

For the year ended December 31, 2014, the Corporation’s subsidiary - Chroma Investment Co., Ltd. sold 10 thousand common shares of Corporation held by it for $741 thousand.

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.

24. ADDITIONAL INFORMATION ON EXPENSES

The following items were included in net income for the years ended December 31, 2015 and 2014:

Finance cost
Interest on bank loans

Interest on convertible bonds

Less: Amount included in the cost of qualifying assets

 For the Years Ended
**December 31 **



2015
2014
$ 24,279
$ 25,706

27,368

17,274
51,647
42,980

(12,653)

(11,680)
$ 38,994
$ 31,300
(Continued)
  • 150 -
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













2015
$ 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
 2014
$ 11,680
1.66%-1.69%
$ 297,188

3,928
$ 301,116
$ 124,228

172,960
$ 297,188
$ 3,928
$ 2,113,963
33,278
63,589
6,150

51,146
$ 2,268,126
$ 520,137

1,747,989
$ 2,268,126

(Concluded)

The existing (2014) Articles of Incorporation of the Corporation stipulate to distribute bonus to employees at 5%-20% and remuneration to directors and supervisors at a fixed amount, respectively, of net income (net of the bonus and remuneration). For the year ended December 31, 2014, the employees’ compensation estimated on the basis of past experience was at 13.6% of net income, or $195,000 thousand. For the year ended December 31, 2014, the remuneration to directors and supervisors was $8,000 thousand in cash.

To be in compliance with the Company Act as amended in May 2015, the proposed amended Articles of Incorporation of the Corporation stipulate to distribute employees’ compensation at 5%-20% and remuneration to directors and supervisors at the rates no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors and supervisors. For the year ended December 31, 2015, the employees’ compensation and the remuneration to directors and supervisors were $135,000 thousand and $8,000 thousand, respectively, representing 8.9% and 0.5%, respectively, of the base net profit. The bonus to employees and remuneration to directors and supervisors for the year ended December 31, 2015 have been proposed by the Corporation’s board of directors on February 23, 2016 and are subject to the resolution of the shareholders in their meeting to be held on June 7, 2016.

  • 151 -

Material differences between such estimated amounts and the amounts proposed by the board of directors on or before the date the annual consolidated financial statements are authorized for issue are adjusted in the year the bonus and remuneration were recognized. 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 bonuses to employees and remuneration to directors and supervisors for 2014 and 2013 which have been approved in the shareholders’ meetings on June 10, 2015 and June 11, 2014, respectively, were as follows:


Bonus to employees

Remuneration of directors and
supervisors		 For the Years Ended December 31 For the Years Ended December 31
2014
Cash Dividends Share Dividends
$ 195,000
$ -

8,000
-		 2013
Cash Dividends Share Dividends
$ 132,000
$ -
8,000
-

There was no difference between the amounts of the bonus to employees and the remuneration to directors and supervisors approved in the shareholders’ meetings on June 10, 2015 and June 11, 2014 and the amounts recognized in the consolidated financial statements for the years ended December 31, 2014 and 2013, respectively.

Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

25. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of income tax expensed 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
**December **		 Ended
**31 **



2015
$ 268,077

17,147

(23,285)

261,939

26,191

$ 288,130
 2014
$ 228,774
21,645

(13,166)
237,253

(9,725)
$ 227,528
  • 152 -

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

Profit before tax from continuing operations
Income tax expense calculated at the statutory rate

Adjustment
Adjustment items in determining taxable income
Tax-exempt income
Temporary difference
Income tax on unappropriated earnings
Investment tax credits
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



2015
$ 1,482,672

$ 252,054

(46,536)
(12,201)
26,191
17,147
(23,182)
7,373
90,569

(23,285)
$ 288,130

 2014
$ 1,523,513
$ 258,997

(49,233)

(15,619)

(9,935)
21,645

(28,820)

4,702
58,957

(13,166)
$ 227,508

The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in 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 2016 appropriations of earnings is uncertain, the potential income tax consequences of 2015 unappropriated earnings are not reliably determinable.

  • 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, 2015

Balance, Exchange Exchange
Beginning of the Recognized in Differences and Balance, End of
Deferred Tax Assets Year Profit or Loss Other 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) - -
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
  • 153 -
Balance, Exchange Exchange Exchange
Beginning of the Recognized in Differences and Balance, End of
Deferred Tax Liabilities Year Profit or Loss Other the Year
Investment income on foreign
investments accounted for by
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

For the year ended December 31, 2014

Balance, Exchange Exchange
Beginning of the Recognized in Differences and Balance, End of
Deferred Tax Assets Year Profit or Loss Other the Year
Unrealized intercompany gain $
35,986
 $ 2,126 $ -
 $
38,112
Accrued pension liabilities 8,567 1,289 - 9,856
Allowance for reduction inventory 13,840 5,901 - 19,741
Tax credit 9,556 - 592 10,148
Impairment loss 11,819 872 - 12,691
Unrealized loss on exchange
difference 1,261 278 - 1,539
Allowance for impaired
receivables 586 1,594 - 2,180
Tax losses 39,768 16,720 2,901 59,389
Others 1,751
 (1,464) 904
 1,191
$
123,134
 $ 27,316 $ 4,397
 $
154,847
Balance, Exchange
Beginning of the Recognized in Differences and Balance, End of
Deferred Tax Liabilities Year Profit or Loss Other the Year
Investment income on foreign
investments accounted for by
the equity method $
79,882
 $ 9,162 $ -
 $
89,044
Unrealized gain on exchange
difference 2,758 3,379 - 6,137
Goodwill 2,990 5,804 - 8,794
Others 5,978
 (754) 226
 5,450
$
91,608
 $ 17,591 $ 226
 $
109,425

  • 154 -

  • 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
Expire in 2016
Expire in 2017
Expire in 2018
Expire in 2019
Expire in 2020
Expire in 2021
Expire after 2022
Investment credits
Purchase of machinery and equipment
Deductible temporary differences
Impairment loss
Valuation loss on financial assets		 December 31






2015
$ 12,721

4,627
30,003
47,327
45,690
68,584

369,647

$ 578,599

$ 8,711

$ 405


(245)

$ 160
 2014
$ -
-
-
28,686
45,690
68,584

265,622
$ 408,582
$ 8,711
$ 405

(205)
$ 200

The unrecognized Investment credits will expire in 2015.

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

As of December 31, 2015, investment tax credits comprised of:

Remaining Remaining
Creditable
Expiry
Laws and Statutes Tax Credit Source Amount Year
Statute for Upgrading Industries
 Purchase of machinery and equipment $ 8,711 2015
Loss carryforwards as of December 31, 2015 comprised of:
Unused Amount Expiry Year
$ 50,600 After 2015
15,286 2016
8,881 2017
33,726 2018
50,540 2019
53,999 2020
61,860 2021
98,654 2022
44,898 2023
55,728 2024
5,151 2025
(Continued)
  • 155 -
Unused Amount Unused Amount Expiry Year
$ 9,763 2028
13,281 2029
9,566 2030
71,260 2031
27,970 2032
2033
$ 651,970
(Concluded)

As of December 31, 2015, 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 2009
Profits on expansion and construction projects for year 2010		 Tax-exemption Period
2011.1.1-2015.12.31
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.
MAS Automation Corp.		 **December ** **31 **



2015
$ 250,190

$ 8,723

$ 10,664

$ 31,791
 2014
$ 214,254
$ 5,144
$ 9,780
$ 30,599

The expected and actual creditable ratios for the appropriation of the Corporation’s earnings of 2015 and 2014, respectively, were 15.76% and 16.73%, respectively. The expected and actual creditable ratios for the appropriation of Chroma New Material Corp.’s earnings of 2015 and 2014, respectively, were 20.77% (expect) and 20.54%, respectively. As of 2015 and 2014, 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. he expected and actual creditable ratios for the appropriation of MAS Automation Corp.’s earnings of 2015 and 2014, respectively, were 22.75% and 28.00%, respectively.

f. Assessment of income tax returns

As of December 31, 2015, the Corporation’s tax returns through 2013 had been examined and cleared by the tax authorities.

The tax return through 2014 of the Corporation subsidiary - Advic Technology Co. had been examined and cleared by the tax authorities.

The tax returns through 2013 of the Corporation’s subsidiaries - Wei Kuang Automatic Equipment Co., Chroma New Material Corp., Chroma Investment Co., Testar Electronic Corp., Adivic Technology Co., EVT Technology Co., and Wei Da Electric Vehicle Co. - had been examined and cleared by the tax authorities.

  • 156 -

26. EARNINGS PER SHARE

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

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		 For the Years Ended
December 31


2015
$ 1,236,557


27,924

$ 1,264,481
 2014
$ 1,318,373

13,341
$ 1,331,714

Shares

Weighted average shares used to calculate basic earnings per share
Dilutive effect of potential common shares:
Convertible bonds
Bonus or employee remuneration
Employee share option
Weighted average shares used to calculate dilutive earnings per share		 (In Thousands of Shares)
For the Years Ended
**December 31 **		 (In Thousands of Shares)
For the Years Ended
**December 31 **


2015
376,984

26,755
2,974

1,292

408,005
 2014
375,496
22,677
3,109

1,487
402,769

Since the Group offered to settle bonuses or employee remuneration paid to employees in cash or shares, the Group assumed the entire amount of the bonus or employee remuneration 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, if the effect as dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

27. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan of Chroma Ate Inc.

The Corporation’s Board of Directors approved Chroma Ate Inc.’s Employee Stock Option Plan on August 7, 2012. The plan was approved by the Securities and Futures Bureau (SFB) on September 17, 2012. The maximum number of options authorized to be granted under the Plan was 8,000 thousand units, with each option eligible to subscribe for one common share of the Corporation when exercised. The options may be granted to qualified employees of the Corporation or any of its subsidiaries, in which the Corporation’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options are valid for six years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plan, the options were granted at an exercise price equal to the closing price of the Corporation’s common shares listed on the TWSE on the grant date. The

  • 157 -

number of outstanding options and the exercise prices had been adjusted to reflect the distribution of earnings by the Corporation in accordance with the plan. Exercise price was $53.5 per share at the issuance date. Due to the appropriation of 2014 and 2013 earnings approved at the annual shareholders meeting for 2015 and 2014, the shareholders approved to distribute dividend of NT$2.6 and NT$2.5 per share, respectively; thus, the exercise price was adjusted to NT$49.9 and NT$51.9 per share, respectively.

The Corporation did not issue additional options for the years ended December 31, 2015 and 2014. Information about Chroma Ate Inc.’s outstanding options for the years ended December 31, 2015 and 2014 was as follows:

For the Years Ended December 31
2015
2014
Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price
(NT$)
Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price
(NT$)
Balance, January 1
5,794
$ 49.9
6,000
$ 51.90
Options forfeited
(118)
-
(206)
-
Options exercised

(384)
49.9

-
-
Balance, December 31

5,292

5,794
Options exercisable, end of
December 31

1,887

-

Weighted-average fair value of options
granted (NT$)

$ 17.88
$ 17.88
Information about outstanding options as follows:
December 31
2014
2013
Range of exercise price (NT$)
$ 49.90
$ 51.90
Weighted-average remained contractual life (years)
3.45
4.45		 **For the Years Ended December 31 ** **For the Years Ended December 31 ** **For the Years Ended December 31 **
2014
Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price
(NT$)
6,000
$ 51.90
(206)
-

-
-

5,794

-
$ 17.88
December 31
$ 2014
2013
49.90
$ 51.90
3.45
4.45

The grant date of aforementioned stock options was July 8, 2013. Chroma Ate Inc. used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

Stock price on grant date (NT$/share) $53.5
Exercise price (NT$/share) $53.5
Expected volatility 36.43%-41.74%
Expected life 4-5 years
Expected dividend rate 0%
Risk-free interest rate 1.12%-1.23%

The Group recognized compensation cost of $25,077 thousand and $33,278 thousand for the years ended December 31, 2015 and 2014.

  • 158 -

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

The Adivic’s board of directors approved Adivic Technology Co.’s Employee Stock Option Plan in 2013. The maximum number of options authorized to be granted under the Plan was 1,360 thousand units, with each option eligible to subscribe for one common share of Adivic Technology Co. when exercised. The option may be granted to qualified employees of Adivic Technology Co. The options granted are valid for 8 years and exercisable at certain percentages after the second anniversary from the grant date. Under the terms of the plan, the options were granted at $10 per common shares.

Adivic Technology Co. did not issue additional options for the year ended December 31, 2015.

Information on employee share options was as follows:

Balance, January 1
Options granted
Options exercised
Balance, December 31
Options exercisable, end of
December 31

Weighted-average fair value of options
granted (NT$)
 For the Years Ended December 31 For the Years Ended December 31
2015
Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price (NT$)
1,135
$ 10.00
-
-

(205)
-

930
-

-
-



$ 2.47
 2014

Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price (NT$)
-
$ -
1,360
10.00

(225)
-

1,135
-

-
-


$ 2.47

Adivic Technology Co. used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

Stock price on grant date (NT$/share) $8.02 Exercise price (NT$/share) $10 Expected volatility 38.75%-40.84% Expected life 5-8 years Expected dividend rate 0% Risk-free interest rate 1.18%-1.52%

Adivic Technology Co. recognized compensation cost of $691 thousand and $925 thousand for the years ended December 31, 2015 and 2014, respectively.

28. BUSINESS COMBINATION

a. Subsidiary acquired

The Corporation’s Board of Directors resolved to participate in the capital increase of EVT Technology Co., Ltd. on June 2, 2015. The investment was originally recorded as financial asset carried at cost. The Corporation’s equity interest in EVT Technology Co., Ltd. rose to 53.2% and the Corporation acquired control over EVT Technology Co., Ltd.; EVT Technology Co., Ltd. was included in the consolidate financial statement since the day the Corporation acquired control over it.

  • 159 -

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

EVT Technology
Co., Ltd. and
Subsidiaries
Current assets
Cash $ 33,897
Accounts receivable 7,210
Inventories 26,241
Prepayments 140
Other current assets 544
Noncurrent assets
Property, plant and equipment 8,131
Refundable deposits 335
Deferred tax assets 11,285
Current liabilities
Short-term borrowing (49,000)
Notes payable (17)
Accounts payable (9,330)
Other payables (384)
Receipts in advance (90)
Other current liabilities
(409)
$ 28,553
  • c. Net cash outflow on acquisition of subsidiaries
EVT Technology
Co., Ltd. and
Subsidiaries
Consideration paid in cash $ (23,000)
Less: Cash and cash equivalent balances acquired
33,897
$ 10,897
  • d. Impact of acquisitions on the results of the Group

The results of acquires since the acquisition date included in the consolidated statement of comprehensive income were as follows:

For the Year
Ended December
31, 2015
Revenue
EVT Technology Co., Ltd. and subsidiaries $ 1,228
Profit
EVT Technology Co., Ltd. and subsidiaries $ (13,435)
  • 160 -

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s revenue from continuing operations would have been $9,693,239 thousand, and the income from continuing 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, 2015, nor is it intended to be a projection of future results.

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

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.

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

  • 1) Fair value hierarchy:

December 31, 2015
Financial assets at FVTPL
Securities listed in ROC
Equity securities

Debt securities

 Level 1
$ 7,921

951

$ 8,872
 Level 2
$ -

-

$ -
 Level 3
$ -

-

$ -
 Total
$ 7,921

951
$ 8,872

(Continued)

  • 161 -
Available-for-sale financial assets
Securities listed in ROC
Equity securities

Open-end beneficial certificate

Financial liability at value through
profit or loss

December 31, 2014
Financial assets at FVTPL
Securities listed in ROC
Equity securities

Debt securities


Available-for-sale financial assets
Securities listed in ROC
Equity securities

Open-end beneficial certificate

Financial liability at value through
profit or loss
 Level 1
$ 359,543

2,057,476

$ 2,417,019

$ -

$ 7,663

975

$ 8,638

$ 468,575

1,873,734

$ 2,342,309

$ -
 Level 2
$ -

-

$ -

$ 1,483

$ -

-

$ -

$ -

-

$ -

$ 927
 Level 3
Total
$ - $ 359,543

-

2,057,476
$ -
$ 2,417,019
$ -
$ 1,483
$ - $ 7,663

-

975
$ -
$ 8,638
$ - $ 468,575

-

1,873,734
$ -
$ 2,342,309
$ -
$ 927
(Concluded)

There were no transfers between Levels 1 and 2 for the years ended December 31, 2015 and 2014.

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

Financial Instruments

Valuation Techniques and Inputs

Derivatives - convertible bonds

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.

  • 162 -

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 **
2015
2014
$ 8,872
$ 8,638
5,603,662
5,485,261
2,625,419
2,527,658
1,483
927
5,519,349
4,997,471

  • 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 and refundable deposits, and trade and other receivables. Those reclassified to held-for-sale disposal groups are also included.

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

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

  • 163 -

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		 **December 31 **
2015
2014
$ 2,720,899
$ 3,000,405
111,698
102,432
889,238
601,696
53,300
74,748
18,136
11,453
1,029,054
1,334,284
405,923
119,910

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 $117,915 thousand and $116,827 thousand for the years ended December 31, 2015 and 2014, 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 borrow 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.

  • 164 -

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 **
2015
2014
$ 838,441
$ 804,796
2,133,726
2,062,069
2,191,155
1,437,593
1,339,793
850,000

Interest rate sensitivity analysis

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

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, 2015 and 2014 would decreased/increased by $4,257 thousand and $2,938 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 $444 thousand and $433 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, 2015 and 2014, respectively; and other comprehensive income would have increased/decreased by $120,851 thousand and $117,116 thousand because of changes in fair values of available-for-sale financial assets held by the Group for the years ended December 31, 2015 and 2014, respectively.

  • 165 -

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 the respective recognized financial assets as stated in the balance sheets; and

2) The amount of contingent liabilities in relation to financial guarantee issued by the Group.

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, 2015 and 2014, the Group’s unused bank credit lines in bank were $3,505,123 thousand and $3,444,900 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.

  • 166 -
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
Short-term bills payable
Notes payable (including related
parties)
Accounts payable (including
related parties)
Other payable
Unsecured convertible bonds
Fixed interest rate instruments
Floating interest rate instruments		 December 31, 2015
Weighted
Average
Effective
Interest Rate
(%)
Within 1 Year
Over 1 Year to
5 Years
-
$ 22,484 $ -
-
1,354,570
-
-
2,298
-
-
665,640
-
-
-
1,854,100
2.31
233,620
124,095
1.02

122,945

1,258,831

$ 2,401,557
$ 3,237,026

December 31, 2014		 More Than 5
Years
$ -

-

-

-

-

33,079

-
$ 33,079
Weighted
Average
Effective
Interest Rate
(%)
Within 1 Year
Over 1 Year to
5 Years
1.38
$ 16,000 $ -
-
59,308
-
-
1,279,721
-
-
745,593
-
-
-
1,854,100
2.43
244,076
143,307
1.62

181,429

649,522

$ 2,526,127
$ 2,646,929
 More Than 5
Years
$ -

-

-

-

-

-

-
$ -

The amounts included in the column “within 1 year” in the above table for bank loans are the maximum amounts the Group could be forced repay immediately if repayment is demanded by the banks. As of December 31, 2015 and 2014, the undiscounted principal amounts of the above bank loans were $360,495 thousand and $425,473 thousand, respectively. 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.

