CHROMA - Annual Report 2016 | FinancialReports.eu

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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 Chieng Jui-ying

Position: Deputy department director

TEL: (03)327-9999 ext. 2701

Email: [email protected]

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

Hsinchu subsidiary address: 6F, No. 5, Keji Road, Hsinchu Science Park, Hsinchu City 30078

TEL: (03)563-5788

Kaohsiung subsidiary address: No. 1, Beineihuan East Road, Nanzi District, Kaohsiung City 81170

TEL: (07)365-6188

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

Certified Public Accountant (CPA) for the most recent financial report
Name: CPA I-wen, Wang and CPA Wen-chi, Kuo

Name of accounting firm: Deloitte & Touche

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

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

TEL: (02)2545-9988

Name of any overseas securities trading agency and search name in the said overseas securities trading agency: None
Company website: http://www.chromaate.com

Critical financial indicators (consolidated )

Consolidated net operating revenues Net income (attributable to the parent company) Earnings per share (NT$) Capital stock Total assets Total equity Return on total assets Return on total equity	2014 10,307 1,318 3.51 3,788 14,970 9,373 9.69 14.80	Unit: NT$ million 2015 2016 9,692 11,624 1,237 1,720 3.28 4.53 3,792 3,899 16,060 18,633 9,531 10,788 8.18 10.12 13.25 17.18

Consolidated operating revenues for the 5 most recent years

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15000
14000
13000
11644 11624
12000
11000 10171 [10307 ]
9692
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2012 2013 2014 2015 2016
Unit: million NT$
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Net income for the 5 most recent Earnings per share for the 5 most
years recent years
5.5
1900
1800 1720 5.0 4.53
1700
1600 4.5
1500
1400 1318 4.0
1300 1205 1237 3.5 3.21 3.51 3.28
1200
11001000 945 3.0 2.46
900 2.5
800
2.0
700
600 1.5
500
400 1.0
300
200 0.5
100
0 0.0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Unit: million NT$ Unit: NT$
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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 ............................................................................ 16 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 to the publication date of this report ............................................................... 40 8. Relationship information, if among the 10 largest shareholders any one 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 .............................................................. 42 IV. Financing 1. Capital and shares ................................................................................................................. 43 2. Corporate bond ...................................................................................................................... 49 3. Preferred shares ..................................................................................................................... 50 4. Overseas depositary receipt .................................................................................................. 50 5. Employee stock warrant ........................................................................................................ 50 6. New restricted employee shares ............................................................................................ 52 7. Issuance of new shares in connection with the merger or acquisition of other companies .. 54 8. Implementation of capital application plan ........................................................................... 54 V. Operation summary 1. Business content .................................................................................................................... 56 2. Market, production, and sales ............................................................................................... 64 3. Information of employees for the 2 most recent years up to the date of the publication of this report ................................................................................................... 71 4. Disbursements for environmental protection ........................................................................ 71 5. Labor relations ...................................................................................................................... 71 6. Important contracts ............................................................................................................... 73

VI. Financial summary

Condensed balance sheet and composite income sheet for the 5 most recent years ............. 74 2. Financial analysis for the 5 most recent fiscal years ............................................................. 79 3. Audit reports from supervisors of the financial report from the most recent year ................ 85 4. Financial report from the most recent year ........................................................................... 86 5. Company-only financial report audited and attested by a CPA from the most recent year .................................................................................................................................... 86 6. Financial condition of the company and affiliated businesses .............................................. 86

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

Financial condition ................................................................................................................ 87 2. Financial performance ........................................................................................................... 88 3. Cash flow .............................................................................................................................. 89 4. Material expenditures of the most recent year and impact to the company's finances and operations ................................................................................................................... 89 5. Policy on investment in other companies, main reasons for profit / losses resulting therefrom, improvement plan, and investment plans for the upcoming fiscal year .......... 89 6. Risk analysis and assessment of the most recent year up to the publication date of this report .......................................................................................................................... 91 7. Other important issues .......................................................................................................... 95 VIII . Special items to be included 1. Affiliated businesses ............................................................................................................. 96 2. Private placement of securities of the most recent year up to the publication date of this report ........................................................................................................................ 100 3. Holding or disposition of company shares of the most recent year up to the publication date of this report ......................................................................................... 100 4. Other items that must be included....................................................................................... 100 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 up to the publication date of this report ......................................................................................... 100

I. Letter to Shareholders

Business results

The global economy made steady improvements in 2016. Despite limited growth in the information and communication technology (ICT) industry, industries related to clean and green technologies continued to boom with the support of various national policies. Manufacturing industries also continued to expand capital expenditure in relevant sectors, resulting in sizable growths of Chroma’s profits. Last year’s revenue amounted to NT$ 7.233 billion while group revenue amounted to NT$ 11.264 billion, providing a net income after taxes (NIAT) of NT$ 1.696 billion and an earning per share (EPS) of NT$ 4.53. This amounted to 59% growth in revenue, 20% growth in group revenue, and 42% increase in net income after taxes (NIAT) when compared to 2015.

Chroma’s revenue achieved a significant growth of 59% compared to last year, with Turnkey Solutions mostly relating to green energy such as lithium batteries and solar power achieving the greatest growth of 303%. After a series of mergers and consolidations two years ago, the semiconductor industry made a significant recovery with rapid developments in IoT and autonomous car technologies. This allowed a 59% growth in revenue for semiconductor test equipment. Demands for Clean Tech industries such as electric vehicles, lithium batteries, and high power supplies remain strong, allowing a stable growth of 18% for the sales of Chroma’s precision electronic measurement instruments and system products. The following lists other consolidated financial figures:

Analysis of financial income, expenditure, and profitability

	Item	2016	2015
Financial structure(%)	Liability to asset ratio	42.10	40.65
	Proportion of long-term capital in property, plant, and equipment (PP&E)	512.48	467.83
Debt-paying ability(%)	Current ratio	237.39	309.47
	Quick ratio	190.86	248.58
Profitability (%)	Return on total assets	10.12	8.18
	Return on total equity	17.18	13.25
	Net profit	14.80	12.76

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

Forecasts predict steady growth for the global economy in 2017. Numerous innovative technologies such as AI, 3D Image Sensing, 5G communications, and other breakthrough applications and developments will bring rapid growth in the semiconductor, electric vehicle, and smart phone sectors. Demands for energy saving and carbon reduction solutions will also continue to support growth in Clean Tech related sectors. Major industrial nations are also stepping up developments in Industry 4.0 and Smart Manufacturing to get ready for global competition in the future. Chroma shall continue to monitor these trends and developments closely, enhance innovative technologies, and accelerate developments to fulfill the precise, reliable, and unique requirements for Test Solutions and Turnkey Solutions of the future market to achieve better revenues and profitability.

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

Leo Huang, Chairman & CEO

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	The world’s first automatic testing with simultaneous and parallel testing
	architecture for switched-mode power supplies was released.
February 1993	Invested in the Chroma ATE Inc. subsidiary in the United States to set up a
	US sales office.
December 1993	Formal opening and operations of the new Wugu plant.
February 1994	Invested in the Neworld Electronics Ltd. subsidiary in Hong Kong to set up
	an office 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	Enlisted in the stock market on December 21 for initial public offering in
	Taiwan.
August 1997	Granted ISO 9001 quality certification.
December 1997	9107 Uninterruptible Power Supply (UPS) and 3203 memory testing
	instrument won the 6th Taiwan Excellence Award.
April 1998	Granted the 6th Industrial Technology Development Outstanding
	Performance Award from the Ministry of Economic Affairs (MOEA)
	Invested in DynaScan Technology Corp.
July 1998	7100 color analysis instrument received the Outstanding Photonics Product
	Award during the 2nd Photonics Festival in Taiwan.
September 1998	Invested in ADLINK Technology Inc.
December 1998	2225and 2235 series video pattern generator and 9105 UPS won 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 set
	up a European sales office.
November 1999	Formal opening and operations of the new Linkou plant.
June 2000	First issuance of unsecured convertible corporate bonds in Taiwan worth
	NT$ 1.5 billion.
August 2000	Invested in EVT Technology.
January 2001	Acquired ZentechTech Inc.
March 2003	Established the Hsinchu Science Park branch.
September 2003	Set up the global operation HQ in Taiwan.
March 2004	Donated a 360 degrees LED display to National Chiao Tung University, the
	first of its kind in a Taiwanese university.
December 2004	20th anniversary and Linkou Operational HQ grand opening.
June 2005	Expiration and delisting of the 1st unsecured convertible corporate bonds

issued in Taiwan.

Spun off Special Material Business Unit to form a new subsidiary Chroma
August 2006 New Material Corp.
September 2006 China Suzhou factory grand opening. January 2007 Invested in Wei Kuang Automatic Equipment (Nanjin) Co., Ltd., Mou Kuan Technologies (Nanjin) Co., Ltd., Sajet Technology Co., Ltd., and MAS Automation Corp.
February 2007 Invested and founded Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. March 2007 Invested and founded Testar Electronics Corp. April 2007 Established MES Business Unit. March 2008 Simplified merger of subsidiary Silver Town Electronic Co., Ltd. May 2008 Invested and founded Chroma Japan Corp. March 2009 Granted ISO 9001:2008 certification. September 2009 Established Kaohsiung branch. September 2009 Invested in Chroma Systems Solutions, Inc. to expand sales offices in the US.
August 2010 Acquired many prestigious awards from FinanceAward as Taiwan’s best managed company, best corporate governance, and best medium-sized enterprise for the year.
October 2010 Granted ISO/TS 16949 certification. August 2011 Acquired Wise Life Technology Co., Ltd. January 2012 Acquired the tender for the industrial development zone (tender A) for Station A7 of the Airport MRT.
January 2012 High Precision LED Rapid 2D Light and Color Measurement Technology Development Project won the Excellent Industrial Contribution Award in the 2011 Technical Excellence Program of the MOEA.
November 2012 Simplified merger of subsidiary Novatest Electronics Co., Ltd. December 2012 Acquired the world’s first SAE J1772 certification from UL for automated communication protocol testing system.
February 2013 Granted the 1st Taiwan Mittelstand Award from the 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 Private. Ltd. in Singapore to establish a sales office in Southeast Asia.
January 2017 Chroma Germany branch established. January 2017 Granted the Distinguished Enterprise Innovation Award, the highest honor available from the 5th National Industrial Innovation Award.
3 -

III. Corporate Governance Report

1. Organization

(1) Organizational structure

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(2) Responsibilities and functions of major departments

Department	Responsibilities
CEO Office	Set up the departments of Corporate Marketing, Legal Affairs, and Safety and Health Center. Formulate company-wide administrative and business objectives, implement communication and coordination, product planning, new business development and planning, patent management, contract review, environmental protection,occupation safetyand 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 market planning, R&D, and sales of semiconductor test equipment.
Test & Measurement BU	Responsible for the R&D and sales of measurement instruments. In charge of calibration services as well as operations of calibration labs for measurement instruments.
Integrated System Solution BU	Responsible for the R&D of automated mechatronic systems used for measurement. Responsible for the planning, R&D, sales of modular instruments and system integration solutions.
Intelligent Manufacturing System BU	Responsible for the R&D and sales of MES systems.
Corporate Manufacturing	Responsible for the raw material purchasing and production for the entire company, as well as planning and maintaining the product qualitysystem.
Advanced Technology Research Center	New technology planning, development, and supporting the business units (BU) to comprehend the future development of new industries.
Finance & Administration Center	Include the departments of Financial, Accounting, Human Resources, General Affairs, and Facilities. Financial Department: Capital planning and utilization for the entire company, assessing investment plans, and providing support for certain operations. Accounting Department: Establish and implement an accounting system to handle various taxation and accounting affairs. HR Department: Planning human 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: In charge of factory maintenance and safety.
Operation Management Center	Construct and manage the company's operations management system. Establish the IT Department (including Information System Development Section, IT System Management Section, and Data Control Section) to carry out planning and safety controls for IT equipment and application systems throughout the entire company, and to issue and control management regulations and rules.

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 10,2017	April 10,2017	April 10,2017
Title	Nationality or place of registration	Name	Gender	Elected Date	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
							Number of shares	Percentage of shares	Number of shares	Percentage of shares	Number of shares	Percentage of shares				Title	Name	Relations
Chairperson of the Board	Republic of China	Leo Huang	Male	June 11, 2014	June 10, 2017	October 23, 1984	23,419,897	6.22%	23,419,897	5.78%	9,167,362	2.26%	0	Department of Engineering, National Chiao Tung University	General Manager of this Corporation Director, I-Sheng Electric Wire & Cable Co., Ltd. Director, Leadtek Research Inc . Director, DynaScan Technology Corp. Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
Independent Director	Republic of China	Quincy Lin	Male	June 11, 2014	June 10, 2017	May 18, 2005	0	0	0	0	0	0	0	PhD, Business Administration, University of Kentucky Senior Deputy General Manager, Taiwan Semiconductor Manufacturing Company Director, Neo Solar PowerCorporation	Director, RafaelMicro Director, General Energy Solutions Independent director, Powertech Technology Inc. Director, Neo Solar Power Corporation	None	None	None
Independent Director	Republic of China	Tsung- Ming Chung	Male	June 11, 2014	June 10, 2017	May 21, 2002	0	0	0	0	0	0	0	Masters of Business Administration, National Chengchi University CPA, Republic of China Licensed accountant, State of Connecticut, USA Accountant, Deloitte & Touche Part-time instructor, Department of Accounting, National Chengchi University Applied accounting instructor, College of Management, National TaiwanUniversity	Director, Dynapack Corp. Independent director, Taiwan Mobile Representative of corporate directors, Far Eastern International Bank Director, Unity Opto Technology Co., Ltd.	None	None	None
Director	Republic of China	Fer Mo Investment Co., Ltd.	-	June 11, 2014	June 10, 2017	May 18, 2005	1,250,505	0.33%	1,250,505	0.31%	0	0	0	-	-	None	None	None
	Republic of China	Representative: Chung-ju Chang	Male				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.	-	June 11, 2014	June 10, 2017	June 6, 2012	1,925,579	0.51%	1,915,579	0.47%	0	0	0	-	-	None	None	None
	Republic of China	Representative: I-shih Tseng	Male				383,548	0.10%	383,548	0.09%	138,722	0.03%	0	PhD, Mechanical Engineering, Pennsylvania State University, US Project Manager, Institute for Information Industry Full-time Assistant Professor, Department of Mechanical Engineering, National Taiwan University	General Manager, Business Unit, Chroma ATE Inc. Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
Supervisor	Republic of China	Chi-jen Chou	Male	June 11, 2014	June 10, 2017	June 13, 2008	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.	-	June 11, 2014	June 10, 2017	May 13, 1999	3,380,922	0.90%	3,200,922	0.79%	0	0	0	-	-	None	None	None
	Republic of China	Representative: Tsun-i Wang	Male				19,339	0.01%	19,339	0	936	0	0	PhD, Department of Photonics, National Chiao Tung University Deputy General Manager, Tailyn Technologies, Inc. Deputy General Manager, Champion-Lighting TechnologiesLimited	Chief Technical Supervisor, DynaScan Technology Corp.	None	None	None

Major artificial persons holding shares of the company (Table 1)

April 10, 2017

	April 10,2017
Name of the artificial person	Major shareholder of the artificial person
Fer Mo Investment Co., Ltd.	Hong Ming Investment Limited (99% of shares), Shu-fang Chen (1% of shares)
Chroma Investment Co., Ltd.	Chroma ATE Inc. (100% of shares)
Kai Sun Investment Co.,Ltd.	Yao-chung Chang (32.42% of shares), Kai-chen Chang (24.42% of shares), Chun-luan Chang-Lin (13.34% of shares), Ming-hsiung Chang (13.34% of shares), Chung Sheng Investment Limited (8.31% of shares), Yen-cheng Chen (8% of shares), Shih-tang Lin (0.05% of shares), Chia- ming Chuang (0.04% of shares), Shih-jung Lin (0.04% of shares), and Ming-i CHang (0.04% of shares).

Table 1 - Major shareholders where artificial persons are the major shareholders.

	April 10,2017
Name of the artificial person	Major shareholders of the artificial person
Hong Ming Investment Limited	Yen-hsun Huang (40% of shares), Yen-chun Huang (40% of shares), Shu- chuan Chen(12% of shares),and Leo Huang (8% of shares).
Chroma ATE Inc.	Leo Huang (5.78% of shares), Cathay Life Insurance (4.03% of shares), Chun-sheng Chen (3.73% of shares), JP Morgan Chase Bank N.A. Taipei Branch in custody for Universities Superannuation Scheme Limited (3.48% of shares), Yu-mei Hsueh (2.73% of shares), JPMorgan Chase Bank N.A. Taipei Branch in custody for Fidelity Central Investment Portfolios LLC: Fidelity Information Technology Central Fund (2.57% of shares), Fidelity Select Portfolios:Technology Portfolio (2.43% of shares), Shu-chuan Chen (2.26% of shares), Wellington Trust National Association Emerging Market Portfolio entrusted to HSBC Bank (2.05% of shares), and JP Morgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 EmergingStars EquityFund(2.04% of shares).
Chung Sheng Investment Limited	Yao-Chung Chang (25.12% of shares), Kai-chen Chang (25.12% of shares), Ming-hsiung Chang (24.8% of shares), Chun-luan Chang-Lin (21.8% of shares), Wei-chen Chang (3.0% of shares), Shih-tang Lin (0.04% of shares), Shih-jung Lin (0.04% of shares), Ming-i Chang (0.04% of shares),and Ming-shun Chang (0.04% of shares).

Directors and supervisors

Condition Name	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Currently serving as an independent 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 administrati on, legal affairs, finance, accounting, or business sector of the company.	1	2	3	4	5	6	7	8	9	10
Leo Huang														0
Quincy Lin														1
Tsung-ming Chung														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 fulfill 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 or subsidiary established in pursuant to this law or local laws).
（ 3 ） Not a natural person shareholder who holds more than 1% of issued shares or is ranked 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 name 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 that directly holds more than 5% of the total number of issued shares of the company or is ranked 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 10,2017	April 10,2017	April 10,2017
Title	Nationality	Name	Gender	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
					Number of shares	Percentage ofshares	Number of shares	Percentage ofshares	Number ofshares	Percentage ofshares			Title	Name	Relations
General Manager	Republic of China(CE)	Leo Huang	Male	November 8, 1984	23,419,897	5.78%	9,167,362	2.26%	0	0	Department of Engineering, National Chiao Tung University	Director, I-Sheng Electric Wire & Cable Co., Ltd. Director, Leadtek Research Inc. Director, DynaScan Technology Corp. Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
General Manager of the Test & Measurement BU	Republic of China(CE)	David Yang	Male	August 14, 1992	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, ChungHua University	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
General Manager of the Integrated SystemSolution BU	Republic of China(CE)	I-shih Tseng	Male	July 16, 1998	383,548	0.09%	138,722	0.03%	0	0	Mechanical Engineering, Pennsylvania State University, US ProjectManager,Institutefor Information Industry	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
General Manager of the Business Department	Republic of China(CE)	C.C. Ho	Male	December 10, 2001	90,088	0.02%	0	0	0	0	Department of Electrical Engineering, Tatung University CEO, GlobalOperationsManagementDepartment,Tatung Company	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
General Manager of the Intelligent Manufacturing System BU	Republic of China(CE)	Joe Lin	Male	April 1, 2007	63,543	0.02%	0	0	0	0	Department of Information Sciences, Cal Poly Pomona General Manager, Sajet Technology	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
General Manager, Semiconductor Test Equipment BU	Republic of China(CE)	George Chang	Male	August 1, 2006	25,000	0.01%	0	0	0	0	Institute of Electrical Control Engineering, National Chiao Tung University Manager,BusinessDepartment,Lian LiCo.,Ltd.	None	None	None	None
Deputy General Manager, Finance &AdministrationCenter	Republic of China(CE)	Paul Ying	Male	May 3, 1999	101,969	0.03%	0	0	0	0	School of Management, New York Institute of Technology Deputy General Managerof Finance,Hsin YuEnergyDevelopment Co.	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
Deputy General Manager, Advanced Technology ResearchCenter	Republic of China(CE)	Mark Fong	Male	May 2, 1990	749,108	0.18%	331,904	0.08%	0	0	Department of Electrical Engineering, National Taiwan University Deputy Manager of R&D, Sampo Corporation	None	None	None	None
Deputy General Manager of the Operation Management Center	Republic of China(CE)	Benjamin Huang	Male	June 22, 1992	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 Corporation	None	None	None	None
Deputy General Manager, Manufacturing Center	Republic of China(CE)	Steven Liu	Male	August 22, 1991	80,012	0.02%	738	0	0	0	Department of Information & Communications, Chinese Culture University Departmental Manager, Property and Product Management Department of this Corporation	None	None	None	None
Deputy General Manager, R&D Department, Semiconductor Test EquipmentBU	Republic of China(CE)	Max Chang	Male	December 1, 2000	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(CE)	Herbert Tsai	Male	July 1, 2005	16,474	0	0	0	0	0	Machinery and Automation Engineering, Nanya Institute of Technology Deputy General Manager, Dasike Technology Company	None	None	None	None
Deputy General Manager, General Manager’s Office	Republic of China(CE)	C.C.Fan	Male	August 1, 2010	375,235	0.09%	0	0	0	0	Department and Institute of Industrial Engineering and Management, Minghsin University of Science and Technology Deputy General Manager,R&D Department,MASAutomationCorp.	None	None	None	None
Deputy General Manager, Planning Department, Test & MeasurementBU	Republic of China(CE)	Bobby Tseng	Male	January 1, 2001	51,000	0.01%	14,000	0	0	0	Electrical Engineering, Waseda University Manager, Product Planning Department, Test & Measurement BU of this Corporation	None	None	None	None
Deputy General Manager, Greater China Area Sales Department, Test & MeasurementBU	Republic of China(CE)	Vincent Chen	Male	January 1, 2001	20,260	0	0	0	0	0	Department of Electrical Engineering, Lunghwa University of Science and Technology Department Manager, Greater China Area Sales Department, Test & MeasurementBU	Refer to Page 98 to 99 for details on positions in affiliated businesses	None	None	None
Deputy General Manager, Technical Service Department, Test &MeasurementBU	Republic of China(CE)	Tony Yang	Male	July 1, 2003	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(CE)	Vincent Wu	Male	July 16, 2003	91,465	0.02%	903	0	0	0	Institute of Electrical Control Engineering, National Chiao Tung University Department Manager, R&D Department, Test & Measurement BU of this Corporation	None	None	None	None
Deputy General Manager, R&D Department 1, Integrated System Solution BU	Republic of China(CE)	Lance Ouyang	Male	July 1, 2009	28,000	0.01%	0	0	0	0	Institute of Mechanical Engineering, National Chiao Tung University Deputy General Manager, Global Target Company	None	None	None	None
Deputy General Manager, Sales Department 2, Integrated System Solution BU (Note1)	Republic of China(CE)	Jeff Lee	Male	January 1, 2007	28,000	0.01%	0	0	0	0	Department of Electrical Engineering, Hsinpu Institute of Technology Departmental Manager, Product Planning Department, Integrated System Solution BU ofthis Corporation	None	None	None	None

Note 1: Promoted to the position of Deputy General Manager on January 1, 2017

(3) Renumeration paid out to Directors, Supervisors, the 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
Title		Name (Note 1)	Director’s remuneration										Proportion of NIAT after summing the 4 items of A, B, C, and D (Note 4)		Employee remuneration for other activities										Proportion of NIAT after summing the 7 items of A, B, C, D, E, F, and G (Note 4)		Whether or not the person receives remuneration from other non- subsidiary companies that this company has invested in (Note 7)
			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)
			This Corporation	All companies listed in this Financial Report (Note 8)	This Corporation		All companies listed in this Financial Report (Note 8)	This Corporation	All companies listed in this Financial Report (Note 8)	This Corporation		All companies listed in this Financial Report (Note 8)	This Corporation	All companies listed in this Financial Report (Note 8)	This Corporation	All companies listed in this Financial Report (Note 8)		This Corporation	All companies listed in this Financial Report (Note 8)	This Corporation		All companies listed in this Financial Report(Note 8)			This Corporation	All companies listed in this Financial Report (Note 8)
																				Cash Sum	Shares Sum	Cash Sum		Shares Sum
Chairperson of the Board		Leo Huang	0	0	0		0	6,000	7,200	495		495	0.38%	0.45%	11,933	11,933		321 (Note 9)	321 (Note 9)	11,593	0	13,513		0	1.76%	1.95%	None
Independent director		Quincy Lin
Independent director		Tsung-ming Chung
Director		Fer Mo Investment Company representative: Chung-ju Chang
Director		Chroma Investment Company representative: I-shih Tseng
*Remuneration received in the			most recent year by the directors			of the company for rendering services (such as serving as a non-employed consultant) to any company listed in the Financial Report: None.
						Table of remuneration ranges
	Remuneration range of each director in this Corporation										Name						of director
						Sum of the first 4 i					tems(A+B+C+D)						Sum of the first 7 items(A+B+C+D+E+F+G)
						This Corporation(Note 10)					All companies listed in this financial report(Note 11)						This Corporation(Note 10)						All companies listed in this financial report(Note 11)
	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 Tsengof Chroma Investment Co. Ltd.					Quincy Lin, Tsung-ming Chung, representative Chung-ju Chang of Fer Mo Investment Co. Ltd., and representative I-shih Tsengof 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 inclusive)					Leo Huang					Leo Huang
	NT$5,000,000(inclusive)to 10,000,000(not inclusive)																Representative I-shih Tsengof Chroma Investment Co. Ltd.						Representative I-shih Tsengof Chroma Investment Co. Ltd.
	NT$10,000,000(inclusive)to 15,000,000(not inclusive)																Leo Huang						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 name of directors shall be listed separately (for artificial persons, the name 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 2016. 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. Salary expenses recognized under IFRS 2 - Share-based Payment, such as employee stock option certificates, new restricted employee shares, and participation in subscription of stocks in cash capital increase, shall also be included within the remuneration.

Note 6: Employee's compensation for directors in 2016 shall be calculated as a proportion of the remuneration actually paid for in the previous year.

Note 7: (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 Corporation for being a director, supervisor, or managerial officer of other non-subsidiary companies that this company has invested in. Note 8: Total remuneration in various items paid out to this Corporation's directors by all companies (including this Corporation) listed in the consolidated statement shall be disclosed. Note 9: Amount of retirement pensions listed.

Note 10: For total remuneration in various items paid to every director, the name of the director shall be disclosed in the proper remuneration range.

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

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2. Supervisor’s remuneration

													Unit: NT$1,000
Title		Name (Note 1)				Supervisor’s remuneration					Proportion of NIAT after summing items A, B, and C(Note 5)		Whether or not the person receives remuneration from other non-subsidiary companies that this company has invested in (Note 7)
			Remuneration (A) (Note 2)			Compensation (B) (Note 3)		Business execution fees (C) (Note 4)
			This Corporation	All companies listed in this financial report (Note 6)		This Corporation	All companies listed in this financial report (Note 6)	This Corporation	All companies listed in this financial report (Note 6)		This Corporation	All companies listed in this financial report (Note 6)
Supervisor		Chi-jen Chou	0		0	2,000	2,000	210	210		0.13%	0.13%	5,700
Supervisor		Representative Tsun-i Wang of Kai Sun Investment Co.,Ltd.
						Table of remuneration ranges
	Remuneration range of each supervisor in this Corporation					Name of the supervisor
						Sum of the first 3 items(A+B+C)
						This Corporation				All other companies that this companyhas invested in(Note 7)
	Less than NT$ 2,000,000				Chi-jen Chou and Representative Tsun-i Wang of 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 name of supervisors shall be listed separately (for artificial persons, the name 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 2016.

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 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 6: Total remuneration in various items paid out to this Corporation's supervisors by all companies (including this Corporation) 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 Corporation for being a director, supervisor, or managerial officer of other non-subsidiary companies that this company has invested in.
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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) (Note 1)		Employee’s remuneration (D) (Note 2)				Proportion of NIAT after summing the 4 items of A, B, C, and D (%) (Note 6)		Whether or not the person receives remuneration from other non-subsidiary companies that this company has invested in(Note 3)
		This Corporation	All companies listed in this financial report (Note 4)	This Corporation	All companies listed in this Financial Report (Note 4`）`	This Corporation	All companies listed in this financial report (Note 4)	This Corporation		All companies listed in this financial report (Note 4)		This Corporation	All companies listed in this financial report (Note 4)
								Cash Sum	Shares Sum	Cash Sum	Shares Sum
General Manager	Leo Huang	35,123	36,116	2,096 (Note 5)	2,096 (Note 5)	29,358	29,358	60,000	0	64,420	0	7.36%	7.67%	None
General Manager of the Test & Measurement BU	David Yang
General Manager of the Integrated System Solution BU	I-shih Tseng
General Manager of the Business Department	C.C. Ho
Manager of the Intelligent ManufacturingSystem BU	Joe Lin
General Manager, Semiconductor Test Equipment BU	George Chang
Deputy General Manager, Finance & Administration Center	Paul Ying
Deputy General Manager, Advanced TechnologyResearch Center	Mark Fong
Deputy General Manager of the Operation Management Center	Benjamin Huang
Deputy General Manager, ManufacturingCenter	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

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Table of remuneration ranges

	Table of remuneration ranges	Table of remuneration ranges
Remuneration range for each General Manager and Deputy General Manager in this Corporation	Name of the General Managers and Vice Presidents
	This Corporation(Note 7)	All companies listed in this Financial Report(Note 8)
Less than NT$ 2,000,000
NT$ 2,000,000 (inclusive) to 5,000,000 (not inclusive)	Max Chang, Herbert Tsai, C.C.Fan, Bobby Tseng, Vincent Chen,TonyYang, Vincent Wu, andLance Ouyang	Max Chang, Herbert Tsai, C.C.Fan, Bobby Tseng, Vincent Chen,TonyYang, Vincent Wu, andLance Ouyang
NT$ 5,000,000 (inclusive) to 10,000,000 (not inclusive)	David Yang , I-Shih Tseng, C.C. Ho, Joe Lin, George Chang, Paul Ying, Mark Fong, Benjamin Huang, Steven Liu	David Yang , I-Shih Tseng, C.C. Ho, Joe Lin, George Chang, Paul Ying, Mark Fong, Benjamin Huang, Steven Liu
NT$ 10,000,000 (inclusive) to 15,000,000 (not inclusive)	Leo Huang	Leo Huang
NT$ 15,000,000(inclusive)to 30,000,000(not inclusive)
NT$ 30,000,000 (inclusive) to 50,000,000 (notinclusive)
NT$50,000,000(inclusive)to 100,000,000(not inclusive)
More than NT$100,000,000
Total	18	18

Note 1: Includes various bonuses, rewards, transport fees, and special expenses, the provision of various kinds of physical entities such as allowances, dormitories, and vehicles, and other types of remuneration. Salary expenses are recognized under IFRS 2 - Share-based Payment,
such as employee stock option certificates, new restricted employee shares, and participation in subscription of stocks in cash capital increase, shall also be included within the remuneration.
Note 2: Employee’s compensation for General Manager and Deputy General Managers allocated by the Board of Directors in 2016 was calculated using the proportion of the remuneration actually paid for in the previous year.
Note 3: a If this Corporation'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 Corporation for being a director, supervisor, or managerial officer of other non-subsidiary companies that this company has invested in.
Note 4: Total remuneration in various items paid out to this Corporation's General Managers and Deputy General Managers by all companies (including this Corporation) listed in the consolidated statement shall be disclosed.

Note 5: Amount of retirement pensions listed.

