CHROMA - Annual Report 2017 | FinancialReports.eu

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Spokesperson of Chroma ATE Inc.

Name: Paul Ying

Position: Vice President, Finance & Administration Center

TEL: (03)327-9999 ext. 2001

Email: [email protected]

Deputy spokesperson of Chroma ATE Inc.

Name: Jennifer Chien
Position: Deputy Director, Finance & Administration Center

TEL: (03)327-9999 ext. 2701

Email: [email protected]

Addresses and telephone numbers of company headquarters and subsidiaries:
Company HQ address: 66 Huaya 1st Road, Guishan, Taoyuan 33383, Taiwan TEL: (03)327-9999

Factory address: 68 Huaya 1st Road, Guishan, Taoyuan 33383, Taiwan

TEL: (03)327-9999

Hsinchu Branch office address: 6F, No. 5, Technology Rd., Science Park, Hsinchu City 30078,

Taiwan

TEL: (03)563-5788

Kaohsiung Branch office address: No.1, Beineihuan E. Rd., Nanzi Dist., Kaohsiung City 81170,

Taiwan

TEL: (07)365-6188

Stock transfer agent
Name: Taishin International Bank

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

TEL: (02)2504-8125

Certified Public Accountant (CPA) for the most recent financial report
Name: CPA Cheng-Ming Lee 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)

		Unit:	NT$ million
		Unit:	NT$ million
	2015	2016	2017
Consolidated revenue	9,692	11,624	14,901
Net income (attributable to the parent company)	1,237	1,720	2,558
Earnings per share, EPS (NT$)	3.28	4.53	6.41
Capital stock	3,792	3,899	4119
Total assets	16,060	18,633	22,018
Total equity	9,531	10,788	13,463
Return on total assets	8.18	10.12	12.68
Return on total equity	13.25	17.18	21.46

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

Net income after tax for the 5 Earnings per share for the 5 most
Consolidated revenue for the 5
most recent years recent years
most recent years
14901 6.41
15000 3000 6.5
14000 2800 6.0
2558
13000 2600 5.5
11624
12000 2400 5.0
11000 10171 [10307] 2200 4.53
9692 4.5
10000 2000
1720 4.0
9000 1800 3.51 3.28
8000 1600 3.5 3.21
7000 1400 1205 [1318] 1237 3.0
6000 1200 2.5
5000 1000 2.0
4000 800 1.5
3000 600
1.0
2000 400
1000 0.5
200
0 0.0
0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Unit: million NT$ Unit: million NT$ Unit: NT$
----- End of picture text -----

I. Reports to Shareholders .................................................................................................................. 1 II. Corporation Introduction 1. Date of Founding ..................................................................................................................... 2 2. Corporation Overview ............................................................................................................. 2 III. Corporate Governance Report 1. Organization ............................................................................................................................ 4 2. Directors, General Managers, Vice Presidents, Assistant Managers, and Supervisors of various branch organization ........................................................................................... 6 3. Operations of Corporate Governance .................................................................................. 15 4. Certified public accountant fees ........................................................................................... 42 5. Replacement of certified public accountants ....................................................................... 43 6. Corporation's chairperson, General Manager, or any manager 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 .................................................. 43 7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report ............................................................................... 44 8. Relationship information, if any one among the 10 largest shareholders is of affiliated party, or is the spouse or a relative within the second degree of kinship, of another. ........................................................................................................................................... 45 9. Number of shares held and percentage of stake of investment in other corporations by the Corporation, the Corporation’s director, supervisor, managerial officer, or an entity directly or indirectly controlled by the Corporation ......................................... 46 IV. Financing 1. Capital and shares ................................................................................................................. 47 2. Corporate bond ..................................................................................................................... 55 3. Preferred shares .................................................................................................................... 56 4. Overseas depositary receipt ................................................................................................. 56 5. Operations of evidence of executive stock option ............................................................... 56 6. Operations of restricted employee shares ........................................................................... 58 7. Issuance of new shares in connection with the merger or acquisition of other corporations .............................................................................................................................................. ……61 8. Implementation of capital application of funds .................................................................... 61 V. Operation summary 1. Business content ................................................................................................................... 63 2. Market, production, and sales .............................................................................................. 73 3. Information of employees for the 2 most recent years up to the date of the

publication of this report .................................................................................................. 82 4. Disbursements for environmental protection ...................................................................... 82 5. Labor relations ...................................................................................................................... 83 6. Important contracts .............................................................................................................. 84

VI. Financial summary 1. Condensed balance sheet and statement of comprehensive income for the 5 most recent years ....................................................................................................................... 85 2. Financial analysis for the 5 most recent years ...................................................................... 88 3. Audit Committee's Audit Report of financial report for the most recent fiscal year ........... 92 4. Financial report from the most recent year .......................................................................... 93 5. Corporation-only financial report audited and attested by a CPA from the most recent year .................................................................................................................................... 93 6. Financial condition of the Corporation and affiliated company ........................................... 93 VII. Review, analysis, and risks of financial position and performance 1. Financial condition ................................................................................................................ 94 2. Financial performance .......................................................................................................... 95 3. Cash flow ............................................................................................................................... 96 4. Material expenditures of the most recent year and impact to the Corporation's finances and operations .................................................................................................... 96 5. Policy on investment in other corporations, main reasons for profit / losses resulting therefrom, improvement plans, and investment plans for the upcoming fiscal year ........................................................................................................................................... 96 6. Risk analysis and assessment of the most recent year up to the publication date of this report ......................................................................................................................... 98 7. Other important issues ....................................................................................................... 103 VIII . Special items to be included 1. Affiliated company .............................................................................................................. 104 2. Private placement of securities of the most recent year up to the publication date of this report ....................................................................................................................... 112 3. Holding or disposition of Corporation shares of the most recent year up to the publication date of this report ........................................................................................ 112 4. Other items that must be included ..................................................................................... 112 5. Any event that results in substantial impact upon the shareholders’ equity or prices of the corporation’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 .................................................................................. 112

I. Reports to Shareholders

Business results

In 2017, the global economy continued to have a robust growth, various industries thrived under the drive of market growth. In addition to actively investing in research and development, most corporations also increased their capital expenditures, expanding their production to meet the market demand. Thus, the corporation's revenues and profits set a new high in the record since its establishment. The revenue for last year was 8,018 million, 14,901 million for group revenue, 2,549 million for profit after tax and 6.41 for earnings per share. Compared to 2016, there are 11% growth in revenue, 28% growth in revenue and 50% growth in profit after tax.

Looking back at last year, the overall revenue of the corporation maintained at a robust growth of 11%, with 103% growth in revenue for photonics semiconductor equipment test, mainly due to the continuous growing demand for semiconductor equipment test and the new VCSEL (3D sensing) equipment product line test. Meanwhile, continued high demand from the Clean Tech industry including electric vehicles, power lithium batteries and high-voltage power supplies maintained double-digit growth of 19% in our corporation's precision electronic measurement instruments and system products. The following lists other consolidated financial figures:

Analysis of financial income, expenditure, and profitability

	Item	2017	2016
Financial structure (%)	Liability to asset ratio	38.85	42.10
	Proportion of long-term capital to property, plant, and equipment	566.49	512.48
Debt-paying ability (%)	Current ratio	203.76	237.39
	Quick ratio	161.87	190.86
Profitability (%)	Return on total assets	12.68	10.12
	Return on total equity	21.46	17.18
	Net profit	17.17	14.80

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

Looking ahead of 2018, due to the rise of American protectionism, the world's free trade might encounter headwinds, making the global economic growth full of uncertainties. With exception in the high-tech field, there still are a lot of new innovative technologies including breakthrough in application developments for AI, 3D Image Sensing, 5G communications and etcetera, in hope of driving the rapid development of semiconductors, electric vehicles and smart phones' industries. The corporation will keep abreast of the changes in the economic situation and strengthen its marketing layout in Europe, United States and Japan. In addition, we will accelerate the development for innovative measurement technology solutions to meet the demand of future market and create more brilliant revenue and profit.

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 for good health to you all.