  • 167 -

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”)

EVT Technology Co., Ltd. (“EVT”)

Wei Da Electric Vehicle Co., Ltd.

Dynascan Electronics (Shanghai) Co., Ltd. (“Dynascan Shanghai”)

Dynascan Technology Inc. (“Dynascan U.S.A.”)

Dynascan Japan Inc.

Mou Kuan Industry Co., Ltd. (“Mou Kuan”)
 Relationship with the Group
Associate
Associate
Joint venture
Other related party (the Corporation
acquired control over the
subsidiary since June 1, 2015, refer
to Note 14)
Other related party (the subsidiary of
EVT)
Associate
Associate
Associate
Other related party

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



2015
$ 19,363

$ 20,721


37,932

$ 58,653
 2014
$ 10,995
$ 27,198

20,255
$ 47,453

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

Associates **December 31 ** **December 31 **
2015
$ 11,650
 2014
$ 9,950

Outstanding trade receivables from related parties are unsecured. In the years ended December 31, 2015 and 2014, there was no impairment of trade receivables from related parties; thus, no impairment allowance was recognized.

  • 168 -

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

Other related parties
Associates
The balances of accounts payable at balance sheet date were as follows:
Associates
Other related parties		 **December 31 ** **December 31 **


2015
2014
$ 3,311
$ 4,128

-

11,151
$ 3,311
$ 15,279
**December 31 **


2015
$ 5,789


-

$ 5,789
 2014
$ 2,003

374
$ 2,377
  • f. The balances of accounts payable at balance sheet date were as follows:

The outstanding trade payables from related parties are unsecured.

g. Others

1) Rental income
Associates
Other related parties		 For the Years Ended
**December 31 **		 For the Years Ended
**December 31 **


2015
$ 1,260


218

$ 1,478
 2014
$ 1,260

623
$ 1,883
2) The balances of other current assets - other at
follows:
Associates

Other related parties

 2) The balances of other current assets - other at
follows:
Associates

Other related parties

 balance sheet date were as
**December 31 **		 balance sheet date were as
**December 31 **


2015
$ 136


-

$ 136
 2014
$ 1,753

92
$ 1,845

  • 169 -

  • h. Compensation of key management personnel

The remunerations of directors and other members of key management personnel for the years ended December 31, 2015 and 2014 and were as follows:

Short-term employee benefits
Post-employment benefits		 For the Years Ended
**December 31 **		 For the Years Ended
**December 31 **
2015
$ 88,569

2,022
$ 90,591		 2014
$ 95,919

1,456
$ 97,375

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
Restricted time deposit		 **December ** **31 **


2015
$ 293,492

540,255

14,985

$ 848,732
 2014
$ 225,775
730,213

24,442
$ 980,430

33. OTHER SIGNIFICANT EVENTS

On January 17, 2012, the Corporation, Dynapack International Corporation and Heran Tech. Co., Ltd. (originally named Heran 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.

  • 170 -

  • 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, the Corporation has paid the first part of the third installment $536,729 thousand.

  • 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.

34. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

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		 **December 31 ** **December 31 **
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		 2014
Foreign
Currencies
Exchange Rate
(In Thousands)
(Note)
$ 94,800
31.65
389,326
0.265
118,165
5.09
1,932
38.68
2,807
4.08
42,157
31.65
23,549
5.09

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

  • 171 -

For the years ended December 31, 2015 and 2014, (realized and unrealized) net foreign exchange gains were $61,260 thousand and $94,921 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.

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

  • k. Information on investment in Mainland China:

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

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

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

  • 172 -

  • 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.

  • l. Business relationship and significant intercompany transactions for year ended December 31, 2015: Table 9 (attached).

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.

  • d. Other

  • 1) Segment revenues and results

Special
Materials
Department
For the year ended December
31,
2015
Revenues from external
customers
$ 2,328,151

Intersegment revenues

-

Segment revenues
$ 2,328,151

Consolidated revenues
Segment income
$ 58,639

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		 Test
Instrument
Department
$ 5,666,173

3,539,092

$ 9,205,265

$ 973,445
 Automatic
Equipment
Department
$ 1,260,831


90,468

$ 1,351,299

$ 258,246
 Other
$ 437,210


5,723

$ 442,933

$ (125,825)
 Elimination
Total
$ -
$ 9,692,365
(3,635,283)

-
$ (3,635,283)
9,692,365
$ 9,692,365
$ 55,494
$ 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
(Continued)
  • 173 -
Special
Materials
Department
Test
Instrument
Department
Automatic
Equipment
Department
For the year ended
December 31,
2014
Revenues from external
customers
$ 2,982,980 $ 6,175,051 $ 680,091
Intersegment revenues

-
2,973,521

210,942

Segment revenues
$ 2,982,980
$ 9,148,572
$ 891,033

Consolidated revenues
Segment income
$ 75,744
$ 1,042,999
$ 122,919

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
Impairment loss on financial
assets
Exchange gain, net
Valuation gain on financial
assets (liabilities) at fair
value through profit or loss,
net
Other revenue and expense, net
Interest expense
Operating income before tax		 Other
Elimination
$ 468,963 $ -

1,866
(3,186,329 )

$ 470,829
$ (3,186,329)


$ (61,556)
$ 41,294


 Total
$10,307,085

-
10,307,085
$10,307,085
$ 1,221,400
82,578
27,497
24,192
34,325
2,852
17,325
(15,500 )
94,921
5,455
59,768

(31,300)
$ 1,523,513

(Concluded)

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, 2015 and 2014 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.

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 - noncurrent
Financial assets carried at cost - noncurrent		 December 31 December 31

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		 2014
$ 991,370
10,793,934
977,395
723,920

(2,148,481)
11,338,138
8,638
1,873,734
398,993
468,575
185,349
(Continued)
  • 174 -
Investments accounted for by 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
Short-term bills payable
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






2015
2014
$ 553,139 $ 508,702
-
33,000

156,651

154,847
$ 16,060,439
$ 14,969,976
$ 694,925 $ 722,192
3,454,229
3,011,644
505,502
351,994
318,419
322,368

(2,042,761)

(1,833,731)
2,930,314
2,574,467
301,303
332,725
-
16,000
1,483
927
1,414,123
832,338
1,758,093
1,731,006

123,827

109,425
$ 6,529,143
$ 5,596,888
(Concluded)

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.

  • 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


2015
$ 2,328,151

5,666,173

1,260,831

$ 9,255,155
 2014
$ 2,982,980
6,175,051

680,091
$ 9,838,122

  • 175 -

  • 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 noncurrent assets by geographical location are shown below.


Republic of China

Asia
Other

 Revenue from External Customers
December 31
2015
2014
$ 5,542,291 $ 6,132,685
2,423,594
2,666,702

1,726,480

1,507,698

$ 9,692,365
$ 10,307,085
 Revenue from External Customers
December 31
2015
2014
$ 5,542,291 $ 6,132,685
2,423,594
2,666,702

1,726,480

1,507,698

$ 9,692,365
$ 10,307,085
 Non-current Assets Non-current Assets
December 31


2015
$ 5,542,291
2,423,594

1,726,480

$ 9,692,365


2015
$ 4,298,284

457,730

394,092

$ 5,150,106
 2014
$ 3,807,335

298,252

329,212
$ 4,434,799

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

  • 5) Information about major customers

Company A
 For the Year Ended December 31, 2014 For the Year Ended December 31, 2014
Special Material
Test Instrument
Equipment
$ 1,090,663
$ 11,721
 Total
$ 1,102,384

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

Except for Company A, no revenue from any individual customer exceeded 10% of the Group’s revenue for the year ended December 31, 2014.

  • 176 -

TABLE 1

CHROMA ATE INC. AND SUBSIDIARIES

FINANCING PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. Financing Company
Name		 Counterparty Financial
Statement
Account		 Related
Parties		 Maximum
Balance for
the Period
(Note 5)		 Ending
Balance
(Note 5)		 Balance Used
(Note 5)
Interest
Rate		 Financing
Provided
(Note 6)		 Transaction
Amounts		 Reasons for
Short-term
Financing		 Allowance
for Bad Debt		 **Collateral ** **Collateral ** Financing
Limit for
Each
Borrowing
Company		 Financing
Company’s
Financing
Amount
Limits
Item Value
0 Chroma Ate Inc. (the
“Corporation”)		 Chroma Systems Solutions
Inc.
Chroma Japan Corp.		 Other receivable
Other receivable		 Y
Y		 $ 157,118
44,803		 $ 127,576

42,414		 $ 127,576

41,278		 3.25%-4%
-		 a
a		 $ 353,916
107,565		 -
-		 $ -
-		 -
-		 $ -
-		 $ 941,010
(Note 1)

941,010
(Note 1)		 $ 1,882,021
(Note 2)
1,882,021
(Note 2)
1 Chroma Electronics
(Shenzhen) Co., Ltd.		 Chroma (Shanghai)
Trading Co., Ltd.		 Other receivable Y 54,945
-
-		 2.6% b - Purchase for
PPE		 - - -
297,968
(Note 3)		 297,968
(Note 3)
2 Wei Kuang Automatic
Equipment (Xiamen)
Co., Ltd.		 Chroma (Shanghai)
Trading Co., Ltd.		 Other receivable Y 34,965
3,996
3,996		 2.6% b - Purchase for
PPE		 - - -
198,341
(Note 4)		 198,341
(Note 4)

Note 1: Based on 10% of the net value of the Corporation ($9,410,104 × 10% = $941,010).

Note 2: Based on 20% of the net value of the Corporation ($9,410,104 × 20% = $1,882,021).

Note 3: Based on 70% of the net value calculated based on the latest financial statements of borrowing company that have been audited ($425,668 × 70% = $297,968).

Note 4: Based on 70% of the net value calculated based on the latest financial statements of borrowing company that have been audited ($283,344 × 70% = $198,341).

Note 5: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.825, RMB1=NT$4.995 and JPY1 = NT$0.273 as of December 31, 2015.

Note 6: Financing provided:

a. For transactions.

b. For short-term financing.

-177-

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2015

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

No. Endorsement/
Guarantee Provider		 Counterparty Counterparty Limits on Each
Counter-party’s
Endorsement/
Guarantee
Amount
(Note 1)
Highest Amount
of Guarantee
Provided for the
Year

Ending Balance		 Amount of
Guarantee
Actually Used
Value of
Collateral		 Ratio of
Accumulated
Amount of
Collateral to
Net Equity
Shown in the
Latest Financial
Statements
Maximum
Collateral/
Guarantee
Amounts
Allowable
(Note 2)		 Endorsed/
Guaranteed to
Subsidiaries by
Parent
Company		 Endorsed/
Guaranteed to
Parent
Company by
Subsidiaries		 Endorsed/
Guaranteed to
Investees in
Mainland China
Name Nature of Relationship
0 Chroma Ate Inc. Chroma Ate Inc.
Chroma Japan Corp.		 Subsidiary
Subsidiary		 $ 1,411,516
1,411,516		 $ 131,300
33,280		 $ 131,300
33,280		 $ 65,650
21,840		 $ -
-		 1.40%
0.35%		 $ 2,823,031
2,823,031		 Y
Y		 -
-		 -
-

Note 1: According to Regulation of the “Procedures for Endorsement/Guarantee and lending of Funds”, the Corporation limits the endorsement/guarantee amount on each entity to (a) within 15% of the net value of the Corporation ($9,410,104 × 15% = $1,411,516) 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 ($9,410,104 × 30% = $2,823,031).

Note 3:

The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.825, JPY1 = NT$0.273 as of December 31, 2015.

-178-

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) FOR THE YEAR ENDED DECEMBER 31, 2015

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

Holding Company Name Marketable Securities Type and Issuer Relationship with the
Holding Company		 Financial Statement Account **December ** 31, 2015 Note
Shares/Units
(Thousands)		 Carrying Value Percentage of
Ownership		 Market Value or
Net Asset Value
Chroma Ate Inc. (the “Corporation”)
Chroma New Material Corp.
Chroma Investment Co., Ltd.
Chenhwa Technology Inc.		 Fund
The RSIT Enhanced Money Market Fund
Paradigm Pion Money Market
Yuanta Wan Tai Money Market
Fuh Hwa You Li Money Market Fund
Cathay Taiwan Money Market
Mega Diamond Money Market
Union Money Market
Stocks
DynaColor, Inc.
Chunghwa Telecom Co., Ltd.
China Communications Media Group Co., Ltd.
WK Technology Fund IX Ltd.
Twoway Catv Service Inc.
Tian Zheng International Precision Machinery Co., Ltd.
WK Technology Fund IV Ltd.
WK Technology Fund VI Ltd.
WI Harper INC Fund VII LP
Lasfocus Corporation
Qualitysource SAS
Fund
Fuh Hwa You Li Money Market Fund
The RSIT Enhanced Money Market Fund
Paradigm Pion Money Market
Fund
Hua Nan Kirin Money Market Fund
Stocks
Greatek Electronics Inc.
Adlink Technology Inc.
ICHIA Tech. 2nd Unsecured Convertible Bond
Chroma Ate Inc.
Fei Hong Industrial Co., Ltd.
Cosmactive Broadband Networks Co., Ltd.
Prance System Technology Co., Ltd.
Hangzhou New Material Chroma Co., Ltd.		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Corporation
-
-
-
-		 Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - noncurrent
Available for sale financial assets - noncurrent
Available for sale financial assets - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Available for sale financial assets - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent		 24,722
24,732
18,863
21,184
21,282
20,373
13,098
6,050
412
26
4,614
3,561
2,300
3,200
2,125
-
2,179
9
6,829
4,525
2,642
4,925
85
64
10
1,916
4,174
26
111
285		 $ 292,341
282,411
282,320
282,295
262,135
252,149
170,870
317,642
40,867
1,034
46,140
39,218
33,000
32,000
21,250
10,152
-
-
90,997
53,513
30,171
58,274
3,049
4,872
951
122,405
17,175
110
-
9,355		 -
-
-
-
-
-
-
6.0
-
-
4.6
4.7
9.9
1.9
1.4
-
-
12.2
-
-
-
-
-
-
-
-
10.3
1.5
5.1
19.0		 $ 292,341
282,411
282,320
282,295
262,135
252,149
170,870
317,642
40,867
1,034
-
-
-
-
-
-
-
-
90,997
53,513
30,171
58,274
3,049
4,872
951
122,405
-
-
-
-		 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 1: Based on the closing price as of December 31, 2015.

Note 2: Based on the net asset value of the fund as of December 31, 2015.

-179-

TABLE 4

CHROMA ATE INC. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COST OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITA L FOR THE YEAR ENDED DECEMBER 31, 2015

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

Company
Name		 Type of
Property		 Transaction
Date		 Transaction
Amount		 Payment Term Counter-party Nature of
Relationship		 Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Price
Reference		 Purpose of
Acquisition		 Other Terms

Owner		 Relationship
Transfer
Date		 Amount
Chroma Ate Inc. Construction in
progress and
prepayments
for equipment.
2015.11.16		 $ 536,729 Based on a
contract; the
first part of third
installment had
been paid.
Ministry of the
Interior,
Republic of
China		 - - - - $ - Public
bidding		 Manufacturing,
R&D,
operating and
building
employee
dormitories		 Note

Note: Please see Note 33 to the financial statements for related information.

-180-

TABLE 5

CHROMA ATE INC. AND SUBSIDIARIES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2015

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

Company Name Related Party Nature of
Relationship		 Transaction Transaction Details Abnormal Transaction Abnormal Transaction Notes/Accounts
Receivable (Payable)		 Notes/Accounts
Receivable (Payable)		 Note
Purchase
(Sale)		 Amount % to
**Total **		 Payment Terms Unit Price Payment Terms
Ending
Balance		 % to
**Total **
Chroma Ate Inc. (the “Corporation”)
Neworld Electronics Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Inc. (U.S.A.)
Chroma Ate Inc. (the “Corporation”)
Chroma Systems Solutions Inc.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Europe B.V.
Chroma Ate Inc. (the “Corporation”)
Chroma Electronics (Shenzhen) Co.,
Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Japan Corp.		 Neworld Electronics Ltd.
Chroma Ate Inc. (the
“Corporation”)
Chroma Ate Inc. (U.S.A.)
Chroma Ate Inc. (the
“Corporation”)
Chroma Systems Solutions Inc.
Chroma Ate Inc. (the
“Corporation”)
Chroma Ate Europe B.V.
Chroma Ate Inc. (the
“Corporation”)
Chroma Ate Inc. ((Shenzhen) Co.,
Ltd.
Chroma Ate Inc. (the
“Corporation”)
Chroma Japan Corp.
Chroma Ate Inc. (the
“Corporation”)		 Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company		 (Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase		 $(1,194,767)
1,194,767
(461,646)
461,646
(353,916)
353,916
(215,646)
215,646
(217,182)
217,182
(107,565)
107,565
(26)
100
(10)
100
(8)
100
(5)
100
(5)
100
2
100		 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 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		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1		 -
-
Note 2
Note 2
-
-
-
-
-
-
-
-		 $ 210,900
(210,900)
326,335
(326,335)
126,671
(126,671)
51,545
(51,545)
55,065
(55,065)
106,782
(106,782)		 13
(100)
20
(100)
8
(100)
3
(100)
3
(100)
6

100		 -
-
-
-
-
-
-
-
-
-
-
-

Note 1: The prices were determined after taking the selling and post sale services expenses into consideration.

Note 2: The actual credit period longer than other customers, approximately 12 months.

-181-

TABLE 6

CHROMA ATE INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2015

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

Company Name Related Party Nature of
Relationship		 Ending Balance Turnover Rate Overdue Overdue Amount Received
in Subsequent
Period (Note)		 Allowance for
Bad Debts
Amount Action Taken
Chroma Ate Inc. Neworld Electronics Ltd.
Chroma Ate Inc. (U.S.A.)
Testar Electronic Corporation
Chroma System Solutions Inc.
Chroma System Solutions Inc.
Chroma Japan Corp.
Chroma Japan Corp.		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 Accounts receivable
$ 210,900
Accounts receivable
326,335
Accounts receivable
139,857
Accounts receivable
126,671
Other receivable - financing provided
127,576
Accounts receivable
106,782
Other receivable - financing provided
41,278		 3.17
1.58
0.57
2.79
-
1.15
-		 $ -
-
-
-
-
-
-		 -
-
-
-
-
-
-		 $ 165,422
109,351
-
42,053
-
17,349
-		 $ -
-
-
-
-
-
-

Note: The amounts had been accrued as of February 23, 2016.