Note 6: 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: For total remuneration in various items paid to every General Manager and Deputy General Manager, the name of the General Managers and Deputy General Managers shall also be disclosed in the proper remuneration range.
Note 8: For total remuneration in various items paid by all companies (including this Corporation) listed in the consolidated statement to every General Manager and Deputy General Manager of this Corporation, the name of the General Managers and Deputy General Managers shall also be disclosed in the proper remuneration range.
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(4) Compare and analyze the total remuneration paid to each of this Corporation's Directors, Supervisors, General Managers, and Deputy General Managers in the 2 most recent years by all companies listed in this Corporation'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.
1.Analysis of total remuneration paid to this Corporation’s Directors, Supervisors, General Managers, and Deputy General Managers in the 2 most recent years as a percentage of NIAT:

percentage of NIAT:	percentage of NIAT:
Total remuneration paid to Directors, Supervisors, General Managers, and Deputy General Managers in 2015 and its proportion to NIAT.		Total remuneration paid to Directors, Supervisors, General Managers, and Deputy General Managers in 2016 and its proportion to NIAT.
This Corporation	All companies listed in the consolidated statement	This Corporation	All companies listed in the consolidated statement
6.26%	7.18%	7.87%	8.25%

2.Policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its linkage to business performance and future risk exposure.
(1)Directors and supervisors: Most remuneration paid by this Corporation has been provided to its Directors and Supervisors. The Director's and Supervisor’s remunerations issued in the 2 most recent years were fixed. When holding the board meeting, both Directors and Supervisors were provided with transport expenses.
(2)General Managers and Deputy General Managers: This Corporation 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's compensation would be subject to change. Proposals shall be established according to the business performance and personal performance appraisal results of the year, submitted to this Corporation’s Salary and Remuneration Committee, and resolved during the board meeting.
(3)This Corporation 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.
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Names of managerial officers provided with employee's compensation and state of payments

		December 31,2016(Unit: NT$1,000)	December 31,2016(Unit: NT$1,000)	December 31,2016(Unit: NT$1,000)	December 31,2016(Unit: NT$1,000)	December 31,2016(Unit: NT$1,000)
	Title	Name	Shares Sum	Cash Sum	Total	Total payment as a proportion of NIAT (%)
Managerial Officer	General Manager	Leo Huang	0	60,000	60,000	3.49 %
	General Manager of the Test & Measurement BU	David Yang
	General Manager of the Integrated System Solution BU	I-shih Tseng
	General Manager of the Business Department	C.C. Ho
	General Manager of the Intelligent Manufacturing System 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 the Operation Management Center	Benjamin Huang
	Deputy General Manager, Manufacturing Center	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: Employee’s compensation for managerial officers allocated by the Board of Directors in 2016 was calculated using the proportion of the remuneration actually paid for in the previous year.

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3. Implementation of Corporate Governance

(1) Implementation of board meetings

A total of 7 board meetings were held in 2016. The following lists the attendance of Directors and Supervisors to these meetings:

Title	Name (Note 1)	Actual presence (attendance)	Delegated presence	Rate of actual presence (attendance) (%) (Note 2)
Chairperson of the Board	Leo Huang	7	-	100%
Independent director	Quincy Lin	6	1	86%
Independent director	Tsung-ming Chung	7	-	100%
Director	Representative Chung-ju Chang of Fer Mo Investment Co., Ltd.	7	-	100%
Director	Representative I-shih Tseng of Chroma Investment Co. Ltd.	6	-	86%
Supervisor	Chi-jen Chou	7	-	100%
Supervisor	Representative Tsun-i Wang of Kai Sun Investment Co.,Ltd.	7	-	100%
Other items that shall be recorded: 1.Where one of the following circumstances apply for the operations of the Board of Director meetings, the date, session, topic discussed, opinions of every independent directors, and this Corporations’ handling of the opinions of the independent directors shall be explained: (1)Any one of the matters listed in Article 14-3 of the Securities and Exchange Act: For resolutions of this Corporation on matters listed in Article 14-3 of the Securities and Exchange Act, there are no dissenting or qualified opinions from the independent director. (2)In addition to the aforementioned matters, any other resolutions from the Board of Directors where an independent director expressed dissenting or qualified opinions that have been recorded or stated by writ: None. 2.For the implementation and state of director’s recusal for conflict of interest, the director's name, contents of the topic, reasons for the required recusal, and participation in the voting process: 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 fiscal year and most recent fiscal year as well as assessments of the actions implemented: This Corporation stipulated the Regulations for Conducting board meeting. The operations of the Board of Directors are compliant to relevant statutory regulations, and major resolutions are disclosed on the same day the said resolutions were made on the Market Observation Post System (MOPS) after the board meeting. Major resolutions of board meeting made in the most recent year were also disclosed on this Corporation's official website to safeguard the shareholder’s interests. This Corporation 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 meeting 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 name of the shareholders and representative of the said artificial person shall be disclosed.
Note 2 : (1) If 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 board meetings convened and actual presence (attendance) during the term of service.
(2) If Directors and Supervisors were re-elected before the end of the year, both the incoming and outgoing Directors and Supervisors shall be listed accordingly. The Notes column shall be annotated whether the Director or Supervisor was outgoing, incoming, or re-elected as well as the date of re-election. Actual presence (attendance) rate (%) shall be calculated using the number of board meetings convened and actual presence (attendance) during the term of service.
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(2) Operations of the Audit Committee or supervisors’ participation in the board meeting
Operations of the Audit Committee: This Corporation has yet to establish an Audit Committee.
Supervisors’ participation in the board meeting

A total of 7 board meetings were held in 2016. The following lists the attendance:

Title	Name	Number of actual attendance	Rate of actual attendance (%) (Note)
Supervisor	Chi-jen Chou	7	100%
Supervisor	Representative Tsun-i Wang of Kai Sun Investment Co.,Ltd.	7	100%
Other items that shall be recorded: 1. Composition and responsibilities of the supervisors: (1)This Corporation has 2 Supervisors who are individuals elected by the Board of Shareholders for their capabilities. (2)The following lists the responsibilities of the Supervisors: 1. Auditing this Corporation’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 accounts reports. 5. Appropriation of net income or reviewing of proposals for making up losses. 6. Other responsibilities empowered by laws. (3)Communication with this Corporation’s employees and shareholders: Where the Supervisor believes to be necessary, the Supervisor may directly contract employees and shareholders, attend shareholder meetings, and directly communicate with the shareholders. (4)Communication between the Supervisor and the internal audit manager or CPA: 1. The Audit Manager shall complete the 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 Corporation’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 board meetings, the date, session, contents of the case discussed, and resolution of the board meeting as well as this Corporation’s disposition of opinions stated by the Supervisors shall be described: None.

Note: *If 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.

*If Supervisors were re-elected before the end of the year, both the incoming and outgoing Supervisors shall be listed accordingly. The Notes column shall be annotated whether the Supervisor was outgoing, incoming, or re-elected as well as the date of re-election. Actual attendance rate (%) shall be calculated using the figures for actual attendance during the term of service.
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(3) State of corporate governance, gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps

Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx 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/TPEx Listed Companies?			This Corporation has stipulated the Corporate Governance Best Practice Principles. Please visit the MOPS or the official website of this Corporation 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?	   		(1) This Corporation has established a system of spokespersons and deputy spokespersons for handling shareholder proposals, inquiries, and other relevant matters. (2) This Corporation has delegated a dedicated person to manage relevant information in order to effectively assess shareholding by this Corporation’s Directors, Supervisors, managerial officers, and major shareholders holding more than 10% of its shares, and disclosed this information according to the statutory regulations. (3) This Corporation has established regulations to monitor the subsidiaries and delegated personnel to supervise the financial operations of those subsidiaries.. (4) This Corporation has stipulated Regulations for Prohibiting Insider Trade that prohibit this Corporation’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 Corporation’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?			(1) This Corporation stipulated Best Practice Principles for Corporate Governance that the composition of the Board of Directors must consider the diversity as well as principles of diversity including basic criteria, professional knowledge,and skills	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
(2) In addition to 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 assess the independence of CPA ?	 		which correspond to the operations, business, and development required by this Corporation. The composition of this Corporation’s Board of Directors shall consider the members’ professional background, skills and experiences required for this Corporation’s businesses, and principles of diversity. This Corporation has a total of 7 Directors including 2 Independent Directors appointed to the position. (2) This Corporation 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 Corporation also conducts regular annual reviews on the independence of CPA hired. Assessment indicators include whether or not the CPA: is a Director or Supervisor of this Corporation, is a Shareholder of this Corporation, receives salary from this Corporation, has major conflicts of interest with this Corporation, is a managerial officer involved with this Corporation’s decision making process, or has served in this Corporation in the last 2 years before providing accounting services. Assessment results shall be submitted to this Corporation’s Board of Directors.
4. Has the TWSE/TPEx listed company set up a full- (or part-) time corporate governance unit or personnelto beincharge of			The financial department of this Corporation has designated personnel to be in charge of corporate governance affairs (includingfurnishinginformation	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
corporate governance affairs (including but not limited to furnishing information required for business execution by directors and supervisors, handling matters related to board meetings and shareholders’ meetings, handling corporate registration and amendment registration, and producing minutes of board meetings and shareholders’ meetings)?			required for business execution by Directors and Supervisors, handling matters related to board meetings and Shareholders’ Meetings, and producing minutes of board meetings and shareholders’ meetings).
5. Has the company established a communication channel with stakeholders (including but not limited to shareholders, employees, customers, and suppliers)? Has a stakeholders’ area been established in the company’s website? Has the company addressed major corporate social responsibility (CSR) topics that the stakeholders are concernedina proper manner?			This Corporation has established a CSR area on its official website providing contact information, emails, and other channels of communication to stakeholders so that they may raise topics they are concerned with. These concerns will then be promptly addressed by this Corporation.	No gaps
6. Has the company delegated a professional shareholder services agent to handle shareholders’ meeting?			This Corporation has delegated the share administration agency of Taishin International Bank to handle shareholder meetings and various services.	No gaps
7. 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)?	 		(1)This Corporation has set up a website with special pages on investor services and regular updates on financial operations and corporate governance. Website: (www.chromaate.com). (2) This Corporation has set up Chinese and English language websites as well as a special area for investor services. A professional has been charged with collecting information and providing regular updates for financial operations. This Corporation has delegated a spokesperson and deputy spokesperson. Investor conferences are held on a regular basis, and relevant information has been disclosed using this Corporation's officialwebsite.	No gaps
8. Has the company provided important information to better understand the state of corporate governance (including butnot			1. Employees’ rights: Employee’s rights are provided according to the Labor Standards Act and HR regulations establishedinthis Corporation.	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
limited to employees’ rights, employee care, investor relations, supplier relations, stakeholders’ rights, progress of training of directors and supervisors, risk management policy and state of implementing risk impact standards, state of implementing customer policies, and the company’s purchase of liability insurance for its directors and supervisors)?			Employees’ feedback mail box, 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, employees also enjoy a diverse selection of recreational facilities such as swimming pools and gyms. To help uphold family virtues and to 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 for employees to select recreational activities after work. 3. Investor relations: This Corporation 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 Corporation also convenes investor conferences on a regular basis and discloses relevant information of company operations on its official website. 4. Supplier relations: The business strategy adopted by this Corporation upholds trust as the highest guiding principle and respects every commitment made with both suppliers and stakeholders. This Corporation 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 transparent and prompt information. The financial and business information posted on the Corporation’s website are regularly updated. 6. Progress of training of Directors and Supervisors: All Directors and Supervisors within this Corporation have academic backgrounds and

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Items assessed	State of operations	State of operations	State of operations
	Yes	No	Summary
			practical experiences in business management that are applicable to the business scope of this Corporation. The financial, business, and professional courses recently taken by this Corporation’s Directors, Supervisors, and managerial officers are listed below (please refer to Note 1). 7. Implementation of risk management policy and risk evaluation standards: This Corporation has carefully stipulated various internal control regulations to manage and evaluate various risks. 8. Execution of customer policies: This Corporation 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 production lines operate smoothly while maintaining positive customer relationships. 9. Liability insurance for Directors and Supervisors of this Corporation: Liability insurances have been taken out for the Directors, Supervisors, and other key employees of this Corporation.
9. Improvements made in the most recent year in response to the results of corporate governance evaluation conducted by the Corporate Governance Center of the Taiwan Stock Exchange Corporation, and prioritized matters and measures to be improved upon for matters that have not been improved. (This section is no need to be completed by the companies unlisted for evaluations.) 1. Improvements made in the most recent year: (1) Every matter in the 2016 annual shareholders’ meeting was resolved by voting. The results of every resolution are recorded within the meeting minutes. (2) On the same day that the 2016 annual shareholders’ meeting was held, the results of every resolution were uploaded to the designated online website for information disclosure. (3) Electronic voting was adopted by the 2016 annual shareholders’ meeting. (4)The English version of the annual report was uploaded 7 days prior to the date of the annual shareholders’ meeting. (5) This Corporation stipulated and disclosed the Corporate Governance Best Practice Principles. (6) This Corporation stipulated and disclosed Best Practices for Ethical Corporate Management and Best Practices for Corporate Social Responsibility. (7) Stipulated corporate social responsibility (CSR) policy, management guidelines, and implementation program, and disclosed actual achievements in the annual report and the website of this Corporation. (8) Compiled a CSR report and acquired third party certification . (9) Stipulated a whistle-blowing system and disclosed the said system on this Corporation’s website. (10) Corporate annual reports and website discloses various employee benefit plans, retirement systems, and status of implementation. (11) Corporate annual reports and website discloses the employees’workenvironment andmeasures to

Improvements made in the most recent year in response to the results of corporate governance evaluation conducted by the Corporate Governance Center of the Taiwan Stock Exchange Corporation, and prioritized matters and measures to be improved upon for matters that have not been improved. (This section is no need to be completed by the companies unlisted for evaluations.)
Improvements made in the most recent year:
(1) Every matter in the 2016 annual shareholders’ meeting was resolved by voting. The results of every resolution are recorded within the meeting minutes.
(2) On the same day that the 2016 annual shareholders’ meeting was held, the results of every resolution were uploaded to the designated online website for information disclosure.
(3) Electronic voting was adopted by the 2016 annual shareholders’ meeting.
(4)The English version of the annual report was uploaded 7 days prior to the date of the annual shareholders’ meeting.
(5) This Corporation stipulated and disclosed the Corporate Governance Best Practice Principles.
(6) This Corporation stipulated and disclosed Best Practices for Ethical Corporate Management and Best Practices for Corporate Social Responsibility.
(7) Stipulated corporate social responsibility (CSR) policy, management guidelines, and implementation program, and disclosed actual achievements in the annual report and the website of this Corporation.
(8) Compiled a CSR report and acquired third party certification .
(9) Stipulated a whistle-blowing system and disclosed the said system on this Corporation’s website. (10) Corporate annual reports and website discloses various employee benefit plans, retirement systems, and status of implementation.

(11) Corporate annual reports and website discloses the employees’ work environment and measures to

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
safeguard personal safety. (12) Established an organization responsible for implementing CSR. The operations and implementation status of the said organization are provided within the corporate annual report and website. 2. Prioritized the matters to be improved and the measures to be taken: This Corporation plans to establish an Audit Committeein 2017.

Note 1: Training status of this Corporation’s Directors and Supervisors in 2016 to the date of publication of this report.

report.
Title Name Training date Organizer Course title Chairperson of the Board Independent director Independent director Supervisor Leo Huang Tsung- ming Chung Quincy Lin Chi-jen Chou September 26, 2016 July 6, 2016 October 29, 2016 April 19, 2016 December 15, 2016 April 1, 2016 Taiwan Academy of Banking and Finance Taiwan Corporate Governance Association Taiwan Corporate Governance Association Securities and Futures Institute Securities and Futures Institute Securities and Futures Institute Corporate Governance Forum - Cross-Strait Anti-Avoidance Clause Trends in the evolution of leases and taxes. Corporate governance structure and operations of the Board of Directors How to establish effective systems in detecting and preventing malpractice and set up whistle- blowing systems to enhance corporate governance Early warnings for corporate financial crisis and analyzing the types of crisis 2016 Corporate Governance Forum series - Conference on insider trading and CSR	Training
	hours 3 3 3 3 3 3

report.

Title
Name
Training date
Organizer
Course title

Chairperson
of the Board
Independent
director
Independent
director
Supervisor
Leo
Huang
Tsung-
ming
Chung
Quincy
Lin
Chi-jen
Chou
September
26, 2016
July 6,
2016
October
29, 2016
April 19,
2016
December
15, 2016
April 1,
2016
Taiwan Academy of Banking
and Finance
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Securities and Futures Institute
Securities and Futures Institute
Securities and Futures Institute
Corporate Governance Forum -
Cross-Strait Anti-Avoidance Clause
Trends in the evolution of leases
and taxes.
Corporate governance structure and
operations of the Board of Directors
How to establish effective systems
in detecting and preventing
malpractice and set up whistle-
blowing systems to enhance
corporate governance
Early warnings for corporate
financial crisis and analyzing the
types of crisis
2016 Corporate Governance Forum
series - Conference on insider
trading and CSR

Training

hours
3
3
3
3
3
3

Corporate governance training for managerial officers of this Corporation in 2016 up to the publication date of this report:

Title	Name	Training date	Organizer Accounting Research and Development Foundation	Course title Continuing Training Class for Principal Accounting Officers of Issuers, Securities Firms, and Securities Exchanges	Training hours
Deputy General Manager, Finance & Administration Center	Paul Ying	August 4, 2016 to August 5, 2016			12

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

Information on the members of the Salary and Remuneration Committee

Identity (Note 1)	Condition Name	Has more than 5 years of work experience and the following professionalqualifications	Has more than 5 years of work experience and the following professionalqualifications	Has more than 5 years of work experience and the following professionalqualifications	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Compliant to the requirements of independence(Note 2)	Number of salary and remuneration committee memberships concurrently held in 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 a 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
Other	Chao-min Yang												0

Note 1: For identity, please annotate whether the person is a director, independent director, or others.
Note 2: For any committee member who fulfill the relevant condition(s) 2 years before being elected or during the term of office, please mark 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. However, this restriction does not apply in cases where the person is an independent director of the company, its parent or subsidiary established in pursuant to this law or local laws.
(3) Not a natural person shareholder who holds more than 1% of issued shares or is ranked 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 name 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 that directly holds more than 5% of the total number of issued shares of the company or is ranked 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.
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Operations of the Salary and Remuneration Committee
(1) This Corporation 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 2016, a total of 2 Salary and Remuneration Committee meetings (A) were held. The following lists member qualifications and presence for these meetings:

Title	Name	Actual presence (B)	Delegated presence	Rate of actual presence (%) (`Ｂ`/`Ａ`) (Note)
Committee chair	Tsung-ming Chung	2	-	100%
Member	Quincy Lin	1	1	50%
Member	Chao-min Yang	2	-	100%
Other items that shall be recorded: 1. If the Board of Directors choose 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 the company’s disposition of opinions provided by the Salary and Remuneration Committee shall be described in detail (also, where the salary and remuneration approved by the Directors’ Meeting is better than that recommended by the Salary and Remuneration Committee, the differences and the reason for the approval shall be described in detail): None. 2. Where resolutions of the Salary and Remuneration Committee include dissenting or qualified opinion which is on record or stated in a written statement, the date, session, contents discussed, opinions from every member, and disposition of the members’ opinions shall be described in detail: None.

Note: If 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.
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(5) Fulfillment of social responsibilities

Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx 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 regarding 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 Corporation has stipulated the Best Practices for Corporate Social Responsibility and issued a second CSR Report in 2016. BSI was commissioned to adopt moderate assurance of AA1000 Assurance Standard as the auditing standards, and provided this Corporation with a third-party verification statement. (2) Environmental Safety and Health (ESH) units organized seminars on safety, heath, and healthcare. The Welfare Committee also organized donation drives and charity performances for the Taiwan Fund for Children and Families to encourage employees participating in social charity. (3) ESH unit shall concurrently implement CSR activities, integrate various CSR efforts and results from other departments, and provide summary reports on CSR activities to upper management on a regular basis. (4) This Corporation 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 usage efficiency of various resources and utilizing renewable resources to reduce environmental impact? (2) Has the company referred to the nature of its industry to establish a suitable environment management system (EMS)?	 		(1)This Corporation is dedicated to developing green products, reduce the use of hazardous substances (HS), and generate lead-free production processes. Specific waste products and domestic wastes from the employees would undergo recycling and reuse. Promotion of relevant policies and garbage sorting would reduce the generation of wastes to properly fulfill the Corporation’s obligations in environmental protection. (2)All environmental health and safety (EHS) operations such as periodic tracking of waste production, stipulating waste reduction goals, promoting resource recycling, and	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx 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?			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 Corporation 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 in order to achieve energy saving and carbon reduction and cut down energy consumption while purchasing 100,000 kWh of green energy to further reduce carbon emissions and fulfill the Corporation’s responsibilities in environmental protection.
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 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?	  		(1) This Corporation is compliant to 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 Corporation has established employee appeal helpline and email addresses. Dedicated personnel have 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	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and root causes
	Yes	No	Summary
(4) Has the company established a 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 effective career competence training plan for its employees? (6) Has the company established relevant policies and systems of appeal for consumer rights in 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 where the company may terminate or rescind the contract at any time if the said supplier has violated the company's corporate social	     		providing various plant areas with automated external defibrillators (AED). (4) To improve the efficiency of internal communication and encourage fellow employees to provide recommendations, this Corporation 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 Corporation 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 Corporation 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 Corporation's products and services are compliant to relevant laws and international standards. (8) This Corporation 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. (9) Suppliers were required to sign Declaration for Environmental Protection which includes terms stipulating that this Corporation may terminate contractual agreements if the supplier violates environmental

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and root causes
	Yes	No	Summary
responsibility policy and have caused significant impact upon the environment and society?			protection laws and requirements.
4. Improvement of information disclosure (1) Does the company disclose relevant and reliable information relating to CSR on its official website or the Market Observation Post System (MOPS)?			This Corporation has established an electronic bulletin board to promptly report any of its activities. CSR reports and information related to social responsibility activities were also disclosed on the Corporation’s official website.	No gaps
5. Where the company has stipulated its own Best Practices on CSR according to the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies, please describe any gaps between the prescribed best practices and actual activities taken by the company: This Corporation 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 at the Corporation's website. For the status of CSR operations of this Corporation, please peruse the CSR reports compiled by the Corporation.
6. Any important information that is useful to 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, waste paper recycling, and monitor and record the use of printer paper. (2) CSR activities carried out in 2016 Donation activities in 2016 include: Taiwan Fund for Children and Families Kaohsiung Office, Boyo Social Welfare Foundation, Chiu Tsai-Hsing Culture and Education Foundation, Taiyuan Arts and Culture Foundation, Paper Windmill Culture and Education Foundation, and Yunlin County Datzu Social Welfare Charity Foundation. Supporting topics of social concern and clean energy policies also demonstrate this Corporation’s focus and environmentally friendly approach towards the development of energy sustainability. As a developer of clean energy equipment, it is imperative for Chroma ATE Inc. to demonstrate support to the said policies. This Corporation therefore subscribed 100,000 kWh of green energy from Taiwan Power Company to further reduce carbon emissions.
7. Any review standards of certification bodies that the company’s CSR report have been qualified for shall be described: The CSR Report of this Corporation published in 2016 is certified by BSI that has adopted moderate assurance levels of AA1000 Assurance Standard as the verification standards.

Where the company has stipulated its own Best Practices on CSR according to the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies, please describe any gaps between the prescribed best practices and actual activities taken by the company:
This Corporation 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 at the Corporation's website. For the status of CSR operations of this Corporation, please peruse the CSR reports compiled by the Corporation.
Any review standards of certification bodies that the company’s CSR report have been qualified for shall be described: The CSR Report of this Corporation published in 2016 is certified by BSI that has adopted moderate assurance levels of AA1000 Assurance Standard as the verification standards.
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(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/TPEx 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/TPEx 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 Corporation has stipulated the Best Practices for Ethical Corporate Management, Operational Rules for 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) The Operational Rules for Best Practices for Ethical Corporate Management of this Corporation clearly stipulate a plan to forestall unethical conduct and prescribed procedures, best practices, and disciplinary and appeal systems for violations within the said plan. The plan is also implemented accordingly. This Corporation 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) In addition to communication to internal personnel of this Corporation regarding the importance of ethical conduct and prescribing various procedures for handling and forestalling unethical conducts within the Operational Rules for Best Practices for Ethical Corporate Management, this Corporation also requires suppliers to sign a Supplier Commitment towards Business Integrity that clearly stipulate a prohibition against improper or unethical conduct during the process of business transaction.	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 on ethical conduct?			(1)To ensure that mutual trust and integrity form the basis of all business dealings, this Corporation’s management regulations have provided that suppliers must sign a letter of commitment towards	No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
(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 interests, provided proper channels of appeal, and enforced these policies and channels accordingly? (4)Has the company established effective accounting systems and internal control systems to enforce ethical corporate management? Are regular audits carried out by the company’s internal auditor or commissioned to a CPA? (5) Does the company regularly organize internal and external training for ethical corporate management?	   		business integrity which clearly prohibited any improper or unethical conduct in business activities and immediate blacklisting of any violators. Standard purchasing / sales contracts of this Corporation also clearly stipulate terms for business integrity and prohibition of unethical dealings and conduct. (2) This Corporation designated Internal Auditor directly under the Board of Directors as the responsible owner for revising, implementing, interpreting, providing counseling services, reporting, registering, and filing the contents of the Operational Rules for Best Practices for Ethical Corporate Management, supervising the implementation of these rules, and providing regular reports to the Board of Directors. (3)This Corporation stipulated the Operational Rules for Best Practices for Ethical Corporate Management that clearly stipulates a policy to prevent conflicts of interest. The official website of this Corporation also provides an independent whistle- blowing e-mail and hotline, providing a channel for internal personnel of this Corporation and external personnel to present their cases. Any matter of whistle-blowing shall be immediately handled by the responsible owner. (4)To achieve ethical corporate management, this Corporation has referred to key constituents of internal systems to establish effective accounting systems and internal control systems. The internal auditor shall also conduct audits according to the annual audit plan. (5)Newly hired employees are regularly provided with lectures on this Corporation’s organization, culture, and important ethical conduct while highlighting the importance of ethics at both individual and professional levels. Internal awareness programs conveying the importance of ethics are also held once every year to the employees.
3. Status for enforcing whistle-blowing				No gaps

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Items assessed	State of operations	State of operations	State of operations	Gaps with the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
systems in the company (1) Has the company established concrete whistle-blowing and reward systems and accessible whistle-blowing channels? Does the company assign a suitable and dedicated individual for the case being exposed by the whistle- blower? (2) Has the company stipulated standard operating procedures (SOP) and relevant systems of confidentiality for investigating the case being exposed by the whistle-blower? (3) Has the company adopted protection against inappropriate disciplinary actions for the whistle- blower?	  		(1) This Corporation has established and announced an independent whistle- blowing e-mail and hotline, allowing whistle-blowers to contact responsible personnel in the Corporation for any findings. (2) This Corporation stipulated standard operation procedures for handling whistle-blowing investigations as well as confidentiality mechanisms. The handling personnel shall investigate the case being exposed by the whistle-blower, generate records, submit a report, file relevant documents, and ensure confidentiality of the whistle-blower’s identity and the content of the reported case. (3) This Corporation stipulated standard operation procedures for handling whistle-blowing investigations as well as confidentiality mechanisms to ensure the confidentiality of the whistle-blower’s identity and the content of the reported case.
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 Corporation has established an electronic bulletin board, providing prompt announcements to relevant regulations and activities. Any regulations related to corporate governance as well as compliance to ethical conduct shall also be disclosed on this Corporation’s official website.	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/TPEx 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 Corporation was promulgated on December 23, 2015, and the Operational Rules for Best Practices for Ethical Corporate Management was promulgated on December 27, 2016 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 Corporation 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 Corporation, please refer to Section 3. Status of corporate governance (6) Compliance to ethical corporate management and measures implemented of this Report. For details on this Corporation’s Best Practices for Ethical Corporate Management, Standards for Ethical Conduct, and Operational Rules for Best Practices for Ethical Corporate Management please visit the MOPS or the Corporation's official website.
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

Where the company has stipulated its own best practices on ethical corporate management according to the Ethical Corporate Management Best Practice Principles for TWSE/TPEx 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 Corporation was promulgated on December 23, 2015, and the Operational Rules for Best Practices for Ethical Corporate Management was promulgated on December 27, 2016 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 Corporation 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 Corporation, please refer to Section 3. Status of corporate governance (6) Compliance to ethical corporate management and measures implemented of this Report. For details on this Corporation’s Best Practices for Ethical Corporate Management, Standards for Ethical Conduct, and Operational Rules for Best Practices for Ethical Corporate Management please visit the MOPS or the Corporation's official website.

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
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Items assessed	State of operations	State of operations	State of operations	Gaps with the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the cause of the said gaps
	Yes	No	Summary
of the company): None.

(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 Corporation’s official website for the Best Practice Principles for Corporate Governance stipulated by this Corporation and specifications provided by this Best Practice on protecting the shareholders’ rights, enhancing the functions of the Board of Directors, respecting the rights stakeholders’ rights, and increasing information transparency.

(8) Other important information to achieve better understanding on the state of corporate governance activities
This Corporation has stipulated Regulations for Prohibiting Insider Trade as the basis for the disclosure system of important news and information from this Corporation. This Corporation also conducts non-periodic inspections of these Regulations to ensure compliance to statutory regulations and have posted these Regulations on the internal website of this Corporation for inquiry.
(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:
(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.
(2) Innovation in resource use: Maximize the benefit of usable resources to reduce wasteful conduct, environmental pollution, and energy consumption.
(3) Sustaining green production: Regular audits and reviews to ensure the proper enforcement of environmental policies and achievement of continuous improvements to jointly safeguard an environmentally friendly global village.
Safety and health: Implementation of and compliance with the Taiwan Occupational Safety & Health Management System (TOSHMS) to stipulate occupational safety and health (OSH) policies and using TOSHMS as the highest guiding principles for OSH management and decision making within this Corporation:
(1) Employee safety:
- Employee fire safety teams shall work with local fire departments to conduct fire safety and evacuation exercises, disaster prevention, and practical disaster response drills.
- Established and enforced self-inspection plans to regularly inspection, 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
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operations.

(2) Employee insurance:
Used relevant laws and table of insurance ranges as the basis to provide employees with labor and health insurances.
Provided social insurances 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, SPA, 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 Corporation also established various societies and clubs to provide various recreational and health activities for employees.
•Hosted health promoting activities every year including healthy meals, aerobic exercises and health seminars in reducing the prevalence of metabolic syndrome.
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(10) State and implementation of the internal control system

1. The Statement on Internal Control System

Chroma ATE Inc. The Statement on Internal Control System

Date: February 21, 2017

This Corporation makes the following statement according to the self-evaluation conducted of its internal control system of 2016:

This Corporation has achieved full understanding that the establishment, implementation, and maintenance of the internal control system (ICS) are the responsibilities of this Corporation’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.
All ICS are bound by natural limitations and regardless of the robustness of designs, effective ICS can only provide reasonable assurance for the 3 objectives listed above. Also, the efficacy of the ICS will also change with the changing environment or context. However, this Corporation’s internal control system has been furnished with self-monitoring systems. This Corporation shall also initiate corrective actions for any verified defects.
This Corporation 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 the 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.
This Corporation has already adopted the aforementioned ICS assessment items to evaluate the effectiveness of ICS design and implementation.
This Corporation has referred to the results of the aforementioned assessments and determined that this Corporation’s ICS (including monitoring and management of its subsidiaries) of December 31, 2016, including this Corporation’s understanding of the level of effectiveness and efficiency of business operations achieved, the reliability, timeliness, transparency, and regulatory compliance of reporting, the compliance with applicable laws, regulations, and bylaws, are effectively designed and implemented and capable of reasonably ensuring the attainment of the aforementioned objectives.
This Statement shall be a major content of this Corporation’s annual report and prospectus, and shall be publicly disclosed. Where any of the disclosed content contain misrepresentations, nondisclosures, or other illegal acts, this Corporation shall be subject to legal responsibilities provided in Articles 20, 32, 171, a and 174 of the Securities and Exchange Act.
We hereby declare that this Statement has been approved by the Board of Directors on February 21, 2017. 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 of the Board: Leo Huang

General Manager: Leo Huang

Any CPA commissioned to conduct a project review of the ICS shall disclose the CPA’s audit report: None.
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(11) Any legal penalty enacted upon this Corporation and its personnel, or any penalty, major defects, and state of improvements enacted by this Corporation upon its personnel for violating the rules of the ICS during the most recent year up to the publication date of this report: None.
(12) Major resolutions of the Board of Shareholders and Board of Directors in the most recent year up to the publication date of this report
Major resolutions of the Board of Shareholders and state of implementation

Date Annual Shareholders’ Meeting of 2016 convened 2016.06.07 1. Approved the amendments to the Articles of Incorporation of this Corporation. State of implementation: Approved by resolution. Changes were made to the Articles of Incorporation. 2. Confirmed the 2015 Annual Business Report and Financial Statement of this Corporation. State of implementation: Approved by resolution. 3. Approved the surplus allocation proposal of 2015 of this Corporation. State of implementation: Approved by resolution. Ex-dividend date was set to August 15, 2016. Cash dividend for the shareholders was completely paid in August 31, 2016. (Dividend per share: NT$ 2.37259748). 4. Approved the issuance of this Corporation’s new restricted employee shares. State of implementation: Approved by resolution. 3,100,000 shares have been issued on July 8, 2016. 2. Key resolutions of the Board of Directors 2016.02.23 1. Approved the employee's compensation issuance proposal of 2015 for this Corporation. 2. Approved remuneration for Directors and Supervisors as well as transport fees for presence at the Directors’ Meeting for this Corporation. 3. Approved the 2015 Business Report and Financial Statement of this Corporation. 4. Approved the surplus allocation proposal of 2015 of this Corporation. 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 Corporation. 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 Corporation. 10. Composed The Statement on Internal Control System of 2015 of this Corporation. 11. Approved the assessment results on this Corporation's capability in generating financial reports independently. 12. Approved the stipulation of and Best Practices for Corporate Governance and Best Practices for Corporate Social Responsibility of this Corporation. 13. Approved salary adjustments for managerial officers for 2016. 14. Approved amendments to the Regulations for Top Management Remuneration of this Corporation. 15. Approved the issuance of this Corporation’s new restricted employee shares. 2016.03.24 Approved a list of stock subscriptions for employee stock warrants issued by this Corporation in 2015. 2016.04.29 1. Business Performance Report - First Quarter 2016 2. Formulated this Corporation's capital increase date for the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock option certificates.