Leo Huang, Chairman & CEO

II. Corporation Introduction

Date of founded: November 8, 1984
Overview:
November, 1984 Founded in Taipei city with a capital of NT$2 million. The first Chinese-invented programmable video signals generator (65MHz) was officially launched.
November, 1986 The world's first synchronous parallel architecture test developed to automatically test switching power supplies.
February, 1993 Invested in Chroma Ate Inc. USA subsidiary corporation with the corporation's sales office based in the United States.
December, 1993 Official opening and operations of the new Wugu plant. February, 1994 Invested in the establishment of Hong Kong subsidiary corporation, Neworld Electronics Ltd to expand its base in the Mainland China market.
December, 1994 Granted ISO9002 quality certification. November, 1995 Successfully acquired the Chinese National Laboratory Accreditation (CNLA) from Central Bureau of Standards.
December, 1996 The corporation's stock was enlisted in the stock market for trading on December 21st.
August, 1997 Granted ISO9001 quality certification. December, 1997 The 9107 Uninterruptible Power Supply and the 3203 Memory IC Tester won the 6th Taiwan Excellence Award.
April, 1998 Honoured with the 6th Industrial Technology Development Outstanding Performance Award from the Ministry of Economic Affairs. Invested in DynaScan Technology Corp.
July, 1998 The 7100 color analyzer won the Outstanding Photonics Product Award during the 2nd Photonics Festival in Taiwan.
September, 1998 Invested in Adlink Technology Inc.
December, 1998 2225 and 2235 series video pattern generator and 9105 UPS won the 7[th] Taiwan Excellence Award.
May, 1999 The 9105/9107 Uninterruptible Power Supply won the Excellent Product Design Award.

June, 1999 Acquire Hita Technology Co., Ltd.

September, 1999 Invested in Chroma Ate Europe B.V. subsidiary corporation to setup a sales office based in Europe.
November, 1999 Official opening and operations of the new Linkou plant. June, 2000 First issuance of domestic insecure convertible of corporate bonds of NT$1,500,000,000.
August, 2000 Invested in EVT Technology Co., Ltd.

Acquired ZentechTech Inc.

March, 2003 Established Hsinchu Science Park branch. September, 2003 Established a global corporate operation headquarters 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 headquarters grand opening. June, 2005 Expiration and delisting of the 1st insecure convertible corporate bonds issued in Taiwan.

August, 2006 Spun off Special Material Business Unit to form a new subsidiary Chroma

	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 several prestigious awards from Finance Award as Taiwan’s best
	managed Corporation, 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 successfully 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	Successfully acquired the world’s first SAE J1772 accreditation from UL for
	automated communication protocol testing system.
February, 2013	Honoured with the 1st Taiwan Mittelstand Award from the MOEA.
February, 2013	Invested in Adivic Technology Co.,Ltd
May, 2014	Second issuance of insecure convertible corporate bonds in Taiwan worth
	NT$ 2 billion.
January 2016	Invested in Quantel Pte. Ltd. in Singapore to establish a sales location in
	Southeast Asia.
January 2017	Won the Distinguished Enterprise Innovation Award, the highest honour
	available from the 5th National Industrial Innovation Award.
August 2017	Established Innovative Nanotech Inc.
September 2017	Established subsidiary corporation in German.
October 2017	Invested Touch Cloud Inc.
October 2017	Honoured with the “Best Trade Contribution Award” by the Ministry of
	Economic Affairs.
February 2018	Established branch office in Korea.

III. Corporate Governance Report

1. Organization

(1) Organizational structure

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(2) Responsibilities and functions of major departments

Department	Responsibilities
General Manager Office	Set up the departments of Corporate Marketing, Legal Affairs, and Safety and Health Center. Formulate Corporation-wide administrative and business objectives, implement communication and coordination, product planning, new business development and planning, patent management, contract review, environmental protection, occupational safety and health (OSH) management.
Internal Auditor	Establish, update, and revise internal audit and control systems. Review, revise, and audit internal control systems.
Semiconductor Test Equipment BU	Responsible for the market planning, R&D, and sales of semiconductor test equipment.
Test & Measurement BU	Responsible for the R&D and marketing of measurement instruments. In charge of calibration services as well as operations of calibration labs for measurement instruments.
Integrated System Solution BU	R&D of automated mechatronic systems used for measurement purposes. Responsible for the planning, R&D, and marketing of modular instruments and products. Responsible for the planning, R&D, and marketing of system integration solutions.
Intelligent Manufacturing System BU	Responsible for the R&D and marketing of MES systems.
Corporate Manufacturing	Responsible for the raw material purchasing and production for the entire Corporation, As well as planning and maintaining the product quality system.
Advanced Technology Research Center	New technology planning and development, and supporting various business units (BU) in understanding 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 Corporation, 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 Corporation. General Affairs Department: Purchasing of routine equipment and items as well as management of equipment and fixed assets for the entire Corporation. Facilities Department: In charge of factory maintenance and safety.
Operation Management Center	Construct and manage the Corporation's operations management system. Establish the IT Department (including IT System Development Section, IT System Management Section, and Data Control Center), carry out planning and safety controls for IT equipment and application systems throughout the entire Corporation, and issuance and control of rules and regulations.

2. Directors, General Managers, Vice Presidents, Assistant Managers, and Supervisors of various branch organization

(1) Director Information

																April 10,2018	April 10,2018	April 10,2018
Title	Nationality or place of registration	Name	Gender	Elected Date	Final date of term	Elected Date 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 corporation or other corporations	Any managerial officer, director, or supervisor who is a spouse or relative within the second degree of kinship
							Number of shares	Shareholding Percentage	Number of shares	Shareholding Percentage	Number of shares	Shareholding Percentage				Title	Name	Relations
Chairperson of the Board	Republic of China	Leo Huang	Male	2017.06.08	2020.06.07	1984.10.23	23,419,897	5.78%	20,443,897	4.94%	12,117,362	2.93%	0	Department of Engineering, National Chiao Tung University	CEO of this Corporation Director, I-Sheng Electric Wire & Cable Co., Ltd. Director, Leadtek Research Inc. Independent Director, Ichia Technology Inc. Judicial representative for Director, Tianzheng International Precision Machinery Co., Ltd. Director, Twoway Communications, Inc. Chairman of the board, DynaScan Technology Corp. Refer to page 108-110 for details on positions inChroma group	None.	None.	None.
Independent Director	Republic of China	Tsung- Ming Chung	Male	2017.06.08	2020.06.07	2002.05.21	0	0	0	0	0	0	0	Master’s 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 Taiwan University	Chairman of the board, Dynapack Corp. Judicial representative for Director, Far Eastern International Bank Director, Unity Opto Technology Co., Ltd.	None.	None.	None.
Independent Director	Republic of China	Quincy Lin	Male	2017.06.08	2020.06.07	2005.05.18	0	0	0	0	0	0	0	PhD, Business Administration, University of Kentucky Vice President, Taiwan Semiconductor Manufacturing Corporation Chairman of the board, Neo Solar Power Corporation	Chairman of the board, RafaelMicro Chairman of the board, General Energy Solutions Chairman of the board, DynaScan Technology Corp. Director, Neo Solar Power Corporation Independent director, Powertech Technology Inc.	None.	None.	None.
Independent Director	Republic of China	Tai-Jen George Chen	Male	2017.06.08	2020.06.07	2017.06.08	0	0	0	0	0	0	0	Department of Atmospheric Sciences, State University of New York, USA National Taiwan University Chair Professor Vice President of National Taiwan University National Taiwan University Dean Director, Department of Atmospheric Sciences, National Taiwan University President of the Republic of China Earth Sciences Association	National Taiwan University Chair Professor Independent Director, Ichia Technology Inc.	None.	None.	None.
Director	Republic of China	I-shih Tseng	Male	2017.06.08	2020.06.07	2012.06.06	383,548	0.09%	393,548	0.10%	138,722	0.03%	0	PhD, Mechanical Engineering, Pennsylvania State University, US Project Manager, Institute for Information Industry	General Manager, Business Department, Chroma ATE Inc. Refer to page 108-110 for details on positions inChroma group	None.	None.	None.
Director	Republic of China	Tsun-I Wang	Male	2017.06.08	2020.06.07	2005.05.18	19,339	0	19,339	0	936	0	0	PhD, Department of Photonics, National Chiao Tung University Vice President, Tailyn Technologies, Inc. Vice President, Champion-Lighting Technologies Limited	Chief Technical Supervisor, DynaScan Technology Corp. Independent Director, Dynapack International Technology Judicial representative for Director, Innovative Nanotech Inc.	None.	None.	None.
Director	Republic of China	Chung-ju Chang	Male	2017.06.08	2020.06.07	2012.11.01	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 Department of Electrical and Computer Engineering, NationalChiaoTung University Chair Professor	Director, Ting-Shiun Telecommunication Development Foundation Director, National Information Infrastructure Enterprise Promotion Association	None.	None.	None.