-182-

TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2015

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

Investor Investee Location Main Businesses and Products Investment Amount Investment Amount Balance as of December 31, 2015 as of December 31, 2015 Net Income
(Loss) of the
Investee		 Investment
Gain (Loss)		 Note
December 31,
2015		 December 31,
2014		 Shares
(Thousands)		 Percentage of
Ownership		 Carrying
Value
Chroma Ate Inc.
(the “Corporation”)
Chroma Ate Inc. (U.S.A.)
San Eagle Development Corp.
EVT Technology Co., Ltd.
Advic Technology Co., Ltd.		 Neworld Electronics Ltd.
San Eagle Development Corp.
Chroma New Material Corporation
Adlink Technology Inc.
MAS Automation Corp.
CHI Incorporation Ltd.
Chroma Investment Co., Ltd.
Chroma Ate Europe B.V.
DynaScan Technology Corp.
Chroma Systems Solutions, Inc.
Sensational Holding Ltd.
Chroma Ate Inc. (U.S.A.)
Deep Red Holding Co., Ltd.
Chen Hwa Technology Inc.
Adivic Technology Co.
Testar Electronic Corporation
Chroma Japan Corp.
Chih Ho Shun Development Co., Ltd.
EVT Technology Co., Ltd.
Chroma Systems Solutions Inc.
Wei Kuang Mech Eng Inc.
Wei Da Electric Vehicle Co., Ltd.
Advic Holding Corporation		 Hong Kong
British Virgin Islands
Taoyuan, Taiwan
New Taipei, Taiwan
Hsinchu, Taiwan
British Virgin Islands
New Taipei, Taiwan
The Netherlands
Taoyuan, Taiwan
U.S.A.
British Virgin Islands
U.S.A.
Mauritius
British Virgin Islands
Taipei, Taiwan
Taoyuan, Taiwan
Japan
Taoyuan, Taiwan
Taoyuan, Taiwan
U.S.A.
Mauritius
Pingtung, Taiwan
Samoa		 Sale and maintenance of electronic test instruments, etc.
Investment
Sale and processing of gold wire
Manufacturing, processing and retailing of software/hardware of
computers and peripherals
Design, manufacturing, installment and testing of automated
factory conveyor systems
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 maintenance of electronic test instruments, etc.
Investment
Test of inductance, capacitance and resistance, and sale of parts
Sale and research of RF device
Testing of LED products
Sale and maintenance of electronic test instruments, etc.
Construction and development of residence, buildings and
specialized field; construction and investment of public works
Manufacturing of motorcycles and its parts
Sale and maintenance of electronic test instruments, etc.
Investments
Sale and lease of motorcycles
Sale and research of RF device		 $ 271,873
186,514
480,715
82,325
533,000
122,884
80,000
54,026
238,746
29,628
38,301
29,895
12,217
98,217
112,200
247,096
147,125
17,500
27,623
64
185,686
3,750
15,223		 $ 271,873
186,514
480,715
82,325
533,000
122,884
80,000
54,026
238,746
29,628
38,301
29,895
12,217
19,977
81,600
247,096
147,125
17,500
4,623
64
185,686
3,750
-		 64,013
2,050
25,000
23,208
10,000
3,830
14,000
1
9,841
120
1,200
1,000
215
3,085
11,220
20,160
9
1,750
2,658
240
4,475
375
500		 100.0
100.0
100.0
11.5
100.0
100.0
100.0
100.0
27.3
25.0
100.0
100.0
100.0
100.0
51.0
67.2
100.0
35.0
53.2
50.0
100.0
75.0
100.0		 $ 705,291
624,769
437,683
457,674
446,591
133,231
102,030
84,939
77,960
(56,946)
52,699
68,577
45,408
111,655
36,119
10,446
(24,387)
17,505
8,275
104,745
616,683
(3,567)
5,496		 $ 85,873
11,571
49,527
606,101
220,615
(19,416)
5,358
20,710
21,788

41,021
1,165
31,094
961
4,173
(60,023)
(48,424)

(5,965)
269
(20,756)
41,021
11,648

(3,251)
(10,556)		 $ 85,873
11,571
49,527
70,124
222,533

(19,416)
365
20,710
5,948
10,255
1,165
31,090
961
4,173

(32,621)

(32,541)

(5,965)
94

(7,200)
NA
NA

NA

NA		 Subsidiary
Subsidiary
Subsidiary
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Joint venture
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary

-183-

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars or Foreign Currency, Unless Stated Otherwise)

Investee Company Main Businesses and Products Main Businesses and Products Total Amount of
Paid-in Capital
(Note 2)
Method of Investment
(Note 1)		 Accumulated
Outflow of
Investment from
Taiwan as of
January 1, 2015
(Note 3)		 Investment Flows Investment Flows Accumulated
Outflow of
Investment from
Taiwan as of
December 31,
2015
(Note 3)
Net Income
(Loss) of the
Investee		 Percentage of
Ownership in
Investment
Investment
Gain (Loss)
(Notes 4 and 5)		 Carrying
Value as of
December 31,
2015
(Note 2)		 Accumulated
Inward
Remittance of
Earnings as of
December 31,
2015

Outflow		 Inflow
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma (Shanghai) Trading Co., Ltd.
Hangzhou New Material Chroma Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Wei Kuang Automatic Equipment (Nanjin)
Co., Ltd.
Wei Kuang Automatic Equipment (Xiamen)
Co., Ltd.
Mou Kuan Technologies (Nanjin) Co., Ltd.
Sajet System Technology (Suzhou) Co., Ltd.		 Sale of power supplies automatic test
systems, signal generators, DC electronic
load, color analyzer, uninterruptible power
supply, switching mode rectifier and etc.
Sale of power supplies automatic test
systems, signal generators, DC electronic
load, uninterruptible power supply,
switching mode rectifier and etc.
International and transit trading, commercial
simple processing and commercial
consulting service and etc.
Production and sale of semiconductor
connecting materials
Sale of power supplies automatic test
systems, signal generators, DC electronic
load, uninterruptible power supply,
switching mode rectifier and etc.
Sale and maintenance of electronic
equipment and factory conveyor systems
Sale and maintenance of electronic
equipment and factory conveyor systems
Assembly, sale and maintenance of factory
conveyors and related systems and renders
related after-sales services
Research, development and design of
computer network security systems and
information management		 $ 127,050
(HK$ 30,000)
98,475
(US$ 3,000)
88,628
(US$ 2,700)
49,238
(US$ 1,500)
124,735
(US$ 3,800)
59,296
(RMB 11,871)
57,028
(RMB 11,417)
8,676
(RMB
1,737)
8,671
(RMB
1,736)		 b. Subsidiary of
Neworld Electronics
Ltd.
b. Subsidiary of
Neworld Electronics
Ltd.
b. Subsidiary of Chen
Hwa Technology Inc.
b. Subsidiary of Chen
Hwa Technology Inc.
b. Subsidiary of Chi
Incorporation Ltd.
b. Subsidiary of Wei
Kuang Mech Eng Inc.
b. Subsidiary of Wei
Kuang Mech Eng Inc.
b. Subsidiary of Wei
Kuang Mech Eng Inc.
b. Subsidiary of Deep
Red Holding Co.,
Ltd.		 $ 132,178
(HK$ 1,200
US$ 3,853)
101,993
(US$ 3,000)
6,748
(US$ 200)
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)		 $ -
-
78,240
(US$ 2,500)
-
-
-
-
-

-		 $ -

-
-

-

-

-

-

-

-		 $ 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)		 $ 35,684
1,132
(710)
30,339
(19,105)
1,923
9,880
35

946		 100
100
100
19
100
100
100
100
100		 $ 35,684
1,132
(710)
-
(19,105)
1,923
9,880
35
946		 $ 425,503

59,315

99,230

9,355
164,223

238,736

286,759

48,056

45,397		 $ -

-

-

12,065
(US$ 368)

-

-

-

-

-
Accumulated Investment in Mainland China as of
December 31, 2015		 Investment Amounts Authorized by the
Investment Commission, MOEA		 Upper Limit on Investment
$635,051
(HK$1,200, US$19,312)		 $695,162
(HK$1,400, US$21,086)
(Note 6)		 $5,646,062 (Note 7)

(Continued)

-184-

Note 1: Methods of investment have following types:

  • a. Direct investment in mainland China.

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

Note 2: The amounts of paid-in capital and carrying value as of December 31, 2015 were translated into New Taiwan dollars at the rates of HK$1=NT$4.235, US$1=NT$32.825, RMB1=NT$4.995 vailing on December 31, 2015.

  • Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2015 and December 31, 2015 were translated into New Taiwan dollars on the original outflow day.

  • Note 4: Based on audited financial statements.

Note 5: Investment income (loss) was translated into New Taiwan dollars at the average rate of HK$1=NT$4.094, US$1=NT$31.739, RMB1=NT$5.033 for the year ended December 31, 2015.

Note 6:

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

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

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

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

(Concluded)

-185-

TABLE 9

CHROMA ATE INC. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Numbe
r		 Company Name Counterparty Flow of
Transactions
(Note 1)		 Transaction Details Transaction Details Percentage to
Consolidated
Total
Operating
Revenues or
Total Assets

Account		 Amount Transaction Terms
0 Chroma Ate. Inc. (the “Corporation”) Neworld Electronics Ltd.
Chroma U.S.A.
Chroma Systems Solutions Inc.
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Europe
Chroma Japan
Testar Electronic Co.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
MAS Automation Corp.
Adivic Technology Co.
MAS Automation Corp.
Chroma U.S.A.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma Systems Solutions Inc.
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.
Chroma Japan
Chroma Electronics (Shenzhen) Co., Ltd.
Neworld Electronics Ltd.
Chroma U.S.A.
Chroma Japan
Testar Electronic Co.
Chroma Systems Solutions Inc.
Neworld Electronics Ltd.
Chroma New Material Corporation
Testar Electronic Co.
MAS Automation Corp.
Neworld Electronics Ltd.
Chroma U.S.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		 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
Rental income
Rental income
Rental income
Commissions expense
Commissions expense
Commissions expense
Commissions expense
Commissions expense
Operating expense
Operating expense
Operating expense
Operating expense
Operating expense
Interest revenue
Non-operating income
Non-operating income
Non-operating income
Notes receivable
Accounts receivable
Accounts receivable		 $ 1,194,767
461,646
353,916
217,182
215,646
107,565
81,042
72,646
29,571
7,468
12
14,456
15,273
145
82
15
14,049
672
305
13,469
12,119
3,296
2,197
797
4,112
3,005
2,100
98
6
5,067
14,701
6,000
650
3,920
210,900
326,335		 Note 2
Note 2
Note 2
Note 2
Note 2
Based on regular terms
Based on regular terms
Note 2
Note 2
Based on regular terms
Based on regular terms
Based on regular terms
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
Note 3		 12
5
4
2
2
1
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
2

(Continued)

-186-

Numbe
r		 Company Name Counterparty Flow of
Transactions
(Note 1)		 Transaction Details Transaction Details Percentage to
Consolidated
Total
Operating
Revenues or
Total Assets

Account		 Amount Transaction Terms
Testar Electronic Co.
Chroma Systems Solutions Inc.
Chroma Japan
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Europe
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Adivic Technology Co.
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.
MAS Automation Corp.
Chroma U.S.A.
Chroma Europe
Chroma Systems Solutions Inc.
Chroma Japan
Chroma U.S.A.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Neworld Electronics Ltd.
Chroma Japan
Chroma U.S.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		 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
Accrued expense
Accrued expense
Accrued expense
Accrued expense
Accrued expense
Temporary receipts		 $ 139,857
126,671
106,782
55,065
51,545
22,560
12,126
13
373
2,298

127,576

41,278
85,876
3,591
1,182
92
25,466
3,327
33
21
11
1,169
292
4,081
2
82
3,909		 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		 1
1
1
-
-
-
-
-
-
-
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 Chroma U.S.A. Advic Holding Corp.
Testar Electronic Co.
MAS Automation Corp.
Chroma Electronics (Shenzhen) Co., Ltd.
Advic Holding Corp.
Testar Electronic Co.
Chroma Systems Solutions Inc.
Testar Electronic Co.		 b
b
b
b
b
b
a
b		 Operating revenue
Operating revenue
Operating revenue
Operating costs
Accounts receivable
Accounts receivable
Dividends receivable
Other receivable		 10,557
319
8
320
3,397
121
4,596
120		 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		 -
-
-
-
-
-
-
-
2 Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd.
MAS Automation Corp.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Electronics (Shenzhen) Co., Ltd.		 a
b
b
a

b
b
a
a		 Operating revenue
Operating revenue
Operating revenue
Operating revenue
Operating costs
Operating costs
Operating costs
Commissions expense		 378,291
115,790
82,445
20,515
45,418
565
36
42,459		 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		 4
1
1
-
-
-
-
-

(Continued)

-187-

Number Company Name Counterparty Flow of
Transactions
(Note 1)		 Transaction Details Transaction Details Percentage to
Consolidated
Total Operating
Revenues or
Total Assets
Account Amount Transaction Terms
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma Electronics (Shenzhen) Co., Ltd.
MAS Automation Corp.
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.		 b
a
a
b
a
a
b
a
a
a
b
b		 Commissions expense
Commissions expense
Accounts receivable
Accounts receivable
Accounts receivable
Other receivable
Prepayments
Account payable
Other payable
Other payable
Other payable
Receipts in advance		 $ 24,575
17,751
82,541
33,495
4,131
154,530
138,982
37
3,120
2,855
2,869
139,643		 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		 -
-
1
-
-
1
1
-
-
-
-
1
3 Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Sajet System Technology (Suzhou) Co., Ltd.
Chroma Systems Solutions Inc.
Adivic Technology Co.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Sensational
Chroma (Shanghai) Trading Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Sajet System Technology (Suzhou) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Chroma Electronics (Shanghai) Co., Ltd.
Chroma (Shanghai) Trading Co., Ltd.
Chroma (Shanghai) Trading Co., Ltd.
Chroma Ate (Suzhou) Ltd.		 b
b
b
b
b
b
b
b
b
b
b
b
b
b
b
b		 Operating revenue
Operating revenue
Operating revenue
Operating revenue
Operating revenue
Operating costs
Operating costs
Rent expense
Rent expense
Commissions expense
Commissions expense
Accounts receivable
Accounts receivable
Prepayments
Other receivable
Account payable		 18,409
14,579
540
176
1,253
4,212
3
303
1,793
3,926
3,798
39,628
39,086
223
445
1,925		 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		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4 Chroma Electronics (Shanghai) Co., Ltd. Chroma Ate (Suzhou) Ltd.
Chroma Ate (Suzhou) Ltd.		 b
b		 Operating costs
Account payable		 6,214
6,445		 Based on regular terms
Based on regular terms		 -
-
5 MAS Automation Corp. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.		 b
b
b
b
b
b		 Operating revenue
Operating revenue
Operating costs
Operating costs
Non-operating income
Non-operating income		 2,587
14,006
2,655
266
5,408
1,903		 Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms		 -
-
-
-
-
-
6 Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Mou Kuan Technologies (Nanjin) Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.		 b
b
b
b
b		 Operating revenue
Operating revenue
Operating costs
Operating costs
Accounts receivable		 5,688
19
2,251
738
675		 Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms		 -
-
-
-
-
(Continued)

-188-

Number Company Name Counterparty Flow of
Transactions
(Note 1)		 Transaction Details Transaction Details Percentage to
Consolidated
Total Operating
Revenues or
Total Assets
Account Amount Transaction Terms
Chroma Ate (Suzhou) Ltd.
Chroma (Shanghai) Trading Co., Ltd.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.		 b
b
b		 Accounts receivable
Other receivable
Receipts in advance		 $ 22
3,996
17,532		 Based on regular terms
Based on regular terms
Based on regular terms		 -
-
-
7 Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd.
Chroma Ate (Suzhou) Ltd.
Mou Kuan Technologies (Nanjin) Co., Ltd.
Mou Kuan Technologies (Nanjin) Co., Ltd.		 b
b
b
b		 Operating revenue
Operating revenue
Operating costs
Accounts receivable		 1,090
187
1,016
349		 Based on regular terms
Based on regular terms
Based on regular terms
Based on regular terms		 -
-
-
-
8 Chroma Ate (Suzhou) Ltd. Sajet System Technology (Suzhou) Co., Ltd.
Sajet System Technology (Suzhou) Co., Ltd.
Sajet System Technology (Suzhou) Co., Ltd.		 b
b
b		 Commissions expense
Operating costs
Account payable		 377
1,510
1,726		 Based on regular terms
Based on regular terms
Based on regular terms		 -
-
-
9 EVT Technology Co., Ltd. Wei Da Electric Vehicle Co., Ltd.
Wei Da Electric Vehicle Co., Ltd.		 a
a		 Operating revenue
Accounts receivable		 38
4,910		 Based on regular terms
Based on regular terms		 -
-

Note 1: a. From parent to subsidiary.

b. Between subsidiaries.

Note 2: The prices were determined after taking the selling and post-sale service expenses into consideration.

Note 3: The collection periods of about 12 months were longer than those for third parties.

(Concluded)

-189-

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

We have audited the accompanying balance sheets of Chroma Ate Inc. (the “Corporation”) as of December 31, 2015 and 2014, and the related statements of comprehensive income, change in shareholders’ equity and cash flows for the years ended December 31, 2015 and 2014. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Regulation Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chroma Ate Inc. as of December 31, 2015 and 2014, and the result of its operations and cash flows for the years ended December 31, 2015 and 2014, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

February 23, 2016

Notice to Readers

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

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

  • 190 -

BALANCE SHEETS (In Thousands of New Taiwan Dollars)

CHROMA ATE INC.