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Approved endorsements and guarantees for Chroma Ate Inc (USA). 4. Approved line of credit extension proposal for financial institutions of this Corporation. 5. Approved capital increase for Adivic Technology Co. 2016.07.01 1. Formulated this Corporation's capital increase date for the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock option certificates. 2. Ratified amendments to the Regulations for the Issuance of New Restricted Employee Shares of 2016 of this Corporation. 3. Issuance of new restricted employee shares of this Corporation. 4. 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 2016 for this Corporation. 5. Approved employees’ compensation allocated to managerial officers for 2015. 2016.07.28 1. Financial Report of second quarter, 2016 2. Approved the capital loan proposal to Chroma Systems Solutions, Inc. 3. Approved endorsements and guarantees for Chroma Japan Corp. 2016.11.07 1. Financial Report of third quarter, 2016 2. Formulated this Corporation's capital increase date for the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock option certificates. 3. Approved capital loans to Chroma Japan Corp. 4. Approved an endorsement/guarantee to Quantel Private Ltd. 5. Approved line of credit extension proposal for financial institutions of this Corporation. 6. Approved an investment to TFBS Bioscience, Inc. 7. Approved matters related to the construction of the A7 factory office building. 2016.12.27 1. Implemented the audit report for ethical corporate management. 2. Evaluated the report concerning the independence of this Corporation’s CPA. 3. Stipulated the Operational Rules for Best Practices for Ethical Corporate Management and Auditing Best Practices for Ethical Corporate Management of this Corporation. 4. Approved the 2017 audit plan. 5. Approved capital loans to Chroma Systems Solutions, Inc. 6. Formulated this Corporation's capital increase date for the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock option certificates. 7. Approved the budget for the construction of the A7 factory office building. 2017.02.21 1. Approved the employee's compensation issuance proposal of 2016 for this Corporation. 2. Approved annual remuneration for Directors and Supervisors as well as transport fees for presence at the Directors’ Meeting for this Corporation. 3. Approved the 2016 Business Report and Financial Statement of this Corporation. 4. Approved the surplus allocation proposal of 2016 of this Corporation. 5. Approved amendments to the Articles of Incorporation of this Corporation. 6. Approved amendments to Procedure for the Acquisition and Disposal of Assets, Endorsement and Guarantee Operations Procedure, Operations Procedure for Loaning of Funds to Other Parties, Procedure for Handling Derivatives Trading, and Standards for Ethical Conduct of this Corporation. 7. Approved title change and amendments to Regulations for the Election of Directors and Supervisors of this Corporation. 8. Approved the handling of director re-election and director candidacy (including
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those for independent directors).

Eliminated an anti-competition restriction for newly appointed directors and their representatives.
Approved the scheduling for the annual shareholders’ meeting for 2017 and items raised by the shareholders to be reviewed.
Composed The Statement on Internal Control System of 2016 of this Corporation.
Approved capital loans to Chroma Japan Corp.
Approved the Business Plan of 2017 for this Corporation.
Approved salary adjustments for managerial officers for 2017.
(13) Major contents of any dissenting opinions on record or stated in a written statement made by Directors or Supervisors regarding key resolutions of the Directors’ Meeting in the most recent year up to 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, and research and development executive in the most recent year up to 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 accountingfirm	Name of the CPA	Name of the CPA	Auditperiod	Notes
Deloitte & Touche	I-wen Wang	Wen-chi Kuo	2016.01.01 to 2016.12.31

Note: Where this Corporation 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.

Unit: Thousand NT$

Fee	Professional charge range	Accounting charge	Non-accounting charge	Total
1	Less than NT$ 2,000,000		1,385	1,385
2	NT$ 2,000,000(inclusive)to NT$ 4,000,000
3	NT$ 4,000,000(inclusive)to NT$ 6,000,000	5,990		5,990
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

Name of the accounting firm	Name of the CPA (Note 1)	Accounting charges		Non-accounting charge	Non-accounting charge	Non-accounting charge		Period of CPA audit	Notes
			System design	Commercial registration	Personnel resources	Other (Note2)	Subtotal
Deloitte & Touche	I-wen, Wang Wen-chi, Kuo	5,990	-	-	-	1,385	1,385	2016.01.01 to 2016.12.31

Note 1: Where this Corporation 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 payment of disbursement fees, subsidiary auditing disbursement fees, English reports, auditing of direct deduction method, and service charges of the restricted new shares.
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(2) Where 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 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.

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
Cause and details of the replacement	To ensure the independence of the CPA and accommodate the internal rotation system of Deloitte & Touche, the original CPA of this Corporation (CPAs Cheng-ming, Lee and Li-wen, Kuo) shall be replaced by CPAs I-wen, Wang and Wen-chi,Kuo effectivefromthe4thQuarterof 2015.
Any details for 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 2 most recent fiscal years containing an opinion other than an unqualified opinion	None
Any disagreement with the issuer	Yes		Generally accepted accounting principles (GAAP) or activities
			Disclosure of financial reports
			Scope or procedure of audits
			Others
	None	
	Details
Other items to be disclosed (items to be disclosed as prescribed by Article 10, Subparagraph 6, Item 1- 4to1-7)	Not applicable

(2) About the successor CPA

(2)About the successor CPA
Name of the accounting form	Deloitte & Touche
Name ofthe CPA	I-wen, Wang and Wen-Chi,Kuo
Date of commission	Approved by the 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 formalengagement	None
Successor CPA to former CPA Writtenviews on disagreements	None

(3) Response of the former CPAs regarding Article 10, Subparagraph 6, Items 1 and 2-3 of these standards: None.
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.
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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 to the publication date of this report
Changes to the equity of directors, supervisors, managerial officers, and major shareholders

Title	Name	2016	2016	For the current year up to April 10, 2017	For the current year up to April 10, 2017
		Additional (reduction) of shares held	Additional (reduction) of hypothecation	Additional (reduction) of shares held	Additional (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	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
Supervisors	Chi-jen Chou	0	0	0	0
Corporate Supervisor	Kai Sun Investment Co., Ltd.	(60,000)	0	0	0
Supervisor representative of the corporation	Tsun-i Wang	0	0	0	0
General Manager of the Test & Measurement BU	David Yang	0	0	0	0
General Manager of the Business Department	C.C. Ho	(1,000)	0	0	0
Manager of the Intelligent Manufacturing System BU	Joe Lin	0	0	(10,000)	0
General Manager, Semiconductor Test Equipment BU	George Chang	25,000	0	0	0
Deputy General Manager, Finance & Administration Center	Paul Ying	(5,000)	0	(9,000)	0
Deputy General Manager, Advanced Technology Research Center	Mark Fong	0	0	0	0
Deputy General Manager, Manufacturing Center	Steven Liu	20,000	0	0	0
Deputy General Manager of the Operation Management Center	Benjamin Huang	0	0	0	0
Deputy General Manager, R&D Department, Semiconductor Testing Equipment BU	Max Chang	35,000	0	(35,000)	0
Deputy General Manager, Sales Department 1, Integrated System Solution BU	Herbert Tsai	(4,000)	0	(4,000)	0
Deputy General Manager, Sales Department 2, Integrated System Solution BU	Jeff Lee (Note 1)	-	-	0	0
DeputyGeneral Manager, CEO Office	C.C.Fan	(12,000)	0	0	0
Deputy General Manager, Planning Department, Test & Measurement BU	Bobby Tseng	0	0	0	0
Deputy General Manager, Greater China Area Sales Department, Test & Measurement BU	Vincent Chen	20,000	0	0	0
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	16,000	0	(10,000)	0
Deputy General Manager, R&D Department 1, Integrated System Solution BU	Lance Ouyang	28,000	0	0	0

Note 1: Promoted to the position of Deputy General Manager on January 1, 2017. Changes to shareholding status are therefore based on this date.

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Where the counterparty of equity transfer is a related party: None.
Where the counterparty of equity pledge is a related party: None.
Relationship information, if any one among the 10 largest shareholders is a related party, or is the spouse or a relative within the second degree of kinship, of another.

Relationship information between 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 relationships of the 10 largest shareholders where they are related parties, spouses, or relatives within the second degree of kinship. (Note 2)	Title or name and relationships of the 10 largest shareholders where they are related parties, spouses, or relatives within the second degree of kinship. (Note 2)
	Number of shares	Percentage of shares	Number of shares	Percentage of shares	Number of shares	Percentage of shares	Title	Relations
Leo Huang	23,419,897	5.78%	9,167,362	2.26%	0	0	Shu- chuan Chen	Spouse
Cathay Life Insurance Representative: Hung-tu Tsai	16,330,500	4.03%	0	0	0	0	None	None
Chun-sheng Chen	15,113,308	3.73%	11,074,646	2.73%	0	0	Yu-mei Hsueh	Spouse
JPMorgan Chase Bank N.A. Taipei Branch in custody for Universities Superannuation Scheme Limited	14,088,724	3.48%	0	0	0	0	None	None
Yu-mei Hsueh	11,074,646	2.73%	15,113,308	3.73%	0	0	Chun- sheng Chen	Spouse
JPMorgan Chase Bank N.A. Taipei Branch in custody for Fidelity Central Investment Portfolios LLC: Fidelity Information Technology Central Fund	10,430,018	2.57%	0	0	0	0	None	None
FIDELITY SELECT PORTFOLIOS:TE CHNOLOGY PORTFOLIO	9,837,644	2.43%	0	0	0	0	None	None
Shu-chuan Chen	9,167,362	2.26%	23,419,897	5.78%	0	0	Leo Huang	Spouse
Wellington Trust National Association Emerging Market Portfolio entrusted to HSBC Bank	8,296,000	2.05%	0	0	0	0	None	None
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 Emerging Stars EquityFund	8,261,000	2.04%	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.

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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 Corporation (Note 1)	Investments by this Corporation		Investments by the Directors, Supervisors, managerial officers, and companies directly or indirectly controlled bythis Corporation		Total investments
	Number of shares	Percentage of shares	Number of shares	Percentage of shares	Number of shares	Percentage of shares
Neworld Electronics Ltd.	64,013	100.0%	0	0	64,013	100.0%
ADLINK TechnologyInc.	24,502	11.3%	8,238	3.8%	32,740	15.1%
Chroma New Material Corp.	25,000	100.0%	0	0	25,000	100.0%
Chroma Investment Co.,Ltd.	14,000	100.0%	0	0	14,000	100.0%
DynaScan TechnologyCorp.	9,841	27.3%	14,964	41.5%	24,805	68.8%
SENSATIONAL HOLDING LTD.	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%
CHEN HWA 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 Electronics	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%
Zhiheshun Development Co., Ltd.	1,750	35.0%	0	0	1,750	35.0%
ADIVIC TechnologyCo.	14,280	51.0%	0	0	14,280	51.0%
EVT Technology	2,658	53.2%	1,907	38.1%	4,565	91.3%
QUANTEL PRIVATE LTD.	1,914	60.0%	0	0	1,914	60.0%
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	0	US210	100.0%	US210	100.0%
Chroma Electronics(Shenzhen)Co., Ltd.(Note 3)	0	0	HK30,000	100.0%	HK30,000	100.0%
Chroma Electronics(Shanghai)Co., Ltd.(Note 3)	0	0	US3,000	100.0%	US3,000	100.0%
Chroma(Shanghai)TradingCo., Ltd.(Note 3)	0	0	US2,700	100.0%	US2,700	100.0%
Chroma ATE(Suzhou)Co., Ltd.(Note 3)	0	0	US3,800	100.0%	US3,800	100.0%
Mou Kuan Technologies(Nanjin)Co., Ltd.(Note 3)	0	0	US2,836	100.0%	US2,836	100.0%
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. (Note 3)	0	0	US1,338	100.0%	US1,338	100.0%
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.(Note 3)	0	0	US1,500	100.0%	US1,500	100.0%

Note 1: The equity method was employed for this Corporation's investments. Note 2: Consolidated shareholding percentage of this Corporation 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.

42 -

IV. Financing

1. Capital and shares

(1) Source of shares

Year and month	Price at issuance	Authorized stock	Authorized stock	Paid-incapital	Paid-incapital	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 thancash	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 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

43 -

2007.08	10	400,000	4,000,000	302,311	3,023,114	Recapitalization of retained earnings: NT$ 142,490,000 Stocks converted from stock warrants: NT$ 6,520,000	None	Note 17
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$ 1,3260,000	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
2016.05	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	Notes 22 and 23
2016.07	10	450,000	4,500,000	383,373	3,833,732	Stocks converted from convertible corporate bonds: NT$ 4,620,000 Stocks converted from stock warrants: NT$ 1,180,000 New restricted employee equities: NT$ 31,000,000	None	Notes 22, 23, and 24
2016.12	10	450,000	4,500,000	387,158	3,871,576	Stocks converted from convertible corporate bonds: NT$ 28,500,000 Stocks converted from stock warrants: NT$ 9,350,000	None	Notes 22 and 23
2017.01	10	450,000	4,500,000	389,887	3,898,872	Stocks converted from convertible corporate bonds: NT$ 23,820,000 Stocks converted from stock warrants: NT$ 3,470,000	None	Notes 22 and 23
2017.04	10	450,000	4,500,000	405,206	4,052,061	Stocks converted from convertible corporate bonds: NT$ 150,640,000 Stocks converted from stock warrants: NT$ 2,550,000	None	Note 25

44 -
(I) 48548 of May 24, 1999

Note 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
Note 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
Note 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
Note 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
Note 9. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. Taiwan-Finance-Securities (I) 0910132477 of June 14, 2002
Note 10. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. Taiwan-Finance-Securities (I) 0920125022 of June 9, 2003
Note 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.
Note 12. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. (90) No. Taiwan-FinanceSecurities (I) 143348 of July 16, 2001 and Taiwan-Finance-Securities (I) 0930128437 of June 28, 2004.
Note 13. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. (90) No. Taiwan-FinanceSecurities (I) 143348 of July 16, 2001 and Taiwan-Finance-Securities (I) 0910132478 of June 14, 2002.
Note 14. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0940122455 of June 3, 2005
Note 15. Approved by the Securities and Exchange Commission, Ministry of Finance per letters Ref. (90) No. Taiwan-FinanceSecurities (I) 143348 of July 16, 2001; Taiwan-Finance-Securities (I) 0910132478 of June 14, 2002.; and Taiwan-FinanceSecurities (I) 0920127281 of June 19, 2003.
Note 16. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0950122451 of June 2, 2006.
Note 17. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0960030405 of June 14, 2007.
Note 18. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities (1) 0970031743 of June 25, 2008.
Note 19. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-SecuritiesCorporate-0980027677 of June 5, 2009.
Note 19. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-SecuritiesCorporate-0990029749 of June 9, 2010.
Note 21. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-SecuritiesCorporate-1000028222 of June 20, 2011.
Note 22. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate1030012130 of April 17, 2014.
Note 23. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate1010042558 of September 17, 2012.
Note 24. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate1050024281 of June 27, 2016.
Note 25. Approved by the Financial Supervisory Commission per letters Ref. No. Financial-Supervisory-Securities-Corporate1030012130 of April 17, 2014 and Financial-Supervisory-Securities-Corporate-1010042558 of September 17, 2012. (changes to capital sum not yet implemented)

	Unit: Shares April 10,2017	Unit: Shares April 10,2017	Unit: Shares April 10,2017	Unit: Shares April 10,2017
Category of shares	Authorized stock			Notes
	Outstanding shares (listed)	Unissued shares	Total
Common shares	405,206,057	44,793,943	450,000,000	30,000,000 shares were reserved for employee purchase of stockwarrants.

Information on the shelf registration system: None.

(2) Shareholder structure

(2) Shareholder structure	(2) Shareholder structure
		April 10,2017
Shareholder structure Quantity	Government agencies	Financial institutions	Other artificial persons	Individuals	Overseas institutions and individuals	Total
Numberof individuals	0	60	45	8,455	348	8,908
Sharesheld	0	52,492,845	19,663,855	102,465,465	230,583,892	405,206,057
Shareholding percentage	0	12.95%	4.85%	25.29%	56.91%	100%

45 -

(3) Dispersion of equity ownership

1. Common shares

(3) Dispersion of equity ownership 1. Common shares	(3) Dispersion of equity ownership 1. Common shares	(3) Dispersion of equity ownership 1. Common shares	(3) Dispersion of equity ownership 1. Common shares
April 10,2017
Shareholdingrange	Number of shareholders	Shares held	Shareholding percentage
1 to999	4,659	873,447	0.22%
1,000to5,000	2,932	5,855,366	1.45%
5,001 to 10,000	422	3,082,561	0.76%
10,001 to 15,000	189	2,341,243	0.58%
15,001 to 20,000	83	1,462,474	0.36%
20,001 to30,000	112	2,740,976	0.68%
30,001 to 50,000	96	3,732,814	0.92%
50,001 to 100,000	114	8,151,619	2.01%
100,001 to 200,000	79	10,978,316	2.71%
200,001 to 400,000	77	21,736,298	5.36%
400,001 to600,000	31	15,202,272	3.75%
600,001 to 800,000	15	10,590,348	2.61%
800,001 to 1,000,000	12	10,936,864	2.70%
1,000,001 or more	87	307,521,459	75.89%
Total	8,908	405,206,057	100.00%

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:

Total 8,908 405,206,057 100.00% 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:	Total 8,908 405,206,057 100.00% 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:	Total 8,908 405,206,057 100.00% 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 10,2017
Shares Name of major shareholder	Shares held	Shareholding percentage
Leo Huang	23,419,897	5.78%
CathayLife Insurance	16,330,500	4.03%
Chun-shengChen	15,113,308	3.73%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Universities Superannuation Scheme Limited	14,088,724	3.48%
Yu-mei Hsueh	11,074,646	2.73%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Fidelity Central Investment Portfolios LLC: Fidelity Information TechnologyCentral Fund	10,430,018	2.57%
FIDELITY SELECT PORTFOLIOS:TECHNOLOGY PORTFOLIO	9,837,644	2.43%
Shu-chuan Chen	9,167,362	2.26%
Wellington Trust National Association Emerging Market Portfolio entrusted to HSBCBank	8,296,000	2.05%
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 EmergingStars EquityFund	8,261,000	2.04%

46 -

(5) Prices, net asset value per share (NAVPS), earnings per share (EPS), and dividends per share (DPS), and related information of the 2 most recent years.

Item	Year	Year	2015	2016	From the current year to March 31,2017
Market price per share (Note 1)	Maximum		84.50	90.80	99.40
	Minimum		47.50	58.40	75.40
	Average		68.37	78.08	90.21
Net asset value per share (NAVPS)	Before issuance		24.82	27.23	-
	After issuance		22.42	-	-
Earnings per share (EPS)	Weighted average		376,984,013	379,930,027	-
	Earnings per share (EPS)		3.28	4.53	-
Dividend per share (DPS)	Cash dividend		2.4	3.3(Note 5)	-
	Free allotment	Surplus allotment	-	-	-
		Capital surplusallotment	-	-	-
	Cumulative unpaid dividends		-	-	-
Return on investment (ROI) Analysis	Price-to-earning (P/E)ratio(Note 2)		20.84	17.24	-
	Price-to-dividend(P/D)ratio(Note 3)		28.49	23.66	-
	Cash dividend yield (Note 4)		3.51	4.23	-

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

Note 5: Surplus allotment plan for 2016 shall be finalized according to the resolutions of the annual shareholders’ meeting of 2017.

(6) Dividend policy of the company and its implementation
Dividend policy stipulated within the articles of association

Where the annual general final accounts indicate a surplus, the said surplus shall be first used to pay taxes and cumulated losses (dues), and shall then set aside 10% of the said surplus as legal reserve. However, this restriction does not apply if the legal reserve exceeds the total authorized capital. This Corporation may review business requirements or refer to statutory regulations to set aside or reversed 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.

Where 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 have in excess of the paid-in capital.

Dividend payout shall be implemented according to the business condition of this Company and consider 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 Corporation for 2015 and 2016 are both about 73%.

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

Dividend payout plans proposed during the most recent shareholder's meeting Surplus distribution plans of 2016 for this Company was reviewed by the Board of

Directors on February 21, 2017 to propose a shareholder cash bonus of NT$ 3.3 dollars per share which shall be distributed after approved by the shareholders in the 2017

47 -

annual general shareholders’ meeting.

Where conversion of convertible corporate bonds, provision of employee stock options, or any other reasons 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 to the company's business performance and earnings per share (EPS) for free shares allotment proposed by this shareholder's meeting: Not applicable.
(8) Compensation for employees, directors, and supervisors
Quantity or scope of compensation for employees, directors, and supervisors as prescribed by the articles of association
- If this Corporation has made a profit, 5 to 20% of the said profit shall be set aside
- for employees’ 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 Corporation 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 employees’ compensation as well as directors’ and supervisors’ compensation shall be submitted to the Board of Shareholders and presented accordingly.
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 employees’ compensation, and for any discrepancy between the actual amount distributed and the estimated figures.
- (1) Provisions of this Corporation’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 2016, the sum for the employees’ compensation and the directors’ and supervisors’ compensation amounted to NT$ 300,000,000 and NT$ 8,000,000 respectively. These sums made up 12.96% and 0.35% of net income before taxes (and before deducting the employees’ compensation as well as the directors’ and supervisors’ compensation) respectively, fulfilling the limits prescribed by the articles of association.
- (2) Number of shares issued for employees’ compensation: 0.
- (3) Accounting treatment for any discrepancy between the actual amount distributed and the estimated figures: Where the Board of Directors 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. Where 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.
Status of compensation distribution as approved by the Board of Directors
- (1) Where the value of the employees’ 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 21, 2017, the Board of Directors of this Company has approved cash distributions of NT$ 300,000,000 and NT$ 8,000,000 for employees’ compensation and the directors’ and supervisors’ compensation respectively. There was no discrepancy with the recognized expense and annual estimates.
- (2) Sum of employees’ 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 employees’ compensation: 0.
Actual distribution of compensations for employees, directors, and supervisors (including the number, sum, and price of shares distributed), and where there were discrepancies with the recognized compensations for employees, directors, and supervisors, the sum, cause, and treatment of the discrepancy shall be described: The Board of Directors of this Corporation resolved to distribute an employees’

cash bonus of NT$ 135,000,000 and a 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.

48 -

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 & 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 Corporation shall, upon the expiration of the convertible corporate bond, provide a single cash payment at par value of the bond.
Unredeemed principal		NT$ 445,300,000 (as of March 31, 2017)
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 up to the publication date of this report	From the issuing date to March 31, 2017, bond holders have requested the conversion of corporate bonds into 22,966,941 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 to 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. Since 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 to 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.

49 -

(2) Information of the convertible corporate bonds

(2) Information of the convertible	(2) Information of the convertible	corporate bonds	corporate bonds	corporate bonds
Type of corporate bond		Second issuance of unsecured convertible corporate bonds in Taiwan
Item	Year	2015	2016	From this fiscal year to March31,2017
Market price of the convertible corporate bond	Maximum	117.30	129.50	146.50
	Minimum	100.00	104.00	113.80
	Average	106.67	119.54	132.49
Conversionprice		72.0~69.3	69.3~67.2	67.2
Conversion price at the date of issuance (placement) and duringissuance		2014.5.23 NT$ 74.2
Method for exercising conversion obligations		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, 2017

		March 31,2017
Categoryof employee stockwarrant	Employee stockwarrant for 2012	Employee stockwarrant for 2015
Date of effective registration	September 17,2012	September 7,2015
Date of issuance	July8,2013	March 25,2016
Quantityissued	6,000,000units	7,900,000units
Ratio of subscribable shares to total issued and outstandingshares(%)	1.5389	2.0262
Warrant exerciseperiod	6 Years	6 Years
Method for exercisingthewarrant	Issuance of newshares	Issuance of newshares
Restrictions on the warrant exercise period and exercise ratio (%)	Period and ratio that may be exercised 2 years 40% 3 years 70% 4years 100%	Period and ratio that may be exercised 2 years 40% 3 years 70% 4years 100%
Number of shares already obtained through exercise ofwarrant rights	2,263,600 shares	0
Total value of shares already obtained through exercise ofwarrant rights	NT$ 111,048,640	0
Number of unsubscribed shares	3,393,600 shares	7,900,000 shares
Subscription price per share of the unsubscribed shares	NT$ 48.4	NT$ 65.7
Proportion of unsubscribed shares of total issued and outstanding shares (%)	0.8704	2.0262
Impact to shareholders’ equity	This Corporation may only refer to the period to issue new stock warrants 2 years after the issuing date of these stock warrants. Warrant exercise period was also 6 years, which meant that dilution effects upon the shareholder equitywould be limited.	This Corporation may only refer to the period to issue new stock warrants 2 years after the issuing date of these stock warrants. Warrant exercise period was also 6 years, which meant that dilution effects upon the shareholder equitywould be limited.

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(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 date of publication of the prospectus

March 31, 2017

									March 31,2017	March 31,2017	March 31,2017	March 31,2017
	Title (Note 1)	Name	Stock subscriptio ns obtained (thousand shares) (Note 2)	Proportion of subscribed shares acquired of total issued and outstanding shares (%) (Note 4)	Implemented				Notyet implemented
					Number of subscribe d shares (thousan d shares)	Price of subscribe d shares (NT$) (Note 5)	Total value of subscribe d shares (thousand NT$)	Proportion of the quantity of subscribed shares of total issued and outstanding shares (%) (Note 4)	Quantity of unsubscribe d shares (thousand shares)	Price of unsubscrib ed shares (NT$) (Note 6)	Total value of unsubscribe d shares (thousand NT$)	Proportion of the quantity of unsubscribed shares of total issued and outstanding shares (%)(Note 4)
Managerial officers	General Manager	Leo Huang	1,350	0.3463	258	48.4~ 49.9	12,595	0.0662	1,092	48.4	52,853	0.2801
	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	George 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	BobbyTseng
	Vice President	Vincent Chen
	Vice President	TonyYang
	Vice President	Vincent Wu
	Vice President	Lance Ouyang
	Vice President	Jeff Lee
Employee (Note 3)	Employee	Cf Huang	993	0.2547	242	48.4~ 49.9	11,878	0.0621	751	48.4~ 65.7	45,334	0.1926
	Employee	Frank Huang
	Employee	Chouyu 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	Liwei Liu
	Employee	Darto Chen

Note 1: Includes managerial officers and employees (special notes shall be provided to those who have resigned or deceased). Individual names and job positions shall be displayed. A summary sheet may be used to disclose the means of acquisition and subscription.

Note 2: Refers to the quantity of employee stock warrants obtained from 2012 to 2015.

Note 3: Refers to a non-managerial employee in the top-10 employees for the quantity of stock subscriptions acquired.

Note 4: Total number of issued shares shall refer to the number of shares issued in the change registry information of the Ministry of Economic Affairs (MOEA) (Change registry information at the MOEA on January 11, 2017 indicated 389,887,236 shares)

Note 5: For the price of employee stock option already implemented, the subscription price at the time of implementation shall be disclosed.

Note 6: For the price of employee stock option not yet implemented, the adjusted subscription price calculated using the regulations of issuance shall be disclosed.

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6. Implementation and state of new restricted employee shares

(1) Implementation of new restricted employee shares

March 31, 2017

	March 31, 2017
New restricted employee equities and categories	1st issuance of new restricted employee shares of 2016
Date of effective registration	June 27,2016
Date of issuance	July 8, 2016
New restricted employee equities issued	3,100,000 shares
Price at issuance	NT$ 10
Proportion of new restricted employee equities issued as part of total equities that have been issued (%)	0.7951
Prerequisites for receiving new restricted employee equities	An employee must be employed for a period of one year after subscribing to the new restricted employee shares and at the maturation of every vesting period. The employee must also fulfill overall financial performance of this Corporation and personal performance assessment indicators. The proportion of shares that may be issued according to the fulfillment of respective vesting conditions shall be distributed according to regulations for the issuance of new restricted employee shares. The following provides the proportion of shares to be issued for various vesting conditions: 1 year: 10%; 2 years: 20% ; 3 years: 30% ; 4 years: 40%
Restrictions of the new restricted employee equities Equity	1. An employee may not sell, pledge, transfer, provide as a gift to other party, set up or use other means to dispose the new restricted employee shares. 2. New restricted employee shares may partake in dividend payouts and cash capital increase subscriptions. Dividend payout that may be acquired is not subject to vesting period restrictions. Dividend payout to be issued shall be remitted from a trust account to a personal bank account of the employee on the date of issuance without any surcharge. 3. For an employee who has yet to fulfill vesting conditions, attendance, proposal, speech, voting rights, and other matters related to shareholder equity in a shareholders’ meeting shall be commissioned to a trust custodian that exercises the said matters on behalf of the employee.
Safekeeping of new restricted employee equities	Once issued, the new restricted employee shares shall be submitted to a trust for custody. Before meeting the vesting conditions, an employee may not, for any reason or by any means,ask the custodian to return the said shares.
Actions for handling allotments or subscription to new equities by employees who have yet to attain the prerequisite conditions	Before fulfilling vesting conditions, this Corporation may refer to law to buyback new restricted employee shares that have been issued at the price of the original issuance and extinguish the shares accordingly.
Quantity of new restricted employee equities that have been recovered or repurchased	0
Quantity of new restricted equities that were extinguished	0
Quantity of new restricted equities not yet extinguished	3,100,000 shares
Proportion of new restricted equities not yet extinguished as part of total issued and outstanding shares (%)	0.7951
Impact to shareholders’ equity	Overall evaluations of the vesting conditions, periods, and proportions listed in these regulations for issuing shares reveal that the said issuance exerts limited impact and dilution of the earnings per share (EPS) of this Corporation from 2016 to 2020, andwill not significantlyaffect the stockholders' equity.

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(2) Name of managerial staff and top 10 employees who have acquired new restricted employee equities, and the state of acquisition

									March 31,2017	March 31,2017	March 31,2017	March 31,2017
	Title (Note 1)	Name	New restricted employee shares acquired (thousand shares)	Proportion of new restricted employee equities issued as part of total equities that have been issued (%) (Note 3)	Restricted equities that we		re extinguished		Restricted equities not yet extinguished
					Quantity of shares that were no longer restricted (thousand shares)	Publisher Price (NT$)	Publisher Sum (thousand dollars)	Proportion of shares that were no longer restricted as part of total equities that have been issued (%) (Note 3)	Quantity of shares that have remained restricted (thousand shares)	Publisher Price (NT$)	Publisher Sum (thousand dollars)	Proportion of shares still restricted as part of total equities that have been issued (%) (Note 3)
Managerial officers	General Manager	Leo Huang	1,340	0.3437	-	-	-	-	1,340	10	13,400	0.3437
	General Manager of Business Unit	I-shih Tseng
	General Manager of Business Unit	David Yang
	General Manager of Business Unit	Joe Lin
	General Manager of Business Unit	George 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	Jeff Lee
	Vice President	Bobby Tseng
	Vice President	Vincent Chen
	Vice President	Tony Yang
	Vice President	Vincent Wu
	Vice President	Lance Ouyang
Employee (Note 2)	Employee	Chin-fu Huang	520	0.1334	-	-	-	-	520	10	5,200	0.1334
	Employee	Hsiu-miao Huang
	Employee	Tien-teng Chang
	Employee	Chih-chung Huang
	Employee	Yen-chia Chou
	Employee	Hung-chi Wang
	Employee	Yu-mei Tai
	Employee	Hao-jan Yang
	Employee	Shu-mu Chen
	Employee	Chao-i Wu
	Employee	Jui-chun Chi

Note 2: Refers to a non-managerial employee in the top-10 employees for new restricted employee shares acquired.