Directors

	Directors	Directors	Directors
Condition Name	Does the individual have more than 5 years of professional experience and the following qualifications?			Meets the criteria for independence (Note 1)										Currently serving as the independent director of other public owned corporations
	Currently serving as an instructor or higher post in a private or public college or university in the field of business, legal affairs dept., finance, accounting, or the business sector of the Corporation.	Currently serving as a judge, prosecutor, lawyer, certified public accountant, or other professional practice or technician that must undergo national examinations and specialized license.	Work experience necessary for business administrati on, legal affairs dept., finance, accounting, or business sector of the Corporation.	1	2	3	4	5	6	7	8	9	10
Leo Huang														1
Tsung- Ming Chung														0
QuincyLin														1
Tai-Jen George Chen														1
I-shih Tseng														0
Tsun-I Wang														1
Chung-ju Chang														0

Note 1: For any director who fulfil 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 Corporation or an affiliated business.
（ 2 ） Not serving as a director or supervisor of the Corporation or any affiliated business (this does not apply in cases where the person is an independent director of the Corporation, 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 Corporation 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 Corporation or institution that has a financial or business relationship with the Corporation.
（ 7 ） Not a professional individual or owner, partner, director (member of the governing board), supervisor (member of the supervising board), or manager of a sole proprietorship, partnership, Corporation, or institution that provides commercial, legal, financial, accounting, or consultation services to the Corporation 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 Corporation 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 Corporation 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.
7 -

(2) General Managers, Vice Presidents, Assistant Managers, and Managers of various departments or branches.

													April 10,2018	April 10,2018	April 10,2018
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 Corporation	Any manager who is a spouse or a relative within the second degree of kinship
					Number of shares	Shareholding Percentage	Number of shares	Shareholding Percentage	Number of shares	Shareholding Percentage			Title	Name	Relations
General Manager	Republic of China	Leo Huang	Male	1984.11.08	20,443,897	4.94%	12,117,362	2.93%	0	0	Department of Engineering, National Chiao Tung University	Director of Sheng Industrial (Stock Co.) Corporation, Director of Leadtek Technology Corporation, Independent Director of Yi Jia Technology (Stock Co.), Representative of Legal Person Director of Tianzheng International Precision Machinery Co., Ltd., and Director of Dayun Optoelectronics Co., Ltd. Guangyuan Technology (Co.) Chairman Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
General Manager of the Test & Measurement BU	Republic of China	David Yang	Male	1992.08.14	25,352	0.01%	70,002	0.02%	0	0	Department of Engineering, National Chiao Tung University Teaching Assistant, Department of Information Technology, College of Engineering,ChungHua University	Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
General Manager of the Integrated System Solution BU	Republic of China	I-shih Tseng	Male	1998.07.16	393,548	0.10%	138,722	0.03%	0	0	Mechanical Engineering, Pennsylvania State University, US Project Manager,Institute for Information Industry	Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
General Manager of the Business Department	Republic of China	C.C. Ho	Male	2001.12.10	10,088	0	0	0	0	0	Department of Electrical Engineering, Tatung University General Manager, Global Operations Management Department, Tatung Corporation	Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
Manager of theIntelligent ManufacturingSystem BU	Republic of China	Joe Lin	Male	2007.04.01	78,343	0.02%	0	0	0	0	Department of Information Sciences, Cal Poly Pomona General Manager,Sajet Technology	Refer to page 108-110 for details on positions in Chroma group..	None	None.	None.
General Manager, Semiconductor Test Equipment BU	Republic of China	George Chang	Male	2006.08.01	88,000	0.02%	0	0	0	0	Institute of Electrical Control Engineering, National Chiao Tung University Manager, Business Department, Lian Li Co., Ltd.	None.	None	None.	None.
Vice President, Finance & Administration Center	Republic of China	Paul Ying	Male	1999.05.03	102,969	0.02%	0	0	0	0	School of Management, New York Institute of Technology Vice President of Finance,Hsin Yu EnergyDevelopment Co.	Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
Vice President of Operation Management Center	Republic of China	Benjamin Huang	Male	1992.06.22	137,723	0.03%	0	0	0	0	Department of Electrical Engineering, National Taiwan University Vice President, R&D Department, Measurement Instrument BU of this Corporation	None.	None	None.	None.
Vice President, Corporate Manufacturing	Republic of China	Steven Liu	Male	1991.08.22	88,012	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.
Vice President, R&D Department, Semiconductor Test Equipment BU	Republic of China	Max Chang	Male	2000.12.01	595	0	0	0	0	0	Department of Electrical Engineering, National Cheng Kung University Assistant Manager, R&D Department, QTS Corporation	None.	None	None.	None.
Vice President, Sales Department 1, Integrated System Solution BU	Republic of China	Herbert Tsai	Male	2005.07.01	2,474	0	0	0	0	0	Machinery and Automation Engineering, Nanya Institute of Technology Vice President, Dasike Technology Corporation	None.	None	None.	None.
Vice President, General Manager’s Office	Republic of China	C.C. Fan	Male	2010.08.01	319,235	0.08%	0	0	0	0	Department and Institute of Industrial Engineering and Management, Minghsin University of Science and Technology Vice President,R&D Department,Wei KuangAutomation Co.,Ltd.	None.	None	None.	None.
Vice President, Planning Department, Test & Measurement BU	Republic of China	Bobby Tseng	Male	2001.01.01	2,000	0	0	0	0	0	Electrical Engineering, Waseda University Manager, Product Planning Department, Measurement Instrument BU of this Corporation	None.	None	None.	None.
Vice President, Greater China Area Sales Department, Test & Measurement BU	Republic of China	Vincent Chen	Male	2001.01.01	6,260	0	0	0	0	0	Department of Electrical Engineering, Lunghwa University of Science and Technology Department Manager, Greater China Area Sales Department, Test & Measurement BU	Refer to page 108-110 for details on positions in Chroma group.	None	None.	None.
Vice President, Technical Service Department, Test & Measurement BU	Republic of China	Tony Yang	Male	2003.07.01	44,554	0.01%	0	0	0	0	Department of Electrical Engineering, National Taitung Junior College Manager, Engineering Department, Tiger Power	None.	None	None.	None.
Vice President, R&D Department, Test & Measurement BU	Republic of China	Vincent Wu	Male	2003.07.16	78,465	0.02%	903	0	0	0	Institute of Electrical Control Engineering, National Chiao Tung University Department Manager, R&D Department, Measurement Instrument BU of this Corporation	None.	None	None.	None.
Vice President, R&D Department 1, Integrated System Solution BU	Republic of China	Lance Ouyang	Male	2009.07.01	5,000	0	0	0	0	0	Institute of Mechanical Engineering, National Chiao Tung University Vice President, Global Target Corporation	None.	None	None.	None.
Vice President, Sales Department 2, Integrated System BU	Republic of China	Jeff Lee	Male	2007.01.01	45,000	0.01%	0	0	0	0	Department of Electrical Engineering, Hsinpu Institute of Technology Departmental Manager, Product Planning Department, Integrated System BU of this Corporation	None.	None	None.	None.

(3) Remuneration paid out to Directors, Supervisors, the General Managers, and Vice Presidents

1. Remuneration for the director (including independent directors)

												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$
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 corporations that this Corporation has invested in (Note 7)
		Remuneration (A)		Retirement pension (B)		Bonus to Directors (C)(Note 2)		Allowances (D) (Note 3)				Salaries, bonuses, and special expenses (E) (Note 5)		Retirement pension (F)		Employee remuneration (G) (Note 6)				This Corporation	Corporations in the consolidated financial statement (Note 8)
		This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation	corporations in the consolidated financial statement (Note 8)	This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation	Corporations in the consolidated financial statement (Note 8)	This Corporation		Corporations in the consolidated financial statement (Note 8)
																Cash Sum	Shares Sum	Cash Sum	Shares Sum
Chairperson of the Board	Leo Huang	0	0	0	0	8,555	9,755	570	570	0.36%	0.40%	13,502	13,502	289 (Note 9)	289 (Note 9)	18,616	0	23,256	0	1.62%	1.85%	7,430
Independent director	Tsung-Ming Chung
Independent director	Quincy Lin
Independent director	Tai-Jen George Chen(Note 10)
Director	I-shih Tseng
Director	Chung-Ju Chang
Director	Tsun-I Wang (Note 10)
Director	Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang (Note 10)
Director	Chroma Investment Co., Ltd. Representative: I- Shih Tseng(Note 10)
*Remuneration received in the most recent year by the directors of the Corporation for rendering services (such as serving as a non-employed consultant) to any Corporation listed in the Financial Report: None.