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)

Available-for-sale financial assets - current (Notes 4 and 8)
Investments in bonds with no active market quotes (Notes 4, 6 and 10)
Notes receivable - related parties (Note 27)
Notes receivable - third parties
Accounts receivable - third parties, net (Notes 4, 5 and 11)
Accounts receivable - related parties (Notes 4, 5, 11 and 27)
Other receivable - related parties (Note 27)
Inventories (Notes 4, 5 and 12)
Prepayments
Other current assets (Note 27)

Total current assets

NONCURRENT ASSETS
Available-for-sale financial assets - noncurrent (Notes 4 and 8)
Financial assets carried at cost - noncurrent (Notes 4 and 9)
Investments accounted for by the equity method (Notes 4, 5 and 13)
Property, plant and equipment (Notes 4, 14 and 28)
Goodwill (Notes 4, 5 and 15)
Deferred tax assets (Notes 4, 5 and 22)
Prepayments for equipment
Refundable deposits
Prepayments for investments
Other noncurrent assets

Total noncurrent assets

TOTAL

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 16)

Short-term bills payable
Financial liability at fair value through profit or loss - current (Notes 4 and 7)
Notes payable
Accounts payable
Accounts payable - related parties (Note 27)
Other payable (Note 18)
Current tax payable (Notes 4, 5 and 22)
Receipts in advance (Note 27)
Current portion of long-term borrowings (Notes 4 and 16)
Other current liabilities - other

Total current liabilities

NONCURRENT LIABILITIES
Long-term borrowings (Notes 4 and 16)
Bonds payable (Notes 4 and 17)
Deferred income tax liabilities (Notes 4 and 22)
Net defined benefit liabilities (Notes 4, 5 and 19)
Guarantee deposits received

Total noncurrent liabilities

Total liabilities

EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 20 and 24)
Common stock

Capital surplus

Retained earnings
Legal reserve
Special reserve
Unappropriated earnings

Total retained earnings

Other equities

Treasury stock

Total equities

TOTAL
 December 31, 2015
Amount
%
$ 878,892
6
1,824,521
13
-
-
3,920
-
6,784
-
591,750
4
1,063,503
8
168,854
1
1,300,519
9
51,834
1

109,114

1


5,999,691
43

359,543
2
181,760
1
3,339,519
24
1,844,215
13
94,424
1
88,429
1
2,046,426
15
1,943
-
-
-

8,966

-


7,965,225
57

$ 13,964,916
100

$ 100,000
1
-
-
1,483
-
35
-
534,402
4
34,647
-
459,173
4
136,340
1
28,111
-
-
-

16,515

-


1,310,706
10

1,230,000
9
1,758,093
12
115,166
1
140,281
1

566

-


3,244,106
23


4,554,812
33


3,791,699
27


1,302,269

9

1,600,920
11
86,888
1

2,264,377
16


3,952,185
28


399,665

3


(35,714)

-


9,410,104
67

$ 13,964,916
100
 December 31, 2014
(Audited after Restated)
Amount
%
$ 482,015
4

1,634,854
12

51,091
-

405
-

7,722
-

974,700
7

1,304,757
10

174,126
1

1,256,528
10

28,654
-

100,789

1


6,015,641
45


468,575
4

159,044
1

3,074,447
23

1,907,429
14

94,424
1

80,157
1

1,431,535
11

2,675
-

33,000
-

24,812

-


7,276,098
55

$ 13,291,739
100

$ 150,000
1

-
-

927
-

1,051
-

440,799
3

102,703
1

499,106
4

166,794
1

7,815
-

70,000
1

16,167

-


1,455,362
11


630,000
4

1,731,006
13

102,987
1

118,870
1

566

-


2,583,429
19


4,038,791
30


3,787,821
29


1,256,654

9


1,469,276
11

86,888
1

2,180,919
16


3,737,083
28


507,104

4


(35,714)

-


9,252,948
70

$ 13,291,739
100
 January 1, 2014
(Audited after Restated)		 January 1, 2014
(Audited after Restated)




























































































































Amount
%
$ 404,475
4

-
-

1,600
-

15,375
-

574
-

646,126
6

1,031,310
9

217,825
2

1,174,172
11

25,871
-

90,104

1

3,607,432
33

534,668
5

141,777
1

3,136,883
29

1,924,727
17

94,424
1

70,069
1

1,432,824
13

3,137
-

2,767
-

41,778

-

7,383,054
67
$ 10,990,486
100
$ 550,000
5

80,000
1

-
-

966
-

351,694
3

33,625
-

397,260
4

113,273
1

8,190
-

-
-

16,512

-

1,551,520
14

700,000
6

-
-

82,872
1

97,395
1

1,003

-

881,270

8

2,432,790
22

3,767,599
34

960,198

9

1,348,787
12

86,888
1

1,951,324
18

3,386,999
31

478,800

4

(35,900)

-

8,557,696
78
$ 10,990,486
100

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

  • 191 -

CHROMA ATE INC.

STATEMENTS OF INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUES (Notes 4 and 27)
Sale revenues

Less:
Sales returns
Sales allowances

Net operating revenues
OPERATING COSTS (Notes 12, 21 and 27)

GROSS PROFIT
UNEARNED GROSS PROFIT

EARNED OPERATING PROFIT

OPERATING EXPENSES (Notes 21 and 27)
Selling
General administrative
Research and development

Total operating expenses

OPERATING INCOME

NONOPERATING INCOME AND EXPENSE
Share of profits of associates and joint venture, net
(Notes 4 and 13)
Foreign currency exchange gain, net (Notes 4
and 30)
Impairment loss (Notes 4 and 9)
Gain on disposal of investments, net (Note 4)
Valuation gain on financial assets (liabilities) at fair
value through profit, net (Notes 4, 7 and 17)
Other expenses
Gain on disposal of property, plant and equipment,
net (Note 4)
Gain on reversal of bad debts
Subsidy income (Note 4)
Rental income (Note 27)
Dividend income (Note 4)
Other income - other (Note 27)
Interest income (Notes 4 and 27)		 **Years Ended ** **December 31 ** **December 31 **
2015
Amount
%
$ 4,605,024
101
(62,184) (1)

(3,399)

-

4,539,441
100
(1,977,863)
(44)

2,561,578
56

(41,744)
(1)


2,519,834
55

552,449
12
357,284
8

784,380
17


1,694,113
37


825,721
18

416,646
9
52,536
1
(14,674)
-
368
-
(556)
-
(850)
-
394
-
9,000
-
18,302
-
30,882
1
29,724
1
20,735
1
6,141
-		 2014
(Audited after Restated)
































Amount
%
$ 5,162,703
100

(20,743)
-

(6,761)

-

5,135,199
100
(2,361,025)
(46)

2,774,174
54

(21,257)

-

2,752,917
54

539,957
10

406,909
8

753,906
15

1,700,772
33

1,052,145
21

226,181
4

84,046
2

(15,500)
-

14,571
-

3,933
-

(1,842)
-

318
-

-
-

37,840
1

31,552
1

27,630
-

21,608
-

12,122
-
(Continued)
  • 192 -

CHROMA ATE INC.

STATEMENTS OF INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Management service income (Note 27)

Interest expense (Notes 4 and 21)

Total nonoperating income and expense

INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 22)

NET INCOME

OTHER COMPREHENSIVE INCOME, NET
(Note 20)
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 by the equity-method
Item that may be reclassified subsequently to profit
or loss
Exchange differences on translating foreign
operations
Unrealized loss from available-for-sale financial
assets
Share of other comprehensive income of
associates accounted for by the equity-method

Total other comprehensive income

TOTAL COMPREHENSIVE INCOME

EARNINGS PER SHARE (NT$; Note 23)
Basic
Diluted		 **Years Ended ** **December 31 ** **December 31 **
2015
Amount
%
$ 8,650
-

(28,834)
(1)


548,464
12

1,374,185
30

137,628

3


1,236,557
27

(26,849) (1)
352
-
(17,071)
-
(99,791) (2)

9,423

-


(133,936)
(3)

$ 1,102,621
24

$3.28
$3.10		 2014
(Audited after Restated)



















Amount
%
$ 11,000
-

(21,627)

-

431,832

8

1,483,977
29

165,604

3

1,318,373
26

(27,308) (1)

919
-

89,661
2

(63,519) (1)

2,162

-

1,915

-
$ 1,320,288
26
$3.51
$3.30

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

(Concluded)

  • 193 -

CHROMA ATE INC.

STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Amounts Per Share)

Issued Capital
Capital Surplus
BALANCE, JANUARY 1, 2014
$ 3,767,599
$ 960,198
Effect of retrospective application and retrospective restatement

-

-
BALANCE AT JANUARY 1, 2014, AS RESTATED

3,767,599

960,198
Appropriation of the 2013 earnings
Legal reserve
-
-
Cash dividends - NT$2.5 per share
-
-
Net income for the year ended December 31, 2014
-
-
Other comprehensive income for the year ended December 31, 2014

-

-
Total comprehensive income for the year ended December 31, 2014

-

-
Change in other capital surplus
Equity component of convertible bonds issued by the Corporation
-
141,487
Change in capital surplus from investments in subsidiaries, associates and
joint ventures accounted for using the equity method
-
1,064
Convertible bonds converted to ordinary shares
20,222
115,283
Disposal of the Corporation's share held by subsidiaries
-
555
Compensation recognized for employee stock options
-
33,278
Adjustment of capital surplus for the Corporation's cash dividends received
by subsidiaries

-

4,789
Increase (decrease) in total equities for the year ended December 31, 2014

20,222

296,456
BALANCE, DECEMBER 31, 2014, AS RESTATED
3,787,821
1,256,654
Appropriation of the 2014 earnings
Legal reserve
-
-
Cash dividends - NT$2.6 per share
-
-
Change in other capital surplus
Change in capital surplus from investments in subsidiaries, associates and
joint ventures accounted for using the equity method
-
-
Net income for the year ended December 31, 2015
-
-
Other comprehensive income for the year ended December 31, 2015

-

-
Total comprehensive income for the year ended December 31, 2015

-

-
Convertible bonds converted to ordinary shares
42
239
Adjustments of capital surplus for the Corporation's cash dividends received
by subsidiaries
-
4,994
Compensation recognized on employee stock options

3,836

40,382
Increase (decrease) in total equities for the year ended December 31, 2015

3,878

45,615
BALANCE, DECEMBER 31, 2015
$ 3,791,699
$ 1,302,269		 **Retained Earnings ** Total
$ 3,406,913

(19,914)

3,386,999
-
(941,900 )
1,318,373

(26,389)

1,291,984
-
-
-
-
-

-

350,084
3,737,083
-
(987,433 )
(7,525 )
1,236,557

(26,497)

1,210,060
-
-

-

215,102
$ 3,952,185		 Other Equities Total Other
Equities
Treasury Stock
Total Equities
$ 478,800
$ (35,900 )
$ 8,577,610

-

-

(19,914)

478,800

(35,900)

8,557,696
-
-
-
-
-
(941,900 )
-
-
1,318,373

28,304

-

1,915

28,304

-

1,320,288
-
-
141,487
-
-
1,064
-
-
135,505
-
186
741
-
-
33,278

-

-

4,789

28,304

186

695,252
507,104
(35,714 )
9,252,948
-
-
-
-
-
(987,433 )
-
-
(7,525 )
-
-
1,236,557

(107,439)

-

(133,936)

(107,439)

-

1,102,621
-
-
281
-
-
4,994

-

-

44,218

(107,439)

-

157,156
$ 399,665
$ (35,714)
$ 9,410,104
Exchange
Differences on
Unrealized Gain
(Loss) from
Translating
Foreign Operations
Available-for-sale
Financial Assets
$ 44,755
$ 434,045


-

-


44,755

434,045

-
-
-
-
-
-

92,001

(63,697)


92,001

(63,697)

-
-
-
-
-
-
-
-
-
-

-

-


92,001

(63,697)

136,756
370,348
-
-
-
-
-
-
-
-

(8,788)

(98,651)


(8,788)

(98,651)

-
-
-
-

-

-


(8,788)

(98,651)

$ 127,968
$ 271,697
Legal Reserve
Special Reserve
Unappropriated
Earnings
$ 1,348,787
$ 86,888
$ 1,971,238


-

-

(19,914)


1,348,787

86,888

1,951,324

120,489
-
(120,489 )
-
-
(941,900 )
-
-
1,318,373

-

-

(26,389)


-

-

1,291,984

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-

-

-


120,489

-

229,595

1,469,276
86,888
2,180,919
131,644
-
(131,644 )
-
-
(987,433 )
-
-
(7,525 )
-
-
1,236,557

-

-

(26,497)


-

-

1,210,060

-
-
-
-
-
-

-

-

-


131,644

-

83,458

$ 1,600,920
$ 86,888
$ 2,264,377

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

  • 194 -

CHROMA ATE INC.

STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income before income tax

Adjustments for:
Share of profits of subsidiaries, associates and joint venture, net
Depreciation
Unrealized foreign currency exchange gain
Unrealized gain on the transactions with subsidiaries, associates and
joint ventures
Impairment loss on non-derivative financial assets
Dividend income
Interest expense
Compensation cost of employee stock options
Impairment loss on financial assets
(Gain on reversal) bad debts expense
Interest income
Gain on disposal and retirement of property, plant and equipment,
net
Gain on disposal of investments, net
Net changes related to operating assets and liabilities
Financial assets held for trading
Notes receivable
Accounts receivable
Inventories
Prepayments
Other current assets
Financial liabilities held for trading
Notes payable
Accounts payable
Other payables
Receipts in advance
Other current liabilities
Net defined benefit liabilities

Cash provided by operating
Income tax paid

Net cash generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Payment to acquire property, plant and equipment
Payment to acquire available-for-sale financial assets
Dividend received
Payment to acquire investments accounted for by the equity method
Proceeds of the disposal available-for-sale financial assets		 Years Ended December 31



2015
2014 (Audited
after Restated)
$ 1,374,185
$ 1,483,977
(416,646)
(226,181)
158,264
146,470
(43,566)
(71,616)
41,744
21,257
32,452
51,000
(29,724)
(27,630)
28,834
21,627
25,077
33,278
14,674
15,500
(9,000)
24,000
(6,141)
(12,122)
(394)
(318)
(368)
(14,571)
-
102
(2,577)
7,822
662,903
(561,375)
(118,162)
(224,300)
(23,180)
(2,783)
(6,175)
16,323
556
(3,933)
(1,016)
85
30,657
152,394
(40,500)
101,610
20,296
(375)
348
(345)
(5,438)

(5,833)
1,687,103
924,063
(164,175)

(101,152)
1,522,928

822,911
(658,699)
(25,526)
(300,000) (2,163,975)
259,269
425,859
(131,840)
(59,163)
119,942
546,164
(Continued)
  • 195 -

CHROMA ATE INC.

STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

Proceeds from disposal of investment in bonds with no quoted market
Payment to acquire financial assets at cost
Decrease in other noncurrent assets
Cash returned of capital reduction of financial assets carried at cost
Decrease in other receivables - related parties
Interest received
Proceeds from disposal of property, plant and equipment
Decrease in refundable deposits
Payment to acquire investment in bonds with no quoted market
Increase in prepayments for long-term investments

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends
Increase in long-term borrowings
Decrease in short-term borrowings
Employee incentive stock options
Interest paid
Proceeds of the issuance of convertible bonds payable
Increase in short-term bills payable
Decrease in guarantee deposits

Net cash (used in) generated from financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES

NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS, END OF YEAR
 Years Ended December 31







2015
2014 (Audited
after Restated)
$ 51,091
$ -
(16,140)
(30,000)
15,846
16,966
11,750
-
11,384
51,560
6,303
12,772
3,452
836
732
462
-
(49,491)
-

(33,000)
(626,910)
(1,306,536)
(987,433)
(941,900)
530,000
-
(50,000)
(400,000)
19,141
-
(13,480)
(16,048)
-
1,994,680
-
(80,000)
-

(437)
(501,772)

556,295
2,631

4,870
396,877
77,540
482,015

404,475
$ 878,892
$ 482,015

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

(Concluded)

  • 196 -

CHROMA ATE INC.

NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

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

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

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Corporation’s Board of Directors on February 23, 2016.

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

  • a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC

Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC on April 3, 2014, stipulated that the Corporation should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015.

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version would not have any material impact on the Corporation’s accounting policies:

  • 1) IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive, please refer to Note 13 for related disclosures

  • 2) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required by the previous standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy previously required only for financial instruments will be extended by IFRS 13 to cover all assets and liabilities within its scope.

  • 197 -

The fair value measurements under IFRS 13 are applied prospectively from January 1, 2015. Refer to Note 26 for related disclosures.

  • 3) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under previous IAS 1, there were no such requirements.

The Corporation retrospectively applied the above amendments starting in 2015. Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans and the share of the defined benefit plans of associates and joint ventures accounted for using the equity method. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets, and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of associates and joint ventures accounted for using the equity method. The application of the above amendments did not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the year.

4) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under previous IAS 19 and accelerates the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus. Remeasurement of the defined benefit plans is presented separately as other equity.

Furthermore, the interest cost and expected return on plan assets used in previous IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. The revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures.

In addition, revised IAS 19 changes the definition of short-term employee benefits as “employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service”. The Corporation’s unused annual leave, which can be carried forward within 24 months after the end of the annual period in which the employee renders service previously classified as short-term employee benefits is classified as other long-term employee benefits under revised IAS 19. Related defined benefit obligation of such other long-term benefit is calculated using the Projected Unit Credit Method. However, this change did not affect unused annual leave presented as a current liability in the consolidated balance sheet.

On initial application of the revised IAS 19, as a result of the retrospective application, the changes in cumulative employee benefit costs as of December 31, 2013 are adjusted to net defined liabilities, deferred tax assets and retained earnings; the carrying amounts of inventories are not adjusted. In addition, in preparing the financial statements for the year ended December 31, 2015, the Corporation elected not to present 2014 comparative information about the sensitivity of the defined benefit obligation. In addition, in preparing the financial statements for the year ended December 31, 2015, the Corporation elects not to present 2014 comparative information about the sensitivity of the defined benefit obligation.

  • 198 -

The impact on the prior period is set out below:

Impact on
Assets, Liabilities and Equity
December 31, 2014
Investments accounted for by the equity
method

Deferred tax assets

Total effect on assets

Net defined benefit liabilities

Retained earnings

January 1, 2014
Investments accounted for by the equity
method

Deferred tax assets

Total effect on assets

Net defined benefit liabilities

Retained earnings

Year ended December 31, 2014
Operating cost

Operating expense
Share of profit of subsidiaries, associates and
joint venture
Income tax expense
Total effect on net income for the year
Item that will not be reclassified to profit or
loss:
Remeasurement of defined benefit plan
Share of the other comprehensive income
of associates adjust ventures
Total effect on other comprehensive income
for the year
Total effect on comprehensive income for the
year
Impact on earnings per share
Basic
Diluted		 As
$		 Originally
Stated

3,074,762

78,193

3,152,955

99,544

2,198,596

3,137,235

67,895

3,205,130

75,659

1,971,238

(2,361,384)
(1,702,515)
226,144
(165,394)

(27,616)
919



$ 3.51
$ 3.30		 Adjustments
Arising from
Initial
Application

$ (315)

1,964

$ 1,649

$ 19,326

$ (17,677)

$ (352)

2,174

$ 1,822

$ 21,736

$ (19,914)

$ 359


1,743
37

(210)

1,929

308

-
$ 308
$ 2,237
$ -
$ -		 Restated
$ 3,074,447

80,157
$ 3,154,604
$ 118,870
$ 2,180,919
$ 3,136,883

70,069
$ 3,206,952
$ 97,395
$ 1,951,324
$ (2,361,025)
(1,700,772)
226,181
(165,604)
(27,308)
919
$ 3.51
$ 3.30
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
$
$
$


$
$

  • 199 -

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

The Corporation has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the financial statements were authorized for issue, the FSC has not announced their effective dates.

New IFRSs
Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2012-2014 Cycle

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”

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”

IFRS 15 “Revenue from Contracts with Customers”

IFRS 16 “Leases”

Amendment to IAS 1 “Disclosure Initiative”

Amendment to IAS 7 “Disclosure Initiative”

Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized
Losses”

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”

Amendment to IAS 27 “Equity Method in Separate Financial Statements”

Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”

Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge
Accounting”

IFRIC 21 “Levies”
 Effective Date
Announced by IASB(Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2018
January 1, 2018
To be determined by IASB
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014

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

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

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

  • 200 -

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

  • 1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

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

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

The impairment of financial assets

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

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

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

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations from January 1, 2017.

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 contracts; and

  • Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 is 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.

  • 201 -

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The accompanying financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of Preparation

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

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

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

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

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

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

Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

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

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

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

Current liabilities include:

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

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

  • 202 -

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

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

Foreign Currencies

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

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

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

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

Inventories

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

Investments Accounted for Using Equity Method

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

  • a.Investment in subsidiaries

Subsidiaries are the entities that are controlled by the Corporation.

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

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

  • 203 -

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

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

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

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

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

b. Investment in associates and joint ventures

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

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

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

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

When the Corporation subscribes for additional new shares of the associate and joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Corporation’s proportionate interest in the associate and joint

  • 204 -

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

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

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

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

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

Property, Plant and Equipment

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

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

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

  • 205 -

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

Goodwill

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

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

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

Intangible Assets

  • a. Intangible assets acquired separately

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

  • b. Intangible assets acquired in a business combination

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

  • c.