Note 3: Total number of issued shares shall refer to the number of shares issued in the change registry information of the Ministry of Economic Affairs (MOEA) (Changes to registered information at the MOEA on January 11, 2017 indicated 389,887,236 shares)

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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 have 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
(1) 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.
(2) 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
			Quarter 3	Quarter 4	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Construction factorybuildings	2016 Quarter 4	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

(3) Anticipated possible effects

The second issuance of unsecured convertible corporate bonds in Taiwan have raised a total of NT$ 2,000,000,000. This plan needs 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 reduce business risks of this Company. 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 measurementinstruments	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 instruments	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 measurementinstruments	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 instruments	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 measurementinstruments	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

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(2) Status of implementation

Unit: NT$ 1,000

					Unit: NT$1,000
Project items	Status of implementation		Q1, 2017	Up to Q1, 2017	Progress is ahead of schedule or behind schedule, andimprovement plans
Construction factory buildings	Expenses	Expected	-	2,180,372	Due to delays in government land acquisition and transfer, after negotiations during the third quarter of 2015, this Corporation opted for a step- wise transfer of land by section. Construction license applications have been approved, and preliminary administrative applications of (1) hazard and safety assessment review and (2) application for initiating the construction for the construction license shall be implemented during the first quarter of 2017. Factory construction is expected to start in the second quarter of 2017 and be completed by 2019. No material nonconformance has appeared.
		Actual	-	44,921
	Progress	Expected	-	100%
		Actual	-	2.06%
Total	Expenses	Expected	-	2,180,372
		Actual	-	44,921
	Progress	Expected	-	100%
		Actual	-	2.06%

For the implementation of the second issuance of unsecured convertible corporate bonds in Taiwan for the construction of factory buildings, due to delays in land acquisition and transfer by the Ministry of the Interior (MOI), this Corporation opted for step-wise land transfer by section after negotiations. Factory building construction plan was initiated in the third quarter of 2015. By the end of the first quarter 2017, a total sum of NT$ 44,921,000 has been paid for the implementation of factory building design and planning, construction, and traffic evaluations and investigations during the construction period for a capital utilization progress of 2.06%.

(3) Gap analysis for expected and actual benefits

Due to delays in land acquisition and transfer by the MOI, stepwise land transfer by section was implemented after negotiations. For factory building construction progress currently acquired by the end of the first quarter of 2017, construction license from the competent authority has been acquired. Administrative applications for the preliminary construction licenses, such as hazards and safety assessment review and applications for starting the construction, has been implemented in the first quarter of 2017. No actual capital expense or benefit has been generated.

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V. Operation summary

1. Business content

(1) Scope of business
Major contents of the businesses engaged in

This Corporation and its subsidiaries are primarily engaged in the design, manufacture, purchasing and sales, repairs, maintenance, calibration, and agency services for hardware and software of computers and its peripheries, computerized automatic testing systems, electronic testing instruments, signal generators, power supplies, and telecommunication power supplies. Current production lines include: 1. Test instrument equipment; 2. Special materials; 3. Automatic equipment.

Proportion of each business

Consolidated revenue:

Unit: Thousand NT$

Consolidated revenue:			Unit: Thousand NT$	Unit: Thousand NT$
Year Product category	2015		2016
	Sum	Proportion of revenue (%)	Sum	Proportion of revenue (%)
Test instrument equipment	5,666,173	58.46	8,587,377	73.87
Special materials	2,328,151	24.02	2,269,057	19.52
Automatic equipment	1,260,831	13.01	382,288	3.29
Other	437,210	4.51	385,647	3.32
Total net operating revenue	9,692,365	100.00	11,624,369	100.00

Current products of the company
- Power electronics testing solutions
  1. DC electrical load
  2. AC electrical load
  3. AC power supply
  4. DC power supply
  5. Digital power meter
  6. Frequency response analyzer
  7. Automatic testing system for power supplies
  8. High voltage DC power supplies
- Video and color testing solution
  1. Video pattern generator
  2. Color analyzer
  3. Automatic testing system for front projectors
  4. 4 Video colorimeter and brightness meter
  5. Video source imaging goniometer
  6. Dual-axis goniometer
  7. Display testing solution
  8. LED screen correction system
  9. Illuminated keyboard testing
- Passive components testing solutions
  1. LCR meter / automatic testing system for transformers
  2. Electrolytic capacitor tester
  3. High frequency AC tester
  4. Milliohm meter
  5. Component test scanner
Passive Component ATS
Microchip inductor production testing
Impulse winding tester
Ultra-high resistance meter / micro ammeter
- Flat panel display testing solutions
  1. Flat panel display tester
  2. OLED test system
56 -
Display testing solution
8K SHV testing solution
Electrical safety testing solution
Multipurpose electrical safety analyzer
High potential tester
Ground bond tester
Electrical safety test scanner
Impulse tester
Calibrator
Automatic testing system (ATS)
Motor testing
Semiconductor / IC testing solutions
VLSI test system
SoC test system
IC test handler
External inspection system
LED / illumination & driver test solutions
LED measurement system (for production lines)
LED measurement system (for labs)
LED full luminous flux test system
ESD test system
LED electrical test module
Burn-in test system
LED Light Bar test system
LED die test system
LED power source testing solution - Photovoltaic (PV) / inverter testing and automation solutions
Inspection System
Automatic loading / unloading system
C-Si PV cell tester
Automatic optical testing system
Thermoelectric chip controller
Temperature recorder
PV inverter test solution

－ Battery test and automation solution

Battery pack / module test solution
Battery testing and formation system
Cell voltage and temperature measurement
Electrical safety test solution
Battery pack manufacture test solution

－ Electric vehicle test solution

Automatic diagnostics and testing system for power electronics and devices
Battery test system
DC power source
AC power source
Electronic load
Motor test
Automatic transformer test system / automatic component analyzer

－ Automated optical inspection solution

Optical profiler
Solar cell AOI system
Automatic optical testing system
LCD / display AOI system

－ Optical component testing solutions

Chip level testing
Packaging level testing
－ Intelligent manufacturing system solutions
Manufacturing execution system (MES) solution

－ Turnkey measurement and automated solutions

Production line automation assembly and testing
57 -

－ PXI measurement and test solution

     1. General PXI equipment

     2. PXI semiconductor / IC test system

     3. PXI LED test system

－ RF and wireless measurement and test solutions

 1. Wireless test solutions

 2. RF recorder / player

 3. GPS signal simulator

- Test solutions for passive components and regulatory testing

Labor costs are growing while price competitions become increasingly stringent. This Corporation provides new automatic testing technologies for passives and regulatory 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 conducting different tests are now streamlined and integrated within a single device such as the 11022 LCR Meter with dual-channel testing functions. A single unit is sufficient in acquiring measurements at different frequencies for electrolytic capacitance and plastic film capacitance, allowing customers to reduce the number of test stations required. The Model 8800 component automatic testing system provides a multi-step, multichannel test procedure allowing it to conduct a variety of test applications. This solution can be used by customers who require conducting tests for RJ-45 equipment, LCD glass substrates, glass printed circuits (including touch panels), circuit boards, ICT, and other applications. The Model 19020 multi-channel high potential (hipot) tester can be used to conduct testing on multiple channels simultaneously. The Model 1810 is capable of conducting power consumption and temperature change of magnetic components under different electrical environments with software testing to provide a reference basis for product development. Electrical testing and high potential testing for wound components are integrated into a single test system to help reducing labor costs and improving the efficiency of test processes.

Semiconductor / IC testing solutions

Increasing competition of the electronics industry forced various suppliers to adopt the most efficient means of producing and manufacturing various electronic components and parts. IC industry has invested greatly in identifying various production combinations. Cost control efforts begun to shift from wafer foundry processes to measures that reduce the proportion of testing expenses. Hence, R&D trends for test equipment suppliers would be to focus on the development of multiple testing programs as well as high volume parallel testing solutions for boosting throughput. Customized test equipment capable of satisfying specific requirements may be directly used to replace experienced general-purpose testers to achieve significant reduction in costs. Handlers used in backend production of ICs could also work with different IC packaging types to sort out defective products from conforming ones. After IC packaging and testing, automatic system function testers could 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. In response to these development trends, this Company and its subsidiaries increased efforts to integrate technologies from multiple industries such as electronics, electrical machinery, mechanics, software, information, and communication in order to provide turnkey solutions for manufacturing andtesting semiconductor products. These new units cover more functions, and automated testers would help to achieve better testing economy through significant reduction of labor costs and great improvements to product quality. Poor economy meant that IC designers 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

Popularization of mobile communication and mobile devices as well as advances in electric vehicles technology was only possible thanks to continous

59 -

improvements in battery functions. Battery reliability became increasingly important, especially for electric vehicle batteries. Quality and reliability not only affect 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

Technical challenges of copper wire bonding processes have been gradually solved or improved on 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, worked with technical services offered by NIPPON MICROMETAL CORPORATION to provide value-added products and consolidate the share of package products with high technical barriers in the Taiwanese market.

Correlation with upstream, midstream, and downstream sections of the industry
A. Test instrument equipment

Such products would be part of the test instruments industry of ICT and electronic industries. This Corporation primarily purchase and acquire parts and components from upstream suppliers. The parts and components were then assembled by this Company and its subsidiaries, and the final products are then marketed and sold to customers under this Company’s brand name. This Corporation and its subsidiaries offer an extensive selection of solutions for product testing and validation purposes to customers in many fields such as video surveillance,passive components.,LCD modules,LED, semiconductor, photovoltaics (PV), and electric vehicle industries.

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

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

B. Special materials

Major products of 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 for wire bonding to create bonding wires. The primary business Chroma New Material Corp., a subsidiary of this Company, engaged in would be the purchasing and sales of special materials. The downstream industry will be IC packagers.

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 MAS Automation Corp.

Development trends and competition of various products
A. Development trends of various products
- (A) Instruments business
  - Power electronics testing industry

The following describes the product development trends of 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
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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 testing the power supplies.
Discontinuous, low power measurements in response to energy saving requirements of power supplies under standby mode.
•AC power supply with high potential and high current to reduce the requirements for DC power supplies with DC/DC converter input, helping to reduce the testing cost.
High potential, high frequency testing technology and low parasitic capacitance testing jigs for LCD Inverter testing to greatly improve the testing speed and stability.
Network data capture functions to those manufacturers can promptly enact production capacity controls and analyze quality statistics.
Video testing industry

The display industry has continued to focus on high definition (HD) displays and attained 8K ultra-HD displays in 2016 in addition to active developments in 3D virtual reality technologies. These advancements highlight the importance of display resolution and interactivity as well as increasing reliance on testing equipment for quality assurance. Manufacturing for key components are 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 HDTV, LCD TV, PDP TV, Multi Media TV and other display products. These test equipment include HDMI and HDCP,which could be used to satisfy both existing and future test requirements for the video industry. - Passive components testing industry

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

High speed precision measuring, integrating equipment automation to improve production efficiency while reducing human negligence to boost reliability.
Integrated testing of multiple parameters to reduce the number of production equipment and length of working hours required, helping to lower production costs.
Provide comprehensive testing solutions for specific applications that help users to quickly establish systems to fulfill their testing requirements,as well as provision of comprehensive technical support.
Providing network data capture functions to those manufacturers can promptly enact production capacity controls and analyze quality statistics.
Electric vehicle / battery test equipment

In response to environmental changes, issues such as energy saving and carbon reduction as well as air pollution and health hazards posed by exhaust gases and emissions 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 also help the development of battery testing equipment.

(B) Special materials

The following lists major development trends in IC packaging wire materials and technologies in response to the changes in semiconductor packaging technologies 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 forthe final product.
Bonding capability and precision of wire bonding process in response to ever
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shrinking 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

This Corporation and its subsidiaries started working extensively with the electronics industry from its earliest stages of development. High barriers of entry in terms of product 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. 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 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 great competitive advantages.

(3) Technologies and recent R&D efforts:
R&D expenses invested in the 2 most recent years

advantages. nologies and recent R&D efforts: R&D expenses invested in the 2 most recent years
	Unit: Thousand NT$
Item / year	2015	2016
R&D expenses	872,966	1,034,541
Net operating revenue	9,692,365	11,624,369
Proportion of R&D expenses of net operating revenue	9%	9%

2. Major R&D outcomes

◎2238 programmable video pattern generator

◎2918 flat panel display tester ◎62150H-S solar battery array simulation power source ◎58173-TC high speed LED test system ◎63200A/63200E high power DC electronic load ◎58158 LED lighting test system ◎61509/61609 programmable AC power source ◎58212-C LED mapping probe tester ◎66200 digital power meter ◎58690/58691 TOSA/BOSA thermal control system ◎7925 TO-CAN inspection system ◎7940 wafer chip inspection system ◎8000 power supply ATS ◎8700 battery module production line automatic testing system ◎11050 high frequency LCR meter ◎19301A impulsing winding tester ◎17011 battery charge / discharge test system ◎17020/17040 regenerative battery pack test system ◎1870D inductor test and packing machine ◎3730-E solar cell sorting system ◎7200 automatic optical solar cell wafer / battery cell inspection module ◎1871 inductor layer short automatic test machine ◎3380D VLSI test system ◎3680 Advance SoC test system ◎3110-FT full range ATC handler ◎58604 laser diode burn-in and reliability test system ◎3160C tri temp quad site handler ◎33010 PXIe digital IO card 3. Future R&D plans Trends of recent IT developments include Smart communication, Internet of Things (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 deploy the latest technologies to improve performance

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and generate additional profits.

R&D plans of this Corporation shall therefore follow the development trends in various industries to develop automatic equipment as well as automatic production management systems (MES) needed by Industry 4.0. Also, in response to the general environment for energy saving and carbon reduction as well as trends to IoT and Internet of Vehicles (IoV), this Corporation also developed electric vehicle and testers, battery testers, wireless communication testers, and testers that correspond to VR and AR requirements. This Corporation and its subsidiaries are also dedicated to the R&D of products related to Clean Technology aiming at developing relevant automatic test equipment.

(4) Long- and short-term business development plans
Short-term development plans
- (1) Enhance global positioning and develop first tier customers throughout the world

To expand the scale of the market, this Corporation invested in the Quantel, a Singaporean company, in 2016, and hopes to use the said company as a sales base for the markets in Southeast Asia and South Asia. A Germany branch has also been established. These efforts are aimed to provide better quality and faster services in various locations around the world, market products to first tier customers around the globe. This Corporation adopted certification systems of first tier customers to improve the scale of operations.

(2) Accelerate innovation, develop turnkey solution products, and establish solutions related to Industry 4.0 and smart manufacturing.

Major industrial nations are stepping up developments in Industry 4.0 and Smart Manufacturing to get ready for global competition in the future. This Corporation shall closely monitor these trends and continue to enhance innovative technologies and accelerate developments that meet the precise, reliable, and unique requirements for testing and turnkey solutions to meet future demands of the market.

(3) Lean operations management to effectively improve quality and efficiency

In response to the rapidly changing environment, this Corporation established a product research and development (R&D) technology database, compiled information of R&D technology personnel, and updated the enterprise management system to improve product R&D rates and rapidly provide various management and analytical information that serve as a basis for business management decision in making processes and effectively improved quality and efficiency.

(4)Implementation of 5300 program to improve operational scale

Enhance product market analytical capabilities for in-depth investigation of market development trends, formulate strategies for developing various product series, and establish marketing strategies as part of implementing the 5300 program to improve the operational scale.

Long-term development plans
(1) Marketing plans

Global specialization of industries led the production centers of IT industries to expand outwards. In order to provide customers with the services of the highest quality, this Company and its subsidiaries established a sales network composed of overseas subsidiaries as well as sales agents and dealers. Establishment of sales channels in various districts have been accelerated in key production areas in Mainland China to greatly promote this Company's brand name products. Meanwhile, this Company also worked with sales networks and formed strategic alliances with renowned global brands to provide agency services and sales to professional equipment in improving overall resource efficiency.

(2) Human resource plans

This Corporation and its subsidiaries have been developing niche products for its business development objectives, and can 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 on the professional and technological field, improve human resources, and reduce learning time.

(3) Product development plan

This Corporation and its subsidiaries had worked extensively in the field of

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testing electronic products for many years, and provide stable product development strategies that are aligned with the industrial development. In addition to the test products developed for semiconductors and flat panel displays, this Company also invested in modular instruments, system integration, and other automated and customized products. With growing labor costs and aging population, smart networks, industrial automation and healthcare industries are becoming increasingly important. This Corporation's long-term product development plans shall therefore focus on the research and development of testing equipment related to products of smart network systems, industrial automation, and healthcare. This Corporation 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 region

Area			2015			Unit: Thousand NT$ 2016 Proportion of net operatingrevenue(%) 33 67 100
		Sum	Proportion of net operatingrevenue(%)		Sum
Internal sales External sales Total		$3,301,311 6,391,054 $9,692,365	34 66 100		$3,887,330 7,737,039 $11,624,369

2. State of the market

As major economies around the world adopted quantitative easing policies to stimulate economic growth, global economy has made a steady recovery in 2016. Despite impacts caused by the intentions of the UK to withdraw from the European Union and the US presidential elections, world economy maintained a steady growth and moderate inflation. The information and electronics industry, however, was an exception. Due to lack of major revolutions in smart phone applications, the industry remained in a phase of limited development. Air pollution and global warming issues compelled various countries to focus on developments in environmental protection and green energy, thereby stimulating rapid advancements in solar power, LED, electric vehicles, and wind power generation. Such trends also increased demands for instruments and equipment related to the green energy sector.

State and growth of market supply and demand

Strengthening impetus for growth of the US economy in 2016 has spurred major economies towards stable development. Demands for fiscal governance in various countries also led to establishment of countermeasures against money laundering and tax evasion. As 4G LTE and smart phones became increasingly ubiquitous, various countries started to greatly support mobile payments and mobile e-wallets. This led to expansions and developments in Internet of Things (IoT) and Internet of Vehicles (IoV) applications, wireless recharging, battery lifespan, as well as VR and AR technologies, creating infinite opportunities for expanding user interfaces. Advances achieved in the information technology (IT) sector and advantages in smart, energy saving, and automation solutions will spread to various aspects of life. It is expected that such trends will encourage supplier investments and increase equipment expenses to bring about developments in relevant testers and instruments.

Positive and negative factors affecting competitive niches and long-term development, as well as response strategies
A. Instruments
(A) Competitive niche and positive factors:

This Corporation and its subsidiaries have been engaged in the instruments business since establishment. 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

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measurement and testing equipment at the proper opportunities, and provide the solutions of the highest quality for the customers’ R&D and production efforts. Green industries will be undergoing large scale expansion. This Corporation and its subsidiaries also applied key technologies acquired in other sectors to clean technologies to develop products with multiple leading technologies, allowing this Corporation and its Subsidiaries 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 the Turnkey Solutions required, providing this Company and its subsidiaries with various advantages to maintain market competitiveness.

(B) Disadvantages:

Instrument products are typically produced in lower amount and larger varieties, making mass production difficult. Production processes are often complicated and difficult to manage. Other negative factors include complexity of test instruments, considerable number of material types required, and high warehousing costs that result from these requirements.

Since products are offered in many models and required in small quantities, this Company and its subsidiaries adopted modular designs during product research and development (R&D) phases. Differences in specifications are concentrated in a single module during the production process. Shared characteristics and designs are adopted into general modules in order to improve production volume for general modules while reducing the materials required for the unique parts. Also, to improve production and 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 has to be imported, which offer a certain degree of uncertainty.

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:

Power electronics testing solutions

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

This Corporation provides various test equipment for programmable AC power supply, programmable DC power source, DC electronic load, AC electronic load, digital power meter, and frequency-response analyzer, offering regulatory tests for both input and output terminals as well as satisfying the requirements of dynamic simulations. Softpanel (exclusive graphic operating software of Chroma) and NI Labview drivers are also provided to help users conveniently employ these solutions.

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This Corporation and its subsidiaries independently developed an automatic testing system which would include a software platform that come with powerful built-in functions and general tests which can be integrated with the desired hardware instrument to independently edit the test items and to acquire and analyze vast amounts of test data. Analysis results could 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, ballast of energy saving lamps, UPS, PV inverters, and even electric vehicle supply equipment (EVSE) are included within the scope of applications. Also, this Company and its subsidiaries have a global technical applications 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 could be adapted to different signal outputs in various products. These complex outputs and input interfaces require a video pattern generator which could provide various international standard signal testing screens for testing purposes to analyze the performance of the display in processing video signals. Precision is a key requirement as the output signals of video pattern generator s are the standard source.

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

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 regulatory testing

Testing equipment for passive components include tests for capacitors, inductors, resistors, and other basic passives as well as tests conducted for various electronic components that are assembled using these components (such as wound components, communication and power source filters) or have comparable 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 in order to satisfy the customer’s requirements for cost reduction and achieving better efficiency.

Electrical regulatory test equipment is widely used in various types of electronic components, electrical products, or 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 those from 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 multi-functional 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 test solutions are capable of fulfilling basic testing requirements of different units.

Flat panel display testing solutions

Liquid crystal module testing solution is able to adopt a shorting-bar signal during the assembly phase to test panels for various defects and implement laser

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correction. After module assembly, different panel dimensions and backlight sources (CCFL or LED BLU) are referenced before using video signal sources and programmable power sources together with ergonomic operation interface on PC platforms to complete voltage, current, and power testing. Both software and hardware are used to analyze the image bright spots, defective spots, color, and resolution. Automated conveyor production line designs and system-based controls will also provide integrated network-based management functions for data analysis. - Semiconductor / IC testing solutions

Cost control efforts have recently shifted from wafer foundry cost reductions to reducing the proportion of testing expenses. VLSI test systems provide an accurate logic simulation for complex electrical signals of the IC as well as rapid assessment of test results. Test head functions are expanded to implement multiple tests and to conduct massive multi-site testing to improve throughput (production volume per unit time). Additionally, customized test equipment capable of satisfying specific requirements may be directly used to replace experienced general-purpose testers to achieve significant reduction in testing 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 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 test solutions

LED test equipment of this Company can be employed during midstream process before or after die singulation or die separation. Tests include electrical, optical, and electrostatic discharge (ESD) properties of the die. These solutions can be integrated with ergonomic operation interface of the probe testers 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 measuring the electrical and optical properties of the LED module. Test requirements for LED modules are primarily lifespan tests for LED Flash Lights, LED Light Bars, and OLEDs. Customized test solutions for electrical properties of LEDs and optical testing are also provided to satisfy various kinds of test requirements.

Solar cell test solutions

Solar cell test solutions include a number of different testers and testing equipment developed primarily for test requirements during the cell phase and module phase of the solar cell. I-V testers can be used to measure 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 be used to implement relevant sorting. When assembling PV systems, system inverters will convert DC into AC currents while controlling the direction of current flow and calculate the reverse current delivered. AC/DC power supply and electronic load 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. Diverse 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.

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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 Corporation and its subsidiaries manufacture a large variety of product types in small quantities. A large variety of raw materials would be required, with primary materials include: programmable logic gate array IC, converter IC, memory, relays, structural materials, and PCB. The following describes the state of 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 of 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 of world renowned manufacturers and have long-term collaborative relationships with this Company, providing stable quality and supply volumes.
Memory	Weikeng, Transcend, and Arrow Electronics	These 3 suppliers are product agents of 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 of 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 precision instruments, all local and overseas purchases are handled by a single purchasing unit. Where possible, 2 or more suppliers are selected to ensure supplier replaceability, acquire competitive pricing, distribute purchasing risks, achieve reasonable cost reductions, and provide better services. The purchasing unit shall regularly review quotations offered by the supplier. QC and

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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 2 most recent 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 2 most recent years

Information of major suppliers in the 2 most recent years

Unit: Thousand NT$

Item	2015	2015	2015	2015	2016	2016	2016	2016
	Name	Sum	Proportion of total procurement value for the entireyear(%)	Relationship with the issuer	Title	Sum	Proportion of total procurement value for the entireyear(%)	Relationship with the issuer
1	NMC	1,207,491	24.29	None	NMC	1,203,234	20.69	None
2	NMC (Philippines)	940,421	18.92	None	NMC (Philippines)	956,431	16.45	None
	Other	2,822,811	56.79	-	Other	3,654,495	62.86	-
	Net procurement	4,970,723	100.00		Net procurement	5,814,160	100.00

Explanation for any changes:

Changes to NMC procurement sums in the two most recent years are down to a minimum. This company remains one of the two largest suppliers of this Corporation.

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

Information of major customers for the 2 most recent years

Unit: Thousand NT$

					Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$
	2015				2016
Item	Title	Sum	Proportion of total sales value for the entire year (%)	Relationship with the issuer	Title	Sum	Proportion of total sales value for the entire year (%)	Relationship with the issuer
1	Other	9,692,365	100.00	-	Other	11,624,369	100.00	-

	Net sales	9,692,365	100.00		Net sales	11,624,369	100.00

In the two most recent years, no single customer accounted for more than 10% of total sales value of this Company.

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

Unit: km, m, feet, g, units, sets, thousand NT$

Year Production value Primarycommodity	2015	2015	2015	2016	2016	2016
	Production capacity (Note 1)	Production volume	Production value	Production capacity (Note 1)	Production volume	Production value
Test instrument equipment	-	55,529	1,496,685	-	91,594	2,433,991
Special materials	-	-	-	-	-	-
Automatic equipment	-	228	1,047,233	-	220	435,432
Others	-	-	-	-	-	-
Total	-	55,757	2,543,918	-	91,814	2,869,423

Note 1: This Corporation and its subsidiaries adopted a production model of producing many product types for limited quantities instead of mass production using automated production lines. No particular 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 work station. Production volume and capacity for various products shall be sequenced according to the product market or purchase order requirements. Expected production volume was used to flexibly adjust production capacity in order to achieve maximum benefits using limited economic resources. Hence, all primary products listed above were capable of maintaining stable capacity utilization rate. Products that proved to be competitive in the market could also utilize the most flexible production plan to achieve optimal capacity utilization rate.

(6) Sales volume in the 2 most recent years

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

Year Sales value Primary commodity	2015	2015	2015	2015	2016	2016	2016	2016
	Internal sales		External sales		Internal sales		External sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Test instrument equipment	18,224	899,741	81,062	4,766,432	14,374	1,181,074	124,415	7,406,303
Special materials	2,259,207,648	2,302,212	3,298,490	25,939	2,722,204,609	2,241,265	61	27,792
Automatic equipment	189	92,861	39	1,167,970	196	148,399	24	233,889
Other	-	6,497	-	430,713	-	316,592	-	69,055
Total	2,259,226,061	3,301,311	3,379,591	6,391,054	2,722,219,179	3,887,330	124,500	7,737,039

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

	Year	2015	2016	The current year to February28,2017
Number of employees	Sales management	1,008	1,070	1,099
	Production	768	750	773
	R&D	614	677	666
	Total	2,390	2,497	2,538
Average age		35.18	35.53	35.54
Average work tenure		5.74	5.83	5.86
Distribution and proportion Of academic backgrounds	PhD	0.72%	0.77%	0.80%
	Masters	17.66%	20.22%	20.24%
	Univeristy/ college degree	65.27%	63.65%	64.15%
	High school diploma	14.37%	13.42%	12.89%
	Below high school	1.98%	1.94%	1.92%

4. Disbursements for environmental protection

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

(2) Future response strategies

This Corporation is situated at the Huaya Technology Park in Linkou and is a high tech and low polluting industry in the IT sector. No public hazards or pollution issues would be generated during the production process. Hence, no licenses for establishing polluting facilities would be required by this Company. For waste water and sewage issues, this Company only generates domestic sewage which would undergo preliminary treatment in this factory before being discharged into the wastewater treatment system of the Technology Park. Domestic wastes would be cleaned and disposed of by waste disposal and handling companies registered and approved by the state. This Corporation 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 a green, spacious, clean, healthy, and comfortable areas for the employees.

Currently, this Company and its subsidiaries are also active in activities related to green and environmental protection industries, and actively introduced or developed greener operations and products for processes, products, services, and principles in order to fulfill laws and requirements related to RoHS and toxic chemical substances of the customers and countries where the products are being sold to. These laws and requirements are 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 are committed towards technical improvements and breakthrough while upholding corporate responsibilities such as compliance with the law, social duties, and environmental protection. Stringent approaches are adopted to actively promote environmental management systems (EMS), safety and health related activities, and pollution prevention measures in order 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

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measures for maintaining employee rights and interests.

Employee benefit plans

This Corporation 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, passing of immediate family members, and other celebrations and festivals, subsidies for employee tours, labor, health insurance, and group insurances, establishing employee restaurants, employee dormitories and recreation centers, providing a diverse selection of recreational and entertainment facilities for employees, and preparing employees’ parking spaces.

Training

To promote the employees’ competence, knowledge, and management skills required of their duties, this Company stipulated the Education and Training Management Regulations. This Corporation's business objectives as well as results of departmental surveys are compiled to formulate the annual training plan. Newly hired staff are provided with work orientation training. On-job training, specialization training, or professional external training are provided every now and then 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$)
6,833	1,415

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

Retirement system

This Corporation has stipulated the Employee Retirement Regulations based upon the Labor Standards Act. 4% of the total monthly salary provided shall be deposited as a retirement reserve fund at the Department of Trusts of Bank of Taiwan, while an Employment Retirement Reserve Fund Supervision Committee was established for monitoring purposes. Since July 1, 2005, 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.

Employee-employer agreement

This Corporation and its subsidiaries place great importance on employee welfare and established a harmonious employee-employer relationship. In addition to complying with Labor Standards Act and relevant laws, welfare measures considered superior to statutory regulations were also enacted. Additionally, the company promotes the efficiency for internal communication and encourages fellow employees to propose various recommendations. In addition to regular internal communication meetings between various units, communication channels for employee relations are also established. Any employee inquiry or recommendations can be communicated using Employee Communication Helpline, Employee Communication Email, and Employee Communication Feedback Mailbox is offered to prevent any possible employee-employer disputes.

Measures for safeguarding employees’ rights

To safeguard the employees’ rights and improve the lifestyle of fellow employees, additional employee-employer communication channels have been established. This Corporation also established the Occupational Welfare Committee to plan the allocation, payment, preservation, and utilization of the occupational welfare and to provide laws specified by relevant laws. Protection of the employees’ rights and implementation of welfare systems shall be based upon statutory regulations.

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

Nature of contract	Party	Starting and ending date of the contract	Major contents	Restrictive terms
Land purchasing / sales contract	Ministry of the Interior	From the April 18, 2012 (date of signing the contract) until the date when notice registration of all projected land have been canceled.	This Corporation entered a contract with HERAN 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$ 10,088,889,990) 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 these lands as undeveloped and unused lands.
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 the development of Business Exclusive Zone at the A7 Station of the Taoyuan International Airport MRT.	Financial ratios must be compliant with the standards stipulated within the contract.

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VI. Financial summary

Condensed balance sheet and composite income sheet for the 5 most recent years
Condensed consolidated balance sheet and statement of comprehensive income or loss - 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$	Unit: Thousand NT$
Year Item		Financial information of the 5 most recent fiscal years
		2012		2013(Note 1)		2014(Note 1)		2015(Note 1)		2016
Current assets		6,837,946		7,005,438		9,184,704		9,632,600		11,212,692
Property, plant, and equipment		2,794,253		2,695,664		2,712,962		2,767,608		2,714,127
Intangible assets		194,038		201,079		200,472		200,576		227,503
Other assets		1,481,131		2,868,238		2,871,838		3,459,655		4,478,456
Total assets		11,307,368		12,770,419		14,969,976		16,060,439		18,632,778
Current liability	Before allotment	3,112,588		3,052,669		2,870,775		3,112,654		4,723,411
	After allotment	3,862,257		3,989,780		3,853,214		4,020,607		(Note 2)
Non-current liability		291,495		1,021,103		2,726,113		3,416,489		3,121,516
Total liabilities	Before allotment	3,404,083		4,073,772		5,596,888		6,529,143		7,844,927
	After allotment	4,153,752		5,010,883		6,579,327		7,437,096		(Note 2)
Equity attributable to the owner ofthe parent company		7,796,606		8,557,696		9,252,948		9,410,104		10,616,627
Capital stock		3,767,599		3,767,599		3,787,821		3,791,699		3,898,872
Capital surplus		917,062		960,198		1,256,654		1,302,269		1,960,159
Retained earnings	Before allotment	2,961,545		3,386,999		3,737,083		3,952,185		4,735,275
	After allotment	2,211,876		2,449,888		2,754,644		3,044,232		(Note 2)
Other equity		186,300		478,800		507,104		399,665		58,035
Treasury stock		(35,900)		(35,900)		(35,714)		(35,714)		(35,714)
Non-controlling interests		106,679		138,951		120,140		121,192		171,224
Total equity	Before allotment After allotment	7,903,285		8,696,647		9,373,088		9,531,296		10,787,851
		7,153,616		7,759,536		8,390,649		8,623,343		(Note 2)

Item		Year	Financial information of the 5 most recent fiscalyears
			2012		2013		2014(Note 1)		2015(Note 1)		2016
Sales revenue			11,643,508		10,170,631		10,307,085		9,692,365		11,624,369
Grossprofit(Note 3)			3,389,640		3,750,820		4,046,270		4,221,340		5,428,322
OperatingIncome			1,073,932		1,168,499		1,221,400		1,219,999		2,013,181
Non-operatingincome and expenses			64,426		248,537		302,113		262,673		28,876
IncomeBeforeIncomeTax			1,138,358		1,417,036		1,523,513		1,482,672		2,042,057
Net income of continuing operations duringthisperiod			916,237		1,179,156		1,295,985		1,194,542		1,695,566
Loss of discontinued operations			─		─		─		─		─
Net income in thisperiod			916,237		1,179,156		1,295,985		1,194,542		1,695,566
Comprehensive income( loss) (net of tax) inthis period			26,276		287,363		4,567		(131,740)		(223,152)
Total comprehensive income( loss) in thisperiod			942,513		1,466,519		1,300,552		1,062,802		1,472,414
Net income attributable to the owner of theparent company			920,328		1,204,892		1,318,373		1,236,557		1,719,935
Net income attributable to non- controllinginterests			(4,091)		(25,736)		(22,388)		(42,015)		(24,369)
Total comprehensive income ( loss) attributable to the owner of the parent company			947,956		1,491,388		1,320,288		1,102,621		1,501,612
Total comprehensive income( loss) attributable to non-controllinginterests			(5,443)		(24,869)		(19,736)		(39,819)		(29,198)
Earningsper share(NT$)			2.46		3.21		3.51		3.28		4.53

74 -

Note 1: In 2015, this Corporation 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 (IFRS) and International Accounting Standards (IAS) as well as interpretations and announcements thereof 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: Distribution for the 2016 surplus have not been distributed by the annual shareholders’ meeting. These fields were left blank as a result.