	Table of remuneration ranges	Table of remuneration ranges	Table of remuneration ranges	Table of remuneration ranges
Remuneration range for each director in this Corporation	Name of director
	Sum of the first 4 items(A+B+C+D)		Sum of the first 7 items(A+B+C+D+E+F+G)
	This Corporation	All other companies that this company has invested in (Note 7)	This Corporation	All other companies that this company has invested in(Note 7)
Less than NT$ 2,000,000	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen, Tsun-I Wang, Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang , Chroma Investment Co.,Ltd. Representative: I-Shih Tseng	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen, Tsun-I Wang, Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang , Chroma Investment Co.,Ltd. Representative: I-Shih Tseng	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen, Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen, Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang
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)			Tsun-I Wang	Tsun-I Wang
NT$10,000,000(inclusive)to 15,000,000(not inclusive)			I-shih Tseng	I-shih Tseng
NT$15,000,000(inclusive)to 30,000,000(not inclusive)			Leo Huang	Leo Huang
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	7	7	7	7

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: Allocation of bonus to directors is based on the consideration of the Board of Directors in 2017.

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: Net profit after tax refers to those acquired from recent years. According to the International Financial Reporting Standards employed for this report, net profit after tax shall refer to that of the most recent fiscal year of the entity.

Note 5: Remuneration for directors concurrently holding positions in the Corporation (for positions that include the General Manager, Vice President, other managers, 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: The director bonus and employee bonus for 2017 is based on the actual allocation sum ratio of the previous year.

Note 7: (a) If the director receives remuneration from investments in other corporations that are not subsidiaries of this Corporation, 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 Corporation employee, director, or supervisor), business expenses, and other related payments received by the director of this Corporation for being a director, supervisor, or manager of other nonsubsidiary corporations that this Corporation has invested in.

Note 8: Total remuneration in various items paid out to this Corporation's directors by all corporations (including this Corporation) listed in the consolidated statement shall be disclosed.

Note 9: Amount of retirement pensions listed.

Note 10: The corporation has fully re-elected directors at 2017.6.8, new appointments: director Tai-Jen George Chen and director Tsun-I, Wang, retiring: corporate directors For Me Investment (stock) corporation and Chroma Investment (stock) corporation.

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2. Supervisor’s remuneration

								Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$
Title (Note)	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 corporations that this Corporation has invested in
		Remuneration (A) (Note 2)		Compensation (B) (Note 3)		Business execution fees (C) (Note 4)
		This Corporation	Corporations in the consolidated financial statement (Note 6)	This Corporation	Corporations in the consolidated financial statement (Note 6)	This Corporation	Corporations in the consolidated financial statement (Note 6)	This Corporation	Corporations in the consolidated financial statement (Note 6)
Supervisor	Chi-Jen Chou	0	0	1,045	1,045	60	60	0.04%	0.04%	0
Supervisor	Kai Sun Investment Co., Ltd. Representative `：`Tsun-I Wang

Note: The Company established an Auditor Committee to replace supervisor on June 8, 2017 and the supervisors are relieved of the position starting on that day.

Table of remuneration ranges

	Table of remuneration ranges	Table of remuneration ranges
Remuneration range for each supervisor in this Corporation	Name of the supervisor
	Sum of the first 3 items (A+B+C)
	This Corporation	All corporations listed in this Financial Report
Less than NT$ 2,000,000	Chi-Jen Chou and Kai Sun Investment Co., Ltd. Representative`：`Tsun-I Wang	Chi-Jen Chou and Kai Sun Investment Co., Ltd. Representative`：`Tsun-I Wang
NT$ 2,000,000 (inclusive) to 5,000,000 (not inclusive)
NT$ 5,000,000 (inclusive) to 10,000,000 (not inclusive)
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: Allocation of the remuneration for the supervisors is based on the amount approved by Board of Directors in 2017.

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 corporations (including this Corporation) listed in the consolidated statement shall be disclosed.

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3. Remuneration for the General Manager and Vice President

																Unit: Thousand NT$
Title		Name	Salary (A)		Retirement pension (B)		Bonuses and special expenses (C) (Note 1)			Employee’s remuneration (D) (Note 2)				Proportion of 4 items of A,	NIAT after summing the B, C, and D (%) (Note 6)	Whether or not the person receives remuneration from other non-subsidiary corporations that this Corporation has invested in (Note 3)
			This Corporation	Corporations in the consolidated financial statement(Note 4)	This Corporation	Corporations in the consolidated financial statement (Note 4)	This Corporation	Corporations in the consolidated financial statement (Note 4)		This Corporation		Consolidated financial statement Corporation (Note 4)		This Corporation	Corporations in the consolidated financial statement (Note 4)
										Cash Sum	Shares Sum	Cash Sum	Shares Sum
General Manager		Leo Huang	38,812	39,735	2,247 (Note 5)	2,247 (Note 5)	35,626	35,626		67,000	0	74,140	0	5.62%	5.93%	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 of the Semiconductor Test Equipment BU		George Chang
Vice President,Finance & Administration Center		Paul Ying
Vice President, Advanced Technology Research Center		Mark Fong (Note 9)
Vice President of the Operation Management Center		Benjamin Huang
Vice President,Corporate Manufacturing		Steven Liu
Vice President, R&D Department, Semiconductor Test Equipment BU		Max Chang
Vice President, Sales Department 1, Integrated System Solution BU		Herbert Tsai
Vice President, General Manager Office		C.C. Fan
Vice president, Planning Department, Test & MeasurementBU		Bobby Tseng
Vice president, Greater China Area Sales Department, Test &MeasurementBU		Vincent Chen
Vice president, Technical Service Department, Test & Measurement BU		Tony Yang
Vice president, R&D Department, Test & Measurement BU		Vincent Wu
Vice president, R&D Department 1, Integrated System Solution BU		Lance Ouyang
Vice president, Sales Department 2, Integrated System BU		Jeff Lee
						Table of	remuneration ranges
Remuneration range for each General Manager and Vicepresident in this Corporation							Name of the General Manager and Vice Presidents
				This Corporation(Note 7)								All corporations listed in this Financial Report(Note 8)
Less than NT$2,000,000
NT$2,000,000(inclusive)to 5,000,000(not inclusive)	Mark Fong,Max Chang,Herbert Tsai,C.C.Fan,BobbyTseng,Vincent Chen,TongYang,Vincent Wu,Lance Ouyang,Jeff Lee								Mark Fong,Max Chang,Herbert Tsai,C.C.Fan,BobbyTseng,Vincent Chen,TongYang,Vincent Wu,Lance Ouyang,Jeff Lee
NT$5,000,000(inclusive)to 10,000,000(not inclusive)	C.C. Ho,Joe Lin,Benjamin Huang,Steven Liu,Paul Ying,George Chang								C.C. Ho,Joe Lin,Benjamin Huang,Steven Liu,Paul Ying,George Chang
NT$10,000,000(inclusive)to 15,000,000(not inclusive)	David Yang,I-Shih Tseng								David Yang,I-Shih Tseng
NT$15,000,000(inclusive)to 30,000,000(not inclusive)	Leo Huang								Leo Huang
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	19								19

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 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: Allocation of profit sharing employee bonus approved by the board of directors in 2017 for General Manager and Vice president is based on the actual allocation sum ratio of the previous year.

Note 3: (a) If this Corporation's General Manager or Vice presidents receive remuneration from investments in other corporations that are not subsidiaries of this Corporation, 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 Corporation employee, director, or supervisor), business expenses, and other related payments received by the General Manager or Vice presidents of this Corporation for being a director, supervisor, or manager of other non-subsidiary corporations that this Corporation has invested in.

Note 4: The total amount of the remuneration and benefit given to General Manager and Vice president for all corporations (including this corporation) should be disclosed in the consolidated statements. Note 5: Amount of retirement pensions listed.

Note 6: Net profit after tax refers to those acquired from recent years. According to the International Financial Reporting Standards employed for this report, net profit after tax 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 Vice president, the name of the General Manager and Vice presidents shall also be disclosed in the proper remuneration range.

Note 8: For total remuneration in various items paid by all corporations (including this Corporation) listed in the consolidated statement to every General Manager and Vice president of this Corporation, the name of the General Manager and Vice presidents shall also be disclosed in the proper remuneration range.