  • Derecognition of intangible assets

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

Impairment of Tangible and Intangible Assets Other Than Goodwill

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

  • 206 -

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

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

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

Financial Instruments

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

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

a. Financial assets

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

  • 1) Measurement category

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

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

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

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

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

  • 207 -

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

b) Loans and receivables

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

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

2) Impairment of financial assets

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

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

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

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

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

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

  • 208 -

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

  • 3) Derecognition of financial assets

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

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

  • b. Equity instruments

Debt and equity instruments issued by a 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 the Corporation are recognized at the proceeds received, net of direct issue costs.

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

  • 209 -

  • c. Financial liabilities

  • 1) Subsequent measurement

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

  • Financial liabilities at fair value through profit or loss

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

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

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

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

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

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

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

  • 2) Derecognition of financial liabilities

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

  • d. Convertible bonds

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

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

  • 210 -

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

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

Revenue Recognition

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

  • a. Sale of goods

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

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

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

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

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

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

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

  • b. Dividend and interest income

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

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

Borrowing Costs

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

  • 211 -

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

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

Government Grants

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

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

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

Employee Benefits

  • a. Short-term employee benefits

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

b. Retirement benefits

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

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

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

  • c. Other long-term employee benefits

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

Employee Stock Options

Equity-settled share-based payments arrangements granted to employee and others providing similar services are measured at the fair value of the equity instruments at the grant date.

  • 212 -

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Corporation's estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately.

At the end of each reporting period, the Corporation revises its estimate of the number of employee share options 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.

Taxation

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

a. Current tax

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

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

b. Deferred tax

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

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

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

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

  • 213 -

  • c. Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Key Sources of Estimation and Uncertainty

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

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

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

  • b. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. The information on the measurement of goodwill impairment is shown in Note 15.

  • c.

  • Impairment of investment in the subsidiaries, associates and joint ventures

The Corporation immediately recognizes impairment loss on its net investment in the associate when there is any indication that the investment may be impaired and the carrying amount may not be recoverable. The Corporation’s management evaluates the impairment based on the estimated future cash flow expected to be generated by the associate, including growth rate of sale and capacity of production facilities estimated by the associate’s management. The Corporation also takes into consideration the market conditions and industry development to evaluate the appropriateness of assumptions.

  • 214 -

d. Realizability of deferred tax assets

Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be used. The management’s significant accounting judgment and estimation should be taken into consideration when measuring the reliability of deferred tax assets, including assumptions on the predicted growth rate of sales and gross profit rate, tax-exempt period, unused tax credits and tax planning, etc. Any changes in industrial circumstances and tax laws could result in significant adjustments to deferred tax assets.

e. 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.

f. Recognition and measurement of defined benefit plans

Net defined benefit liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

g. Impairment of accounts receivable

When there is objective indication of impairment, the Corporation will concern the estimate of future cash flow. The amount of the impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, excluding future credit losses, discounted at the receivable’s original effective interest rate. If the actual amount of future cash flows is less than estimated, the Corporation may have significant impairment loss on accounts receivable.

6. CASH

Cash on hand
Checking accounts and demand deposits		 December 31


2015
$ 2,698


876,194

$ 878,892
 2014
$ 2,630

479,385
$ 482,015

At the balance sheet dates, the interest rates intervals of bank deposits and time deposits with maturities less than 3 months from date of investments were as follows:

Bank deposits December 31
2015
2014
0.001%-0.40%
0.01%-0.45%

As of December 31, 2015 and 2014, time deposits with maturities more than 3 months from date of investments were $0 thousand and $51,091 thousand, respectively, which is classified to investment in bonds with no active market (see Notes 10 and 26).

  • 215 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial liabilities held for trading
Derivative instruments
Call and put option of convertible bonds payable (Note 17)		 December 31 December 31
2015
$ 1,483		 2014
$ 927

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Domestic investments
Listed stocks

Open-end beneficial certificates


Current

Noncurrent

 December 31 December 31





2015
$ 359,543


1,824,521

$ 2,184,064

$ 1,824,521


359,543

$ 2,184,064
 2014
$ 468,575

1,634,854
$ 2,103,429
$ 1,634,854

468,575
$ 2,103,429

9. FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

Domestic unlisted common stocks
Foreign open-end beneficial certificates
Foreign unlisted common stocks
Foreign unlisted preferred stock
Classification by measurement of financial instruments
Available-for-sale financial assets		 December 31



2015
$ 171,608

10,152
-

-

$ 181,760

$ 181,760
 2014
$ 134,218
10,152
2,411

12,263
$ 159,044
$ 159,044

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

For the years ended December 31, 2015 and 2014, the Corporation recognized impairment losses of $2,411 thousand and $2,410 thousand, respectively, 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, 2014, the Corporation recognized an impairment loss of $3,090 thousand on EVT Technology Co., Ltd. These impairment losses were recognized to reflect an other-than- temporary decline in value of these investments.

  • 216 -

For the years ended December 31, 2015 and 2014, the Corporation recognized impairment losses of $12,263 thousand and $10,000 thousand on Lasfocus Corporation. These impairment losses were recognized to reflect an other-than-temporary decline in value of these investments.

The Corporation did not disposed of financial assets carried at cost for the years ended December 31, 2015 and 2014.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

Time deposits with maturities more than 3 months from date of investments December 31 December 31

2015
$ -
 2014
$ 51,091

As of December 31, 2014, the market interest rates of the time deposits with original maturity more than 3 months were 0.5%.

11. ACCOUNTS RECEIVABLE, NET

Accounts receivable

Less: Allowance for doubtful accounts

Accounts receivable - related parties

 December 31 December 31



2015
$ 627,890


(36,140)

591,750

1,063,503

$ 1,655,253
 2014
$ 1,020,056

(45,356)
974,700

1,304,757
$ 2,279,457

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

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

The aging of receivables was as follows:

Less than 60 days

61-365 days
Over 365 days

 December 31 December 31


2015
$ 409,334

116,489

102,007

$ 627,890
 2014
$ 710,753
269,738

39,565
$ 1,020,056

The above aging analysis was based on the past due date.

  • 217 -

Age of receivables that are past due but not impaired:

Less than 60 days
61-365 days
Over 365 days		 December 31


2015
$ 102,627

107,048
78,337

$ 288,012
 2014
$ 292,912
252,271
11,070
$ 556,253

The above aging schedule was based on the past due date.

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

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2014
$ 1,937
$ 20,852
Bad debts expense
-
24,000
Reclassification of impairment loss from collective
assessment individual assessment
1,153
(1,153)
Written off as uncollectible

(1,433)

-
Balance at December 31, 2014
$ 1,657
$ 43,699
Balance at January 1, 2015
$ 1,657
$ 43,699
Impairment loss reversed on receivables
-
(9,000)
Reclassification of impairment loss from collective
assessment to individual assessment
26,971
(26,971)
Reclassification of impairment loss from individual
assessment to collective assessment
(1,640)
1,640
Written off as uncollected

(16)

(200)
Balance at December 31, 2015
$ 26,972
$ 9,168		 Total
$ 22,789
24,000
-

(1,433)
$ 45,356
$ 45,356
(9,000)
-
-

(216)
$ 36,140

The impairment recognized represent the difference between the carrying amount of these trade receivables and the present value of the expected proceeds received from liquidation. Included in the allowance for impairment loss were individually impaired trade receivable amount to $26,972 thousand and $1,657 thousand as of December 31, 2015 and 2014, respectively. The Corporation did not hold any collateral over these balances.

12. INVENTORIES

Finished goods

Semi-finished products
Work in process
Raw materials

 December 31 December 31


2015
$ 194,339

277,762
368,814

459,604

$ 1,300,519
 2014
$ 187,561
235,541
448,734

384,692
$ 1,256,528
  • 218 -

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2015 and 2014 were included $32,452 thousand and $51,000 thousand due to write-downs of inventories, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2015 and 2014 was $1,977,863 thousand and $2,361,025 thousand, respectively.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries

Investments in associates
Investments in joint venture

 December 31 December 31


2015
$ 2,786,380

535,634

17,505

$ 3,339,519
 2014
$ 2,565,745
491,291

17,411
$ 3,074,447

a. Investments in subsidiaries

Unlisted company
Neworld Electronics Ltd.

San Eagle Development Corp.
MAS Automation Corp.
Chroma New Material Corporation
Chi Incorporation Ltd.
Chen Hwa Technology Inc.
Chroma Investment Co., Ltd.
Chroma Ate Europe B.V.
Chroma Ate Inc.
Chroma Systems Solutions Inc.
Sensational Holding Ltd.
Deep Red Holding Co., Ltd.
Adivic Technology Co.
Chroma Japan Corp.
Testar Electronic Corporation
EVT Technology Co., Ltd.

 December 31 December 31


2015
$ 705,291

624,769
446,591
437,683
133,231
111,655
102,030
84,939
68,577
(56,946)
52,699
45,408
36,119
(24,387)
10,446

8,275

$ 2,786,380
 2014
$ 632,352
623,006
343,702
444,486
169,518
41,639
96,436
75,774
47,555

(59,374)
49,651
45,487
37,862

(19,737)
37,388

-
$ 2,565,745

The Corporation’s percentage of equity interest and voting power in subsidiaries were as follows:

Name of Subsidiaries
Neworld Electronics Ltd.
Chroma New Material Corporation
San Eagle Development Corp.
MAS Automation Corp.
Chi Incorporation Ltd.		 December 31
2015
2014
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
(Continued)
  • 219 -
Name of Subsidiaries
Testar Electronic Corporation
Chroma Ate Inc.
Chroma Ate Europe B.V.
Chroma Investment Co., Ltd.
Chroma Systems Solutions Inc.
Sensational Holding Ltd.
Chen Hwa Technology Inc.
Chroma Japan Corp.
Deep Red Holding Co., Ltd.
Adivic Technology Co.
EVT Technology Co., Ltd.		 December 31
2015
2014
67.2%
67.2%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
25.0%
25.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
51.0%
51.0%
53.2%
17.9%
(Concluded)

On October 27, 2006, the Corporation’s Board of Directors resolved to incorporate a subsidiary, San Eagle Development Corp. (“San Eagle”), in the British Virgin Islands to expand its foreign market. Through San Eagle, the Corporation bought all of the issued shares of Wei Kuang Mech Eng Inc. from Scn Finance Corp. Wei Kuang Mech Eng Inc. had two 100% subsidiaries, Mou Kuan Technologies (Nanjin) Co., Ltd. (“Mou Kuan Nanjin”) and Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. (“Wei Kuang Nanjin”). Mou Kuan Nanjin mainly assembles and sells factory conveyors and related systems and renders after-sales services. Wei Kuang Nanjin mainly sells and maintains of electronic equipment and factory conveyor systems.

To enhance the Corporation’s competitiveness, the Corporation paid $160,000 thousand in December 2006, $134,000 thousand in January 2007 and $239,000 thousand in January 2008 to acquire 100% equity interest in Silver Town Electronic Co., Ltd. (“Silver Town”) from Ever Growth Investment Holding Ltd., respectively. On February 29, 2008, the Corporation’s Board of Directors resolved that the Corporation merge with Silver Town, with the Corporation as the survivor entity, on the record date of March 21, 2008. Since Wei Kuang Automatic Equipment (Taiwan) Co., Ltd. (“Wei Kuang”) was a 100% subsidiary of Silver Town before the merge, Wei Kuang became the Corporation’s subsidiary after its merger with Silver Town. Wei Kuang mainly designs, manufactures, installs and tests automated factory conveyor systems.

To strengthen its relationship with customers and enhance customer service, the Corporation’s Board of Directors resolved on December 28, 2006 to establish Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. (“Wei Kuang Xiamen”) through San Eagle and Wei Kuang Mech Eng Inc. The planned investment would amount to US$2,000 thousand. As of December 31, 2015, the Corporation had remitted out an investment amount of $49,935 thousand. Wei Kuang Xiamen sells and maintains electronic equipment and factory conveyor systems.

To expand its market and strengthen its sales channel in North America, the Corporation acquired 25% equity interest in Chroma Systems Solutions Inc. for US$900 thousand on September 1, 2009. The Corporation’s subsidiary, Chroma Ate Inc. (U.S.A.), held 50% equity interest in Chroma Systems Solutions Inc.; thus, the Corporation directly and indirectly held 75% equity interest in Chroma Systems Solutions Inc. and controlled the investee. Chroma Systems Solutions Inc. mainly sells and maintains electronic test instruments, etc.

To expand its operating scale, the Corporation’s subsidiary, Chroma Systems Solutions Inc., bought the net assets of Quad Tech Inc. for US$3,517 thousand.

Taiwan Wei Kuang, Mou Kuan Nanjin, Wei Kuang Nanjin, Adivic Technology Co. and Chroma Systems Solutions Inc. and the net assets of Quad Tech Inc. purchased by Chroma Systems Solutions Inc. were acquired by the Corporation and were accounted for by the purchase method.

  • 220 -

Refer to Note 17 to the consolidated financial statement as of December 31, 2015 for the movements of differences between cost of investment and net asset value, which were regarded as amortization’s assets.

Refer to Note 17 to the consolidated financial statements as of December 31, 2015 for the movements of the differences between cost of investment and net asset value, which were regarded as goodwill.

To expand the Corporation’s service scope, the Corporation’s Board of Directors resolved on February 27, 2007 to invest jointly with Raster Opto-Mechatronics Co., Ltd. in Testar Electronic Corporation (“Testar”), which will test LED products.

On December 27, 2007, the Corporation’s Board of Directors resolved to incorporate a subsidiary, Chroma Japan Corp., in Japan to expand its foreign market. Chroma Japan Corp. is mainly engaged in the sells and maintains electronic test instruments, etc. In April 2011, Chroma Japan Corp. reduced its capital by 93.3% to offset its deficit and increased its capital by ￥ 150,000 thousand. In that month, the full investment amount was paid. In April 2014, Chroma Japan Corp. reduced its capital by 100% to offset its deficit and increased its capital by ￥ 199,000 thousand. The Corporation’s Board of Directors resolved to fully participate in the capital increase of Chroma Japan Corp. by buying shares; Chroma Japan Corp. is still a 100% held subsidiary of the Corporation.

To develop radio frequency identification (RFID) technology, the Corporation’s Board of Directors resolved to participate in the capital increase of Adivic Technology Co. (“Adivic”) by buying shares amounting to $81,600 thousand in 2013; thus, the Corporation’s equity interest in Adivic rose to 51.0% and the Corporation acquired control over Adivic. In April 2015, Advic increased its capital by $60,000 thousand to strengthen its financial structure. The Corporation’s Board of Director resolved to participate proportionately in the capital increase by buying shares amounting to $30,600 thousand at the same percentage as its original equity interest of Advic. The Corporation’s equity interest in Advic is still 51%.

In May 2015, EVT Technology Co., Ltd. (“EVT”), the Corporation’s investee (originally recognized as financial assets carried at cost), increased its capital by $30,000 thousand to strengthen its financial structure, the Corporation’s Board of Directors resolved to participate in the capital increase of EVT by buying $23,000 but a higher percentage than its previous equity interest; thus, the Corporation equity interest rose to 53.2% and acquired control over EVT. Refer to Note 28 to the consolidated financial statements for the disclosures of the Corporation’s acquisitions of EVT.

In February 2015, Chroma (Shanghai) Trading Co., Ltd., the Corporation’s grandson company increase its capital by US$2,500 thousand to purchase plants and expand its operating scale, the Corporation’s Board of Directors resolved to fully participate in the capital increase of Chroma (Shanghai) Trading Co., Ltd. through Chen Hwa Technology Inc. by buying shares. As of December 31, 2015, the full investment amount has been full paid.

Refer to Note 31 to the consolidated financial statements for the detail of the subsidiaries indirectly held by the Corporation.

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

Unlisted company
MAS Automation Corp.
Neworld Electronics Ltd.
Chroma New Material Corporation		 Years Ended December 31
2015
2014
$ 222,533
$ 78,732
85,873
(11,398)
49,527
64,262
(Continued)
  • 221 -
Adivic Technology Co.
Testar Electronic Corporation
Chroma Ate Inc.
Chroma Ate Europe B.V.
Chi Incorporation Ltd.
San Eagle Development Corp.
Chroma Systems Solutions Inc.
EVT Technology Co., Ltd.
Chroma Japan Corp.
Chen Hwa Technology Inc.
Sensational Holding Ltd.
Deep Red Holding Co., Ltd.
Chroma Investment Co., Ltd.		 Years Ended December 31 Years Ended December 31


2015
$ (32,621)

(32,541)
31,090
20,710
(19,416)
11,571
10,255
(7,200)
(5,965)
4,173
1,165
961

365

$ 340,480
 2014
$ (20,288)
(19,931)
(7,943)
7,874
3,875
35,961
2,983
-
(9,865)
5,686
1,177
9,358

3,120
$ 143,603
(Concluded)

The investments in subsidiaries accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2015 and 2014 was based on the subsidiaries’ financial statements audited by the auditors for the same years.

b. Investment in associate

Associates that are not individually material
Adlink Technology Inc.
Dynascan Technology Corp.		 December 31


2015
$ 457,674


77,960

$ 535,634
 2014
$ 418,932

72,359
$ 491,291

Aggregate information of associates that are not individually material:

The Corporation’s share of:
Income from continuing operations
Other comprehensive income
Total comprehensive income for the year		 Years Ended December 31 Years Ended December 31
2015
$ 76,072

9,015
$ 85,087		 2014
$ 82,518

452
$ 82,970

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

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

  • 222 -

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

Name of Associates
Adlink Technology Inc.
 December 31 December 31
2015
$ 1,763,821
 2014
$ 1,590,351

The investments in associates accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2015 and 2014 was based on the associates’ financial statements audited by the auditors for the same years.

  • c. Investment in joint venture
Joint ventures that are not individually material
Chih Ho Shun Development Co., Ltd.
Aggregate information of joint ventures that are not individually material:		 December 31 December 31

2015
$ 17,505
 2014
$ 17,411
The Corporation’s share of:
Income from continuing operations
Other comprehensive income
Total comprehensive income for the year		 Years Ended December 31 Years Ended December 31


2015
$ 94


-

$ 94
 2014
$ 60

-
$ 60

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. (originally named Heran Co., Ltd.) to set up Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”). The Corporation invested $17,500 thousand for a 35% entity interest in Chih Ho Shun but did not have control over this investee.

The investments in joint ventures accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2015 and 2014 was based on the joint ventures’ financial statements audited by the auditors for the same years.