Note 3: Values listed are net realized gross profit from which unrealized gross profit were deducted from.

2. Individual balance sheet and comprehensive income or loss sheet - International Financial Reporting Standards

Unit: Thousand NT$

Year Item	Year Item	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears	Financial information of the 5 most recent fiscalyears
		2012		2013(Note 1)		2014(Note 1)		2015(Note 1)		2016
Current assets		3,469,952		3,607,432		6,015,641		5,999,691		7,709,289
Property, plant, and equipment		1,993,820		1,924,727		1,907,429		1,844,215		1,805,031
Intangible assets		94,424		94,424		94,424		94,424		94,424
Other assets		3,699,118		5,363,903		5,274,245		6,026,586		6,977,507
Total assets		9,257,314		10,990,486		13,291,739		13,964,916		16,586,251
Current liability	Before allotment	1,298,484		1,551,520		1,455,362		1,310,706		3,037,002
	After allotment	2,052,004		2,493,420		2,442,795		2,220,906		(Note 2)
Non-current liability		162,224		881,270		2,583,429		3,244,106		2,932,622
Total liabilities	Before allotment After allotment	1,460,708		2,432,790		4,038,791		4,554,812		5,969,624
		2,214,228		3,374,690		5,026,224		5,465,012		(Note 2)
Equity attributable to the owner of theparent company		7,796,606		8,557,696		9,252,948		9,410,104		10,616,627
Capital stock		3,767,599		3,767,599		3,787,821		3,791,699		3,898,872
Capital surplus		917,062		960,198		1,256,654		1,302,269		1,960,159
Retained earnings	Before allotment	2,961,545		3,386,999		3,737,083		3,952,185		4,735,275
	After allotment	2,208,025		2,445,099		2,749,650		3,041,985		(Note 2)
Other equity		186,300		478,800		507,104		399,665		58,035
Treasury stock		(35,900)		(35,900)		(35,714)		(35,714)		(35,714)
Non-controlling interests		─		─		─		─		─
Total equity	Before allotment	7,796,606		8,557,696		9,252,948		9,410,104		10,616,627
	After allotment	7,043,086		7,615,796		8,265,515		8,499,904		(Note 2)

Item		Year	Financial information of the 5 most recent fiscal years
			2012		2013		2014 (Note 1)		2015 (Note 1)		2016
Sales rev	enue		4,173,732		3,926,480		5,135,199		4,539,441		7,233,315
Gross profit (Note 3)			2,269,354		2,153,911		2,752,917		2,519,834		3,763,579
Operating Income			878,533		741,590		1,052,145		825,721		1,726,398
Non-operating income and expenses			191,716		563,197		431,832		548,464		281,123
Income Before Income Tax			1,070,249		1,304,787		1,483,977		1,374,185		2,007,521
Net income of continuing operations duringthisperiod			920,328		1,204,892		1,318,373		1,236,557		1,719,935
Loss of discontinued operations			─		─		─		─		─
Net income in this period			920,328		1,204,892		1,318,373		1,236,557		1,719,935
Comprehensive income ( loss) (net of tax)in thisperiod			27,628		286,496		1,915		(133,936)		(218,323)
Total comprehensive income in this period			947,956		1,491,388		1,320,288		1,102,621		1,501,612
Net income attributable to the owner of theparent company			920,328		1,204,892		1,318,373		1,236,557		1,719,935
Net income attributable to non- controllinginterests			─		─		─		─		─

75 -

Total comprehensive income attributable to the ownerofthe parent company	947,956	1,491,388	1,320,288	1,102,621	1,501,612
Total comprehensive income (loss) attributable to non-controllinginterests	─	─	─	─	─
Earnings per share (NT$)	2.46	3.21	3.51	3.28	4.53

Note 1: In 2015, this Corporation 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 (IFRS) and International Accounting Standards (IAS) as well as interpretations and announcements thereof 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: Distribution for the 2016 surplus have not been distributed by the annual shareholders’ meeting. These fields were left blank as a result.
Note 3: Unrealized profits with subsidiaries and related businesses were removed. The only values listed are realized gross profit.

3. Condensed consolidated balance sheet and statement of comprehensive income or loss -

Taiwan’s Financial Accounting Standards

Unit: Thousand NT$

Year Item	Year Item	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)
		2012	Year	Year	Year	Year
Current assets		6,888,849	─	─	─	─
Funds and investments		916,114	─	─	─	─
Fixed assets		3,151,132	─	─	─	─
Intangible assets		194,038	─	─	─	─
Other assets		141,754	─	─	─	─
Total assets		11,291,887	─	─	─	─
Current liability	Before allotment	3,130,394	─	─	─	─
	After allotment	3,883,914	─	─	─	─
Long-term liability		119,415	─	─	─	─
Other liability		140,635	─	─	─	─
Total liabilities	Before allotment	3,390,444	─	─	─	─
	After allotment	4,143,964	─	─	─	─
Capital stock		3,767,599	─	─	─	─
Capital surplus		910,680	─	─	─	─
Retained earnings	Before allotment	2,879,197	─	─	─	─
	After allotment	2,125,677	─	─	─	─
Unrealized income of financial products		227,382	─	─	─	─
Cumulative translation adjustment		40,144	─	─	─	─
Net loss not recognized as pension cost		─	─	─	─	─
Treasury stock		(30,238)	─	─	─	─
Minority equity		106,679	─	─	─	─
Shareholder equity Total	Before allotment	7,901,443	─	─	─	─
	After allotment	7,147,923	─	─	─	─

76 -

Year Item	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)
	2012	Year	Year	Year	Year
Sales revenue	11,747,443	─	─	─	─
Gross profit	3,418,513	─	─	─	─
Operating Income	1,082,984	─	─	─	─
Non-business income and benefits	147,322	─	─	─	─
Non-business expenses and loss	66,127	─	─	─	─
Income Before Income Tax	1,164,179	─	─	─	─
Gain of continuing operations	941,023	─	─	─	─
Gain (loss) of discontinued operations	─	─	─	─	─
Gain (loss) of extraordinary items	─	─	─	─	─
Cumulative effect of changes in accounting principles	─	─	─	─	─
Net income in this period	941,023	─	─	─	─
Net income attributable to shareholders of the parent company during this period	945,114	─	─	─	─
Earnings per share (NT$) (Note 2)	2.52	─	─	─	─

Note 1: Based upon the 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 s, and employees’ bonuses.

Condensed individual balance sheet and statement of comprehensive income or loss - Taiwan’s Financial Accounting Standards

		Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$
Year Item		Financial information of the 5 most recentyears(note 1)
		2012	Year	Year	Year	Year
Current assets		3,515,055	─	─	─	─
Funds and investments		3,531,509	─	─	─	─
Fixed assets		2,350,699	─	─	─	─
Intangible assets		94,424	─	─	─	─
Other assets		66,966	─	─	─	─
Total assets		9,558,653	─	─	─	─
Current liability	Before allotment	1,298,484	─	─	─	─
	After allotment	2,052,004	─	─	─	─
Long-term liability		─	─	─	─	─
Other liability		465,405	─	─	─	─
Total liabilities	Before allotment	1,763,889	─	─	─	─
	After allotment	2,517,409	─	─	─	─
Capital stock		3,767,599	─	─	─	─
Capital surplus		910,680	─	─	─	─
Retained earnings	Before allotment	2,879,197	─	─	─	─
	After allotment	2,125,677	─	─	─	─
Unrealized income of financial products		227,382	─	─	─	─
Cumulative translation adjustment		40,144	─	─	─	─
Net loss not recognized as pension cost		─	─	─	─	─
Treasurystock		(30,238)	─	─	─	─
Total stockholders' equities	Before allotment	7,794,764	─	─	─	─
	After allotment	7,041,244	─	─	─	─

77 -

Year Item	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)	Financial information of the 5 most recentyears(note 1)
	2012	Year	Year	Year	Year
Sales revenue	4,173,732	─	─	─	─
Gross profit (Note 2)	2,269,354	─	─	─	─
Operating Income	875,487	─	─	─	─
Non-business income and benefits	261,122	─	─	─	─
Non-business expenses and loss	40,495	─	─	─	─
Income Before Income Tax	1,096,114	─	─	─	─
Gain of continuing operations	945,114	─	─	─	─
Gain (loss) of discontinued operations	─	─	─	─	─
Gain (loss) of extraordinary items	─	─	─	─	─
Cumulative effect of changes in accounting principles	─	─	─	─	─
Net income in this period	945,114	─	─	─	─
Earnings per share (NT$) (Note 3)	2.52	─	─	─	─

Note 1: Based upon the 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 from. Note 3: Earnings per share are based upon recapitalization of traced and adjusted surplus, Capital surplus, and employees’ bonuses.

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

Year	Accounting firms	Name of the CPA	Audit opinions
2012	Deloitte & Touche	Wen-chin Lin, Chen-ming Li	Unqualified opinion
2013	Deloitte & Touche	Wen-chin Lin, Chen-ming Li	Unqualified opinion
2014	Deloitte & Touche	Cheng-ming, Lee and Li-wen, Kuo	Unqualified opinion
2015	Deloitte & Touche	I-wen, Wangand Wen-Chi, Kuo	Unqualified opinion
2016	Deloitte & Touche	I-wen, Wangand Wen-Chi, Kuo	Unqualified opinion

(2) Accounting firms, former and successor CPAs, and reasons for the replacement for any replacement of CPAs in the 5 most recent years
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.
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 I-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 & Touche.
c. Date of incident: December 23, 2015.
d. Any disagreement relating to accounting principles or auditing items between the former and successor CPAs: None.
78 -

2. Financial analysis for the 5 most recent fiscal years

1. Consolidated financial analysis - International Financial and Accounting Reporting Standards

Item analyzed	Year (Note 2)	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years
		2012	2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016
Financial structure (%)	Liability to asset ratio	30.10	31.90	37.39	40.65	42.10
	Proportion of long-term capital in property, plant, and equipment (PP&E)	293.27	360.50	445.98	467.83	512.48
Debt-paying ability (%)	Current ratio	219.69	229.49	319.94	309.47	237.39
	Quick ratio	167.06	177.19	258.74	248.58	190.86
	Interest coverage ratio	114.59	100.66	49.67	39.02	49.56
Operating ability	Receivables turnover ratio (times)	3.65	3.41	3.25	3.23	3.92
	Average collection days	100	107	112	113	93
	Inventory turnover ratio (times)	4.28	3.79	3.46	2.73	2.77
	Payables turnover ratio (times)	4.09	4.14	4.77	4.02	3.62
	Average inventory turnover days	85	96	105	134	132
	Property, plant, and equipment turnover ratio (times)	4.18	3.71	3.81	3.54	4.24
	Total asset turnover ratio (times)	1.01	0.84	0.74	0.62	0.67
Return on investments	Return on assets (%)	8.07	10.11	9.69	8.18	10.12
	Return on equity (%)	11.80	14.73	14.80	13.25	17.18
	Ratio of pre-tax income to paid-in capital(%)	30.21	37.61	40.22	39.10	52.38
	Net profit rate (`％`)	7.90	11.85	12.79	12.76	14.80
	Earnings per share (NT$)	2.46	3.21	3.51	3.28	4.53
Cash flow	Cash flow ratio (%)	47.22	30.80	42.76	72.88	42.36
	Cash flow adequacy ratio (`％`)	118.95	100.44	103.43	89.78	84.19
	Cash re-investment ratio (`％`)	5.26	1.91	2.31	9.82	8.31
Degree of leverages	Degree of operating leverage (DOL)	1.33	1.27	1.25	1.27	1.17
	Degree of financial leverage (DFL)	1.01	1.01	1.03	1.03	1.02

79 -

Description of causes for changes to various financial ratios in the 2 most recent fiscal 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 2 most recent years: 1.Decrease in current ratio and quick ratio: Mainly attributed to an increase in accounts payable at the end of 2016 when compared to the previous period, and increase in 1-year long-term loans for land acquisition for the A7 factory building. 2. Increase in interest coverage ratio: Mainly attributed to an increase in Sales revenue in 2016 and earnings before tax (EBT) compared to the previous period. 3. Increase in return on assets and return on equities: Mainly attributed to increase in net income in 2016 compared to the previous period, leading to an increase in relevant ratios. 4. Increase in EBT and paid-in capital ratio: Mainly attributed to increase in Sales revenue and increase in EBT in 2016 when compared to the previous period. 5. Increase in earnings per share (EPS): Mainly attributed to increase in Sales revenue and significant increase in EPS in 2016. 6. Decrease in cash flow ratio: Mainly attributed to an increase of NT$ 1,610,757,000 in current liability in 2016 when compared to the previous period, leading to a decrease in cash flow ratio. Note 1: In 2015, this Corporation began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the IFRS and IAS as well as interpretations and announcements thereof approved by the FSC, and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions. Note 2: 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 capital in property, plant, and equipment = (Total equities + non-current liabilities) / (Total net value of property, plant, and equipment). 2. Debt-paying ability (1) Current ratio = Current assets / Current liabilities. (2) Quick ratio = (Current asset - inventories) / Current liabilities (3) Interest coverage ratio = Earnings before interests and taxes (EBIT) / Interest expenses over this period. 3. Operating ability (1) Receivables 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). (2) Average collection days = 365 / Receivables turnover ratio. (3) Inventory turnover ratio = Cost of sales / Average inventory value (1) Payables 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). (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. Return on investments (1) Return on assets (ROA) = [Gain (loss) after tax + Interest expenses x (1 - interest rates)] / Average total asset value. (2) Return on Equity (ROE) = Gain (loss) after tax / Average total equity value. (3) Net profit rate = 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 5 most recent years / (Capital expenditure + Inventory increase + Cash dividends) for the 5 most recent years.

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

Degree of leverages
- (1) Degree of operating leverage (DOL) = (Net Sales revenue - operating change costs and expenses) / Operating profit.
- (2) Degree of financial leverage (DFL) = Operating profit / (Operating profit - interest expenses).
Note3: The formula listed above for calculating EPS shall take special reminders of the following matters during calculations:
1. 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.
3. 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 sad recapitalization.
4. If the preferred share cannot be converted into cumulative preferred shares, then the dividend of the year (whether it has been issued or not) shall be deducted from 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 4: Cash flow analysis must make special considerations to the following matters during calculation:
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.
80 -
Increase in inventory shall only be included 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.
Cash dividends include those for common shares as well as preferred shares.
Gross value of PP&E refers to the total value of PP&E minus accumulated depreciation.
Note 5: 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 6: Where 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.

2. Individual financial analysis - International Financial and Accounting Reporting Standards

Year Itemanalyzed (note 3)	Year Itemanalyzed (note 3)	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years	Financial analysis for the 5 most recent fiscal years
		2012	2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016
Financial structure (%)	Liability to asset ratio	15.78	22.14	30.39	32.62	35.99
	Proportion of long-term capital in property, plant, and equipment (PP&E)	399.17	490.41	620.54	686.16	750.64
Debt-paying ability (%)	Current ratio	267.23	232.51	413.34	457.74	253.85
	Quick ratio	182.57	155.16	325.04	354.57	204.82
	Interest coverage ratio	401.69	263.22	69.62	48.66	74.97
Operating ability	Receivables turnover ratio (times)	2.56	2.41	2.54	2.25	3.58
	Average collection days	143	151	144	162	2013
	Inventory turnover ratio (times)	1.43	1.42	1.73	1.34	2.13
	Payables turnover ratio (times)	4.01	4.30	5.07	3.55	3.94
	Average inventory turnover days	255	257	211	272	171
	Property, plant, and equipment turnover ratio (times)	2.07	2.00	2.68	2.42	3.96
	Total asset turnover ratio (times)	0.45	0.39	0.42	0.33	0.47
Return on investments	Return on assets (%)	9.93	11.94	11.01	9.25	11.41
	Return on equity (%)	11.80	14.73	14.80	13.25	17.18
	Ratio of pre-tax income to paid-incapital(%)	28.41	34.63	39.18	36.24	51.49
	Net profit rate (`％`)	22.05	30.69	25.67	27.24	23.78
	Earnings per share (NT$)	2.46	3.21	3.51	3.28	4.53
Cash flow	Cash flow ratio (%)	81.78	39.92	56.54	116.19	65.03
	Cash flow adequacy ratio (`％`)	112.99	87.62	82.31	74.59	72.41
	Cash re-investment ratio (`％`)	1.38	(Note 2)	(Note 2)	4.46	8.88
Degree of leverages	Degree of operating leverage (DOL)	1.26	1.23	1.16	1.24	1.14
	Degree of financial leverage (DFL)	1.00	1.01	1.02	1.04	1.02

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Description of causes for changes to various financial ratios in the 2 most recent fiscal 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 2 most recent years:

1.Decrease in current ratio and quick ratio: Mainly attributed to an increase in accounts payable at the end of 2016 when compared to the previous period, and increase in 1-year long-term loans for land acquisition for the A7 factory building.
1. Increase in interest coverage ratio: Mainly attributed to an increase in Sales revenue and EBT in 2016 compared to the previous period.
1. Increase in receivables turnover ratio and decrease in average collection days: Mainly attributed to significant increase in Sales revenue in 2016, leading to an increase in receivables turnover ratio and decrease in average collection days.
1. Increase in inventory turnover and decrease in average inventory turnover days: Mainly attributed to significant increase in Sales revenue in 2016, leading to an increase in inventory turnover and decrease in average inventory turnover days.
1. Increase in PP&E turnover rate and increase in total asset turnover rate: Mainly attributed to increase in Sales revenue that led to increases in relevant ratios.
1. Increase in return on asset and return on equity: Mainly attributed to increase in net profit in 2016 compared to the previous period, leading to an increase in relevant ratios.
1. Increase in EBT as a portion of paid-in capital and EPS: Mainly attributed to increase in Sales revenue in 2016, leading to increases in relevant ratios when compared to the previous period.
1. 1. Decrease in cash flow ratio: Mainly attributed to an increase of NT$ 1,726,296,000 in current liability in 2016 when compared to the previous period, leading to a decrease in cash flow ratio.
1. Increase in cash re-investment ratio: Mainly attributed to an increase in net cash flow in business activities during 2016.

Note 1: In 2015, this Corporation began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of the IFRS and IAS as well as interpretations and announcements thereof approved by the FSC, and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions. Note 2: The total sum of net cash flow for the 5 most recent years was a negative value, or that net cash flow resulting from business activities were net cash outflow. Relevant ratios would not be applicable in such circumstances. Note 3: 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 capital in property, plant, and equipment = (Total equities + non-current liabilities) / (Total net value of property, plant, and equipment). 2. Debt-paying ability (1) Current ratio = Current assets / Current liabilities. (2) Quick ratio = (Current asset - inventories) / Current liabilities (3) Interest coverage ratio = Earnings before interests and taxes (EBIT) / Interest expenses over this period. 3. Operating ability (1) Receivables 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). (2) Average collection days = 365 / Receivables turnover ratio.

(3) Inventory turnover ratio = Cost of sales / Average inventory value (4) Payables 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).
(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.
Return on investments

(1) Return on assets (ROA) = [Gain (loss) after tax + Interest expenses x (1 - interest rates)] / Average total asset value.

  - (2) Return on Equity (ROE) = Gain (loss) after tax / Average total equity value.

  - (3) Net profit rate = 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.

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 5 most recent years / (Capital expenditure + Inventory increase + Cash dividends) for the 5 most recent years.
- (3) Cash re-investment ratio = (Net cash flow for business activities - cash dividends) / (Gross value of PP&E + Long-term investments + Other non-current assets + business capital).
Degree of leverages
- (1) Degree of operating leverage (DOL) = (Net Sales revenue - operating change costs and expenses) / Operating profit.
- (2) Degree of financial leverage (DFL) = Operating profit / (Operating profit - interest expenses).
Note 4: The formula listed above for calculating EPS shall take special reminders of the following matters during calculations:
Based upon the weighted average of common shares and not the number of issued shares at the end of the year.
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.
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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 sad recapitalization.
If the preferred share cannot be converted into cumulative preferred shares, then the dividend of the year (whether it has been issued or not) shall be deducted from 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 must make special considerations to the following matters during calculation:
Net cash flow of business activities shall refer to the amount of net cash inflow for business activities indicated in the cash flow statement.
Capital expenditure shall refer to cash outflow for annual capital investments.
Increase in inventory shall only be included 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.
Cash dividends include those for common shares as well as preferred shares.
Gross value of PP&E refers 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: Where company shares have no par value or where the par value per share is not NT$ 10, any calculations that involve paidin capital and its ratio shall be replaced with the equity ratio belonging to the owner of the parent company of the asset balance sheet.

3. Consolidated financial analysis - Taiwan's Financial and Accounting Standards

Year Item analyzed	Year Item analyzed	Year Item analyzed	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears
			2012	Year	Year	Year	Year
Financial structure (%)	Liabilityto asset ratio		30.03	─	─	─	─
	Long-term capital as a proportion of fixed assets		254.54	─	─	─	─
Debt-paying ability (%)	Current ratio		220.06	─	─	─	─
	Quick ratio		165.13	─	─	─	─
	Interest coverage ratio		117.16	─	─	─	─
Operating ability	Receivables turnover ratio(times)		3.80	─	─	─	─
	Average collection days		96	─	─	─	─
	Inventoryturnover ratio(times)		4.14	─	─	─	─
	Payables turnover ratio(times)		4.30	─	─	─	─
	Average inventoryturnover days		88	─	─	─	─
	Fixed asset turnover ratio(times)		3.95	─	─	─	─
	Total asset turnover ratio(times)		1.04	─	─	─	─
Profitability	Return on assets(%)		8.31	─	─	─	─
	Return on shareholders’ equity (%)		12.15	─	─	─	─
	As a proportion of paid-in capital (`％`)	Operating profit	28.74	─	─	─	─
		Earnings before tax(EBT)	30.90	─	─	─	─
	Netprofit rate(`％`)		8.05	─	─	─	─
	Earningsper share(NT$)		2.52	─	─	─	─
Cash flow	Cash flow ratio(%)		48.60	─	─	─	─
	Cash flow adequacyratio(`％`)		119.13	─	─	─	─
	Cash re-investment ratio(`％`)		5.86	─	─	─	─
Degree of leverages	Degree of operatingleverage(DOL)		1.34	─	─	─	─
	Degree of financial leverage(DFL)		1.01	─	─	─	─
Description of causes for changes to various financial ratios in the 2 most recent years: Not applicable.

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4. Individual financial analysis - Taiwan's Financial and Accounting Standards

Year Item analyzed	Year Item analyzed	Year Item analyzed	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears	Financial analysis for the 5 most recent fiscalyears
			2012	Year	Year	Year	Year
Financial structure (%)	Liabilityto asset ratio		18.45	─	─	─	─
	Long-term capital as a proportion of fixed assets		331.59	─	─	─	─
Debt-paying ability (%)	Current ratio		270.70	─	─	─	─
	Quick ratio		186.04	─	─	─	─
	Interest coverage ratio		411.38	─	─	─	─
Operating ability	Receivables turnover ratio(times)		2.59	─	─	─	─
	Average collection days		141	─	─	─	─
	Inventoryturnover ratio(times)		1.52	─	─	─	─
	Payables turnover ratio(times)		4.01	─	─	─	─
	Average inventoryturnover days		241	─	─	─	─
	Fixed asset turnover ratio(times)		1.78	─	─	─	─
	Total asset turnover ratio(times)		0.44	─	─	─	─
Profitability	Return on assets(%)		9.92	─	─	─	─
	Return on shareholders’ equity (%)		12.15	─	─	─	─
	As a proportion of paid-in capital(`％`)	Operating profit	23.24	─	─	─	─
		Earnings before tax (EBT)	29.09	─	─	─	─
	Netprofit rate(`％`)		22.64	─	─	─	─
	Earningsper share(NT$)		2.52	─	─	─	─
Cash flow	Cash flow ratio(%)		93.38	─	─	─	─
	Cash flow adequacyratio(`％`)		115.36	─	─	─	─
	Cash re-investment ratio(`％`)		2.98	─	─	─	─
Degree of leverages	Degree of operating leverage (DOL)		1.29	─	─	─	─
	Degree of financial leverage (DFL)		1.00	─	─	─	─
Description of	causes for changes to various financial ratios in the 2 most recent years: Not applicable.

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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 Corporation's business report, individual and consolidated financial statements, and surplus distribution proposal for 2016 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 & 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 of 2017

Supervisor Chi-jen Chou

Kai Sun Investment Co.,Ltd.

Representative: Tsun-i Wang

March 10, 2017

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Financial report from the most recent year: Please peruse pages 101 to191 of this Report.
Company-only financial report audited and attested by a CPA from the most recent year: Please peruse pages 192 to265 of this Report.
Any financial difficulties experienced by the company and its affiliated businesses during the most recent year up to the publication date of this report as well as the impact of the said difficulties on the financial condition of this company: None.
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VII. Review, analysis, and risks of financial position and performance

1. Financial condition

Comparative analysis of financial conditions

			Units: Thousand NT$;%	Units: Thousand NT$;%
Year			Differences
	Db 31 2016	Db 31 2015 N
Item	ecemer ,	ecemer , (ote)	Sum	%

Current assets	11,212,692	9,632,600	1,580,092	16
Property, plant, and
	2,714,127	2,767,608	(53,481)	(2)
equipment

Intangible assets	227,503	200,576	26,927	13
Other assets	4,478,456	3,459,655	1,018,801	29
Total assets	18,632,778	16,060,439	2,572,339	16
Current liability	4,723,411	3,112,654	1,610,757	52
Non-current liability	3,121,516	3,416,489	(294,973)	(9)
Total liabilities	7,844,927	6,529,143	1,315,784	20
Capital stock	3,898,872	3,791,699	107,173	3
Capital surplus	1,960,159	1,302,269	657,890	51
Retained earnings	4,735,275	3,952,185	783,090	20
Other equity	58,035	399,665	(341,630)	(85)
Treasury stock	(35,714)	(35,714)	0	0
Non-controlling interests	171,224	121,192	50,032	41
Total stockholders' equities	10,787,851	9,531,296	1,256,555	13
1. Any material change to the company's assets, liabilities, or equity in the 2 most recent 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 that the sum of the change reached NT$ 10 million) (1) Increase in other assets: Mainly attributed to pre-payments for Phase 3 Stage 2 land of the A7 Business Exclusive Zone. (2) Increase in current liability: Mainly attributed to an increase in accounts payable and conversion of long-term loans acquired for land of the A7 Business Exclusive Zone into 1-year long-term loans. (3) Increase in total liability: Mainly attributed to an increase in long-term loans acquired for land of the A7 Business Exclusive Zone. (4) Increase in Capital surplus: Mainly attributed to converting of convertible corporate bonds to common shares and issuance of new restricted employee shares that led to an increase in Capital surplus. (5) Increase in retained earnings: Mainly attributed to growth in Sales revenue in 2016 and significant increase in profitability. (6) Decrease in other equities: Mainly attributed to reduction in rate of exchange differences when exchanging figures on financial statements of overseas business institutions as well as issuance of new restricted employee shares and recognizing unearned employee remuneration under the deductibles in other equities. (7) Increase in non-controlling interests: Mainly attributed to an increase in non-controlling interests as a result of aquiring subsidiaries. 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. Futures 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 IFRS and IAS as well as interpretations and announcements thereof approved by the FSC, and traced applicable items in previous financial reports to adjust those items that may be affected by these adoptions.

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2. Financial performance

Financial performance analysis

Units: Thousand NT$; %

Year Item	2016	2015 (Note 1)	Sum of the changes	Proportion of the changes (%)
Sales revenue	11,624,369	9,692,365	1,932,004	20
Gross profit (Note 2)	5,428,322	4,221,340	1,206,982	29
Operating Income	2,013,181	1,219,999	793,182	65
Non-operating income and expenses	28,876	262,673	(233,797)	(89)
Income Before Income Tax	2,042,057	1,482,672	559,385	38
Net income of this period	1,695,566	1,194,542	501,024	42
comprehensive income or loss (net of tax) in this period	(223,152)	(131,740)	(91,412)	(69)
Total comprehensive income or loss in this period	1,472,414	1,062,802	409,612	39
Net income attributable to the owner of the parent company	1,719,935	1,236,557	483,378	39
Total comprehensive income
or loss attributable to the	1,501,612	1,102,621	398,991	36
owner of the parent company

Any material change to Sales revenue, operating profit, and earnings before tax (EBT) in the 2 most recent 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 that the sum of the change reached NT$ 10 million)
(1) Increase in Sales revenue: The parent company of Chroma ATE Inc. is the major business entity mainly responsible for the majority of Sales revenue for the entire group in 2016. The primary impetus for growth is attributed to turnkey solutions and semiconductor testing solutions.
(2) Increase in gross profit and operating Income : Mainly attributed to increase in Sales revenue in 2016 when compared to the previous period.
(3) Decrease in non-operating income and expenses: Mainly attributed to increase in foreign currency exchange losses when compared to the previous period.
(4) Increase in EBT and net income : Mainly attributed to an increase in Sales revenue in 2016 compared to the previous period which led to an increase in EBT and net income for this period.
(5) 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 2016.
(6) Increase in total comprehensive income, net income attributable to the owner of the parent company, and total comprehensive income attributable to the owner of the parent company: Mainly attributed to an increase in Sales revenue in 2016 compared to the previous period,
leading to an increase in the sums of relevant items.
Expected sales volume and relevant data, possible impact to the company’s financial operations, and response plans:

This Corporation has invested in integrated testing technology and automation equipment for many years. The effectiveness of automation equipment provided by this Company has been proven in an increasing number of sectors, establishing additional sales performance. Despite being applied in different sectors, these solutions have been qualified and employed by many leading manufacturers. For 2017, active growth and development in the electric vehicle sector will raise demands for testing equipment of electric vehicles and power sources. Growing demands for SLT equipment and contributions from sales of new laser diode (LD) testing equipment will increase total sales for semiconductor testing solutions. This is expected to bring about improved business performance for this Corporation.

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 from.

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3. Cash flow

Cash liquidity analysis

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

				Unit: Thousand NT$	Unit: Thousand NT$
Initial cash balance	Net cash inflow resulting from business activities throughout the year	Total net cash inflow (outflow) from investment and capitalization activities throughout the year (Note)	Cash surplus (inadequacy)	Remedial measures for cash inadequacy
				Investment plan	Financing plan
2,489,289	2,000,866	(1,340,185)	3,149,970	─	─
Note: Includes net capital outflow from investment and capitalization activities of NT$ 1,258,349,000 and impact of currency exchange rate amounting to NT$ 81,836,000. 1. Analysis of changes in cash flow in the most recent year: (1) Business activities: Net cash inflow resulting from business activities since 2016 amounted to NT$ 2,000,866,000, mainly from business profits. (2) Investing activities: Net cash outflow resulting from investing activities since 2016 amounted to NT$ 1,107,321,000, mainly attributed to cash outflow for payment for land of the A7 project. (3) Financing activities: Net cash outflow resulting from financing activities since 2016 amounted to NT$ 151,028,000, mainly attributed to net cash outflow caused by the issuance of cash dividends and payment of short-term loans. 2. Remedial measures and liquidityanalysis for cash inadequacy: Not applicable.

(2) Cash liquidity analysis for the following year

(2) Cash liquidity analysis for the	(2) Cash liquidity analysis for the	following year	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
3,149,970	2,200,952	(1,965,000)	3,385,922	─	─
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) Investment activities: Mainly refer to cash outflow for expected payments constructing the new A7 office building. (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) Investment activities: Mainly refer to cash outflow for expected payments constructing the new A7 office building.