Note 9: Since the dismissal of the position was dismissed on January 1, 2018, the remuneration up to that date was provided.

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(4) Compare and analyze the total remuneration paid to each of this corporation's directors, supervisors, general managers, and vice presidents in the 2 most recent years by all corporations listed in this company's individual and consolidated financial statement as a percentage of NIAT listed in the individual financial report and describe the policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its linkage to business performance and future risk exposure.
Analysis of total remuneration paid to this corporation’s directors, supervisors, g eneral managers , and vice presidents in the 2 most recent years as a percentage of net profit after tax:

ax:	ax:
Total remuneration paid to directors, supervisors, general manager, and vice presidents in 2016 and its proportion to netprofit after tax.		Total remuneration paid to directors, supervisors, general manager, and vice presidents in 2017 and its proportion to netprofit after tax.
This Corporation	All corporations listed in the consolidated statement	This Corporation	All corporations listed in the consolidated statement
7.87%	8.25%	6.02%	6.37%

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, Supervisor:
The corporation pays compensation mainly to the supervisors, according to Article 34 of the corporation's articles of association, in the current year, the pre-tax profit before distribution of employees and supervisors is not higher than 1.5%. The supervisor's fee payment policy not only refers to the corporation's overall operating performance, but also refers to the individual's contribution to the corporation's performance. The relevant remuneration of the directors and supervisors was reviewed by the Compensation Committee and the Board of Directors, and the remuneration system was reviewed at any time depending on the actual operating conditions.
In 2017 and 2016, the corporation provided NT$9,600,000 and NT$8,000,000 respectively, which accounted for approximately 0.30% and 0.35% of pre-tax net profit respectively. At the time of each board meeting, the corporation paid directors and supervisors attending meeting attendance fees.
(2) General Manager and Vice President
The corporation adheres to "Regulations for Top Management Compensation", when a general manager or vice president is recruited, he or she will be paid a fixed basic salary monthly based on the payment standards for similar positions in the same industry. 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 manager.
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Names of manager provided with employee's compensation and state of payments

		December 31,2017 (Unit: NT$1,000)	December 31,2017 (Unit: NT$1,000)	December 31,2017 (Unit: NT$1,000)	December 31,2017 (Unit: NT$1,000)	December 31,2017 (Unit: NT$1,000)
	Title	Name	Shares Sum	Cash Sum	Total	Total payment as a proportion of net profit (%)
Manager	General Manager	Leo Huang	0	67,000	67,000	2.62%
	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
	Vice president, Finance & Administration Center	Paul Ying
	Vice president of the Operation Management Center	Benjamin Huang
	Vice president, Corporate Manufacturing	Steven Liu
	Vice president, R&D Department, Semiconductor Test Equipment BU	Max Chang
	Vice president, Sales Department 1, Integrated System Solution BU	Herbert Tsai
	Vice president, General Manager’s Office	C.C. Fan
	Vice president, Planning Department, Test & Measurement BU	Bobby Tseng
	Vice president, Greater China Area Sales Department, Test & Measurement BU	Vincent Chen
	Vice president, Technical Service Department,Test & Measurement BU	Tony Yang
	Vice president, R&D Department, Test & Measurement BU	Vincent Wu
	Vice president, R&D Department 1, Integrated System Solution BU	Lance Ouyang
	Vice president, Sales Department 2, Integrated System BU	Jeff Lee

Allocation of profit sharing employee bonus approved by the board of directors in 2017 for General Manager and Vice president is based on the actual allocation sum ratio of the previous year.

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3. Operations of Corporate Governance

(1) Implementation of board meetings

A total of 6 Board of Directors' meetings were held in 2017, following is the list of attendance of directors:

Title	Name (Note 1)	Actual presence (attendance)	Proxy Delegated presence	Rate of actual presence (attendance) (%) (Note2)	Remarks
Chairman of the Board	Leo Huang	6	-	100%	Reappointed
Independent director	Tsung-Ming Chung	6	-	100%	Reappointed
Independent director	Quincy Lin	6	-	100%	Reappointed
Independent director	Tai-Jen George Chen	4	-	100%	Newly Appointed
Director	I-shih Tseng	4	-	100%	Newly Appointed
Director	Chung-ju Chang	4	-	100%	Newly Appointed
Director	Tsun-I Wang	4	-	100%	Newly Appointed
Director	Fer Mo Investment Co., Ltd. Representative: Chung-Ju Chang	2	-	100%	Previously Appointed
Director	Chroma Investment Co. Ltd. Representative: I- shih Tseng	2	-	100%	Previously Appointed
Supervisor	Chi-Jen Chou	2	-	100%	Previously Appointed
Supervisor	Kai Sun Investment Co., Ltd. Representative: Tsun-I Wang	2	-	100%	Previously Appointed
Note1: The shareholders' regular meeting was fully re-elected on June 8, 2017 and all independent directors formed an audit committee to replace the supervisor. The board of directors was convened two times before the re-election, and the board of directors was convened four times after the re-election. 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) Article 14(3) of the Securities Exchange Act: Board of Directors Meeting Date Term Agenda All independen directors' opinions Chroma's handling of the opinions of the independent director 2017.02.21 The first time in 2017 (1) Annual remuneration for the transport fees of Directors and supervisors in attending Board of Directors' meeting. (2) Amend the corporation's "Procedure for The Acquisition and Disposal of Assets, "Procedure for Endorsement Operations", "Procedure for Financial Loans for Other Parties", "Procedure for Handling Derivative Products Trading" and "Code of Ethical Conduct". (3) Issue the corporation's 2016 internal control system statement. No opinion Proposal approved

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:
15 -

		(4) Capital loans to Chroma Japan Corp.
		(5) 2017 Payadjustment for the corporation's manager.
2017.04.26	The second	(1) Examine the qualifications of directors for candidates.	No opinion	Proposal approved
	time in	(2) Endorsement for Chroma Ate Inc. (USA).
	2017	(3) Increase capital for Adivic TechnologyCo.,Ltd
2017.06.19	Third time	(1) Recruit a member for the third pay remuneration committee.	No opinion	Proposal approved
	in 2017	(2) The corporation's 2016 restricted employee shares issued for
		the second time.
		(3) Sajet System Technology (Suzhou) Co., Ltd. Surplus capital
		increase case.
		(4) An endorsementguarantee for Chroma ATE(Suzhou)Co.,Ltd.
2017.07.31	The fourth	(1) Propose to distribute 2016 employee bonus to managers.	No opinion	Proposal approved
	in 2017	(2) 2017 remuneration for the transport fees of audit committee in
		attending Auditor Committee's meeting.
		(3) Capital loans to Chroma Systems Solutions Inc.
		(4) Endorsement for Chroma Japan Corp.
		(5) Endorsement for Chroma Ate Europe B.V.
		(6) Invested in Touch Cloud Co., Ltd.
		(7) Invested in Innovative Nanotech Inc.
2017.11.02	The fifth in	(1)Capital loans to Chroma Japan Corp.	No opinion	Proposal approved
	2017	(2)Endorsement for Quantel Private Ltd.
		(3)Invested in EVT TechnologyCo.,Ltd.
2017.12.27	The sixth in	(1)Revised the corporation's "Internal Control System",	No opinion	Proposal approved
	2017	"Implementation Rules for Internal Auditing," and "Code of
		Integrity Practice Rules".
		(2)Replace visa certified public accountant and independent
		assessment.
		(3)Capital loans to Chroma Systems Solutions, Inc.
		(4)Invested in Taiwan Advanced Nanotech.

(2) In addition to the aforementioned matters, any other resolutions from the Board of Directors where an independent director expressed a dissenting or qualified opinion that have been recorded or stated by writ: None.

During the execution process where the Director abstain from begin a stakeholder, the name of the director, the content of proposal, the reason of abstinence and the results of the voting should be stated:

On April 26, 2017, the Board of Directors approved the qualification review of director candidates, according to Article 206 of the Company Act, the relevant directors are not involved in the discussion and voting, except for those involved in the review of individual directors' qualifications, are able to cast votes after consultation with the Board of Directors by the chairman and received approval without objections. 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:

The corporation set up an audit committee on June 8, 2017. It has a “Regulation of the Audit Committee Organization” and the operation of the audit committee complies with laws and regulations. The corporation's website also discloses important resolutions of the board of directors in the most recent year to safeguard stockholders 'equity.