14. PROPERTY, PLANT AND EQUIPMENT

Cost

Balance, January 1, 2014

Additions
Disposals
Intercompany transfer
Reclassification

Balance, December 31, 2014
 Land
$ 450,575
-
-
-

-

$ 450,575

Land		 Buildings
$ 1,975,926

16,313

-

-

-

$ 1,992,239

Buildings		 Machinery
Miscellaneou
s Equipment
Total
$ 88,896 $ 743,699 $ 3,259,096

5,276
43,628
65,217

(584)
(29,715)
(30,299)

2,806
61,523
64,329

144

-

144
$ 96,538
$ 819,135
$ 3,358,487
(Continued)
Machinery
Miscellaneou
s Equipment
Total
  • 223 -
Accumulated depreciation and
impairment


Balance, January 1, 2014
$ - $ (657,038) $ (66,462)
Disposals

-
-
584
Intercompany transfer

-
(85,063)
(12,841)
Reclassification

-

-

293


Balance, December 31, 2014
$ -
$ (742,101)
$ (78,426)


Carrying value

December 31, 2014
$ 450,575
$ 1,250,138
$ 18,112


Cost

Balance, January 1, 2015
$ 450,575 $ 1,992,239 $ 96,538
Additions
-
8,301
7,152
Disposals
-
-
(332)
Intercompany transfer
-
-
2,294
Reclassification

-

-

(2,804)

Balance, December 31, 2015
$ 450,575
$ 2,000,540
$ 102,848


Accumulated depreciation and
impairment


Balance, January 1, 2015
$ - $ (742,101) $ (78,426)
Disposals

-
-
332
Depreciation

-
(84,354)
(10,792)
Reclassification

-

-

594


Balance, December 31, 2015
$ -
$ (826,455)
$ (88,292)


Carrying value

December 31, 2015
$ 450,575
$ 1,174,085
$ 14,556

The following useful lives are used in the calculation of depreciation:
Building
Primary buildings
Mechanical and electrical equipment
Duty-free rooms equipment
Others
Machinery
Miscellaneous equipment		 $ (610,869) $(1,334,369 )

29,197
29,781

(48,566) (146,470)

(293)

-
$ (630,531)
$(1,451,058)
$ 188,604
$ 1,907,429
$ 819,135 $ 3,358,487

46,564
62,017

(16,330)
(16,662)

33,797
36,091

2,804

-
$ 885,970
$ 3,439,933
$ (630,531) $(1,451,058)

13,272
13,604

(63,118) (158,264)

(594)

-
$ (680,971)
$(1,595,718)
$ 204,999
$ 1,844,215
(Concluded)
55 years
10 years
10 years
6-50 years
2-12 years
3-15 years

Refer to Note 29 for property, plant and equipment have been pledged to secure borrowings of the Corporation.

15. GOODWILL

Cost Years Ended December 31 Years Ended December 31
2015
$ 94,424
 2014
$ 94,424
  • 224 -

For assessing goodwill for impairment, the Corporation took value in use as basis for calculating the recoverable amount of goodwill. The Corporation used the cash flows of a five-year financial forecast as the basis for calculating value in use to reflect the specific risk of cash-generating units. After these calculations, the Corporation did not recognize any impairment loss on goodwill for the years ended December 31, 2015 and 2014.

16. BORROWINGS

Short-term Borrowings


Unsecured borrowings
Bank loans
Interest rate (%)
Long-term Borrowings		 December 31

2015
2014
$ 100,000
$ 150,000
1.01%
1.15%-1.17%
Unsecured loans
Syndicated bank loans

Less: Loans due in one year

 December 31 December 31


2015
$ 1,230,000


-

$ 1,230,000
 2014
$ 700,000

(70,000)
$ 630,000

On August 30, 2012, the Corporation applied to E.SUN and other banks for syndicated bank loans with $2,000,000 thousand credit line. In September 2013, the Corporation borrowed $700,000 thousand to pay the second installment of “The Action Plan for Developing Land surrounding the MRT Airport Station to Improve Civilians Life” (refer to Note 29). The syndicated bank loan is due on September 3, 2018 and repayable from March 2017 to March 2018 in three equal semiannual installments ($246,000 thousand per one installment), the remaining $492,000 thousand will be paid on September 3, 2018 (which is the due date), and the interest is payable monthly. In November 2015, the Corporation acquired new borrowing in the amount of $530,000 thousand to pay the first part of the third installment of the land. As of December 31, 2015 and 2014, the interest rate per annum was 1.60% and 1.69% (floating interest rate), respectively.

17. BONDS PAYABLE

Unsecured domestic convertible bonds

Less: Discounts on bonds payable

 December 31 December 31


2015
$ 1,854,100


96,007

$ 1,758,093
 2014
$ 1,854,400

123,394
$ 1,731,006
  • 225 -

On May 23, 2014, the Corporation issued its second domestic unsecured 0% convertible bonds with aggregate par value of $2,000,000 thousand and face value of $100 thousand. These bonds were listed on the GreTai Securities Market at the same date. Except for the book closure period, bondholders are entitled to convert bonds into the Chroma Ate Inc.’s common stock at $74.2 (conversion price) per share since June 24, 2014 to May 13, 2019. Due to the appropriation of 2014 and 2013 earnings approved at the annual shareholders meeting for 2015 and 2014, the shareholders approved to distribute dividend of NT$2.6 and NT$2.5 per share, respectively; thus, the conversion price was adjusted to NT$69.3 and NT$72.0 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 begin 1 month after the issuance date (June 24, 2014) to 40 days before the maturity date (April 13, 2019).

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

The convertible bonds contain both liability and equity components. The equity components was presented in equity under the heading of “capital surplus - option” and recognized of $141,487 thousand. The liability components were recognized into embedded derivative and non-derivative liability of $4,989 thousand and $1,849,108 thousand, separately. The estimated fair value of derivative instruments as of December 31, 2015 was $556 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, 2015
 $ 1,994,680
(141,487)
904

(4,989)
1,849,108
44,642

(135,657)
$ 1,758,093

Liability component as of December 31, 2015

18. OTHER PAYABLE


Salaries payable and bonus payable
Other payable		 December 31



2015
$ 393,474


65,699

$ 459,173
 2014
$ 429,432

69,674
$ 499,106

19. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

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

The Corporation recognized pension costs of $43,336 thousand and $39,775 thousand for the years ended December 31, 2015 and 2014, respectively.

  • 226 -

Defined Benefit Plans

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

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

Present value of defined benefit obligation
Fair value of plan assets
Deficit (surplus)
Asset ceiling
Net defined benefit liability		 December 31



2015
$ 399,442


(259,161)

140,281

-

$ 140,281
 2014
$ 362,979

(244,109)
118,870

-
$ 118,870

Movements in net defined benefit liability were as follows:

Present Value of Present Value of
the Defined
Benefit Fair Value of the Net Defined
Obligation Plan Assets Benefit Liability
Balance at January 1, 2014 $
338,167		 $ (240,772) $
97,395
Service cost
Current service cost 4,203 - 4,203
Net interest expense (income) 6,255
(4,624)		 1,631
Recognized in profit or loss 10,458
(4,624)		 5,834
Remeasurement
Return on plan assets (excluding amounts included
in net interest) - (1,183) (1,183)
Actuarial loss - changes in demographic
assumptions 4,948 - 4,948
Actuarial loss - changes in financial assumptions 10,798 - 10,798
Actuarial loss - experience adjustments 12,745
-		 12,745
Recognized in other comprehensive income 28,491
(1,183)		 27,308
Contributions from the employer - (11,667) (11,667)
Benefits paid (14,137)
14,137		 -
Balance at December 31, 2014 362,979
(244,109)		 118,870
(Continued)
  • 227 -
Present Value of Present Value of
the Defined
Benefit Fair Value of the Net Defined
Obligation Plan Assets Benefit Liability
Service cost
Current service cost $
4,185		 $
-		 $
4,185
Net interest expense (income) 6,736 (4,686) 2,050
Recognized in profit or loss 10,921 (4,686) 6,235
Remeasurement
Return on plan assets (excluding amounts included
in net interest) - (1,876) (1,876)
Actuarial loss - changes in demographic
assumptions 9,710 - 9,710
Actuarial loss - changes in financial assumptions 12,751 - 12,751
Actuarial loss - experience adjustments 6,264 - 6,264
Recognized in other comprehensive income 28,725 (1,876) 26,849
Contributions from the employer - (11,673) (11,673)
Benefits paid (3,183) 3,183 -
Balance at December 31, 2015 $
399,442		 $ (259,161) $
140,281
(Concluded)

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

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

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

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

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
2015
2014
1.00%-1.63%
1.50%-1.88%
1.50%-2.50%
1.50%-2.50%
  • 228 -

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 (decrease/increase) as follows:

December 31,
2015
Discount rate(s)
0.25% increase $ (13,114)
0.25% decrease $ 13,743
Expected rate(s) of salary increase
0.25% increase $ 13,397
0.25% decrease $ (12,852)

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

The expected contributions to the plan for the next year
The average duration of the defined benefit obligation		 December 31 December 31
2015
$ 11,564

14 years		 2014
$ 11,596
13.5 years

20. EQUITIES

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




2015

450,000

$ 4,500,000


379,170

$ 3,791,699
 2014

450,000
$ 4,500,000

378,782
$ 3,787,821

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		 December 31
2015
2014
$ 769,143
$ 748,329
160,514
155,520
146,976
146,976
(Continued)
  • 229 -
Used to offset a deficit
Employee stock options expired

May not be used for any purpose
Change in share of associates and joint venture
Convertible bonds payable options
Employee stock options

 December 31 December 31


2015
$ 1,640

24,725
131,166

68,105

$ 1,302,269
 2014
$ -
24,725
131,187

49,917
$ 1,256,654
(Concluded)

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

  • c. Retained earnings and dividend policy

The Corporation’s Articles of Incorporation provide that a 10% legal reserve should be set aside from the annual net income less any deficit. The remainder, special reserve appropriation or reverse appropriation based on regulations or relevant laws, together with unappropriated earnings of prior years, should be distributed as follows:

  • 1) Remuneration to directors and supervisors.

  • 2) Bonus to employees - 5%-20%.

  • 3) Dividends.

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.

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 consequential amendments to the Corporation’s Articles of Incorporation had been proposed by the Corporation’s board of directors on December 23, 2015 and are subject to the resolution of the shareholders in their meeting to be held on June 7, 2016. For information about the accrual basis of the employees’ compensation and remuneration to directors and supervisors and the actual appropriations for the years ended December 31, 2015 and 2014, please refer to Note 21 employee benefits expense.

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.

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.

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.

  • 230 -

The appropriations of earnings, including bonus to employees, and the remuneration to directors and supervisors for 2014 and 2013, have been approved at the annual shareholders’ meeting on June 10, 2015 and June 11, 2014, respectively. The appropriations and dividends per share were as follows:

Legal reserve

Cash dividends		 Appropriation of Earnings
For Fiscal Year
2014
For Fiscal Year
2013
$ 131,644
$ 120,489
987,433
941,900		 Dividends Per Share(NT$)
For Fiscal Year
2014
For Fiscal Year
2013
$2.6
$2.5

The appropriations of earnings for 2015 had been proposed by the Corporation’s board of directors on February 23, 2016. The appropriations and dividends per share were as follows:

Appropriation of Dividends Per
Earnings Share (NT$)
Legal reserve $ 123,656
Cash dividends 910,200 $2.4

The appropriations of earnings for 2015 are subject to the resolution of the shareholders’ meeting to be held on June 7, 2016.

Information on the bonus to employees, directors and supervisors can be accessed on the Market Observation Post System website of the Taiwan Stock Exchange.

d. Other equities

  • 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 subsidiaries,
associates and joint ventures accounted for using the equity
method
Balance, end of the year
Unrealized gain/loss on available-for-sale financial assets
Balance, beginning of the year
Unrealized gain/loss on available-for-sale financial assets
Share of unrealized gain on revaluation of available-for-sale
financial assets of subsidiaries, associates and joint ventures
accounted for by the equity method
Balance, end of the year		 Years Ended December 31 Years Ended December 31



2015
2014
$ 136,756
$ 44,755
(17,071)
89,661

8,283

2,340
$ 127,968
$ 136,756
Years Ended December 31


2015
$ 370,348

(99,791)

1,140

$ 271,697
 2014
$ 434,045
(63,519)

(178)
$ 370,348

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

  • 231 -

e. Treasury stock

Corporation’s Corporation’s
Shares Held by
Its Subsidiaries
(In Thousand
Shares)
Balance, January 1, 2014 1,926
Decreased during the year (10)
Balance, December 31, 2014 1,916
Balance, January 1, 2015 1,916
Decreased during the year -
Balance, December 31, 2015 1,916
Shares Held
(In Thousand
Subsidiaries Shares) Carrying Value
Market Price
December 31, 2015
Chroma Investment Co., Ltd. 1,916 $ 35,714 $ 122,405
December 31, 2014
Chroma Investment Co., Ltd. 1,916 $ 35,714 $ 157,267

For the year ended December 31, 2014, the Corporation’s subsidiary - Chroma Investment Co., Ltd. sold 10 thousand common shares of the Corporation held by it for $741 thousand.

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.

21. ADDITIONAL INFORMATION ON EXPENSES

The following items were included in net income for the years ended December 31, 2015 and 2014:

Finance cost
Interest on convertible bonds

Interest on bank loans
Less: Amount included in the cost of qualifying assets


Information about capitalized interest were as follows:
Capitalized interest

Capitalization rate		 Years Ended December 31 Years Ended December 31



2015
$ 27,368

14,119

(12,653)

$ 28,834

$ 12,653

1.60%-1.69%		 2014
$ 17,274
16,033

(11,680)
$ 21,627
$ 11,680
1.66%-1.69%
(Continued)
  • 232 -
Depreciation expense
Depreciation of property, plant and equipment

Operating cost

Operating expense


Employee benefits expense
Short-term benefits

Share-based payments
Equity-settled share-based payments
Post-employment benefits (see Note 19)
Defined contribution plans
Defined benefit plans
Other employee benefits


Operating cost

Operating expense

 Years Ended December 31 Years Ended December 31









2015
$ 158,264

$ 30,724


127,540

$ 158,264

$ 1,211,338

25,077
43,336
6,235

27,893

$ 1,313,879

$ 238,325


1,075,554

$ 1,313,879
 2014
$ 146,470
$ 33,261

113,209
$ 146,470
$ 1,205,208
33,278
39,775
5,834

26,077
$ 1,310,172
$ 242,247

1,067,925
$ 1,310,172
(Concluded)

The existing (2014) Articles of Incorporation of the Corporation stipulate to distribute bonus to employees at 5%-20% and remuneration to directors and supervisors at a fixed amount, respectively, of net income (net of the bonus and remuneration). For the year ended December 31, 2014, the employees’ compensation estimated on the basis of past experience was at 13.6% of net income, or $195,000 thousand. For the year ended December 31, 2014, the remuneration to directors and supervisors was $8,000 thousand in cash.

To be in compliance with the Company Act as amended in May 2015, the proposed amended Articles of Incorporation of the Corporation stipulate to distribute employees’ compensation at 5%-20% and remuneration to directors and supervisors at the rates no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors and supervisors. For the year ended December 31, 2015, the employees’ compensation and the remuneration to directors and supervisors were $135,000 thousand and $8,000 thousand, respectively, representing 8.9% and 0.5%, respectively, of the base net profit. The bonus to employees and remuneration to directors and supervisors for the year ended December 31, 2015 have been proposed by the Corporation’s board of directors on February 23, 2016 and are subject to the resolution of the shareholders in their meeting to be held on June 7, 2016.

Material differences between such estimated amounts and the amounts proposed by the board of directors on or before the date the annual consolidated financial statements are authorized for issue are adjusted in the year the bonus and remuneration were recognized. 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.

  • 233 -

The bonuses to employees and remuneration to directors and supervisors for 2014 and 2013 which have been approved in the shareholders’ meetings on June 10, 2015 and June 11, 2014, respectively, were as follows: Years Ended December 31


Bonus to employees

Remuneration of directors and
supervisors		 2014
Cash Dividends Share Dividends
$ 195,000
$ -

8,000
-		 2013
Cash Dividends Share Dividends
$ 132,000
$ -
8,000
-

There was no difference between the amounts of the bonus to employees and the remuneration to directors and supervisors approved in the shareholders’ meetings on June 10, 2015 and June 11, 2014 and the amounts recognized in the consolidated financial statements for the years ended December 31, 2014 and 2013, respectively.

Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

22. INCOME TAXES

  • a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

Current tax
In respect of the current period
In respect of unappropriated earnings (10%)
In respect of prior year’s adjustment
Deferred tax
In respect of the current period
Total income tax expense recognized in profit or loss		 Years Ended December 31 Years Ended December 31
2015
$ 144,443
17,067

(27,789)

133,721

3,907
$ 137,628		 2014
$ 157,520
13,650

(16,497)

154,673

10,931
$ 165,604

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

Profit before tax from continuing operations
Income tax expense calculated at the statutory rate

Adjustment
Adjustment items in determining taxable income
Tax-exempt income
Temporary difference
Income tax on unapproproated earnings
Investment tax credits
Prior year’s adjustments

Income tax expense recognized in profit or loss
 Years Ended December 31 Years Ended December 31



2015
$ 1,374,185

$ 233,612

(53,969)
(12,018)
3,907
17,067
(23,182)
(27,789)

$ 137,628
 2014
$ 1,483,977
$ 252,276

(51,573)

(15,619)

10,931
13,650

(27,564)
(16,497)
$ 165,604
  • 234 -

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

As the status of 2016 appropriations of earnings is uncertain, the potential income tax consequences of 2015 unappropriated earnings are not reliably determinable.

  • b. Deferred tax assets and liabilities

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

For the year ended December 31, 2015
Balance,
Beginning of the
Year
Recognized in
Profit or Loss
Deferred tax assets
Temporary difference
Unrealized intercompany gain
$ 38,112
$ 4,175

Net defined benefit liability

9,157
(2,517)
Allowance for loss on decline in
inventory market price

17,859
3,245
Impairment loss

12,691
1,467
Unrealized foreign exchange

Others

2,338

1,902

$ 80,157
$ 8,272

Deferred tax liabilities
Temporary difference
Investment income on foreign
investments accounted for by
the equity method
$ 89,044
$ 12,835

Unrealized foreign exchange
gain

5,149
(1,958)
Goodwill

8,794

1,302


$ 102,987
$ 12,179

For the year ended December 31, 2014
Balance,
Beginning of the
Year
Recognized in
Profit or Loss
Deferred tax assets
Temporary difference
Unrealized intercompany gain
$ 35,986
$ 2,126

Net defined benefit liability

7,767
1,390		 Others
Balance, End of
the Year
$ -
$ 42,287
-
6,640
-
21,104
-
14,158

-

4,240
$ -
$ 88,429
$ -
$ 101,879
-
3,191

-

10,096
$ -
$ 115,166
Others
Balance, End of
the Year
$ -
$ 38,112
-
9,157
(Continued)
  • 235 -
Balance,
Beginning of the
Year
Recognized in
Profit or Loss
Allowance for loss on decline in
inventory
$ 12,759
$ 5,100

Impairment loss
11,819
872
Unrealized foreign exchange
1,073
(1,073)
Others

665

769

$ 70,069
$ 9,184

Deferred tax liabilities
Temporary difference
Investment income on foreign
investments accounted for by
the equity method
$ 79,882
$ 9,162

Unrealized foreign exchange
gain
-
5,149
Goodwill

2,990

5,804

$ 82,872
$ 20,115
 Others
Balance, End of
the Year
$ -
$ 17,859
-
12,691
-
-

904

2,338
$ 904
$ 80,157
$ -
$ 89,044
-
5,149

-

8,794
$ -
$ 102,987
(Concluded)
  • c. Information about tax-exemption
Expansion of Construction Project
Profits on expansion and construction projects for year 2009
Profits on expansion and construction projects for year 2010
Integrated income tax information is as follows:

Balance of imputation credit account (ICA)		 Tax-exemption Period Tax-exemption Period
2011.1.1-2015.12.31
2013.1.1-2017.12.31
December 31

2015
$ 250,190
 2014
$ 214,254
  • d. Integrated income tax information is as follows:

The expected and actual creditable ratios for the appropriation of the Corporation’s earnings of 2015 and 2014, respectively, were 15.76% and 16.73%, respectively.