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

This Corporation made plans to invest NT$ 3.5 billion for expanding and constructing new A7 factory building. The construction 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 reduce business risks of this Corporation.

Policy on investment in other companies, main reasons for profit / losses resulting therefrom, improvement plan, and investment plans for the upcoming fiscal year
(1) Investments in other enterprises for the most recent year mainly focus on capital increases for companies already invested in. Investments in the Singaporean company of Quantel are used to setup sales locations in Southeast Asia and South Asia, and establish branch companies in Germany. Various locations around the globe will provide better quality and faster services to improve the scale of business.
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(2) Profitability or loss analysis of invested companies

December 31,2016. Unit: Thousand NT$	December 31,2016. Unit: Thousand NT$	December 31,2016. Unit: Thousand NT$	December 31,2016. Unit: Thousand NT$
Company name	Shareholding percentage	Investment gain(loss)	Details
Neworld Electronics Ltd.	100.0%	81,411	Profits resulting from excellent sales.
Chroma New Material Corp.	100.0%	47,089	Profits resulting from excellent sales.
Chroma Investment Co., Ltd.	100.0%	(534)	Mainly refer to recognized losses from investmentsin financialassets.
ADLINK Technology Inc.	11.3%	49,568	Good R&D capabilities and business performance.
San Eagle Development Corp.	100.0%	(12,895)	Mainly derived from investment losses calculated using the recognized equity method.
MAS Automation Corp.	100.0%	69,459	Profits resulting from excellent sales.
CHI Incorporation Ltd.	100.0%	21,946	Mainly derived from investment profits calculated using the recognized equity method.
Testar Electronics	67.2%	(29,720)	The LED industry have been impacted by large scale expansion and price competitions of Mainland Chinese firms. Losses were incurred as the company was unable to effectively reduce its expenses.
Chroma ATE Inc.(USA)	100.0%	11,231	Mainly derived from investment profits calculated using the recognized equity method.
Sensational HoldingLtd.	100.0%	1,583	Primarily derived from rental income.
CHROMA SYSTEMS SOLUTIONS, INC.	25.0%	18,002	Establishment of a comprehensive sales network with good business performance.
CHROMA ATE EUROPE B.V.	100.0%	8,716	Establishment of a comprehensive sales network with good business performance.
Chen Hwa Technology Inc.	100.0%	2,928	Mainly due to dividend income.
DynaScan Technology Corp.	27.3%	12,323	Profits resulting from excellent sales.
Deep Red Holding Co., Ltd.	100.0%	7,587	Mainly derived from investment profits calculated using the recognized equity method.
Chroma Japan Corp.	100.0%	(13,118)	Market expansion has yet to reach economies of scale, resulting in relativelyhighercosts and expenses.
Zhiheshun Development Co., Ltd.	35.0%	88	Mainly derived from recognized interest income.
Adivic Technology Co.	51.0%	(31,309)	R&D for new products not yet complete. High R&D costs have led to operational loss.
EVT Technology	53.2%	(5,848)	Losses arose due to product conversion and new product validation that have yet to be completed.
Quantel Private Ltd.	60.0%	7,500	Profits resulting from excellent sales.

(3) Improvement plan

Testar Electronics: As a result of poor business climate in 2016, operations fail to reach expectations. The company shall continue to develop first-rate customers and expand business scale to improve business conditions.
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Chroma Japan Corp: Continue to expand sales networks to establish economies of scale to improve upon corporate losses.
3.Adivic Technology Co.: ADIVIC provides original audio recorder equipment and thus has a smaller market scale, making it difficult to improve revenue. In 2016, the WIFI tester invested that the company invested in has been gradually released for customer verification. A number of products can be integrated with this Corporation's products. Once verified, the new products would be able to improve business volume and performance.
4.EVT Technology: EVT is now working with this Corporation to develop production lines for parts of electric vehicles. Completion of product R&D and release of the product for sales is expected to improve business performance.
(4) Investment plans for the following year: By principle, this Corporation shall continue to raise capital for other companies that this Corporation had already invested in and establishing additional sales networks, and shall continue to carefully review investment plans in other companies.

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

(1) Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact this Corporation’s gain or loss as well as future response measures
Changes to interest rates and resulting impact to this Company's gain or loss as well as future response measures
- (1) Changes to interest rates and impact to the gain or loss of this Company and its subsidiaries

nges to interest rates, currency exchange fluctuations, and inflation and how these may act this Corporation’s gain or loss as well as future response measures Changes to interest rates and resulting impact to this Company's gain or loss as well as future response measures (1) Changes to interest rates and impact to the gain or loss of this Company and its subsidiaries	nges to interest rates, currency exchange fluctuations, and inflation and how these may act this Corporation’s gain or loss as well as future response measures Changes to interest rates and resulting impact to this Company's gain or loss as well as future response measures (1) Changes to interest rates and impact to the gain or loss of this Company and its subsidiaries	nges to interest rates, currency exchange fluctuations, and inflation and how these may act this Corporation’s gain or loss as well as future response measures Changes to interest rates and resulting impact to this Company's gain or loss as well as future response measures (1) Changes to interest rates and impact to the gain or loss of this Company and its subsidiaries
Unit: Thousand NT$
Item /year	2015	2016
Interest expense	38,994	42,052
Net Sales revenue	9,692,365	11,624,369
Operatingincome	1,219,999	2,013,181
Interest expense / Sales revenue (%)	0.40	0.36
Interest expense / operating income (%)	3.20	2.09

Interest expense and its proportion of operating income in 2015 and 2016 were NT$ 38,994,000 (3.20%) and NT 42,052,000 (2.09%) respectively for this Corporation and its subsidiaries. Changes to interest expenses exerted no significant impact upon this Corporation and its subsidiaries.

(2) Future response measures

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 risk of changing interest rates include carrying out negotiations with various banks for loan interests based upon state of QE policies upon the market and taking active steps in reducing 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 of interest rates in the market to reduce the impact upon this Company’s profitability as a result of changing interest rates.

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Currency exchange fluctuations and resulting impact to this Company's gain or loss as well as future response measures
(1) Currency exchange fluctuations and its impact to the gain or loss of this Company and its subsidiaries

Currency exchange fluctuations and resulting impact to this Company's gain or loss as well as future response measures 1) Currency exchange fluctuations and its impact to the gain or loss of this Company and its subsidiaries	Currency exchange fluctuations and resulting impact to this Company's gain or loss as well as future response measures 1) Currency exchange fluctuations and its impact to the gain or loss of this Company and its subsidiaries	Currency exchange fluctuations and resulting impact to this Company's gain or loss as well as future response measures 1) Currency exchange fluctuations and its impact to the gain or loss of this Company and its subsidiaries
Unit: Thousand NT$
Item /year	2015	2016
Net income(loss) on exchange	61,260	(110,497)
Net Sales revenue	9,692,365	11,624,369
Operatingincomet	1,219,999	2,013,181
Income Before Income Tax	1,482,672	2,042,057
Ratio of net income (loss) on exchange net to Sales revenue (%)	0.63	(0.95)
Ratio of net income (loss) on exchange to operating income (%)	5.02	(5.49)
Ratio of net income (loss) on exchange to earnings before tax(EBT) (%)	4.13	(5.41)

This Corporation and its subsidiaries has provided accounts payable and receivable calculating value in US dollars. Hence, fluctuations to the US dollar exchange rate would be related to changes to of profit (loss) on exchange of this Corporation and its subsidiaries. Profit (loss) on exchange in 2015 and 2016 were NT$ 61,260,000 and (NT$ 110,497,000) respectively. These values also amounted to 4.13% and (5.41%) of EBT 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 direct US dollar transactions or paid off using short-term foreign currency loans from banks to achieve natural hedging. The financial organization also collects information on currency exchange rates every day to thoroughly monitor changes to currency exchange rates and make prompt adjustments to foreign currency accounts. The Department shall also refer to the regulations prescribed in the Procedure for Handling Derivatives Trading and initiate foreign currency hedging tools at appropriate circumstances to reduce the impact to corporate gain or loss as a result of fluctuations in exchange rates.

Inflation and its impact on this Company’s gain or loss as well as future response measures

(1) Inflation and its impact to the gain or loss of this Corporation and its subsidiaries This Corporation and its subsidiaries has not been affected by inflation severe enough to result in major impact to the gains or losses to this Corporation and its subsidiaries during the period of the most recent year to the publication date of this report.

(2) Future response measures

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

(2) Future response measures

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

Loans to other parties, endorsements, and guarantees
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(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 that this Company and its subsidiaries have business dealings with. 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 Corporation has stipulated Provision of Financial Loans to Other Parties as well as Endorsement and Guarantee Operations Procedure and refer to the relevant provisions to provide relevant public disclosures.

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

All derivatives trading engaged by this Corporation and its subsidiaries include hedging of foreign exchange risks generated by the assets or liabilities. No derivative trading has been implemented in the most recent fiscal year up to the date of printing of the annual report.

(2) Future response measures

This Corporation and its subsidiaries shall adopt a conservative business principle and seek stable growth, and shall continue to assess impacts to profits or losses resulting from exchange rate fluctuations. To manage transaction risks, this Corporation 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 R&D investments

R&D plans	Current progress	Expected completion time	Additional investments required
Next generation high power/high speed Solar Array Simulator	Design validation phase	Q4, 2017	12,000,000
High bandwidth single/three phase AC Source	Design validation phase	Q2, 2017	4,500,000
Next generation high power Energy Recycling AC Load Simulator	Design planning phase	Q4, 2018	11,000,000
Hi-Pot analyzer with partial discharge measurement function.	Design validation phase	Q3, 2017	4,000,000
High bandwidth and high power density bias current generator	Design validation phase	Q2, 2017	3,500,000
High bandwidth Hybrid type recycling Linear Load	Design planning phase	Q4, 2018	7,500,000
AOI system for VR & AR manufacture testing	Design validation phase	Q4, 2017	2,000,000
High-speed AOI system for critical dimension measurement of metal housing	Design validation phase	Q3, 2017	3,600,000
Next generation 10K5K flat panel display tester	Design validation phase	Q3, 2017	4,000,000
Third generation 8.1G video pattern generator for DP1.3	Design validation phase	Q2, 2017	3,000,000
High power bi-direction charger for Battery pack testing	Design validation phase	Q3, 2017	6,000,000
Next generation bi-direction charger for battery cell testing.	Design validation phase	Q3, 2017	3,500,000
Low destroy energy motor stator testing system	Design planning phase	Q4, 2017	6,000,000
High Speed and High Power Battery Insulation Tester	Design planning phase	Q2, 2018	9,500,000
High power / high efficiency DC Source with constant power output	Design validation phase	Q4, 2017	7,500,000

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(4) Changes to local and overseas policies and laws that impact corporate financial operations, and response measures:
No changes to local and overseas policies and laws have resulted in major impact to
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 Corporation produces instruments for the technology sector which enjoy longer life cycles. This Corporation also has a wide selection of product lines and would not be easily affected by changes to the technology or industry.

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

This Corporation 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

This Corporation invested in Quantel Private Ltd. (a Singaporean company) and acquired 60% of its equity in 2016 with the hope of investing in this Corporation to establish sales locations in Southeast Asia and South Asia to improve business scale.

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

Factory building expansions allow this Company and its subsidiaries to increase its productivity, gain the ability to receive more purchase orders, improve revenue and profitability, and increase market share. Factory building expansions undertaken by this Company and its subsidiaries have 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 1. Purchasing risks
- Purchases from NMC by this Company and its subsidiaries amounted to 43.21% and 37.14% of total purchases in 2015 and 2016 respectively, indicating a consolidation of purchases 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, and are better suited to satisfy product quality requirements of downstream semiconductor packaging customers. Purchasing values of this Company and its 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 Corporation and its subsidiaries to produce their products, all local and overseas purchases were handled by a single purchasing unit. Where 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. Also, 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 would only be initiated 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 so far. Since 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.
Sales risks
- This Corporation 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 were listed companies or renowned companies in Taiwan and other countries. From consolidated statements of 2015 and 2016, no single customer was responsible for more than 10% of total income of this corporation. Therefore, there is no risks 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 Corporation and its subsidiaries did not encounter any major equity transfer or
94 -

replacement of directors, supervisors, or shareholders holding more than 10% of the company’s shares from 2016 to the publication date of this report.

(11) Impact, risk, and response measures related to any change in governance rights in the company
- This Corporation and its subsidiaries did not undertake any major change to its
- governance team and did not undertake any major change to business strategies or guidelines. Hence, this Corporation and its subsidiaries did not experience any changes their governance rights.
(12) Any litigious or non-litigious matters or administrative disputes up to the publication date of this report where the company and company directors, supervisors, general managers, person with actual responsibility in the company, and 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 where 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.
Other important issues: None
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VIII . Special items to be included

1. Affiliated businesses

(1) Consolidated Business Report up till December 31, 2016
Diagram of affiliated businesses

==> picture [556 x 584] intentionally omitted <==

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

Neworld Electronics Ltd.
Shares held: 100% ChromaElectronics (Shenzhen)
Co., Ltd. Shares held: 100%
Chroma ATE Inc.(USA)
Shares held: 100% Chroma Electronics (Shanghai)
Co., Ltd. Shares held: 100%
Chroma ATE Europe B.V.
Shares held: 100%
Chroma New Material Corp.
Shares held: 100%
Shares
held:
Chroma Investment Co.,
Ltd. Shares held: 100% 50%
Chroma Japan Corp.
Shares held: 100%
Sensational Holding
Ltd. Shares held: 100%
Chroma Systems Solutions
, Inc. Shares held: 25%
Testar Electronics
Chroma
Shares held: 67.2%
ATE Inc.
MAS Automation Corp.
Shares held: 100%
CHI Incorporation Ltd. Chroma ATE (Suzhou) Co.,
Shares held: 100% Ltd. Shares held: 100%
Mou Kuan Technologies
Chen Hwa Technology Chroma (Shanghai) Trading (Nanjin)Co.,Ltd.
Inc. Shares held: 100% Co.,Ltd. Shares held: 100% Shares held: 100%
San Eagle Development Wei Kuang Mech Eng Inc. Wei Kuang Automatic
Corp. Shares held: 100% Shares held: 100% Equipment (Nanjin) Co.,Ltd.
Shares held: 100%
Deep Red Holding Co., Ltd. Sajet System Technology (Suzhou)
Shares held: 100% Co.,Ltd. Shares held: 100% Wei Kuang Automatic
Equipment (Xiamen) Co., Ltd.
Shares held: 100%
Adivic Technology Co. Advic Holding Corporation
Shares held: 51% Shares held: 100%
EVT Technology Weida Electric Vehicle Co.,
Shares held: 53.2% Ltd. Shares held: 75%
Quantel Private Ltd.
Shares held: 60%
----- End of picture text -----

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2. Basic information of various affiliated businesses

	December 31,2016. Unit: Thousand NT$or other foreign currency	December 31,2016. Unit: Thousand NT$or other foreign currency	December 31,2016. Unit: Thousand NT$or other foreign currency	December 31,2016. Unit: Thousand NT$or other foreign currency
Company name	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 Electronics	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 testingandparts
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 testingandparts
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 inquiryservices.
San Eagle Development Corp.	2006.07.04	Drake Chambers, Road Town, Tortola, British Virgin Islands	US$2,050	General investments
Wei Kuang Mech Eng Inc.	2002.01.10	608 St. James Court, St. Denis Street Port Louis, Mauritius	US$4,475	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 services of equipment.
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	2005.06.30	No 811, Hushan Road, Jiangning District, Nanjing City, China	RMB$11,871	Assembly, sales, and post-sales services for electronic production equipment and conveyingsystems
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	2007.02.01	Floor 1, Building A4, No. 20, Jinhui Road, Houxi, Jimei District, Xiamen	RMB$11,417	Assembly, sales, and post-sales services for electronic production equipment and conveyingsystems
MAS Automation Corp.	1975.11.26	No. 6, Lane 17, Niupu South Road, Puqian Village, New Taipei City	NT$100,000	Design, manufacturing, installation, and testing of automated conveying and engineeringsystems
Chroma Japan Corp.	2008.05.30	888 Nippa-cho, Kouhoku-ku, Yokohama-shi, Kanagawa, 223-0057 Japan	JPY$99,500	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	US$215	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$280,000	R&D and sales of RF equipment
Advic Holding Corporation	2015.01.15	Offshore Chambers, P.O.Box 217, Apia, Samoa.	US$500	R&D and sales of RF equipment
EVT Technology	1999.10.26	No. 68,Huaya 1st Road,Guishan District,Taoyuan City	NT$50,000	Manufacturingof vehicles andparts
Weida Electric Vehicle Co., Ltd.	2012.02.14	No. 5, Gongye 5th Road, Pingtung City	NT$5,000	Distribution and rental services of scooters
Quantel Private Ltd.	1989.02.15	46 Lorong 17 Gerang # 05-02 Enterprise Industrial Building,Singapore 388568	SG$3,190	Sales of testing and measurement instrument

Information of shareholders with corporate governance power while working in the company: None.
97 -

4. Overall business scope of every affiliated business

Overall business scope of every affiliated business of this Company primarily focus upon specialized manufacturing services for measurement instruments. There are also a small number of affiliated businesses that focus on investments in its scope of business. In general, specialization of work amongst affiliated businesses focus on mutual support in technology, production capacity, sales, and services to maximize synergy so that this Company could keep providing the best manufacturing services for professional measurement instruments for customers throughout the world and ensure this Company’s leadership in the global market.

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

			December 31, 2016	December 31, 2016
Company name	Title	Name or representative	Shares held
			Number of shares	Shareholding percentage
Neworld Electronics Ltd.	Director Director	Chroma ATE Inc. (representative: Leo Huang) Chroma ATE Inc. (representative: Ming-hsiung Chang)	64,012,815 shares	100%
Chroma Electronics (Shenzhen) Co., Ltd.	Chairperson of the Board Director Director General Manager	Neworld Electronics (representative: Leo Huang) Vincent Chen Chih-hsin Liao Vincent Chen	(Note 1) - - -	100% - - -
Chroma Electronics (Shanghai) Co., Ltd.	Chairperson of the Board Director Director General Manager	Neworld Electronics (representative: Leo Huang) Paul Ying 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 Director Director	Chroma ATE Inc. (representative: David Yang) Chroma ATE Inc. (representative: Paul Ying) ChromaATE Inc. (representative:I-shih Tseng)	1,000 shares	100%
Chroma Investment Co., Ltd.	Chairperson of the Board Director Director Supervisor	Chroma ATE Inc. (representative: Ming-hsiung Chang) Chroma ATE Inc. (representative: Paul Ying) Chroma ATE Inc. (representative: Amy Huang) LeoHuang	13,999,994 shares -	100% -
Chroma New Material Corp.	Chairperson of the Board Director Director Supervisor General Manager	Chroma ATE Inc. (representative: Leo Huang) Chroma ATE Inc. (representative: C.C. Ho) Chroma ATE Inc. (representative: Amy Huang) Chroma ATE Inc. (representative: Paul Ying) C.C. Ho	25,000,000 shares -	100% -
Testar Electronics	Chairperson of the Board Vice Chairman Director Supervisor General Manager	Chroma ATE Inc. (representative: Leo Huang) Chroma ATE Inc. (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 HoldingLtd.	Director	Chroma ATE Inc.(representative: Leo Huang)	1,200,000 shares	100%
Chroma Systems Solutions, Inc	Director Director	Fred Sabatine Chroma ATE Inc. (representative: Ming-hsiung Chang)	120,000 shares Chroma ATE holds 120,000 shares CHROMA USA holds 240,000 shares	25% 25% 50%
CHI Incorporation Ltd.	Director	Leo Huang	- (Chroma ATE holds 3,830,000 shares)	- 100%
Chroma ATE (Suzhou) Co., Ltd.	Chairperson of the Board Director Director General Manager	CHI (representative: Leo Huang) Paul Ying Emma Chen Vincent Chen	(Note 1) - - -	100% - - -
Chen Hwa Technology Inc.	Director	Leo Huang	- (Chroma ATE holds 3,085,000 shares)	- 100%
Chroma (Shanghai)Trading Co.,Ltd.	ChairpersonoftheBoard	Chen Hwa (representative:LeoHuang)	(Note1)	100%
San Eagle Development Corp.	Director	Chroma ATE Inc. (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.	Chairperson of the Board Director Director	Wei Kuang (representative: Leo Huang) Chin-fu Huang AmyHuang	(Note 1) - -	100% - -
Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	Chairperson of the Board Director Director	Wei Kuang (representative: Leo Huang) Chin-fu Huang Amy Huang	(Note 1) - -	100% - -
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chairperson of the Board Director Director	Wei Kuang (representative: Leo Huang) Chin-fu Huang Amy Huang	(Note 1) - -	100% - -
MAS Automation Corp.	Chairperson of the Board Director Director Supervisor General Manager	Chroma ATE Inc. (representative: Leo Huang) Chroma ATE Inc. (representative: Chin-fu Huang) Chroma ATE Inc. (representative: I-shih Tseng) Chroma ATE Inc. (representative: Amy Huang) Chin-fuHuang	10,000,000 shares -	100% -
Chroma Japan Corp.	Director	Leo Huang	- (Chroma ATE holds 8,980 shares)	- 100%
Deep Red Holding Co., Ltd.	Director	Leo Huang	- (Chroma ATE holds 215,000 shares)	- 100%
Sajet System Technology (Suzhou)	ChairpersonoftheBoard	DeepRedHolding Co.,Ltd. (Representative: JoeLin)	(Note1)	100%

98 -

Company name	Title	Name or representative	Shares held	Shares held
			Number of shares	Shareholding percentage
Co., Ltd.	Director Director General Manager	Shu-chun Wu Paul Ying JoeLin	- - -	- - -
ADIVIC Technology Co.	Chairperson of the Board Director Director Supervisor General Manager	Chroma ATE Inc. (representative: I-shih Tseng) Chroma ATE Inc. (representative: Leo Huang) AIT group (representative: Fu-hai Yeh) Ming-jen Hsu Hsieh-shengHuang	14,280,000 shares 13,720,000 shares - -	51% 49% - -
Advic Holding Corporation	Director	ADIVIC Technology (representative: I-shih Tseng)	500,000 shares	100%
EVT Technology	Chairperson of the Board Director Director Supervisor General Manager	Leo Huang Hsiu-chou Chang Tsun-i Wang Chroma ATE Inc. (representative: Paul Ying) LeoHuang	81,034 shares 667 shares 17,361 shares 2,658,219 shares 81,034shares	1.6% - - 53.2% 1.6%
Weida Electric Vehicle Co., Ltd.	Chairperson of the Board Director Director Supervisor General Manager	EVT Technology (representative: Leo Huang) EVT Technology (representative: Kun-chi Huang) EVT Technology (representative: Hsiu-chou Chang) Ming-sheng Hsiao LeoHuang	375,000 shares - -	75% - -
Quantel Private Ltd.	Director Director Director	Chroma ATE Inc. (representative: Leo Huang) Chroma ATE Inc. (representative: Paul Ying) Yip Hin Lay	1,914,000 shares 1,276,000 shares	60% 40%

Note 1: Limited liabilitycompany

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

December 31, 2016. Unit: NT$ 1,000

Company name	Actual paid-in capital	Total assets	Total liabilities	Net equity	Sales revenue	Operating income(loss)	Net income(loss)	Earnings per share(NT$)
Neworld Electronics Ltd.(Note 1)	266,166	2,239,744	1,386,864	852,880	4,299,500	126,152	81,411	1.27
Chroma Electronics (Shenzhen) Co., Ltd.	124,740	959,549	505,184	454,365	1,315,122	81,917	63,973	Not applicable
Chroma Electronics (Shanghai) Co., Ltd.	96,750	116,446	48,523	67,923	204,943	17,215	13,732	Not applicable
Chroma ATE Inc.(USA)	32,250	647,680	520,370	127,310	757,292	(34,412)	11,343	11.34
Chroma Systems Solutions,Inc.	155	742,820	484,370	258,450	765,699	97,806	72,010	Not applicable
Chroma Investment Co.,Ltd.	140,000	250,765	120	250,645	0	(242)	4,011	0.29
Chroma New Material Corp.	250,000	1,179,459	740,089	439,370	2,269,057	58,350	47,089	1.88
Chroma ATE Europe B.V.	1,538	342,511	205,439	137,072	374,261	13,908	8,716	Not applicable
Chroma (Shanghai) Trading Co., Ltd.	87,075	92,749	5,955	86,794	0	(5,481)	(1,266)	Not applicable
Chroma ATE(Suzhou)Co.,Ltd.	122,550	374,360	203,436	170,924	465,081	18,593	21,976	Not applicable
MAS Automation Corp.	100,000	588,639	272,588	316,051	612,277	94,159	69,445	6.94
Mou Kuan Technologies (Nanjin) Co.,Ltd.	8,020	15,375	2,139	13,236	5,378	1,013	984	Not applicable
Wei Kuang Automatic Equipment (Nanjin)Co.,Ltd.	54,808	360,294	143,198	217,096	20,572	(5,999)	(1,949)	Not applicable
Wei Kuang Automatic Equipment (Xiamen)Co.,Ltd.	52,712	281,876	30,616	251,260	69,393	(14,099)	(11,177)	Not applicable
Sajet System Technology (Suzhou) Co.,Ltd.	8,015	51,380	2,708	48,672	50,144	3,534	7,569	Not applicable
Testar Electronics	300,000	349,668	300,162	49,506	325,632	(47,948)	(44,227)	(1.47)
Chroma Japan Corp.	27,462	175,882	204,373	(28,491)	180,096	(12,188)	(13,118)	Not applicable
Sensational HoldingLtd.	38,700	53,661	303	53,358	0	(605)	1,583	1.32
Chen Hwa TechnologyInc.	99,491	106,468	20	106,448	0	(548)	2,928	0.95
CHI Incorporation Ltd.	123,518	172,151	20	172,131	0	(74)	21,946	5.73
San Eagle Development Corp.	66,113	567,569	20	567,549	0	(79)	(12,895)	(6.29)
Wei KuangMech.Eng.Inc.	144,319	559,663	20	559,643	0	(65)	(12,841)	(2.87)
DeepRed HoldingCo.,Ltd.	6,934	49,022	0	49,022	0	0	7,587	35.29
ADIVIC TechnologyCo.	280,000	81,101	14,884	66,217	16,442	(42,220)	(57,450)	(2.05)
Advic HoldingCorporation	16,125	808	11,584	(10,776)	0	(16,183)	(16,181)	(32.36)
EVT Technology	50,000	42,078	37,418	4,660	1,020	(10,484)	(11,002)	(2.20)
Weida Electric Vehicle Co.,Ltd.	5,000	1,285	1,249	36	2	(70)	3,078	6.16
Quantel Private Ltd.	71,105	190,527	50,239	140,288	240,958	14,038	13,897	4.36

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$32.25; HKD$1 = NT$ 4.158; EUR$ 1 = NT$ 33.90; RMB$ 1 = NT$ 4.617; JPY$ 1 = NT$ 0.276;SGD$ 1 = NT$ 22.29 The following lists the exchange rates for the profit and loss statement:

US$ 1 = NT$32.263; HKD$1 = NT$ 4.156; EUR$ 1 = NT$ 35.70; RMB$ 1 = NT$ 4.849; JPY$ 1 = NT$ 0.297;SGD$ 1 = NT$ 23.37

99 -
(2) Consolidated financial statements of affiliated businesses

For 2016 (January 1 to December 31, 2016), 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 into 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 therefore 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 has not been publicly listed.

Private placement of securities of the most recent year up to the publication date of this report: None.
Holding or disposition of company shares of the most recent year up to the publication date of this report

									Unit: Thousand NT$;shares;%	Unit: Thousand NT$;shares;%	Unit: Thousand NT$;shares;%
Subsidiary Title	Actual paid-in capital	Source of capital	Shareholding of this Company	Date of acquisition or disposal	Quantity and value of shares acquired	Quantity and value of shares disposed of	Investment gain (loss)	Quantity and value of shares up to the publication date of this report(Note 1)	Status and settings for the pledge	Value of endorsements and guarantees provided to subsidiaries by this Company	Loans provided to subsidiaries by this Company
Chroma Investment Co., Ltd.	140,000	Own capital	100%	2016	0	0	0	1,915,579 shares NT$ 176,042,000	None	0	0
				In the current year up till 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$ 91.9 of March 31, 2017.

Other items that must be included: None.
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 up to the printing date of this report: None.
100 -

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

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

Very truly yours,

CHROMA ATE INC.

LEO HUANG Chairman

February 21, 2017

101 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

Opinion

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

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

Basis for Opinion

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

Key Audit Matters

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

102 -

Key audit matters for the consolidated financial statements for the year ended December 31, 2016 are stated as follows:

Impairment of Property, Plant and Equipment

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

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

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

Evaluation of Write-down of Inventories

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

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

Please refer to Note 13 of the consolidated financial statements for the details of the information about inventories.

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

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

103 -

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

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.
104 -

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

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

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

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

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

Notice to Readers

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

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

105 -

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

106 -

CHROMA ATE INC. AND SUBSIDIARIES

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

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

107 -

CHROMA ATE INC. AND SUBSIDIARIES

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

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

108 -

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

109 -

CHROMA ATE INC. AND SUBSIDIARIES

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

	Equity Attributable to O	Equity Attributable to O	wners of the Corporation
Issued Capital Capital Surplus $ 3,787,821 $ 1,256,654 - - - - - - - - - - - - 42 239 - 4,994 3,836 40,382 - - 3,791,699 1,302,269 - - - - - 27,978 - - - - - - 59,823 326,205 47,350 299,162 - 4,545 - - $ 3,898,872 $ 1,960,159	Retained Earnings	Total $ 3,737,083 - (987,433 ) (7,525 ) 1,236,557 (26,497) 1,210,060 - - - - 3,952,185 - (910,200 ) - 1,719,935 (26,645) 1,693,290 - - - - $ 4,735,275		Other Equity	Total Treasury Stock $ 507,104 $ (35,714 ) - - - - - - - - (107,439) - (107,439) - - - - - - - - - 399,665 (35,714 ) - - - - - - - - (191,678) - (191,678) - - - (149,952 ) - - - - - $ 58,035 $ (35,714)
			Exchange U Differences on Translating A Foreign Operations F $ 136,756 - - - - (8,788) (8,788) - - - - 127,968 - - - - (152,882) (152,882) - - - - $ (24,914)	nrealized Gain (Loss) from vailable-for- sale Unearned inancial Assets Employee Benefit $ 370,348 $ - - - - - - - - - (98,651) - (98,651) - - - - - - - - - 271,697 - - - - - - - - - (38,796) - (38,796) - - - - (149,952 ) - - - - $ 232,901 $ (149,952)
	Unappropriated Legal Reserve Special Reserve Earnings $ 1,469,276 $ 86,888 $ 2,180,919 131,644 - (131,644 ) - - (987,433 ) - - (7,525 ) - - 1,236,557 - - (26,497) - - 1,210,060 - - - - - - - - - - - - 1,600,920 86,888 2,264,377 123,656 - (123,656 ) - - (910,200 ) - - - - - 1,719,935 - - (26,645) - - 1,693,290 - - - - - - - - - - - - $ 1,724,576 $ 86,888 $ 2,923,811

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

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CHROMA ATE INC. AND SUBSIDIARIES

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

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

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CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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CHROMA ATE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (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 21, 2017.

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

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

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

New IFRSs
Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2012-2014 Cycle

Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment
Entities: Applying the Consolidation Exception”

Amendment to IFRS 11 “Accounting for Acquisitions of
Interests in Joint Operations”

Amendment to IAS 1 “Disclosure Initiative”

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer
Plants”

Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”

Effective Date
Announced by IASB (Note 1)

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

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Effective Date Announced by IASB (Note 1)

New IFRSs

Amendment to IAS 36 “Impairment of Assets: Recoverable January 1, 2014 Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and January 1, 2014 Continuation of Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

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

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

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

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

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

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

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

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

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

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

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

New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle

Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”

IFRS 9 “Financial Instruments”

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date
of IFRS 9 and Transition Disclosures”

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture”

IFRS 15 “Revenue from Contracts with Customers”

Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue
from Contracts with Customers”

IFRS 16 “Leases”

Amendment to IAS 7 “Disclosure Initiative”

Amendments to IAS 12 “Recognition of Deferred Tax Assets
for Unrealized Losses”

Amendments to IAS 40 “Transfers of investment property”

IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

Effective Date
Announced by IASB (Note 1)

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

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

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

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

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

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

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

The impairment of financial assets

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

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

Transition

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

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

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and

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will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations from January 1, 2018.