In addition, the corporation has established and operated a remuneration committee in accordance with the law. It has assessed the salary and remuneration policy and system of directors and managers, and has made recommendations to the board of directors for reference of their decisions. For the execution process of the corporation, please refer to Corporate Governance Operation (4) The Committee's Remuneration Operation.

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

Note 2. (1) Where 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.

16 -
(2) Operations of the Audit Committee or supervisors’ participation in the board meeting
Operations of the Audit Committee:

4 Audit Committee meetings in 2017, the attendance of the independent directors is as follows:

follows:
Title	Name	Actual presence	Delegated attendance	Rate of actual presence (%)	Notes
Independent director	Quincy Lin	4	-	100%	June 8, 2017 Newly appointed
Independent director	Tsung-Ming Chung	4	-	100%	June 8, 2017 Newly appointed
Independent director	Tai-Jen George Chen	4	-	100%	June 8, 2017 Newly appointed
Other items that shall be recorded: (1) If any of the following applies to the operations of the Audit Committee, the date and session of the Board of Directors' Meeting, as well as the resolutions, resolutions of the Audit Committee and the corporation's actions in response to the opinions of the Audit Committee should be stated. 1. Items listed in Article14(5)of the Securities and Exchange Act Board of Directors Meeting Date Term Agenda Audit Committee Resolution results Corporation's responses to the comments of the Audit Committee 2017.06.19 Third time in 2017 (1) Investment conversion of surplus to capital increase for Sajet System Technology (Suzhou) Co., Ltd. (2) Endorsement for Chroma Electronics (Suzhou) Co., Ltd. All members of the first session of the first (June 19, 2017) audit committee approved. Proposal approved 2017.07.31 The fourth in 2017 (1) Capital loans to Chroma Systems Solutions, Inc. (2) Endorsement for Chroma Japan Corp. (3) Endorsement for Chroma Ate Europe B.V. (4) Invested in Touch Cloud Co., Ltd. (5) Invested inInnovative Nanotech Inc. All members of the second session of the first (July 31, 2017) audit committee approved. Proposal approved 2017.11.02 The fifth in 2017 (1) Capital loads to Chroma Japan Corp. (2) Endorsement for Quantel Private Ltd. (3) Invested in EVT Technology Co, Ltd. All members of the third session of the first (November 2, 2017) audit committee approved. Proposal approved 2017.12.27 The sixth in 2017 (1) Revise the corporation's "Internal Control System", "Implementation Rules for Internal Auditing," and "Code of Integrity Practice Rules". (2) Replace visa certified public accountant and independent assessment. (3) Capital loans to Chroma Systems Solution, Inc. (4)Invested in Taiwan Advanced Nanotech. All members of the 4th session of the first (December 27, 2017) audit committee approved. Proposal approved 2. Except the items in the preceding issues, other resolutions approved by two-thirds of all directors but yet to be approved by the Audit Committee: None. (2)Executionprocess where the independent director abstain from begin a stakeholder,the name of the

17 -

director, the content of proposal, the reason of abstinence and the results of the voting should be stated: None.

(3) Communication between directors and head of internal audit and CPA (including material issues, audit methods and results relating to the corporation's finances and business).
Communication methods between independent directors and internal audit director:
(1) The audit supervisor should complete an audit report at the end of every month and submit said report to the independent directors and they may request clarification from the audit supervisors upon any inquiry.
(2) The audit supervisor will attend the corporation's routine directors' meeting to submit the internal auditing report, independent directors may directly inquire and communicate with the audit supervisor on the spot.
Communication between independent directors and certified public accountants:
(1) The certified public accountant submits the consolidated financial statements after quarterly verification (or review) to the board of directors in written form. The independent directors are required to clarify if they have doubts.
(2) The audit committee completed the review report by examining the audited accountants’ financial statements and checking the written statement.

Note: *Before the end of the year, if there is an independent directors re-election, both newly appointed and previously appointed independent directors should be listed in the remarks column with the status, previously appointed, newly appointed or reappointed of the independent directors together with the re-election date. The actual attendance rate (%) shall be calculated based on the number of meetings held during the member’s term in the compensation committee and the number of actual attendance of this member.

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2. Supervisors’ participation in the board meeting

A total of 6 Board of Directors' meetings were held in 2017, following is the list of attendance of directors:

Title	Name	Number of actual attendance	Percentage of Attendance in Person	Notes
Supervisor	Chi-Jen Chou	2	100%	An audit committee was set up on June 8, 2017, and the supervisors attended Board of Directors' meeting twice during their terms.
Supervisor	Kai Sun Investment Co., Ltd. Representative: Tsun- I Wang	2	100%	An audit committee was set up on June 8, 2017, and the supervisors attended Board of Directors' meeting twice duringtheir terms.
Other items that shall be recorded: 1. Composition and responsibilities of the supervisors: (1) The corporation re-elected the board of directors at the regular shareholders' meeting on June 8, 2017, and all independent directors formed an audit committee to replace the supervisor. (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 other 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.

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

Assessed items			State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed corporations, and the cause of the said gaps
	Yes	No	Summary
1. Did the Corporation stipulate and disclose best practice principles for corporate governance according to the Corporate Governance Best Practice Principles for TWSE/TPEx Listed	V		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 differences

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Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed corporations, and the cause of the said gaps
	Yes	No	Summary
corporations?
2. Equity structure and shareholders’ rights of the Corporation (1) Did the Corporation establish an internal procedure for handling shareholder proposals, inquiries, disputes, and litigations? Are such matters handled according to the internal procedure? (2) Did the Corporation 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 Corporation establish and enforce risk control and firewall systems with its affiliated company? (4) Did the Corporation stipulate internal rules that prohibit Corporation insiders from trading securities using information not disclosed to the market?	V V V V		(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, managers, 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 for the monitoring of subsidiaries and delegated personnel for supervising 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 official website.	No differences
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?	V		(1) Corporation stipulated Best Practice Principles for Corporate Governance that provided that the composition of the Board of Directors must consider the diversity as well as principles of diversity that include basic criteria, professional knowledge, and skills that 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. There are a total of 7 members on the Board of Directors, including 3 independent directors.	No differences

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Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed corporations, 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 Corporation voluntarily established other functional committees? (3) Did the Corporation 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 Corporation regularly implement assessments on the independence of CPA?	V V	V	(2) The corporation has established a salary remuneration committee and an audit committee according to law. (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 managers, and shall submit the Committee's recommendations to the Directors’ Meeting for discussion. (4) In addition to acquire an independent statement from the certified public accountants, the corporation will conduct a regular assessment on the independence of recruited certified public accountants annually, the main assessment targets are employees that had yet to take up the position of director and supervisor, not a shareholder of the corporation, yet to receive salary from the corporation, not major stakeholder of the corporation, not a manager involved in the corporation's decision making and have not serviced the corporation for the past 2 years. Assessment result will be submitted to the corporation's Audit Committee and Board of Directors. The results of the corporation's most recent annual assessment have been submitted to the Audit Committee and the Board of Directors on December 27, 2017 for review and approval.
4. Has the TWSE/TPEx listed Corporation set up a full- (or part-) time corporate governance unit or personnel to be in charge of 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	V		The financial department of the corporation has a special person responsible for corporate governance related affairs. The public security corporation has already had public management corporations with more than three years of management experience in finance, stock affairs, and deliberations. Their main responsibilities are to provide the information needed by the directors to execute their business, handle matters related to meetings of the board of	No differences

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Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed corporations, and the cause of the said gaps
	Yes	No	Summary
registration and amendment registration, and producing minutes of board meetings and shareholders meetings)?			directors and shareholders, prepare meetings, and register changes in the corporation. The most recent annual business performance is as follows: (1)Assisting the Board of Directors and shareholders in the proceedings and compliance with resolutions. (2) Draft the meeting agenda, inform the directors 7 days prior to the meeting and provide meeting information, if there are issues about stockholding that needed to be avoided, they should be reminded beforehand and the meeting minutes should be completed within 20 days after the meeting. (3) Issues concerning the issuance of major messages concerning important resolutions of the Board of Directors after the meeting to ensure the correctness and correctness of the content of the re-information so as to protect the equivalence of investor transaction information. (4) Registration of the date of the shareholders' meeting in accordance with the law, production of meeting notices within the statutory time limit, annual reports, discussion manuals, deliberations, and amendments to the articles of association or directors for change registration.
5. Has the Corporation established a communication channel with stakeholders (including but not limited to shareholders, employees, customers, and suppliers)? Has a stakeholders’ area been established in the Corporation’s website? Has the Corporation addressed major corporate social responsibility (CSR) topics that the stakeholders are concerned in a proper manner?	V		This Corporation has established a CSR area on its official website that provided contact information, emails, and other channels of communication to stakeholders so that they may raise topics that they are concerned with. These concerns will then be promptly addressed by this Corporation.	No differences
6. Has the Corporation delegated a professional shareholder services agent to handle shareholders’ meeting?	V		The corporation has appointed Taishin International Bank to handle affairs of the Board of Shareholders.	No differences
7. Information disclosure (1) Did the Corporation establish a website to disclose information on financial operations and corporate governance?	V		(1)This Corporation has established a website with special pages on investor services and regular updates on financial operations and corporate governance. Website:	No differences