  • e. Assessment of income tax returns

As of December 31, 2015, the Corporation’s tax returns through 2013 had been examined and cleared by the tax authorities.

  • 236 -

23. EARNINGS PER SHARE

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

Net Income

Profit for the period attributable to owners of the Corporation

Dilutive effect of potential common shares:
Interest on unsecured convertible bonds and valuation gain on conversion
option

Income used to calculate dilutive earnings per share
 Years Ended December 31 Years Ended December 31


2015
$ 1,236,557


27,924

$ 1,264,481
 2014
$ 1,318,373

13,341
$ 1,331,714

Shares

Weighted average shares used to calculate basic earnings per share
Dilutive effect of potential common shares:
Convertible bonds
Bonus to employees or employee remuneration
Employee stock options
Weighted average shares used to calculate dilutive earnings per share		 (In Thousands of Shares)
Years Ended December 31		 (In Thousands of Shares)
Years Ended December 31


2015
376,984

26,755
2,974

1,292

408,005
 2014
375,496
22,677
3,109

1,487
402,769

Since the Corporation was able to settle the bonuses or employee remuneration paid to employees by cash or shares, the Corporation presumed that the entire amount of the bonus or employee remuneration 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 shareholders resolve the number of shares to be distributed to employees is resolved at their meeting in the following year.

24. SHARE-BASED PAYMENT ARRANGEMENTS

The Corporation’s Board of Directors approved Chroma Ate Inc.’s Employee Stock Option Plan on August 7, 2012. The plan was approved by the Securities and Futures Bureau (SFB) on September 17, 2012. The maximum number of options authorized to be granted under the Plan was 8,000 thousand units, with each option eligible to subscribe for one common share of the Corporation when exercised. The options may be granted to qualified employees of the Corporation or any of its subsidiaries, in which the Corporation’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options are valid for six years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plan, the options were granted at an exercise price equal to the closing price of the Corporation’s common shares listed on the TWSE on the grant date. The number of outstanding options and the exercise prices had been adjusted to reflect the distribution of earnings by the Corporation in accordance with the plan. Exercise price was $53.5 per share at the issuance date. Due to the appropriation of 2014 and 2013 earnings approved at the annual shareholders meeting for 2015 and 2014, the shareholders approved to distribute dividend of NT$2.6 and NT$2.5 per share, respectively; thus, the exercise price was adjusted to NT$49.9 and NT$51.9 per share, respectively.

  • 237 -

Information on employee share options was as follows:

Balance at January 1
Options forfeited
Options exercised
Balance at December 31
Options exercisable, end of period
Weighted-average fair value of options
granted (NT$)		 Years Ended December 31
2015
Number of
Options
(In Thousands)
Weighted-
average
Exercise
Price (NT$)
5,794
$ 49.9
(118)
-

(384)
49.9

5,292

1,887
$ 17.88		 2014

Number of
Options
(In Thousands)
Weighted-
average
Exercise
Price (NT$)
6,000
$ 51.9
(206)
-

-
-

5,794

-
$ 17.88

Information about outstanding options as of December 31, 2015 is as follows:

Range of exercise price (NT$)
Weighted-average remained contractual life (years)		 December 31
2015
2014
$49.90
$51.90
3.45
4.45

The grant date of aforementioned stock options was July 8, 2013. Chroma Ate Inc. used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

Stock price on grant date (NT$/share) $53.5 Exercise price (NT$/share) $53.5 Expected volatility 36.43%-41.74% Expected life 4-5 years Expected dividend rate 0% Risk-free interest rate 1.12%-1.23%

The Corporation recognized compensation cost both of $25,077 thousand and $33,278 thousand for the years ended December 31, 2015 and 2014.

25. CAPITAL MANAGEMENT

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

  • 238 -

26. FINANCIAL INSTRUMENTS

Information for Fair Value

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

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

  • b. Fair value measurements recognized in the consolidated statements

  • 1) Fair value hierarchy

December 31, 2015
Available-for-sale financial
assets
Securities listed in ROC
Equity securities

Open-end beneficial certificate

Financial liabilities at value
through profit or loss

December 31, 2014
Available-for-sale financial
assets
Securities listed in ROC
Equity securities
Equity investments

Open-end beneficial certificate

Financial liabilities at value
through profit or loss
 Level 1
$ 359,543

1,824,521

$ 2,184,064

$ -

$ 468,575

1,634,854

$ 2,103,429

$ -
 Level 2
$ -

-

$ -

$ 1,483

$ -

-

$ -

$ 927
 Level 3
$ -

-

$ -

$ -

$ -

-

$ -

$ -
 Total
$ 359,543

1,824,521
$ 2,184,064
$ 1,483
$ 468,575

1,634,854
$ 2,103,429
$ 927

There were no transfers between Levels 1 and 2 for the years ended December 31, 2015 and 2014.

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

Financial Instruments Valuation Techniques and Inputs

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

  • 239 -

Categories of Financial Instruments

Financial assets
Loan and receivable (a)

Available-for-sale financial assets (b)
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities at amortized cost (c)		 December 31
2015
2014
$ 2,546,792
$ 2,823,365
2,365,824
2,262,473
1,483
927
4,116,916
3,625,231

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 and refundable deposits, and trade and other receivables. Those reclassified to held-for-sale disposal groups are also included.

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

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

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

Financial Risk Management Objectives and Strategies

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

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

a. Market risk

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

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

  • 240 -

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

1) Exchange rate sensitivity analysis

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

Refer to Note 30 for information of the carrying value of the Corporation’s monetary assets and liabilities denominated in nonfunctional currency and of the derivatives exposing to foreign currency risk at the end of the reporting period.

Foreign currency sensitivity analysis

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

Had the NTD strengthened/weakened by 5% against the relevant currency, the income before tax would have decreased/increased by $65,104 thousand and $92,021 thousand for the years ended December 31, 2015 and 2014, respectively. The 5% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency-denominated monetary items and their translation at period-end is adjusted for a 5% change in foreign-currency rates.

2) Interest rate risk

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

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

Fair value interest rate risk
Financial liabilities

Cash flow interest rate risk
Financial assets
Financial liabilities		 December 31
2015
2014
$ 1,758,093
$ 1,731,006
876,077
530,346
1,330,000
850,000

Interest rate sensitivity analysis

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

  • 241 -

Had interest rates been 50 basis points higher/lower and all other variables been held constant, the income before tax would have decreased/increased by $2,270 thousand $1,598 thousand for the years ended December 31, 2015 and 2014, respectively. These pretax income changes would be mainly due to the Corporation’s exposure to interest rates on its variable rate deposits and bank loans.

3) Price risk

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

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

Price sensitivity analysis

Had equity prices been 5% higher/lower, the other comprehensive income would have increased/decreased by $109,203 thousand and $105,172 thousand because of changes in fair values of available-for-sale financial assets held by the Corporation for the years ended December 31, 2015 and 2014, respectively.

b. Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Corporation. The Corporation is exposed to credit risk in relation to the carrying amounts of accounts receivable and deposits from investing activities, fixed-income financial instruments and other financial instruments. Credit risk will arise if the counterparties fail to carry out their contractual obligations as of the balance sheet date.

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

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

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

c.

Liquidity risk

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

Bank loans are a significant source of the Corporation’s liquidity risk. As of December 31, 2015 and 2014, the Corporation’s unused bank credit lines in bank were $2,540,000 thousand and $3,020,000 thousand, respectively.

  • 242 -

Liquidity and interest risk tables

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

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

Nonderivative financial liabilities
Notes payable (including related
parties)
Accounts payable (including related
parties)
Other payable
Unsecured convertible bonds
Floating interest rate instruments
Nonderivative financial liabilities
Notes payable (including related
parties)
Accounts payable (including related
parties)
Other payable
Unsecured convertible bonds
Fixed interest rate instruments
Floating interest rate instruments		 December 31, 2015
Weighted
Average
Effective
Interest Rate
(%)
Within 1 Year
-
$ 35
-
569,049
-
459,173
1.57
-
1.02

120,358

$ 1,148,615

December		 Over 1 Year
to 5 Years
$ -

-

-

1,854,100

1,251,071

$ 3,105,171

31, 2014		 More Than
5 Years
$ -

-

-

-

-
$ -
Weighted
Average
Effective
Interest Rate
(%)
Within 1 Year
-
$ 1,051
-
543,502
-
499,106
1.57
-
1.17
50,010
1.59

181,429

$ 1,275,098
 Over 1 Year
to 5 Years
$ -

-

-

1,854,400

-

649,522

$ 2,503,922
 More Than
5 Years
$ -

-

-

-

-

-
$ -

The amounts included in the column “within 1 year” in the above table for bank loans are the maximum amounts the Corporation could be forced repay immediately if repayment is demanded by the banks. As of December 31, 2015, the undiscounted principal amounts of the above bank loans were $100,000 thousand and $220,000 thousand, respectively. After considering the financial position of the Corporation, management does not think the banks will execute their rights of requiring the Corporation to repay the bank loans. In addition, management believes the operating funds of the Corporation and subsidiaries are sufficient to meet cash flow demand; thus, liquidity risk is not considered significant.

  • 243 -

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

27. RELATED-PARTY TRANSACTIONS

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

Related Party Relationship with the Corporation Chroma Ate Inc. (“Chroma U.S.A.”) Subsidiary Neworld Electronics Ltd. (“Neworld Electronics”) Subsidiary Chroma Ate Europe B.V. (“Chroma Europe”) Subsidiary Chi Incorporation Ltd. (“Chi”) Subsidiary Chroma Investment Co., Ltd. (“Chroma Investment”) Subsidiary Chen Hwa Technology Inc. (“Chen Hwa”) Subsidiary Sensational Holding Ltd. (“Sensational”) Subsidiary Chroma New Material Corp. (“Chroma New Material”) Subsidiary Chroma Japan Corp. (“Chroma Japan”) Subsidiary Chroma System Solutions Inc. (“CSS”) Subsidiary San Eagle Development Corp. (“San Eagle”) Subsidiary MAS Automation Corp. (“Wei Kuang Automatic”) Subsidiary Testar Electronic Corp. (“Testar Electronic”) Subsidiary Deep Red Holding Co., Ltd. (“Deep Red”) Subsidiary Adivic Technology Co. (“Adivic Tech.”) Subsidiary Sajet System Technology (Suzhou) Co., Ltd. (“Sajet Suzhou”) Subsidiary Wei Kuang Mech Eng Inc. (“Wei Kuang”) Subsidiary Advic Holding Corp. (“Advic Holding”) Subsidiary Chroma Electronics (Shenzhen) Co., Ltd. (“Chroma Shenzhen”) Subsidiary Chroma Electronics (Shanghai) Co., Ltd. (“Chroma Shanghai”) Subsidiary Chroma (Shanghai) Trading Co., Ltd. (“Chroma Shanghai Trading”) Subsidiary Chroma Ate (Suzhou) Ltd. (“Chroma Suzhou”) Subsidiary Mou Kuan Technologies (Nanjin) Co., Ltd. (“Mou Kuan Nanjin”) Subsidiary Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. (“Wei Kuang Subsidiary Nanjin”) Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. (“Wei Kuang Subsidiary Xiamen”)

EVT Technology Co., Ltd. (“EVT”)

EVT Technology Co., Ltd. (“EVT”) Subsidiary (the Corporation acquire control over the subsidiary since June 1, 2015, refer to Note 13) Wei Da Electric Vehicle Co., Ltd. Subsidiary (EVT’s subsidiary) DynaScan Technology Corp. (“DynaScan”) Associate Chih Ho Shun Development Co., Ltd. Joint venture Adlink Technology Inc. (“Adlink”) Associate Mon Kuan Technologies Co., Ltd. Other related party

  • 244 -

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

a. Sales
Subsidiaries

Associates

 Years Ended December 31 Years Ended December 31


2015
$ 2,741,461


18,761

$ 2,760,222
 2014
$ 2,796,308

10,266
$ 2,806,574

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

b. Purchase
Subsidiaries

Associates
Other related party


c. Notes receivable
Subsidiaries

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

Associates


e. Accounts payable (without borrowing to related parties)

Subsidiaries

Associates
Other related parties

 Years Ended December 31 Years Ended December 31


2015
2014
$ 29,971
$ 187,543
12,889
16,535

107

357
$ 42,967
$ 204,435
December 31







2015
$ 3,920

$ 1,051,854


11,649

$ 1,063,503

$ 28,858

5,789

-

$ 34,647
 2014
$ 405
$ 1,294,807

9,950
$ 1,304,757
$ 100,327
2,002

374
$ 102,703
  • 245 -
f.
Property transaction
Subsidiaries

Associates


g. Loans to related parties


Other receivable - financing provided

Subsidiaries (Note)

Interest receivables
Subsidiaries (Note)

Interest revenue
Subsidiaries (Note)
 Years Ended December 31 Years Ended December 31


2015
2014
$ -
$ 5,740

-

78
$ -
$ 5,818
December 31




2015
2014
$ 168,854
$ 174,126
$ 373
$ 471
Years Ended December 31
2015

$ 5,067
 2014
$ 5,707

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

h. Endorsement guarantees provided
Subsidiaries (Note)
 December 31 December 31
2015
$ 164,580
 2014
$ 159,880

Note:

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

i.
Others
1)
Commission expense
Subsidiaries
 Years Ended December 31 Years Ended December 31
2015
$ 31,878
 2014
$ 53,379

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

  • 246 -
2)
Rental income
Subsidiaries

Associates
Other related parties

 Years Ended December 31 Years Ended December 31


2015
$ 15,026

1,260

218

$ 16,504
 2014
$ 15,204
1,260

623
$ 17,087

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

Years Ended December 31
2015
2014
3)
Management service income
Subsidiaries
$ 6,650
$ 9,000
Management service income was from the Corporation’s provision of administrative services.
Years Ended December 31
2015
2014
4)
Other income
Subsidiaries
$ 14,701
$ -
Associates

-

25
$ 14,701
$ 25
Other income is the earnings on repairs and maintenance.
December 31
2015
2014
5)
Other current assets - other receivable
Subsidiaries
$ 93,039
$ 75,759
Associates
136
1,753
Other related parties

-

92
$ 93,175
$ 77,604		 Years Ended December 31 Years Ended December 31


2015
2014
$ 14,701
$ -

-

25
$ 14,701
$ 25
December 31


2015
$ 93,039

136

-

$ 93,175
 2014
$ 75,759
1,753

92
$ 77,604

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

  • 247 -

6) Receipts in advance Subsidiaries 7) Temporary receipts Subsidiaries j. Compensation of key management personnel Short-term employee benefits Post-employment benefits

December 31 December 31

2015
2014
$ -
$ 88
$ 3,909
$ 717
Years Ended December 31


2015
$ 77,729


2,022

$ 79,751
 2014
$ 89,397

1,456
$ 90,853

28. ASSETS PLEDGED

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

Property, plant and equipment, net December 31
2015
$ 540,255
 2014
$ 730,213

29. SIGNIFICANT EVENTS

On January 17, 2012, the Corporation, Dynapack International Corporation and Heran Tech. Co., Ltd. (originally named Heran 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.

  • 248 -

  • 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, the Corporation has paid the first part of the third installment $536,729 thousand.

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

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

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

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.

30. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

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

Financial assets
Monetary items
USD

JPY

EUR

RMB

HKD



Non-monetary items
Investments accounted for by the equity method
USD

HKD
 December 31, 2015
Foreign
Currencies
(In Thousands) Exchange Rate
Carrying
Amount
(In Thousands of
Dollars)
$ 34,110
32.825
$ 1,119,645

560,341
0.273
153,127

1,461
35.88
52,436

28,037
4.995
140,052

169
4.235

715


$ 1,465,975

35,621
32.825
$ 1,137,655

191,695
4.235
811,830
(Continued)
  • 249 -
EUR

JPY




Financial liabilities

Monetary items
USD

Financial assets
Monetary items
USD

JPY

EUR

RMB

HKD



Non-monetary items
Investments accounted for by the equity method
USD

HKD

EUR

JPY




Financial liabilities

Monetary items
USD
 December 31, 2015
Foreign
Currencies
(In Thousands) Exchange Rate
Carrying
Amount
(In Thousands of
Dollars)
$ 3,799
35.88
$ 136,318

(59,061)
0.273

(16,124)


$ 2,069,679



4,988
32.825
$ 163,735
(Concluded)
December 31, 2014
Foreign
Currencies
(In Thousands) Exchange Rate
Carrying
Amount
(In Thousands of
Dollars)
$ 50,644
31.65
$ 1,602,872

358,266
0.265
94,809

1,904
38.47
73,229

35,118
5.09
178,820

4
4.08

15


$ 1,949,745

33,900
31.65
$ 1,041,229

178,342
4.08
727,636

3,212
38.47
123,550

(36,293)
0.265

(9,618)


$ 1,882,797



3,455
31.65
$ 109,358

For the years ended December 31, 2015 and 2014, (realized and unrealized) net foreign exchange gains were $52,536 thousand and $84,046 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.

  • 250 -

31. ADDITIONAL DISCLOSURES

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

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

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

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

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

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

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

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

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

  • i. Derivative transactions: Note 7.

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

  • k. Information on investment in Mainland China:

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

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

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

    • 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.

  • 251 -

  • 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.

  • 252 -

CHROMA ATE INC.

FINANCING PROVIDED YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. Financing Company
Name		 Counterparty Financial
Statement
Account		 Related
Parties		 Maximum
Balance for
the Period
(Note 5)		 Ending
Balance
(Note 5)		 Balance Used
(Note 5)
Interest Rate		 Financing
Provided
(Note 6)		 Transaction
Amounts		 Reasons for
Short-term
Financing		 Allowance
for Bad Debt		 **Collateral ** **Collateral ** Financing
Limit for
Each
Borrowing
Company		 Financing
Company’s
Financing
Amount
Limits
Item Value
0 Chroma Ate Inc. (the
“Corporation”)		 Chroma Systems Solutions
Inc.
Chroma Japan Corp.		 Other receivable
Other receivable		 Y
Y		 $ 157,118
44,803		 $ 127,576

42,414		 $ 127,576

41,278		 3.25%-4%
-		 a
a		 $ 353,916
107,565		 -
-		 $ -
-		 -
-		 $ -
-		 $ 941,010
(Note 1)

941,010
(Note 1)		 $ 1,882,021
(Note 2)
1,882,021
(Note 2)
1 Chroma Electronics
(Shenzhen) Co.,
Ltd.		 Chroma (Shanghai)
Trading Co., Ltd.		 Other receivable Y 54,945
-
-		 2.6% b - Purchase for
PPE		 - - -
297,968
(Note 3)		 297,968
(Note 3)
2 Wei Kuang Automatic
Equipment
(Xiamen) Co., Ltd.
Chroma (Shanghai)
Trading Co., Ltd.		 Other receivable Y 34,965
3,996
3,996		 2.6% b - Purchase for
PPE		 - - -
198,341
(Note 4)		 198,341
(Note 4)

Note 1: Based on 10% of the net value of the Corporation ($9,410,104 × 10% = $941,010).