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

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

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

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

b. Basis of preparation

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

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

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.
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Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as non-current.

d. Basis of consolidation

Principle of preparing consolidated financial statements

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

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

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

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

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

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

e. Business combinations

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

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

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

f. Foreign currencies

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

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

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

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

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

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

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

g. Inventories

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

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h. Investments in associates and joint ventures

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

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

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

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

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

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

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

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

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

i. Property, plant and equipment

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

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

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

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

j. Goodwill

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

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

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

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

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k. Intangible assets

1) Intangible assets acquired separately

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

2) Intangible assets acquired in a business combination

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

3) Derecognition of intangible assets

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

l. Impairment of tangible and intangible assets other than goodwill

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

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

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

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

m. Financial instruments

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

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

1) Financial assets

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

a) Measurement category

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

i. Financial assets at fair value through profit or loss

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

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

i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and has performance evaluated on a fair value basis in accordance with the Corporation’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

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

ii. Available-for-sale financial assets (AFS financial assets)

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

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

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

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

iii. Loans and receivables

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

Cash equivalent includes time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

b) Impairment of financial assets

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

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

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

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

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

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

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

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

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

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

c) Derecognition of financial assets

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

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

2) Equity instruments

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

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

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

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3) Financial liabilities

a) Subsequent measurement

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

Financial liabilities at fair value through profit or loss

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

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 30.

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

i. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
ii. The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and has performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
iii. The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

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

b) Derecognition of financial liabilities

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

4) Convertible bonds

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

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

126 -

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

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

n. Revenue recognition

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

1) Sale of goods

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

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

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

2) Dividend and interest income

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

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

127 -

o. Construction contracts

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

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

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

p. Borrowing costs

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

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

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

q. Government grants

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

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

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

r. Employee benefits
1) Short-term employee benefits

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

128 -

2) Retirement benefits

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

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

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

s. Options Share-based payment arrangements

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

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

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

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

t. Taxation

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

1) Current tax

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

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

129 -

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

3) Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

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a. Impairment of tangible and intangible assets other than goodwill

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

b. Valuation of inventories

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

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits with maturities less than 3 months from date of investments Repurchase agreements collateralized by bonds		December 31
		2016 $ 6,098 2,768,658 245,315 129,899 $ 3,149,970	2015 $ 4,547 2,206,259 278,483 - $ 2,489,289

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

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

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

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

131 -

Financial liabilities at FVTPL-current Derivative instruments Call and put option of convertible bonds payable (Note 20) AVAILABLE-FOR-SALE FINANCIAL ASSETS Domestic investments Listed stocks Open-end beneficial certificates Current Non-current			December
			2016 $ - December
		2016 $ 314,233 2,291,504 $ 2,605,737 $ 2,291,504 314,233 $ 2,605,737

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

9. FINANCIAL ASSETS CARRIED AT COST - NON-CURRENT

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

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

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

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

132 -

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

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

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

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET

Time deposits with maturities more than 3 months from date of investments		December 31	December 31
		2016 $ 378,515	2015 $ 559,958

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

11. ACCOUNTS RECEIVABLE, NET

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

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

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

The aging of receivables was as follows:

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

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

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

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

Less than 60 days 61-180 days Over 180 days		December 31	December 31
		2016 $ 381,176 385,443 131,886 $ 898,505	2015 $ 313,015 114,727 207,023 $ 634,765

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

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

Individual
Assessment of
Impairment
Loss
Collective
Assessment of
Impairment
Loss
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

Balance at January 1, 2016
$ 152,272
$ 33,405

Add: Bad debts expense recognized
(reversed) on receivable
(18,529)
13,854
Add: Addition through business
combinations (Note 28)
-
1
Deduct: Amounts written off as
uncollectible
(3,057)
(2,261)
Reclassification of impairment loss from
collective assessment to individual
assessment
9,804
(9,804)
Foreign exchange translation losses

(4,794)

(530)

Balance at December 31, 2016
$ 135,696
$ 34,665

Total
$ 100,164
86,551
(2,156)
-
1,118
$ 185,677
$ 185,677
(4,675)
1
(5,318)
-
(5,324)
$ 170,361

The impairment recognized represent the difference between the carrying amount of these trade receivables and the present value of the expected proceeds to be received from liquidation. The allowance for impairment loss included allowance for individually assessed impairment of trade receivables in the amounts of $135,696 thousand and $152,272 thousand as of December 31, 2016 and 2015, respectively. The Group did not hold any collateral over these balances.

134 -

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	December 31
		2016 $ 217,326 (2,510) $ 214,816 $ 346,218 (116,360) $ 229,858 $ -	2015 $ 178,277 (2,414) $ 175,863 $ 383,303 (128,085) $ 255,218 $ -

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

13. INVENTORIES

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

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

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

135 -

14. SUBSIDIARIES

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

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

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

Note 1: The Corporation and the Corporation’s subsidiary, Chroma USA, held 75% equity interest in Chroma Systems Solutions Inc.
Note 2: In April 2015 and May 2016, Advic Technology increased its capital by $60,000 thousand and $60,000 thousand, respectively, to strengthen its financial structure. The Corporation’s board of director resolved to participate proportionately in the capital increase. The Corporation’s equity interest in Advic was still 51%.
Note 3: In May 2015, EVT Technology Co., Ltd. (“EVT”), the Corporation’s investee (originally recognized as financial assets carried at cost), increased its capital by $30,000 thousand to strengthen its financial structure. The Corporation’s Board of Directors resolved to participate in the capital increase of EVT by buying $23,000 but at a higher percentage than its previous equity interest; thus, the Corporation equity interest rose to 53.2% and acquired control over EVT.
136 -
Note 4: To expand its market scale and lay out sales network in Southeast Asia, the Corporation’s board of directors resolved to acquire 60% equity interest of Quantel Private Ltd. amounting to SGD3,240 thousand. Quantel Private Ltd. is mainly engaged in the sales of electronic test instruments, etc. In April 2016, Quantel Private Ltd. increased its capital by SGD2,500 thousand to strengthen its financial structure. The Corporation’s board of directors resolved to participate proportionally in the capital increase. The Corporation’s equity interest in Quantel Private Ltd. remained the same.
Note 5: In June 2015, Adivic Technology Co. (“Adivic”), the Corporation’s subsidiary set up Advic Holding Corporation to develop radio frequency identification (RFID) technology in USA.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

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

a. Investments in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2016 Amount Percentage of Equity Interest (%) $ 535,490 11.3 88,414 27.3 $ 623,904		2015
				Amount Percentage of Equity Interest (%) $ 457,674 11.6 77,960 27.3 $ 535,634

Aggregate information of associates that are not individually material:

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

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

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

137 -

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

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

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

b. Investment in joint venture

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

Aggregate information of joint ventures that are not individually material:

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

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

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

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

138 -

16. PROPERTY, PLANT AND EQUIPMENT

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

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

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

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

17. GOODWILL

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

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

18. OTHER INTANGIBLE ASSETS

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

(Continued)

140 -

Core
Technology
Customer
Relationships
Cost
Balance, January 1 2016
$ 317,931
$ -

Acquisition through business combination

-

5,592

Balance, December 31, 2016
$ 317,931
$ 5,592

Accumulated amortization and impairment
losses
Balance, January 1, 2016
$(313,407) $ -

Amortization

(2,010)

(839)

Balance, December 31, 2016
$(315,417)
$ (839)

Net amounts on December 31, 2016
$ 2,514
$ 4,753

Total
$ 317,931
5,592
$ 323,523
$(313,407)
(2,849)
$(316,256)
$ 7,267
(Concluded)

Other intangible assets are depreciated on a straight-line basis over the estimated useful lives as follows: Core technology 5 years Customer relationships 5 years

19. BORROWINGS

Short-term Borrowings

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

a. Secured by Testar Electronic Corporation’s Machinery (refer to Note 32). As of December 31, 2016 and 2015, the interest rate on the bank loans was 1.32% and 1.32%-1.35% per annum, respectively.
b. As of December 31, 2016 and 2015, the interest rate on the bank loans was 1.23%-3.50% and 1.01%3.25% per annum, respectively.
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Long-term Borrowings

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

a. Secured by Chroma Systems Solutions Inc.’s land and buildings (refer to Note 32). The bank loan is due on November 16, 2019 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the bank loans was 4.00% per annum.
b. Secured by Chroma USA’s buildings in California (refer to Note 32). The bank loan is due on June 8, 2023 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the bank loans was 0.90%-4.00% and 0.90%-4.25% per annum.
c. Secured by Chroma Japan’s properties (refer to Note 32). The Bank loan is due on April 30, 2025 and repayable in equal monthly installments with additional interest. As of December 31, 2016 and 2015, the effective interest rate on the Bank loans was 2.25% per annum.
d. Secured by Quantel Private Ltd.’s debt investments with no active market and properties (refer to Note 32). The bank loan is due on May 1, 2021, and repayable in equal monthly installments with additional interest. As of December 31, 2016, the effective interest rate on the bank loans was 2.87%-11% per annum.
e. On August 30, 2012, the Corporation applied to E.SUN and other banks for syndicated bank loans with $2,000,000 thousand credit line to pay each installment of “The Action Plan for Developing Land Surrounding the MRT Airport Station to Improve Civilians Life” (refer to Note 33). The Corporation borrowed $700,000 thousand in September 2013 to pay the second installment, $530,000 thousand in November 2015 to pay the first part of the third installment and $770,000 thousand in July 2016 to pay the remaining part of the third installment. The syndicated bank loan is due on September 3, 2018 and repayable from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per one installment), the remaining $800,000 thousand will be paid on September 3, 2018 (which is the due date), and the interest is payable monthly. As of December 31, 2016 and 2015, the interest rate per annum was 1.58% and 1.60% (floating interest rate), respectively.
f. EVT Technology Co., Ltd applied for the bank loan due to on December 16, 2019. As of December 31, 2016 and 2015, the interest rate on the bank loan was 1.72% and 1.43% per annum, respectively.
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20. BONDS PAYABLE

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

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

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

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

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

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

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21. OTHER PAYABLES - CURRENT

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

22. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

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

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

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

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

Defined Benefit Plans

The Corporation and its subsidiaries, Chroma New Material Corp. and Adivic Technology Co., have defined benefit plans based on the Labor Standards Act (LSA) which is operated by government. Pension benefits are calculated on the basis of length of service and average monthly salaries of the six month before retirement. The Corporation and its ROC subsidiaries mentioned above contribute amount equal to 4% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of year, the Corporation and its ROC subsidiaries assess the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation and its ROC subsidiaries are required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Corporation has no right to influence the investment policy and strategy.

144 -

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

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

Movements in net defined benefit liability were as follows:

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

145 -

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

a. Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 0.88%-1.50% 1.00%-1.75% 1.50%-2.50% 1.50%-2.50%

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

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2016 $(14,234) $ 14,898 $ 14,490 $(13,919)	2015 $(13,511) $ 14,161 $ 13,805 $(13,243)

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

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
	2016 2015 $ 15,211 $ 11,705 15.0 years 15.8 years

146 -

23. EQUITY

Capital Stock

a. Common stock

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

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

b. Capital surplus

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

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

c. Retained earnings and dividend policy

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

147 -

Under the dividend policy as set forth in the amended Articles, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration to directors and supervisors before and after amendment, please refer to Note 24 employee benefits expense.

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

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

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

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

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

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

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

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

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

148 -

d. Other equity

1) Exchange differences on translating foreign operations

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

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

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

3) Employee unearned benefit

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

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

e. Non-controlling interests

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

149 -

Net loss Decrease in non-controlling interest - declaration of cash dividends Exchange differences on the translation of foreign financial statements Compensation cost of employee share options - subsidiaries (Note 27) Actuarial loss on defined benefit plans Share of changes of associates and joint ventures accounted for using the equity method Balance, end of the year		For the Years Ended December 31 2016 2015 $ (24,369) $ (42,015) (4,838) (2,298) (4,757) 2,335 323 691 (72) (139) - 7,525 $ 171,224 $ 121,192 (Concluded)
		2016 $ (24,369) (4,838) (4,757) 323 (72) - $ 171,224

f. Treasury stock

Balance, January 1, 2015 Decrease during the year ended December 31, 2015 Balance, December 31, 2015 Balance, January 1, 2016 Decrease during the year ended December 31, 2016 Balance, December 31, 2016 Subsidiaries Shares Held (In Thousand Shares) December 31, 2016 Chroma Investment Co., Ltd. 1,916 December 31, 2015 Chroma Investment Co., Ltd. 1,916	Corporation’s Shares Held by Its Subsidiaries (In Thousand Shares) 1,916 - 1,916 1,916 - 1,916 Carrying Value Market Price $ 35,714 $ 144,435 $ 35,714 $ 122,405

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

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

150 -

24. ADDITIONAL INFORMATION ON EXPENSES

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

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

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

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

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

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

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

There was no difference between the amounts of the employee’s compensation and the remuneration to directors and supervisors resolved by the board of directors on February 23, 2016 and the amounts of the bonus to employees and the remuneration to directors and supervisors approved in the shareholders’ meetings on June 10, 2015, and the respective amounts recognized in the financial statements for the years ended December 31, 2015 and 2014.

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

152 -

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

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

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Adjustment Adjustment items in determining taxable income Tax-exempt income Temporary difference Income tax on unappropriated earnings Investment tax credits Other Effect of different tax rates on the Group entities Prior year’s adjustments ncome tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 2,042,057 $ 347,150 (13,544) (6,215) (1,055) 17,620 (32,329) - 63,493 (28,629) $ 346,491	2015 $ 1,482,672 $ 252,054 (46,536) (12,201) 26,191 17,147 (23,182) 7,373 90,569 (23,285) $ 288,130

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

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

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b. Deferred tax assets and liabilities

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

For the year ended December 31, 2016

	Balance,	Balance,	Recognized	Recognized	Exchange	Exchange
	Beginning of		in	Profit or	Differences		Balance, End
Deferred Tax Assets	the Year			Loss	and	Other	of the Year
Unrealized intercompany
gain	$	42,287	$	28,133	$	-	$ 70,420
Accrued pension liabilities		9,199		(168)		(31)	9,000
Allowance for reduction
inventory		23,154		10,167		-	33,321
Tax credit		10,779		5,676		(192)	16,263
Impairment loss		14,158		1,872		-	16,030
Unrealized loss on exchange
difference		-		4,367		-	4,367
Allowance for impaired
receivables		2,396		1,014		(8)	3,402
Tax losses		50,872		11,037		(702)	61,207
Others		3,806		2,303		(55)	6,054
	$ 156,651		$	64,401	$	(988)	$ 220,064
	Balance,		Recognized		Exchange
	Beginning of		in	Profit or	Differences		Balance, End
Deferred Tax Liabilities	the Year			Loss	and	Other	of the Year
Investment income on
foreign investments
accounted for using the
equity method	$ 101,879		$	59,315	$	-	$ 161,194
Unrealized gain on exchange
difference		3,777		(2,832)		-	945
Goodwill		10,096		5,863		-	15,959
Others		8,075		1,000		(3)	9,072
	$ 123,827		$	63,346	$	(3)	$ 187,170
For the year ended December 31,	2015
	Balance,		Recognized		Exchange
	Beginning of		in	Profit or	Differences		Balance, End
Deferred Tax Assets	the Year			Loss	and	Other	of the Year
Unrealized intercompany
gain	$	38,112	$	4,175	$	-	$ 42,287
Accrued pension liabilities		9,856		(717)		60	9,199
Allowance for reduction
inventory		19,741		3,413		-	23,154
Tax credit		10,148		246		385	10,779
Impairment loss		12,691		1,467		-	14,158
Unrealized loss on exchange
difference		1,539		(1,539)		-	-
							(Continued)

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

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

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

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

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

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

$ 142,284

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

Expansion of Construction Project Tax-exemption Period

Profits on expansion and construction projects for year 2013.1.1-2017.12.31 2010

e. Integrated income tax information is as follows:

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

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

f. Assessment of income tax returns

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

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

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

26. EARNINGS PER SHARE

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

Net Income

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 Shares Weighted average shares used to calculate basic earnings per share Dilutive effect of potential common shares: Convertible bonds Employee remuneration Employee stock option Weighted average shares used to calculate dilutive earnings per share		For the Years Ended December 31 2016 2015 $ 1,719,935 $ 1,236,557 23,543 27,924 $ 1,743,478 $ 1,264,481 (In Thousands of Shares) For the Years Ended December 31 2016 2015 379,930 376,984 26,336 26,755 4,272 2,974 1,788 1,292 412,326 408,005	For the Years Ended December 31 2016 2015 $ 1,719,935 $ 1,236,557 23,543 27,924 $ 1,743,478 $ 1,264,481 (In Thousands of Shares) For the Years Ended December 31 2016 2015 379,930 376,984 26,336 26,755 4,272 2,974 1,788 1,292 412,326 408,005


			2016 379,930 26,336 4,272 1,788 412,326

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

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27. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan of Chroma Ate Inc.

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

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

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

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

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

For the Years Ended December 31

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

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

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

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

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

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

b. Restricted shares for employees

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

1) Employees who are granted RSUs, upon meeting the Corporation’s financial performance and personal performance indicators, are eligible to be vested 10, 20, 30 and 40 percent of the RSUs granted after 1, 2, 3 and 4 years of tenure after the subscription date, respectively.
2) The restrictions on the rights of the employees who are granted RSUs but have not met the vesting conditions are as follows:
a) The employees are not eligible to sell, pledge, transfer, donate or to dispose any RSUs in any form.
b) The employees holding RSUs are entitled to receive dividends and similar purchasing rights to ordinary shares during capital increase. Cash dividends from RSUs are not restricted during the vesting period. Cash dividends are appropriated to the employees’ personal account from trust account after the dividend distribution date.
c) Before the restricted shares are vested to the employees, the right of attendance, proposal, speech, voting and other rights of shareholders are acted by the custodian.
d) The RSUs should be delivered to trust custodians upon grant date. The employees cannot request for return in any manner before vesting conditions are met.
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3) If an employee fails to meet the vesting conditions, the Corporation will recall or buy back and cancel the restricted shares at issued price. If an employee voluntarily resigns, retires, disabled or decease due to occupational hazards, dismissed, be transferred to another post, violates labor contracts or working protocols substantially or abandons restricted shares, related guidelines of RSU Plan will be followed accordingly.

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

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

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

c. Employee share option plan of Adivic Technology Co.

Adivic Technology Co. granted its employees stock options 1,360 thousand units in March 2014, with each option eligible to subscribe for one common share of Adivic Technology Co. when exercised. The options are valid for eight years and exercisable at certain percentages subsequent to the second year of the grant date. The related information for the units granted and exercise price were as follows:

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

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

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

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

For the Years Ended December 31

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

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

Vested Period Expected volatility Risk-free interest rate Expected dividend rate Expected life	Grant Date
	March 12, 2014
	2 Years 3 Years 4 Years 38.75% 40.09% 40.40% 1.18% 1.24% 1.30% - - - 5 years 5.5 years 6 years

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

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

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

28. BUSINESS COMBINATION

a. Subsidiary acquired

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

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

		EVT and its
	Quantel	Subsidiaries
Current assets
Cash (net of bank overdrafts of $16,733 thousand and $0
thousand, respectively)	$ 20,341	$ 33,897
Accounts receivable (net of allowance for doubtful
accounts of $1 thousand and $0 thousand, respectively)	42,177	7,210
Debt Investments with no active market	9,567	-
Inventories	13,736	26,241
Prepayments	-	140
Other current assets	951	544
Non-current assets
Property, plant and equipment, net	40,129	8,131
Refundable deposits	800	335
Deferred tax assets	-	11,285
Current liabilities
Short-term borrowing	(19,601)	(49,000)
Notes payable	-	(17)
Accounts payable	(10,066)	(9,330)
Other payables	(2,359)	(384)
Income tax payable	(1,380)	-
Receipts in advance	-	(90)
Current portion of long-term borrowings	(6,259)	-
Other current liabilities	(20)	(409)
Non-current liabilities
Long-term borrowings	(11,494)	-
Deferred tax liabilities	(223)	-
	$ 76,299	$ 28,553
Intangible assets arising on acquisition
		Quantel
Consideration transferred		$ 76,590
Plus: Non-controlling interest		30,520
Less: Fair value of identifiable net assets acquired (refer to	Notes 17 and
18)		(76,299)
		$ 30,811
Goodwill		$ 25,219
Customer relationships		5,592
		$ 30,811
Net cash inflow (outflow) on acquisition of subsidiaries
		EVT and its
	Quantel	Subsidiaries
Consideration paid in cash	$(76,590)	$(23,000)
Less: Cash and cash equivalent balances acquired	20,341	33,897
	$(56,249)	$ 10,897

c. Intangible assets arising on acquisition

d. Net cash inflow (outflow) on acquisition of subsidiaries
162 -
e. Impact of acquisitions on the results of the Group

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

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

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

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

1) Calculated depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements; and
2) Calculated borrowing costs on the funding levels, credit ratings and debt/equity position of the Group after the business combination.

29. CAPITAL MANAGEMENT

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

30. FINANCIAL INSTRUMENTS

Information for Fair Value

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

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

163 -

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

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

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

164 -
2) Valuation techniques and inputs applied for the purpose of measuring level fair value measurement:

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

Categories of Financial Instruments

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

a. The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, accounts receivable, other receivable (other current asset) and refundable deposits, and trade and other receivables.
b. The balances included the carrying amount of available-for-sale financial assets measured at cost.
c. The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, trade and other payables, bonds issued and guarantee deposits received.

Financial Risk Management Objectives and Strategies

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

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

a. Market risk

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

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

165 -

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

1) Exchange rate sensitivity analysis

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

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

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

Foreign currency sensitivity analysis

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

Had the NTD strengthened/weakened by 5% against the relevant currency, the income before tax would have decreased/increased by $141,129 thousand and $117,915 thousand for the years ended December 31, 2016 and 2015, respectively. The 5% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency-denominated monetary items and their translation at period-end is adjusted for a 5% change in foreign-currency rates.

2) Interest rate risk

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

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

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2016 2015 $ 753,729 $ 838,441 1,765,437 2,133,726 2,768,557 2,191,155 2,011,810 1,339,793

Interest rate sensitivity analysis

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

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

3) Price risk

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

a) Investment in available-for-sale financial assets (mainly investment in open-end beneficial certificates and listed stocks in Taiwan), which are held for strategic rather than trading purposes. The Group does not actively trade these investments.
b) Financial assets at fair value through profit or loss (mainly investment in open-end beneficial certificates and listed stocks in Taiwan)

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

Price sensitivity analysis

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

167 -

b. Credit risk

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

1) The carrying amount of accounts receivables from operating activities; and
2) The amount of bank deposits, fixed-income and other financial instruments from investing activities.

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

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

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

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

c. Liquidity risk

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

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

Liquidity and interest risk tables

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

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

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Nonderivative financial liabilities
Notes payable (including related parties)
Accounts payable (including related
parties)
Dividends payable
Other payable
Unsecured convertible bonds
Fixed interest rate instruments
Floating interest rate instruments

Nonderivative financial liabilities
Notes payable (including related parties)
Accounts payable (including related
parties)
Dividends payable
Other payable
Unsecured convertible bonds
Fixed interest rate instruments
Floating interest rate instruments

December 31, 2016

Within 1 Year
Over 1 Year to
5 Years
More Than 5
Years
$ 58,106
$ -
$ -
1,988,042
-
-
4,838
-
-
848,232
-
-
-
1,450,500
-
211,758
138,855
40,023

829,937
1,216,579

-
$ 3,940,913
$ 2,805,934
$ 40,023
December 31, 2015

Within 1 Year
Over 1 Year to
5 Years
More Than 5
Years
$ 22,484
$ -
$ -
1,354,570
-
-
2,298
-
-
665,640
-
-
-
1,854,100
-
233,620
124,095
33,079

122,945
1,258,831

-
$ 2,401,557
$ 3,237,026
$ 33,079

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

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

31. RELATED-PARTY TRANSACTIONS

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

Relationship with the Group

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

169 -

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

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

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

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

December 31 2016 2015 Associates $ 7,890 $ 11,650 Outstanding trade receivables from related parties are unsecured. The balances of notes payable at the balance sheet date were as follows: December 31 2016 2015 Other related parties $ 2,595 $ 3,311		December 31	December 31
		2016 $ 2,595	2015 $ 3,311

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

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

The outstanding trade payables from related parties are unsecured.

170 -

g. Others

For the Years Ended December 31 2016 2015 1) Rental income Associates $ 1,260 $ 1,260 Other related parties - 218 $ 1,260 $ 1,478 2) Rental cost Other related parties $ 12,600 $ - 3) The balances of other current assets - other at balance sheet date were as follows: December 31 2016 2015 Associates $ 552 $ 136		For the Years Ended December 31	For the Years Ended December 31
		2016 $ 552	2015 $ 136

h. Compensation of key management personnel

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

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

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

32. ASSETS PLEDGED

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

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

171 -

33. OTHER SIGNIFICANT EVENTS

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

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

a. The first installment of the bid amount (10% of the total bid amount, or $353,111 thousand) should be paid within 10 days from the contract date. The Corporation paid the first installment using the bid deposit ($353,040 thousand) and by adding cash.
b. To meet the schedule for zone expropriation, the Corporation should pay the second installment (30% of the total bid amount) within 10 days of receiving the payment notice from the MOI. The MOI will approve the Corporation’s land usage rights as the payment is made. On September 3, 2013, the Corporation has paid the second installment $1,059,333 thousand.
c. To help the MOI provide the compensations for land expropriation and complete the demolition and relocation of structures on the land, the Corporation should pay the third installment (40% of the total bid amount) within 10 days of the payment notice from the MOI. The MOI will then check with the Corporation to see if the demolition and relocation are completed as the payment is made. In November 2015 and July 2016, the Corporation has paid the first part of the third installments $536,729 thousand and the remaining part of the third installment $875,716 thousand, respectively.
d. The Corporation should accomplish the following things within four years from the time of obtaining the approval of the land usage rights:
1) Open up the main road system and build related public facilities.
2) Acquire the building license for over 50% percent of all industrial land and register with the authorities to go into operation.

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

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

172 -

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY

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

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

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

For the years ended December 31, 2016 and 2015, (realized and unrealized) net foreign exchange (losses) gains were $(110,497) thousand and $61,260 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies.

35. ADDITIONAL DISCLOSURES

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

a. Financing provided: Table 1 (attached).
b. Endorsement/guarantee provided: Table 2 (attached).
c. Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 3 (attached).
d. Marketable securities acquired and disposed of at costs or prices of at least $300 million or 20% of the paid-in capital: None.
e. Acquisition of individual real estate properties at costs of at least $300 million or 20% of the paid-in capital: Table 4 (attached).
f. Disposal of individual real estate properties at prices of at least $300 million or 20% of the paid-in capital: None.
173 -
g. Total purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Table 5 (attached).
h. Receivable from related parties amounting to at least $100 million or 20% of the paid-in capital: Table 6 (attached).
i. Information about derivative instrument transactions: Note 7.
j. Others: Business relationships and significant intercompany transactions: Table 9 (attached).
k. Names, locations, and related information of investees on which the Group exercised significant influence: Table 7 (attached).
l. Information on investment in mainland China:
1) The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 8 (attached).
2) Significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: None.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 5 (attached).
- c) The amount of property transactions and the amount of the resultant gains or losses: None.
- d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: None.
- f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: None.

36. SEGMENT INFORMATION

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

a. Special materials department.
b. Test instrument department.
c. Automatic equipment department.
174 -

d. Other

1) Segment revenues and results

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

The sales between segments are based on fair value.

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

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

175 -

2)Segment assets

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

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

a) All assets were allocated to reportable segments other than interests in associates accounted for using the equity method, other financial assets, and current and deferred tax assets. Goodwill was allocated to reportable segments. Assets used jointly by reportable segments were allocated on the basis of the revenues earned by individual reportable segments; and
b) All liabilities were allocated to reportable segments other than borrowings, other financial liabilities, current and deferred tax liabilities. Liabilities for which reportable segments are jointly liable were allocated in proportion to segment assets.
176 -

3) Revenue from major product

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

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

4) Geographical information

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

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

Revenue from External

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

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

5) Information about major customers

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

177 -

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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

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

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

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

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

Note 7: Financing provided: a. For transactions. b. For short-term financing.
178 -

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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

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

Note 3: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.250, JPY1 = NT$0.276 as of December 31, 2016.

179 -

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2016

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

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

Note 1: Based on the closing price as of December 31, 2016. Note 2: Based on the net asset value of the fund as of December 31, 2016.

180 -

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 CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

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

Company Name	Type of Property	Transaction Date	Transaction Amount	Payment Term	Counter-party	Nature of Relationship	Prior Transaction of Related 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.	2016.07.25	$ 875,716	Based on a contract; third installment had been paid.	Ministry of the Interior, Republic of China	-	-	-	-	$ -	Public bidding	Manufacturing, R&D, operating and building employee dormitories	Note

Note: Please see Note 33 to the financial statements for related information.

181 -

TABLE 5

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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

182 -

TABLE 6

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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

183 -

TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

184 -

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016

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

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

Accumulated Investment in Mainland China as of December 31, 2016	Investment Amounts Authorized by the Investment Commission, MOEA
$635,051 (HK$1,200, US$19,312)	$695,162 (HK$1,400, US$21,086) (Note 6)

(Continued)

185 -

Note 1: Methods of investment have following types:

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

Note 2: The amounts of paid-in capital and carrying value as of December 31, 2016 were translated into New Taiwan dollars at the rates of HK$1=NT$4.158, US$1=NT$32.250, RMB1=NT$4.617 vailing on December 31, 2016.

Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2016 and December 31, 2016 were translated into New Taiwan dollars on the original outflow day.
Note 4: Based on audited financial statements.

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

Note 6:

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

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

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

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

(Concluded)

186 -

TABLE 9

CHROMA ATE INC. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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

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

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

189 -

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

(Continued)

190 -

(Concluded)

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.

191 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma Ate Inc.

Opinion

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

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

Basis for Opinion

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

Key Audit Matters

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

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

Impairment of Property, Plant and Equipment

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

192

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

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

Evaluation of Write-down of Inventories

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

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

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

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

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

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

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

193 -

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

194 -

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

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

Deloitte & Touche Taipei, Taiwan Republic of China

February 21, 2017

Notice to Readers

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

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

195 -

CHROMA ATE INC.

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

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

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

196 -

CHROMA ATE INC.

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

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

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CHROMA ATE INC.

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

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

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

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CHROMA ATE INC.

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

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

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

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CHROMA ATE INC.

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

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

200

CHROMA ATE INC.

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

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

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

(Concluded)

201

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

CHROMA ATE INC.

1. GENERAL INFORMATION

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

2. APPROVAL OF FINANCIAL STATEMENTS

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

3.APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND

INTERPRETATIONS

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

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

Effective Date
Announced by IASB
(Note 1)

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

202 -

Effective Date New, Amended or Revised Standards and Interpretations Announced by IASB (Note (the “New IFRSs”) 1)

Amendment to IAS 27 “Equity Method in Separate Financial January 1, 2016 Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable January 1, 2014 Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and January 1, 2014 Continuation of Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

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

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

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

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

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

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

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

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

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

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

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

Effective Date
Announced by
IASB (Note 1)

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

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

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

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

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

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

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

Transition

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

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

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

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when the entity satisfies a performance obligation.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

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

Basis of Preparation

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

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

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

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

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

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

Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

a.Assets held primarily for the purpose of trading;

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

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

Current liabilities include:

a.Liabilities held primarily for the purpose of trading;

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

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

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

Foreign Currencies

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

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

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

Inventories

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

Investments Accounted for Using Equity Method

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

a.Investment in subsidiaries

Subsidiaries are the entities that are controlled by the Corporation.

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

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

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

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

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

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

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

b. Investment in associates and joint ventures

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

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

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

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

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

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

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

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

Property, Plant and Equipment

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

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

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

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

Goodwill

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

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

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

Intangible Assets

a.Intangible assets acquired separately

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

b.Intangible assets acquired in a business combination

c.Derecognition of intangible assets

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

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Impairment of Tangible and Intangible Assets Other Than Goodwill

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

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-forsale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

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

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

b) Available-for-sale financial assets

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

c) Loans and receivables

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

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

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2)Impairment of financial assets

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

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

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

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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.

b.Equity instruments

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

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

c. Financial liabilities
1)Subsequent measurement

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

Financial liabilities at fair value through profit or loss

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

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

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

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
b) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Corporation’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
c) The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

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

2) Derecognition of financial liabilities

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.

Revenue Recognition

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

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a.Sale of goods

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

1) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3)The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Corporation; and
5)The costs incurred or to be incurred in respect of the transaction can be measured reliably.