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Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed corporations, and the cause of the said gaps
	Yes	No	Summary
(2) Did the Corporation adopt other means of information disclosure (such as establishing an English language website, delegating a professional to collect and disclose Corporation information, implement a spokesperson system, and disclosing the process of investor conferences on the Corporation website)?	V		(www.chromaate.com). (2) This Corporation has established 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 official website.
8. Has the Corporation provided important information to provide better understanding of the state of corporate governance (including but not limited to employees’ rights, employee care, investor relations, supplier relations, stakeholders’ rights, progress of training of directors and supervisors, risk management policy and state of implementing risk impact standards, state of implementing customer policies, and the Corporation’s purchase of liability insurance for its directors and supervisors)?	V		1. Employees' equity: According to the Labor Standards Act and the corporation's personnel regulations; the corporation takes the employees' equity seriously and so sets up the employees' feedback mailbox, communications channels and various specific areas for discussion to provide a comprehensive selection of channels for feedback. 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 available for the employees and their family members during weekends and public holidays. Various health seminars and subsidies to societies and clubs are also available to provide employees with a selection of recreational activities after work. 3. Investor relations: The corporation's website has an investors' service page, a spokesperson and a deputy spokesperson, specifically responsible for public disclosure of the corporation matters. The corporation will also organize road show regularly to disclose relevant information regarding the corporation's operations, at the same time update those information in the corporation's 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	No differences

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Assessed items	State of operations	State of operations	State of operations
	Yes	No	Summary
			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 information transparency and prompt notification, financial and business information posted in this 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 practical experiences in business management that are applicable to the business scope of this Corporation. The following lists financial, business, and professional courses recently taken by this Corporation’s Directors, Supervisors, and managers (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 clients’ 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 need not be completed by corporations not listed for evaluations) 1. Improvements made in the most recent year: (1)Electronic voting was adopted for 2017 annual shareholders’ meeting. (2) Completed a corporate social responsibility report and acquired third party attestation. (3) Set up an audit committee in 2017. 2. Prioritized matters and measures yet to be improved: (1) The implementation of the board member diversity policy is disclosed in the corporation's website. (2) The annual report reveals the results of the resolution of the audit committee on the major proposals and the corporation's handling of the opinions of the audit committee.

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Note 1: In 2017 and up to the publication date of the annual report, the progress of the directors:

Title	Name	Name	Trainingdate	Trainingdate	Organizer	Course title	Course hours
Chairman	Leo Huang		2017.09.11		Taiwan Academy of Banking and Finance	Corporate Governance Forum - Business continuity	3
Independent director	Tsung-Ming Chung		2017.07.13		Taiwan Academy of Banking and Finance	Seminar on the Applied Operations of the Board of Directors and Supervisors and Corporate Governance	3
			2017.12.26		Taiwan Academy of Banking and Finance	Seminar on the Applied Operations of the Board of Directors and Supervisors and Corporate Governance	3
Independent director	Tai-Jen George Chen		2017.09.22		Taiwan Corporate Governance Association	How Directors Do Their Best "Attentions"	3
			2017.11.03		Taiwan Corporate Governance Association	Science and technology quickly change the environment, the directors lead the corporation to respond	3
			2017.11.21		Taiwan Corporate Governance Association	Global Trend Analysis - Risks and Opportunities	3
			2017.11.24		Taiwan Corporate Governance Association	Evaluation of Board of Directors' Effectiveness from the Perspective of Directors and Supervisors	3
Director	Tsun-I Wang		2017.08.23		Securities and Futures Institute of Taiwan Corporate Governance Association	Discussion on fraud cases of corporate financial statements	3
			2017.08.23		Securities and Futures Institute of Taiwan Corporate Governance Association	A Discussion on the Utilization of Employee Compensation Strategies and Tools	3
In 2017 and up to the publication date of the annual report, corporate governance training for							managers:
Title	Name	Trainingdate		Organizer		Course title	Course hours
Accounting Manager	Paul Ying	2017.07.13~ 2017.07.14		Accounting Research and Development Foundation of Taiwan Corporate Governance Association		Continuing Training Class for Securities Issuers, Securities Dealers, Securities Exchange Firms and certified public accountant supervisors	12

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

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

Identity	Condition Name	Has more than 5 years of work experience Has the following professionalqualifications	Has more than 5 years of work experience Has the following professionalqualifications	Has more than 5 years of work experience Has the following professionalqualifications	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)	Number of salary and remuneration committee memberships concurrently held in other public corporations
		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 Corporation	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 administratio n, legal affairs, finance, accounting, or business sector of the Corporation.	1	2	3	4	5	6	7	8
Independent director	Tai-Jen George Chen												3
Independent director	Tsung-Ming Chung												0
Independent director	Quincy Lin												1

Note 1: For members that are recruited two years prior to election and met the criteria below, please "tick" in the boxes below each criterion. (1) Not employed by the Corporation or an affiliated company.

(2) Not a director or supervisor of the Corporation or an affiliated company. However, this restriction does not apply in cases where the person is an independent director of the Corporation, 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 Corporation 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 Corporation or institution that has a financial or business relationship with the Corporation.

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

(8) Where none of the circumstances in the subparagraphs of Article 30 of the Corporation 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, 2017 until June 7, 2020, a total of 2 Salary and Remunerations Committee meetings (A) were held in 2017, member qualifications and attendance as follow:

Title	Name	Actual presence (B)	Delegated attendance	Rate of actual presence (%) (B/A) (Note)	Notes
Committee chair	Tai-Jen George Chen	1	-	100%	2017.6.19 New appointment
Member	Tsung-Ming Chung	2	-	100%	Renew
Member	QuincyLin	2	-	100%	Renew
Member	Chao-min Yang	1	-	100%	2017.6.8 Retiring
Other items that shall be recorded: I. 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 Corporation’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. II. 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.

I. 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 Corporation’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.

Note: Where 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) Fulfilment of social responsibilities

Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed corporations and root causes
	Yes	No	Summary
1. Implementation of corporate governance (1) Has the Corporation stipulated corporate social responsibility (CSR) policies and systems and reviewed the effectiveness of CSR actions? (2) Has the Corporation provided regular training on CSR topics? (3) Has the Corporation 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 Corporation established a relevant salary and remuneration policy and combined its employee performance assessment system with CSR policies? Has the Corporation established a clear reward and penalty system?	 ˇ   		(1) The corporation has established the “Code of Practice for Corporate Social Responsibility” and issued the third CSR report in 2017. It also entrusted BSI with AA1000 assurance standards, using the moderate assurance level as the verification standard, and was acquired a third-party verification statement. . (2) Each year, the ESH Center organizes lectures on topics related to safety, health care, and environmental protection. In 2017, the employee welfare committee initiated an event of sending love to rural areas and donating books to promote the colleagues participation in social welfare. (3) ESH center 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)1. The corporation has established a comprehensive performance assessment system linked with regulations governing employee rewards and penalties which were then implemented accordingly. 2. The 43 regulation of the corporation's articles of association: If the corporation profited for that particular year (meaning the profit after deducting the bonus to employees and directors from the net profit before tax), there should be a raise of 5% to 20% in the employee bonus.	No differences
2. Developing a sustainable environment (1)Is the Corporation committed to			(1)This Corporation is dedicated to	No differences