Note 2: Based on 20% of the net value of the Corporation ($9,410,104 × 20% = $1,882,021).

Note 3: Based on 70% of the net value calculated based on the latest financial statements of borrowing company that have been audited ($425,668 × 70% = $297,968).

Note 4: Based on 70% of the net value calculated based on the latest financial statements of borrowing company that have been audited ($283,344 × 70% = $198,341).

Note 5: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.825, RMB1=NT$4.995 and JPY1 = NT$0.273 as of December 31, 2015.

Note 6: Financing provided:

a. For transactions.

  • b. For short-term financing.

  • 253 -

TABLE 2

CHROMA ATE INC.

ENDORSEMENT/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2015

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

No. Endorsement/
Guarantee Provider		 Counterparty Counterparty Limits on Each
Counter-
party’s
Endorsement/
Guarantee
Amount
(Note 1)		 Highest Amount
of Guarantee
Provided for the
Year

Ending Balance		 Amount of
Guarantee
Actually Used
Value of
Collateral		 Ratio of
Accumulated
Amount of
Collateral to
Net Equity
Shown in the
Latest Financial
Statements
Maximum
Collateral/
Guarantee
Amounts
Allowable
(Note 2)		 Endorsed/
Guaranteed to
Subsidiaries by
Parent
Company		 Endorsed/
Guaranteed to
Parent
Company by
Subsidiaries		 Endorsed/
Guaranteed to
Investees in
Mainland China
Name Nature of Relationship
0 Chroma Ate Inc. Chroma Ate Inc. (U.S.A.)
Chroma Japan Corp.		 Subsidiary
Subsidiary		 $ 1,411,516
1,411,516		 $ 131,300
33,280		 $ 131,300
33,280		 $ 65,650
21,840		 $ -
-		 1.40%
0.35%		 $ 2,823,031
2,823,031		 Y
Y		 -
-		 -
-

Note 1: According to Regulation of the “Procedures for Endorsement/Guarantee and lending of Funds”, the Corporation limits the endorsement/guarantee amount on each entity to (a) within 15% of the net value of the Corporation ($9,410,104 × 15% = $1,411,516) 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 ($9,410,104 × 30% = $2,823,031).

Note 3: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.825 and JPY1 = NT$0.273 as of December 31, 2015.

  • 254 -

TABLE 3

CHROMA ATE INC.

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) YEAR ENDED DECEMBER 31, 2015

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

Holding Company Name Marketable Securities Type and Issuer Relationship with the
Holding Company		 Financial Statement Account **December ** 31, 2015 Note
Shares/Units
(Thousands)		 Carrying Value Percentage of
Ownership		 Market Value or
Net Asset Value
Chroma Ate Inc. (the “Corporation”)
Chroma New Material Corp.
Chroma Investment Co., Ltd.
Chenhwa Technology Inc.		 Fund
The RSIT Enhanced Money Market Fund
Paradigm Pion Money Market
Yuanta Wan Tai Money Market
Fuh Hwa You Li Money Market Fund
Cathay Taiwan Money Market
Mega Diamond Money Market
Union Money Market
Stocks
DynaColor, Inc.
Chunghwa Telecom Co., Ltd.
China Communications Media Group Co., Ltd.
WK Technology Fund IX Ltd.
Twoway Catv Service Inc.
Tian Zheng International Precision Machinery Co., Ltd.
WK Technology Fund IV Ltd.
WK Technology Fund VI Ltd.
WI Harper INC Fund VII LP
Lasfocus Corporation
Qualitysource SAS
Fund
Fuh Hwa You Li Money Market Fund
The RSIT Enhanced Money Market Fund
Paradigm Pion Money Market
Fund
Hua Nan Kirin Money Market Fund
Stocks
Greatek Electronics Inc.
Adlink Technology Inc.
ICHIA Tech. 2nd Unsecured Convertible Bond
Chroma Ate Inc.
Fei Hong Industrial Co., Ltd.
Cosmactive Broadband Networks Co., Ltd.
Prance System Technology Co., Ltd.
Hangzhou New Material Chroma Co., Ltd.		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Corporation
-
-
-
-		 Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - current
Available for sale financial assets - noncurrent
Available for sale financial assets - noncurrent
Available for sale financial assets - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Available-for-sale financial assets - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Available for sale financial assets - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent		 24,722
24,732
18,863
21,184
21,282
20,373
13,098
6,050
412
26
4,614
3,561
2,300
3,200
2,125
-
2,179
9
6,829
4,525
2,642
4,925
85
64
10
1,916
4,174
26
111
285		 $ 292,341
282,411
282,320
282,295
262,135
252,149
170,870
317,642
40,867
1,034
46,140
39,218
33,000
32,000
21,250
10,152
-
-
90,997
53,513
30,171
58,274
3,049
4,872
951
122,405
17,175
110
-
9,355		 -
-
-
-
-
-
-
6.0
-
-
4.6
4.7
9.9
1.9
1.4
-
-
12.2
-
-
-
-
-
-
-
-
10.3
1.5
5.1
19.0		 $ 292,341
282,411
282,320
282,295
262,135
252,149
170,870
317,642
40,867
1,034
-
-
-
-
-
-
-
-
90,997
53,513
30,171
58,274
3,049
4,872
951
122,405
-
-
-
-		 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 1: Based on the closing price as of December 31, 2015.

Note 2: Based on the net asset value of the fund as of December 31, 2015.

  • 255 -

TABLE 4

CHROMA ATE INC.

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COST OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITA L YEAR ENDED DECEMBER 31, 2015

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

Company Name Type of Property Transaction Date Transaction
Amount		 Payment Term Counter-party Nature of
Relationship		 Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Prior Transaction of Related Counter-party Price Reference Purpose of
Acquisition		 Other Terms
**Owner ** Relationship Transfer Date Amount
Chroma Ate Inc. Construction in
progress and
prepayments for
equipment.		 2015.11.16 $ 536,729 Based on a contract;
the first part of
third installment
had been paid.
Ministry of the
Interior, Republic
of China.		 - - - - $ - Public bidding Manufacturing,
R&D,
operating and
building
employee
dormitories.		 Note

Note: Please see Note 29 to the financial statements for related information.

  • 256 -

TABLE 5

CHROMA ATE INC.

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2015

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

Company Name Related Party Nature of
Relationship		 Transaction Details Transaction Details Transaction Details Abnormal Transaction Abnormal Transaction Notes/Accounts
Receivable (Payable)		 Notes/Accounts
Receivable (Payable)		 Note
Purchase
(Sale)		 Amount % to
**Total **		 Payment Terms Unit Price Payment Terms Ending Balance
% to
**Total **
Chroma Ate Inc. (the “Corporation”)
Neworld Electronics Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Inc. (U.S.A.)
Chroma Ate Inc. (the “Corporation”)
Chroma Systems Solutions Inc.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Europe B.V.
Chroma Ate Inc. (the “Corporation”)
Chroma Electronics (Shenzhen) Co., Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Japan Corp.		 Neworld Electronics Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Inc. (U.S.A.)
Chroma Ate Inc. (the “Corporation”)
Chroma Systems Solutions Inc.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Europe B.V.
Chroma Ate Inc. (the “Corporation”)
Chroma Ate Inc. (Shenzhen) Co., Ltd.
Chroma Ate Inc. (the “Corporation”)
Chroma Japan Corp.
Chroma Ate Inc. (the “Corporation”)		 Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company
Subsidiary
Parent company		 (Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase
(Sale)
Purchase		 $ (1,194,767)
1,194,767
(461,646)
461,646
(353,916)
353,916
(215,646)
215,646
(217,182)
217,182
(107,565)
107,565		 (26)
100
(10)
100
(8)
100
(5)
100
(5)
100
2
100		 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 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		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1		 -
-
Note 2
Note 2
-
-
-
-
-
-
-
-		 $ 210,900
(210,900)
326,335
(326,335)
126,671
(126,671)
51,545
(51,545)
55,065
(55,065)
106,782
(106,782)		 13
(100)
20
(100)
8
(100)
3
(100)
3
(100)
6
100		 -
-
-
-
-
-
-
-
-
-
-
-

Note 1: The prices were determined after taking the selling and post-sale services expenses into consideration.

Note 2: The actual credit period longer than other customers, approximately 12 months.

  • 257 -

TABLE 6

CHROMA ATE INC.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2015

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

Company Name Related Party Nature of
Relationship		 Ending Balance Turnover Rate Overdue Overdue Amount Received in
Subsequent Period
(Note)		 Allowance for
Bad Debts
Amount Action Taken
Chroma Ate Inc. Neworld Electronics Ltd.
Chroma Ate Inc. (U.S.A.)
Testar Electronic Corporation
Chroma System Solutions Inc.
Chroma System Solutions Inc.
Chroma Japan Corp.
Chroma Japan Corp.		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 Accounts receivable
$ 210,900
Accounts receivable
326,335
Accounts receivable
139,857
Accounts receivable
126,671
Other receivable - financing provided
127,576
Accounts receivable
106,782
Other receivable - financing provided
41,278		 3.17
1.58
0.57
2.79
-
1.15
-		 $ -
-
-
-
-
-
-		 -
-
-
-
-
-
-		 $ 165,422
109,351
-
42,053
-
17,349
-		 $ -
-
-
-
-
-
-

Note: The amounts had been accrued as of February 23, 2016.

  • 258 -

TABLE 7

CHROMA ATE INC.

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE YEAR ENDED DECEMBER 31, 2015

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

Investor Investee Location Main Businesses and Products Investment Amount Investment Amount Balance a s of December 31, 2015 s of December 31, 2015 Net Income
(Loss) of the
Investee		 Investment
Gain (Loss)		 Note
December
31, 2015		 December
31, 2014		 Shares
(Thousands)		 Percentage
of
Ownership		 Carrying
Value
Chroma Ate Inc.
(the “Corporation”)
Chroma Ate Inc. (U.S.A.)
San Eagle Development
Corp.
EVT Technology Co., Ltd.
Advic Technology Co.,
Ltd.		 Neworld Electronics Ltd.
San Eagle Development Corp.
Chroma New Material Corporation
Adlink Technology Inc.
MAS Automation Corp.
CHI Incorporation Ltd.
Chroma Investment Co., Ltd.
Chroma Ate Europe B.V.
DynaScan Technology Corp.
Chroma Systems Solutions, Inc.
Sensational Holding Ltd.
Chroma Ate Inc. (U.S.A.)
Deep Red Holding Co., Ltd.
Chen Hwa Technology Inc.
Adivic Technology Co.
Testar Electronic Corporation
Chroma Japan Corp.
Chih Ho Shun Development Co., Ltd.
EVT Technology Co., Ltd.
Chroma Systems Solutions Inc.
Wei Kuang Mech Eng Inc.
Wei Da Electric Vehicle Co., Ltd.
Advic Holding Corporation		 Hong Kong
British Virgin
Islands
Taoyuan, Taiwan
New Taipei, Taiwan
Hsinchu, Taiwan
British Virgin
Islands
New Taipei, Taiwan
The Netherlands
Taoyuan, Taiwan
U.S.A.
British Virgin
Islands
U.S.A.
Mauritius
British Virgin
Islands
Taipei, Taiwan
Taoyuan, Taiwan
Japan
Taoyuan, Taiwan
Taoyuan, Taiwan
U.S.A.
Mauritius
Pingtung, Taiwan
Samoa		 Sale and maintenance of electronic test instruments, etc.
Investment
Sale and processing of gold wire
Manufacturing, processing and retailing of
software/hardware of computers and peripherals
Design, manufacturing, installment and testing of
automated factory conveyor systems
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 maintenance of electronic test instruments, etc.
Investment
Test of inductance, capacitance and resistance, and sale of
parts
Sale and research of RF device
Testing of LED products
Sale and maintenance of electronic test instruments, etc.
Construction and development of residence, buildings and
specialized field; construction and investment of public
works
Manufacturing of motorcycles and its parts
Sale and maintenance of electronic test instruments, etc.
Investments
Sale and lease of motorcycles
Sale and research of RF device		 $ 271,873
186,514
480,715
82,325
533,000
122,884
80,000
54,026
238,746
29,628
38,301
29,895
12,217
98,217
112,200
247,096
147,125
17,500
27,623
64
185,686
3,750
15,223		 $ 271,873
186,514
480,715
82,325
533,000
122,884
80,000
54,026
238,746
29,628
38,301
29,895
12,217
19,977
81,600
247,096
147,125
17,500
4,623
64
185,686
3,750
-		 64,013
2,050
25,000
23,208
10,000
3,830
14,000
1
9,841
120
1,200
1,000
215
3,085
11,220
20,160
9
1,750
2,658
240
4,475
375
500		 100.0
100.0
100.0
11.5
100.0
100.0
100.0
100.0
27.3
25.0
100.0
100.0
100.0
100.0
51.0
67.2
100.0
35.0
53.2
50.0
100.0
75.0
100.0		 $ 705,291
624,769
437,683
457,674
446,591
133,231
102,030
84,939
77,960
(56,946)
52,699
68,577
45,408
111,655
36,119
10,446
(24,387)
17,505
8,275
104,745
616,683
(3,567)
5,496		 $ (85,873)
11,571
49,527
606,101
220,615
(19,416)
5,358
20,710
21,788

41,021
1,165
31,094
961
4,173
(60,023)
(48,424)

(5,965)
269
(20,756)
41,021
11,648

(3,251)
(10,556)		 $ (85,873)
11,571
49,527
70,124
222,533
(19,416)
365
20,710
5,948
10,255
1,165
31,090
961
4,173
(32,621)
(32,541)

(5,965)
94

(7,200)
NA
NA

NA

NA		 Subsidiary
Subsidiary
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Joint venture
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
  • 259 -

TABLE 8

CHROMA ATE INC.

INVESTMENT IN MAINLAND CHINA YEAR ENDED DECEMBER 31, 2015

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

Investee Company Main Businesses and Products Main Businesses and Products Total Amount
of Paid-in
Capital (Note
2)		 Method of
Investment
(Note 1)		 Accumulated
Outflow of
Investment
from Taiwan
as of
January 1,
2015
(Note 3)		 Investment Flows Investment Flows Accumulated
Outflow of
Investment
from Taiwan
as of
December 31,
2015
(Note 3)		 Net Income
(Loss) of the
Investee		 Percentage
of
Ownership
in
Investment		 Investment
Gain (Loss)
(Notes 4 and 5)		 Carrying
Value as of
December 31,
2015
(Note 2)		 Accumulated
Inward
Remittance of
Earnings as of
December 31,
2015
Outflow Inflow
Chroma Electronics (Shenzhen) Co.,
Ltd.
Chroma Electronics (Shanghai) Co.,
Ltd.
Chroma (Shanghai) Trading Co., Ltd.
Hangzhou New Material Chroma Co.,
Ltd.
Chroma Ate (Suzhou) Ltd.
Wei Kuang Automatic Equipment
(Nanjin) Co., Ltd.
Wei Kuang Automatic Equipment
(Xiamen) Co., Ltd.
Mou Kuan Technologies (Nanjin) Co.,
Ltd.
Sajet System Technology (Suzhou) Co.,
Ltd.		 Sale of power supplies automatic test
systems, signal generators, DC
electronic load, color analyzer,
uninterruptible power supply,
switching mode rectifier and etc.
Sale of power supplies automatic test
systems, signal generators, DC
electronic load, uninterruptible power
supply, switching mode rectifier and
etc.
International and transit trading,
commercial simple processing and
commercial consulting service and etc.
Production and sale of semiconductor
connecting materials
Sale of power supplies automatic test
systems, signal generators, DC
electronic load, uninterruptible power
supply, switching mode rectifier and
etc.
Sale and maintenance of electronic
equipment and factory conveyor
systems
Sale and maintenance of electronic
equipment and factory conveyor
systems
Assembly, sale and maintenance of
factory conveyors and related systems
and renders related after-sales services
Research, development and design of
computer network security systems
and information management		 $ 127,050
(HK$ 30,000)
98,475
(US$ 3,000)

88,628
(US$ 2,700)
49,238
(US$ 1,500)
124,735
(US$ 3,800)
59,296
(RMB 11,871)
57,028
(RMB 11,417)
8,676
(RMB 1,737)
8,671
(RMB 1,736)		 b. Subsidiary of
Neworld
Electronics Ltd.
b. Subsidiary of
Neworld
Electronics Ltd.
b. Subsidiary of Chen
Hwa Technology
Inc.
b. Subsidiary of Chen
Hwa Technology
Inc.
b. Subsidiary of Chi
Incorporation Ltd.
b. Subsidiary of Wei
Kuang Mech Eng
Inc.
b. Subsidiary of Wei
Kuang Mech Eng
Inc.
b. Subsidiary of Wei
Kuang Mech Eng
Inc.
b. Subsidiary of Deep
Red Holding Co.,
Ltd.		 $ 132,178
(HK$ 1,200
US$ 3,853)
101,993
(US$ 3,000)
6,748
(US$ 200)
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)		 $ -
-
78,240
(US$ 2,500)
-
-
-
-
-

-		 $ -

-
-

-

-

-

-

-

-		 $ 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)		 $ 35,684
1,132
(710)
30,339
(19,105)
1,923
9,880
35

946		 100
100
100
19
100
100
100
100
100		 $ 35,684
1,132
(710)
-
(19,105)
1,923
9,880
35
946		 $ 425,503

59,315

99,230

9,355
164,223

238,736

286,759

48,056

45,397		 $ -

-

-

12,065
(US$ 368)

-

-

-

-

-
Accumulated Investment in Mainland China
as of December 31, 2015		 Investment Amounts Authorized by the
Investment Commission, MOEA		 Upper Limit on Investment
$635,051
(HK$1,200, US$19,312)		 $695,162
(HK$1,400, US$21,086) (Note 6)		 $5,646,062 (Note 7)

(Continued)

  • 260 -

Note 1: Methods of investment have following types:

a. Direct investment in mainland China.

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

Note 2: The amounts of paid-in capital and carrying value as of December 31, 2015 were translated into New Taiwan dollars at the rates of HK$1=NT$4.235, US$1=NT$32.825, RMB1=NT$4.995 vailing on December 31, 2015.

Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2015 and December 31, 2015 were translated into New Taiwan dollars on the original outflow day. Note 4: Based on audited financial statements.

Note 5: Investment income (loss) was translated into New Taiwan dollars at the average rate of HK$1=NT$4.094, US$1=NT$31.739, RMB1=NT$5.033 for the year ended December 31, 2015.

Note 6:

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

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

Note 8: Chroma Ate Inc. invested accounts receivable amounting to US$853 thousand in Chroma Electronics (Shenzhen) Co., Ltd. through Neworld Electronics Ltd. Note 9: The investment in Sajet Technology Inc. (liquidated on September 15, 2008) was authorized by the Investment Commission in 2004.

(Concluded)

  • 261 -

==> picture [497 x 703] intentionally omitted <==

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