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

b. Dividend and interest income

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

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

Borrowing Costs

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

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

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

Government Grants

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

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

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

Employee Benefits

a. Short-term employee benefits

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

b. Retirement benefits

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

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

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

c. Other long-term employee benefits

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

Options Share-based Payment Arrangements

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

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

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

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Taxation

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

a. Current tax

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

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

b. Deferred tax

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

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

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

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

c. Current and deferred taxes for the year

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5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Key Sources of Estimation and Uncertainty

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

a. Impairment of tangible and intangible assets other than goodwill

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

b. Valuation of inventories

6. CASH AND CASH EQUIVALENTS

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

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7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

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

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

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

9. FINANCIAL ASSETS CARRIED AT COST- NON-CURRENT

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

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

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

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

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

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

10. ACCOUNTS RECEIVABLE, NET

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

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

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

The aging of receivables was as follows:

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

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

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Age of receivables that were past due but not impaired:

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

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

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

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

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

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

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11. INVENTORIES

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

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

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

12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

a. Investments in subsidiaries

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

Unlisted company Neworld Electronics Ltd. San Eagle Development Corp. Chroma New Material Corporation Wei Kuang Automatic Equipment Co., Ltd. CHI Incorporation Ltd. Chen Hwa Technology Inc. Quantel Private Ltd. Chroma Investment Co., Ltd. Chroma Ate Europe B.V. Chroma Ate Inc. (“Chroma USA”) Sensational Holding Ltd.	December 31	December 31
	2016 Amount Percentage of Equity Interest (%) $ 696,69 100.0 567,54 100.0 439,36 100.0 316,05 100.0 109,04 100.0 106,44 100.0 108,07 60.0 106,21 100.0 85,62 100.0 70,82 100.0 53,35 100.0	2015
		Amount Percentage of Equity Interest (%) $ 705,291 100.0 624,769 100.0 437,683 100.0 446,591 100.0 133,231 100.0 111,655 100.0 - - 102,030 100.0 84,939 100.0 68,577 100.0 52,699 100.0 (Continued)

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

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

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

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

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

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

224 -

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

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

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

b. Investment in associates

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

Aggregate information of associates that are not individually material:

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

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

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

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

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

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

c.Investment in joint venture

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

Aggregate information of joint ventures that are not individually material:

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

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

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

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

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13. PROPERTY, PLANT AND EQUIPMENT

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

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

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

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

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14. GOODWILL

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

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

15. BORROWINGS

Short-term Borrowings

Unsecured borrowings Bank loans Interest rate (%) Long-term Borrowings Unsecured loans Syndicated bank loans Less: Loans due in one year			December 31	December 31
			2016 2015 $ - $ 100,000 - 1.01% December 31
		2016 $ 2,000,000 800,000 $ 1,200,000		2015 $ 1,230,000 - $ 1,230,000

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

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16. BONDS PAYABLE

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

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

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

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

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

17. OTHER PAYABLE

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

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18. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

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

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

Defined Benefit Plans

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

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

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

Movements in net defined benefit liability were as follows:

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

230 -

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

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

a. Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.
231 -

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

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

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

19. EQUITY

Capital Stock

a. Common stock

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

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

232 -

b. Capital surplus

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

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

c. Appropriation of earnings and dividend policy

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

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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.

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

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

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

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

d. Other equity

1)Exchange differences on translating foreign operations

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

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

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

3)Unearned employee benefit

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

Balance, beginning of the year
Shares granted
Share-based payment expenses recognized
Balance, end of the year
e. Treasury stock
Balance, January 1, 2015
Decrease during the year
Balance, December 31, 2015
Balance, January 1, 2016
Decrease during the year
Balance, December 31, 2016
Subsidiaries
Shares Held
(In Thousand
Shares)
December 31, 2016
Chroma Investment Co., Ltd.
1,916

December 31, 2015
Chroma Investment Co., Ltd.
1,916

Year Ended
December 31,
2016
$ -
(188,311)

38,359
$(149,952)
Corporation’s
Shares Held
by Its
Subsidiaries
(In Thousand
Shares)
1,916
-
1,916
1,916
-
1,916
Carrying
Value
Market Price
$ 35,714
$ 144,435
$ 35,714
$ 122,405

235 -

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

20. ADDITIONAL INFORMATION ON EXPENSES

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

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

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

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

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

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

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

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

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

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21. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

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

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

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

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

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

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b. Deferred tax assets and liabilities

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

For the year ended December 31, 2016

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

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c. Information about tax-exemption

Expansion of Construction Project 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
		2013.1.1-2017.12.31 December 31
		2016 $ 302,877	2015 $ 250,190

d. Integrated income tax information is as follows:

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

e. Assessment of income tax returns

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

22. EARNINGS PER SHARE

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

Net Income

Profit for the period attributable to owners of the Corporation Dilutive effect of potential common shares: Interest on unsecured convertible bonds and valuation gain on conversion option Income used to calculate dilutive earnings per share Shares Weighted average shares used to calculate basic earnings per share Dilutive effect of potential common shares: Convertible bonds Compensation or bonus to employees Employee stock options Weighted average shares used to calculate dilutive earnings per share		Years Ended December 31	Years Ended December 31	Years Ended December 31
		2016 2015 $ 1,719,935 $ 1,236,557 23,543 27,924 $ 1,743,478 $ 1,264,481 (In Thousands of Shares) Years Ended December 31
			2016 379,930 26,336 4,272 1,788 412,326	2015 376,984 26,755 2,974 1,292 408,005

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

23. SHARE-BASED PAYMENT ARRANGEMENTS

a. Share option plan

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

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

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

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

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

Years Ended December 31	Years Ended December 31
2016 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $48.4 2.52 65.7 5.24	2015
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $49.9 3.52 - -

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

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

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

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

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

b. Restricted shares for employees

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

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2) The restrictions on the rights of the employees who are granted RSUs but have not met the vesting conditions are as follows:
a) The employees are not eligible to sell, pledge, transfer, donate or to dispose any RSUs in any form.
b) The employees holding RSUs are entitled to receive dividends and similar purchasing rights to ordinary shares during capital increase. Cash dividends from RSUs are not restricted during the vesting period. Cash dividends are appropriated to the employees’ personal account from trust account after the dividend distribution date.
c) Before the restricted shares are vested to the employees, the right of attendance, proposal, speech, voting and other rights of shareholders are acted by the custodian.
d) The RSUs should be delivered to trust custodians upon grant date. The employees cannot request for return in any manner before vesting conditions are met.
3) If an employee fails to meet the vesting conditions, the Corporation will recall or buy back and cancel the restricted shares at issued price. If an employee voluntarily resigns, retires, disabled or decease due to occupational hazards, dismissed, be transferred to another post, violates labor contracts or working protocols substantially or abandons restricted shares, related guidelines of RSU Plan will be followed accordingly.

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

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

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

24. CAPITAL MANAGEMENT

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

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25. FINANCIAL INSTRUMENTS

Information for Fair Value

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

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

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

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

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

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

Financial Instruments

Valuation Techniques and Inputs

Derivative - convertible Binomial tree valuation model of convertible bonds: The fair bonds 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.

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Categories of Financial Instruments

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

a. The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, other receivables and refundable deposits.
b. The balances included the carrying amount of available-for-sale financial assets measured at cost.
c. The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, short-term bills payable, notes payable, accounts payable, other payables, bonds payable and guarantee deposits received.

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

Financial Risk Management Objectives and Strategies

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

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

a.Market risk

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

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

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

1) Exchange rate sensitivity analysis

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

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

Foreign currency sensitivity analysis

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

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

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

Interest rate sensitivity analysis

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

3) Price risk

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

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

Price sensitivity analysis

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

b. Credit risk

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

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

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

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

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.

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

Liquidity and interest risk tables

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

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

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

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

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

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26. RELATED-PARTY TRANSACTIONS

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

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

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

a. Sales

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

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

b. Purchase

Related Party Categories Subsidiaries Associates Other related party c. Notes receivable Related Party Categories Subsidiaries d. Accounts receivable (without loans to related parties) Related Party Categories Subsidiaries Associates e. Notes payable Related Party Categories Other related parties		Years Ended December 31	Years Ended December 31
		2016 2015 $ 362,846 $ 29,971 17,582 12,889 18 107 $ 380,446 $ 42,967 December 31
		2016 2015 $ 354 $ 3,920 December 31
		2016 2015 $ 1,596,371 $ 1,051,854 7,891 11,649 $ 1,604,262 $ 1,063,503 December 31
		2016 $ 90	2015 $ -

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f. Accounts payable (without borrowing to related parties)

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

g. Loans to related parties

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

h. Endorsement guarantees provided

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

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

i. Others
1) Commission expense

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

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

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2) Rental income

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

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

3) Management service income

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

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

4) Other income

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

Other income is the earnings on repairs and maintenance.

5) Other current assets - other receivable

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

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

6) Receipts in advance and other current liabilities

Related Party Categories Subsidiaries		December 31	December 31
		2016 $ 702	2015 $ 3,909

There were receipts in advance from selling.

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j. Compensation of key management personnel

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

27. ASSETS PLEDGED

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

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

28. SIGNIFICANT EVENTS

a. The first installment of the bid amount (10% of the total bid amount, or $353,111 thousand) should be paid within 10 days from the contract date. The Corporation paid the first installment using the bid deposit ($353,040 thousand) and by adding cash.
b. To meet the schedule for zone expropriation, the Corporation should pay the second installment (30% of the total bid amount) within 10 days of receiving the payment notice from the MOI. The MOI will approve the Corporation’s land usage rights as the payment is made. On September 3, 2013, the Corporation has paid the second installment $1,059,333 thousand.
c. To help the MOI provide the compensations for land expropriation and complete the demolition and relocation of structures on the land, the Corporation should pay the third installment (40% of the total bid amount) within 10 days of the payment notice from the MOI. The MOI will then check with the Corporation to see if the demolition and relocation are completed as the payment is made. In November 2015 and July 2016, the Corporation has paid the first part of the third installment $536,729 thousand and the remaining part of the third installment $875,716 thousand, respectively.
d. The Corporation should accomplish the following things within four years from the time of obtaining the approval of the land usage rights:
1)Open up the main road system and build related public facilities.
2) Acquire the building license for 50% percent of all industrial land and register with the authorities to go into operation.
253 -

29. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

Financial assets
Monetary items
USD

JPY

EUR

RMB

HKD

Non-monetary items
Investments accounted for by the equity
method
USD

HKD

EUR

JPY

SGD

Financial liabilities

Monetary items
USD

December 31, 2016

Foreign
Currencies
(In
Thousands)
Exchange
Rate
Carrying
Amount
(In Thousands
of Dollars)
$ 51,400
32.250
$ 1,657,640

561,309
0.276
154,921

3,187
33.900
108,040

115,665
4.617
534,025

211
4.158

878

$ 2,455,504

35,362
32.250
$ 1,154,112

205,118
4.158
852,879

4,043
33.900
137,072

(103,228)
0.276
(28,491)

4,740
22.290

114,145

$ 2,229,717

5,756
32.250
$ 185,641

254 -

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

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

30. ADDITIONAL DISCLOSURES

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

a. Financing provided: Table 1 (attached).
b. Endorsement/guarantee provided: Table 2 (attached).
c. Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 3 (attached).
d. Marketable securities acquired and disposed of at costs or prices of at least $300 million or 20% of the paid-in capital: None.
e. Acquisition of individual real estate properties at costs of at least $300 million or 20% of the paid-in capital: Table 4 (attached).
255 -
f. Disposal of individual real estate properties at prices of at least $300 million or 20% of the paid-in capital: None.
g. Total purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Table 5 (attached).
h. Receivable from related parties amounting to at least $100 million or 20% of the paid-in capital: Table 6 (attached).
i. Derivative transactions: Note 7.
j. Names, locations, and related information of investees on which the Corporation exercised significant influence: Table 7 (attached).
k. Information on investment in Mainland China:
1) The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 8 (attached).
2) Significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 5.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 5.
- c) The amount of property transactions and the amount of the resultant gains or losses: None.
- d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: None.
- f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: None.
256 -

TABLE1

CHROMA ATE INC. AND SUBSIDIARIES

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

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

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

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

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

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

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

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

Note 7:

Financing provided:

a. For transactions.

b. For short-term financing.

257 -

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars or Foreign Currency, Unless Stated Otherwise)

No.	Endorsement/ Guarantee Provider	Counterparty	Counterparty	Limits on Each Counter-party’s Endorsement/ Guarantee Amount (Note 1)	Highest Amount of Guarantee Provided for the Year	Ending Balance	Amount of Guarantee Actually Used	Value of Collateral	Ratio of Accumulated Amount of Collateral to Net Equity Shown in the Latest Financial Statements	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsed/ Guaranteed to Subsidiaries by Parent Company	Endorsed/ Guaranteed to Parent Company by Subsidiaries	Endorsed/ Guaranteed to Investees in Mainland China
		Name	Nature of Relationship
0	Chroma Ate Inc.	Chroma USA Chroma Japan Corp. Quantel Private Ltd.	Subsidiary Subsidiary Subsidiary	$ 1,592,494 1,592,494 1,592,494	$ 129,000 34,100 44,580	$ 64,500 34,100 44,580	$ 64,500 22,080 -	$ - - -	0.61% 0.32% 0.42%	$ 3,184,988 3,184,988 3,184,988	Y Y Y	- - -	- - -

Note 1: According to Regulation of the “Procedures for Endorsement/Guarantee and lending of Funds”, the Corporation limits the endorsement/guarantee amount on each entity to (a) within 15% of the net value of the Corporation ($10,616,627 × 15% = $1,592,494) and (b) the capital issued of the entity endorsed/guaranteed, but 100% held subsidiary is not limited by the regulation.

Note 3:

The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$32.250, JPY1 = NT$0.276 as of December 31, 2016.

258 -

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Marketable Securities Type and Issuer	Relationship with the Holding Company	Financial Statement Account		December 31, 2016	December 31, 2016		Note
				Shares/Units (Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Chroma Ate Inc. (the “Corporation”) Chroma New Material Corp. Chroma Investment Co., Ltd. Adivic Technology Co. Chen Hwa Technology Inc.	Fund The RSIT Enhanced Money Market Fund Paradigm Pion Money Market Yuanta Wan Tai Money Market Fuh Hwa You Li Money Market Fund Cathay Taiwan Money Market Mega Diamond Money Market Union Money Market Stocks DynaColor, Inc. Chunghwa Telecom Co., Ltd. China Communications Media Group Co., Ltd. WK Technology Fund IX Ltd. Twoway Catv Service Inc. Tian Zheng International Precision Machinery Co., Ltd. WK Technology Fund IV Ltd. WK Technology Fund VI Ltd. WI Harper INC Fund VII LP Fund Fuh Hwa You Li Money Market Fund The RSIT Enhanced Money Market Fund Paradigm Pion Money Market Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Adlink Technology Inc. ICHIA Tech. 2nd Unsecured Convertible Bond Chroma Ate Inc. Fei Hong Industrial Co., Ltd. Cosmactive Broadband Networks Co., Ltd. Prance System Technology Co., Ltd. Fund Cathay Taiwan Money Market Fund Stocks Hangzhou New Material Chroma Co., Ltd.	- - - - - - - - - - - - - - - - - - - - - - - The Corporation - - - - -	Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - current Available for sale financial assets - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Available for sale financial assets - noncurrent Financial assets carried at cost - non-current Financial assets carried at cost - non-current Financial assets carried at cost - non-current Available for sale financial assets - current Financial assets carried at cost - non-current	24,722 24,732 18,863 21,184 21,282 36,520 13,098 6,050 412 26 4,614 3,561 2,300 2,560 1,806 - 6,829 4,525 2,642 5,768 85 68 10 1,916 4,174 26 111 1,419 -	$ 293,219 283,281 283,154 283,043 262,784 453,518 171,363 271,962 41,857 414 46,140 39,218 33,000 25,600 18,063 10,152 91,238 53,674 30,264 68,443 3,318 4,135 983 144,435 17,175 110 - 17,523 9,191	- - - - - - - 6.1 - - 4.6 4.4 9.7 1.9 1.4 - - - - - - - - - 10.3 1.5 5.1 - 19.0	$ 293,219 283,281 283,154 283,043 262,784 453,518 171,363 271,962 41,857 414 - - - - - - 91,238 53,674 30,264 68,443 3,318 4,135 983 144,435 - - - 17,523 -	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 - - - - - - Note 2 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 Note 1 - - - Note 2 -

Note 1: Based on the closing price as of December 31, 2016.

Note 2: Based on the net asset value of the fund as of December 31, 2016.

259 -

TABLE 4

CHROMA ATE INC. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COST OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITA L FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Type of Property	Transaction Date	Transaction Amount	Payment Term	Counter-party	Nature of Relationship	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Prior Transaction of Related Counterparty	Price Reference	Purpose of Acquisition	Other Terms
							Owner	Relationship	Transfer Date	Amount
Chroma Ate Inc.	Construction in progress and prepayments for equipment.	2016.07.25	$ 875,716	Based on a contract; third installment had been paid.	Ministry of the Interior, Republic of China	-	-	-	-	$ -	Public bidding	Manufacturing, R&D, operating and building employee dormitories	Note

Note: Please see Note 28 to the financial statements for related information.

260 -

TABLE 5

CHROMA ATE INC. AND SUBSIDIARIES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Nature of Relationship		Transaction	Transaction	Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Chroma Ate Inc. (the “Corporation”) Neworld Electronics Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) Chroma Ate Inc. (the “Corporation”) Chroma Systems Solutions Inc. Chroma Ate Inc. (the “Corporation”) Chroma Electronics (Shenzhen) Co., Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Europe B.V. Chroma Ate Inc. (the “Corporation”) Chroma Ate (Suzhou) Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Japan Corp. Chroma Ate Inc. (the “Corporation”) Quantel Private Ltd. Chroma Ate Inc. (the “Corporation”) Wei Kuang Automatic Equipment Co., Ltd.	Neworld Electronics Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) Chroma Ate Inc. (the “Corporation”) Chroma Systems Solutions Inc. Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (Shenzhen) Co., Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Ate Europe B.V. Chroma Ate Inc. (the “Corporation”) Chroma Ate (Suzhou) Ltd. Chroma Ate Inc. (the “Corporation”) Chroma Japan Corp. Chroma Ate Inc. (the “Corporation”) Quantel Private Ltd. Chroma Ate Inc. (the “Corporation”) Wei Kuang Automatic Equipment Co., Ltd. Chroma Ate Inc. (the “Corporation”)	Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company Subsidiary Parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase Purchase (Sale)	$(2,495,216) 2,495,216 (503,795) 503,795 (318,408) 318,408 (296,132) 296,132 (238,759) 238,759 (183,621) 183,621 (119,884) 119,884 (110,939) 110,939 313,453 (313,453)	(34) 100 (7) 100 (4) 100 (4) 100 (3) 100 (3) 100 (2) 100 (2) 100 9 (50)	Net 90 days after delivery Net 90 days after delivery Net 180 days after delivery Net 180 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 90 days after delivery Net 90 days after delivery Net 120 days after delivery Net 120 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing	- - - - - - - - - - - - - - - - - -	- - Note 1 Note 1 - - - - - - Note 1 Note 1 - - - - - -	$ 672,460 (672,460) 208,527 (208,527) 154,742 (154,742) 65,194 (65,194) 122,469 (122,469) 92,500 (92,500) 119,209 (119,209) 33,567 (33,567) (53,261) 53,261	29 (100) 9 (100) 7 (100) 3 (100) 5 (100) 4 (100) 5 (100) 1 (100) (5) 32	- - - - - - - - - - - - - - - - - -

Note 1: The actual credit period longer than other customers, approximately 12 months.

261 -

TABLE 6

CHROMA ATE INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period (Note)	Allowance for Bad Debts
					Amount	Action Taken
Chroma Ate Inc. (the “Corporation”)	Neworld Electronics Ltd. Chroma Ate Inc. (USA) Testar Electronic Corporation Chroma Ate Europe B.V. Chroma System Solutions Inc. Chroma Japan Corp.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	Accounts receivable $ 672,460 Accounts receivable 208,527 Accounts receivable 124,435 Accounts receivable 122,469 Accounts receivable 154,742 Other receivable - financing provided 125,341 Accounts receivable 119,209 Other receivable - financing provided 36,533	5.65 1.88 0.34 2.74 2.26 - 1.06 -	$ - - - - - - - -	- - - - - - - -	$ 307,072 83,283 16,837 57,297 62,126 - 9,597 -	$ - - - - - - - -

Note: The amounts had been accrued as of February 21, 2017.

262 -

TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance	as of December 31, 2016	as of December 31, 2016	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2016	December 31, 2015	Shares (Thousands)	Percentage of Ownership	Carrying Value
Chroma Ate Inc. (the “Corporation”) Chroma Ate Inc. (USA) San Eagle Development Corp. EVT Technology Co., Ltd. Advic Technology Co., Ltd.	Neworld Electronics Ltd. San Eagle Development Corp. Adlink Technology Inc. Chroma New Material Corporation Wei Kuang Automatic Equipment Co., Ltd. CHI Incorporation Ltd. Quantel Private Ltd. Chen Hwa Technology Inc. Chroma Investment Co., Ltd. Chroma Ate Europe B.V. DynaScan Technology Corp. Chroma Ate Inc. (USA) Sensational Holding Ltd. Adivic Technology Co. Chroma Japan Corp. Chroma Systems Solutions, Inc. Deep Red Holding Co., Ltd. Chih Ho Shun Development Co., Ltd. Testar Electronic Corporation EVT Technology Co., Ltd. Chroma Systems Solutions Inc. Wei Kuang Mech Eng Inc. Wei Da Electric Vehicle Co., Ltd. Advic Holding Corporation	Hong Kong British Virgin Islands New Taipei, Taiwan Taoyuan, Taiwan Hsinchu, Taiwan British Virgin Islands Singapore British Virgin Islands New Taipei, Taiwan The Netherlands Taoyuan, Taiwan U.S.A. British Virgin Islands Taipei, Taiwan Japan U.S.A. Mauritius Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan U.S.A. Mauritius Pingtung, Taiwan Samoa	Sale and maintenance of electronic test instruments, etc. Investment Manufacturing, processing and retailing of software/hardware of computers and peripherals Sale and processing of gold wire Design, manufacturing, installment and testing of automated factory conveyor systems Test of inductance, capacitance and resistance, and sale of parts Sale and maintenance of test instruments, etc. Test of inductance, capacitance and resistance, and sale of parts Investment Sale and maintenance of electronic test instruments etc. Research and manufacture of LED generators Sale and maintenance of electronic test instruments, etc. Investment Sale and research of RF device Sale and maintenance of electronic test instruments, etc. Sale and maintenance of electronic test instruments, etc. Investment Construction and development of residence, buildings and specialized field; construction and investment of public works Testing of LED products Manufacturing of motorcycles and its parts Sale and maintenance of electronic test instruments, etc. Investments Sale and lease of motorcycles Sale and research of RF device	$ 271,873 186,514 165,146 480,715 533,000 122,884 112,328 98,217 80,000 54,026 238,746 29,895 38,301 142,800 147,125 29,628 12,217 17,500 247,096 27,623 64 185,686 3,750 15,223	$ 271,873 186,514 82,325 480,715 533,000 122,884 - 98,217 80,000 54,026 238,746 29,895 38,301 112,200 147,125 29,628 12,217 17,500 247,096 27,623 64 185,686 3,750 15,223	64,013 2,050 24,502 25,000 10,000 3,830 1,914 3,085 14,000 1 9,841 1,000 1,200 14,280 9 120 215 1,750 20,160 2,658 240 4,475 375 500	100.0 100.0 11.3 100.0 100.0 100.0 60.0 100.0 100.0 100.0 27.3 100.0 100.0 51.0 100.0 25.0 100.0 35.0 67.2 53.2 50.0 100.0 75.0 100.0	$ 696,690 567,548 535,490 439,369 316,050 109,043 108,073 106,449 106,210 85,621 88,414 70,824 53,358 35,298 (36,904) (43,893) 49,021 17,593 (5,545) 2,396 129,226 559,634 (3,926) (10,776)	$ 81,411 (12,895) 438,783 47,089 69,445 21,946 13,897 2,928 4,011 8,716 45,140 11,343 1,583 (57,450) (13,118) 72,010 7,587 251 (44,227) (11,002) 72,010 (12,841) 3,078 (16,181)	$ 81,411 (12,895) 49,568 47,089 69,459 21,946 7,500 2,928 (534) 8,716 12,323 11,231 1,583 (31,309) (13,118) 18,002 7,587 88 (29,720) (5,848) NA NA NA NA	Subsidiary Subsidiary Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Joint venture Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

263 -

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars or Foreign Currency, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital (Note 2)	Method of Investment (Note 1)	Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (Note 3)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016 (Note 3)	Net Income (Loss) of the Investee	Percentage of Ownership in Investment	Investment Gain (Loss) (Notes 4 and 5)	Carrying Value as of December 31, 2016 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2016
					Outflow	Inflow
Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Hangzhou New Material Chroma Co., Ltd. Chroma Ate (Suzhou) Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd.	Sale of power supplies automatic test systems, signal generators, DC electronic load, color analyzer, uninterruptible power supply, switching mode rectifier and etc. Sale of power supplies automatic test systems, signal generators, DC electronic load, uninterruptible power supply, switching mode rectifier and etc. International and transit trading, commercial simple processing and commercial consulting service and etc. Production and sale of semiconductor connecting materials Sale of power supplies automatic test systems, signal generators, DC electronic load, uninterruptible power supply, switching mode rectifier and etc. Sale and maintenance of electronic equipment and factory conveyor systems Sale and maintenance of electronic equipment and factory conveyor systems Assembly, sale and maintenance of factory conveyors and related systems and renders related after-sales services Research, development and design of computer network security systems and information management	$ 124,740 (HK$ 30,000) 96,750 (US$ 3,000) 87,075 (US$ 2,700) 48,375 (US$ 1,500) 122,550 (US$ 3,800) 54,808 (RMB 11,871) 52,712 (RMB 11,417) 8,020 (RMB 1,737) 8,015 (RMB 1,736)	b. Subsidiary of Neworld Electronics Ltd. b. Subsidiary of Neworld Electronics Ltd. b. Subsidiary of Chen Hwa Technology Inc. b. Subsidiary of Chen Hwa Technology Inc. b. Subsidiary of CHI Incorporation Ltd. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Wei Kuang Mech Eng Inc. b. Subsidiary of Deep Red Holding Co., Ltd.	$ 132,178 (HK$ 1,200 US$ 3,853) 101,993 (US$ 3,000) 84,988 (US$ 2,700) 9,091 (US$ 285) 121,115 (US$ 3,800) 43,751 (US$ 1,338) 49,935 (US$ 1,500) 92,000 (US$ 2,836) (Note 9)	$ - - - - - - - - -	$ - - - - - - - - -	$ 132,178 (HK$ 1,200 US$ 3,853) 101,993 (US$ 3,000) 84,988 (US$ 2,700) 9,091 (US$ 285) 121,115 (US$ 3,800) 43,751 (US$ 1,338) 49,935 (US$ 1,500) 92,000 (US$ 2,836) (Note 9)	$ 63,973 13,732 (1,266) 20,608 21,976 (1,949) (11,177) 984 7,569	100 100 100 19 100 100 100 100 100	$ 63,973 13,732 (1,266) - 21,976 (1,949) (11,177) 984 7,569	$ 454,207 67,900 90,042 9,191 172,118 217,623 253,001 47,311 49,020	$ - - - - - - - - -

Accumulated Investment in Mainland China as of December 31, 2016	Investment Amounts Authorized by the Investment Commission, MOEA
$635,051 (HK$1,200, US$19,312)	$695,162 (HK$1,400, US$21,086) (Note 6)

(Continued)

264 -

Note 1: Methods of investment have following types:

a. Direct investment in mainland China.
b. Indirect investment in the Company of Mainland China through a third place. c. Other
Note 2: The amounts of paid-in capital and carrying value as of December 31, 2016 were translated into New Taiwan dollars at the rates of HK$1=NT$4.158, US$1=NT$32.250, RMB1=NT$4.617 prevailing on December 31, 2016. Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2016 and December 31, 2016 were translated into New Taiwan dollars on the original outflow day.

Note 4: Based on audited financial statements.

Note 5: Investment income (loss) was translated into New Taiwan dollars at the average rate of HK$1=NT$4.156, US$1=NT$32.263, RMB1=NT$4.849 for the year ended December 31, 2016.

Note 6:

	Approval Letter	Approved Amount	Approved Amount
a.	Letter (1998) II-87710585 of Investment Commission of MOEA	NT$	5,852
		(HK$	1,400)
b.	Letter (2000) II-89014726 and 89037430 of Investment Commission of MOEA	NT$	63,180
		(US$	2,000)
c.	Letter (2001) II-89037430 of Investment Commission of MOEA	NT$	33,160
		(US$	1,000)
d.	Letter II-91048640 of Investment Commission of MOEA	NT$	63,984
		(US$	1,853) (Note 8)
e.	Letter II-90025170 of Investment Commission of MOEA	NT$	60,240
		(US$	1,750)
f.	Letter II-092020235 of Investment Commission of MOEA	NT$	19,230
		(US$	560)
g.	Letter II-092043358 of Investment Commission of MOEA	NT$	6,748
		(US$	200)
h.	Letter II-093004076 of Investment Commission of MOEA	NT$	3,158
		(US$	95)
i.	Letter II-094006092 of Investment Commission of MOEA	NT$	6,896
		(US$	219)
j.	Letter II-09500052120 of Investment Commission of MOEA	NT$	81,528
		(US$	2,500)
k.	Letter II-09600175700 of Investment Commission of MOEA	NT$	120,000
		(US$	3,699)
l.	Letter II-096000006020 of Investment Commission of MOEA	NT$	66,580
		(US$	2,000)
m.	Letter II-09600310110 of Investment Commission of MOEA	NT$	33,160
		(US$	1,000)
n.	Letter II-09700186010 of Investment Commission of MOEA	NT$	46,110
		(US$	1,500)
o.	Letter II-09700403210 of Investment Commission of MOEA	NT$	7,096
		(US$	210) (Note 9)
p.	Letter II-10400042770 of Investment Commission of MOEA	NT$	78,240
		(US$	2,500)

Note 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.

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AI assistant

CHROMA — Annual Report 2016

52029_rns_2017-07-20_579da08a-9ae8-45da-a12b-41c439692e23.pdf

Critical financial indicators (consolidated )

Table of Contents

VI. Financial summary

I. Letter to Shareholders

Business results

Business plan, development strategies, external competition and environment, legal environment, and general business environment

II. Company Introduction

1. Date founded: November 8, 1984

2. Company History:

III. Corporate Governance Report

1. Organization

(2) Responsibilities and functions of major departments

2. Board of Directors, Supervisors, General Manager, Deputy General Managers, Assistant Managers, and Directors of various Departments and Subsidiary Agencies

(1) Directors and supervisors

Major artificial persons holding shares of the company (Table 1)

Directors and supervisors

(3) Renumeration paid out to Directors, Supervisors, the General Manager, and Deputy General Managers

1. Remuneration for the director (including independent directors)

2. Supervisor’s remuneration

3. Remuneration for the General Manager and Deputy General Manager

Names of managerial officers provided with employee's compensation and state of payments

3. Implementation of Corporate Governance

(1) Implementation of board meetings

(4) Composition, duties, and operations of the Salary and Remuneration Committee

(5) Fulfillment of social responsibilities

(10) State and implementation of the internal control system

1. The Statement on Internal Control System

4. Accounting Expenses

Table on the range of professional charge of the CPA

Information on the CPA’s professional charge

5. Replacement of Accountants

(1) Information on the previous CPA

(2) About the successor CPA

Relationship information between 10 largest shareholders

Consolidated shareholding percentage

IV. Financing

1. Capital and shares

(3) Dispersion of equity ownership

1. Common shares

2. Preferred shares: None.

(4) List of major shareholders

2. Corporate bond

(2) Information of the convertible corporate bonds

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

6. Implementation and state of new restricted employee shares

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

(2) Status of implementation

(3) Gap analysis for expected and actual benefits

V. Operation summary

1. Business content

- Test solutions for passive components and regulatory testing

B. Special materials

B. Special materials

C. Automatic equipment

2. Major R&D outcomes

(3) Product development plan

2. Market, production, and sales

(1) Market analysis

2. State of the market

2. Production process

(5) Table of production volume in the two most recent years

(6) Sales volume in the 2 most recent years

3. Information of employees for the 2 most recent years up to the date of the publication of this report

4. Disbursements for environmental protection

5. Labor relations

6. Important contracts

VI. Financial summary

2. Individual balance sheet and comprehensive income or loss sheet - International Financial Reporting Standards

3. Condensed consolidated balance sheet and statement of comprehensive income or loss -

Taiwan’s Financial Accounting Standards

2. Financial analysis for the 5 most recent fiscal years

1. Consolidated financial analysis - International Financial and Accounting Reporting Standards

2. Individual financial analysis - International Financial and Accounting Reporting Standards

CHROMA Annual Report 2016