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Assessed items	State of operations	State of operations	State of operations
	Yes	No	Summary
improving usage efficiency of various resources and utilizing renewable resources with reduced environmental impact? (2) Has the Corporation referred to the nature of its industry to establish a suitable environment management system (EMS)? (3) Is the Corporation concerned with changes to the global climate and how it may affect business activities? Has the Corporation implemented greenhouse gas (GHG) inventory checks and stipulated strategies for reducing energy consumption, carbon emissions, and greenhouse gas production?	 		developing green products, reducing the use of hazardous substances (HS), and generating lead-free production processes. According to the attributes of wastes, suitable recycling processes are applied. The waste classification is implemented through policies proclamation, lectures, labelling, posting and secondary sorting to reduce waste and increase resource recovery rate in fulfilling the environmental protection responsibility. (2)All environmental safety operations are regulated in accordance with laws and regulations, regularly track and declare the amount of waste generated, set targets for waste reduction, carry out ideas for resource recycling and set various energy saving programs to achieve the goal of energy conservation and the love for earth. The corporation currently granted obtains ISO 14064 carbon footprint certification. (3) To address the issue of climate change, the corporation enhanced the efficiency air-conditioning ice storage systems, improved energy consuming hardware in promoting air-conditioning temperature control, replaced refrigerant flow meters and strengthened power usage monitoring, used water-saving gasket devices and replaced the public lighting equipment in the entire plant area with LED lights. All of these actions achieved energy conservation and carbon reduction, reduced energy consumption and carbon emission intensity, thus fulfilling the responsibility of environmental protection.
3. Sustaining community services (1) Has the Corporation referred to relevant laws and international human rights instruments to stipulate relevant management policies and procedures?			(1) The corporation is committed to fulfilling its corporate social responsibility, safeguarding the basic human rights of all its colleagues, customers and interested parties, and respectinginternationallyrecognized
	- 29 -

Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed corporations and root causes
	Yes	No	Summary
(2) Has the Corporation established employee appeal system and channels, and are employee appeals handled appropriately? (3) Has the Corporation provided employees with safe and healthy work environments as well as regular classes on health and safety? (4) Has the Corporation 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?	  		basic human rights, including freedom of association, caring for disadvantaged groups, prohibition of child labor, elimination of all forms of forced labor, elimination of employment and employment discrimination, etc. In addition, it abides by the labor-related laws and regulations set in the corporation's location, formulates employee appointment, attendance, remuneration and other personnel methods to protect employee rights and interests. (2) To improve internal communication, this Corporation has established employee appeal helpline and email addresses. A dedicated personnel has been assigned to handle and file these appeals. (3) The ESH Center administers regular safety and health education training courses, conducts regular inspections of the working environment, conducts fire drills, and contractor management in compliance with regulatory deadlines. It also organizes annual physical and mental health checks for employees, holdes diversified health promotion and care talks, sets up special health and safety management units, medical care rooms, and provides Chinese and Western doctors' consultation services. First aid personnel, first aid kits, and automatic external defibrillators (AED) are staffed and provided in each factory area to all employees a safe and healthy working environment. (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	No differences

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Assessed items	State of operations	State of operations	State of operations	Gaps with the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed corporations and root causes
	Yes	No	Summary
(5) Has the Corporation established effective career competence training plan for its employees? (6) Has the Corporation 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 Corporation compliant with relevant laws and international laws governing the marketing and labelling of its products and services? (8) Has the Corporation 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 Corporation and its major suppliers include terms where the Corporation may terminate or rescind the contract at any time if the said supplier has violated the Corporation's corporate social responsibility policy and have caused significant impact upon the environment and society?	    		electronic bulletin board. (5) This corporation has established the Education and Training Management guidelines, which are used with career plans to cultivate and develop professional competence for 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 labelling 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 are used as a basis for selecting qualified suppliers. (9) Suppliers are required to sign Declaration for Environmental Protection which include terms stipulating that this Corporation may terminate contractual agreements if the supplier violates environmental protection laws and requirements.
4. Improvement of information disclosure (1)Does the Corporation disclose			This Corporation has established an	No differences

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Assessed items	State of operations	State of operations	State of operations
	Yes	No	Summary
relevant and reliable information relating to CSR on its official website or the Market Observation Post System (MOPS)?			electronic bulletin board to promptly report any of its activities. CSR reports and information relating to social responsibility activities were also disclosed upon this Corporation’s official website.
5. Where the Corporation has stipulated its own Best Practices on CSR according to the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed corporations, please describe any gaps between the prescribed best practices and actual activities taken by the Corporation: 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 this corporation's website. For the status of CSR operations of this corporation, pleaseperuse the CSR reports compiled bythis corporation.
6. Any important information useful for understanding the state of CSR operations: (1) The corporation promotes corporate social responsibility in a long-term manner. It annually exposes the corporation's sustainable development status and business philosophy through its CSR report, and reports to the public on the concept and practice of transparent openness and corporate social sustainability. The corporation's risk issues are related to the implementation of human rights are described below: 1.Multiple inclusive and equal opportunities:  No difference treatment in language, attitude and behavior towards one's gender, race, social status, age, marital status, family status, language, religion, party affiliation, nationality, appearance, facial features, mental/physical handicap and etcetera.  Ensure equal opportunity employment policy and fairness in employment, salary benefits, training, evaluation, and promotion opportunity, provide effective and appropriate complaint mechanism to avoid violation of employee human rights, great effort in creating equal employment, elimination of prejudice and harassment in the workplace.  Regularly track implementation of diversity inclusion and equal opportunity. 2.Healthy and safe workplace:  The corporation conducts a full range of employee health management, has a professional and warm medical room, provides employees with a wealth of medical resources, through the cloud health management system, always concerned about the health of employees; held a variety of health talks.  The corporation is committed to providing a safe and healthy work environment so that employees can work at ease. The “Occupational Safety and Hygiene Committee” is set up to review the safety and health- related issues and plans on a regular quarterly basis, and conduct regular occupational safety advocacy and education training for colleagues to obtain a secured workplace certification at the same time. 3. Reasonable working hours: In the corporation's methods, the corporation stipulates the specifications for working hours and extension of working hours, and regularly cares about and manages employees' attendance. 4. Freedom of association: Encourage employees to cultivate interest, cultivate physical and mental health, formulate club subsidies, and apply for the establishment of societies in accordance with regulations. 5.Labor-management consultation: Establish a smooth communication channel and hold regular labor and capital conferences to ensure the rights and interests of both parties. 6. Privacy protection: In order to fully protect the privacy of clients and stakeholders, a comprehensive information security management system is established, following a strict control specifications and protective measures. (2) Environmental obligation • Increase responsibilities for environmental protection, actively promote clean energy technologies, and providegreen corporations with automated testingsolutions.

No difference treatment in language, attitude and behavior towards one's gender, race, social status, age, marital status, family status, language, religion, party affiliation, nationality, appearance, facial features, mental/physical handicap and etcetera.
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Assessed items	State of operations Yes No Summary	State of operations Yes No Summary
	No	Summary
• 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. (3) Corporate social responsibility carried out in 2017 Targets for donations in 2017 include National Chiao Tung University Tainan Campus Dormitory, Foundation Boyo Social Welfare Foundation, TFCF North Kaohsiung Branch Shanlin Rainbow House, Chiao Tung University Angel Foundation, Soft Power Foundation, Qiu Zaixing Culture and Education Foundation, the Taoyuan Police Friendship Association, and the Gui shan Police Friendship Association. The total amount of donation is approximately 53.8 million NT dollars. For social issues, the support for clean energy policies also reflects the corporation’s concern for sustainable energy development and environmental friendly attitudes. It is imperative that the Chroma ATE Inc., as a developer of clean energy devices, needs to respond to this policy. Currently, it is evaluating the solar panels installed on the roof,in hope of usingsolarpower to reduce the carbon emission intensity.
7. Any review standards of certification bodies that the Corporation’s CSR report have been qualified for shall be described: The corporation issued CSR report in 2017 and entrusted BSI with AA1000 assurance standards, using the moderate assurance level as the verification standard.

(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 corporations, and the cause of the said gaps
	Yes	No	Summary
1. Stipulating policies and plans for ethical corporate management (1) Has the Corporation clearly indicated policies and activities related to ethical corporate management in its bylaws and external documents? Are the Corporation’s directors and management actively fulfilling their commitment to corporate policies? (2) Has the Corporation stipulated a plan to forestall unethical conduct? Has the Corporation clearly prescribed procedures, best practices, and disciplinary and appeal systems for violations within the said plan? Is the plan implemented accordingly?	 		(1) This Corporation has stipulated the Best Practices for Ethical Corporate Management, Code of Integrity Practice Rules, and 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) "Code of Integrity Practice Rules" of this Corporation clearly stipulate a plan to forestall unethical conduct and prescribed procedures, best practices, and disciplinary and appeal system 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	No differences

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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 corporations, and the cause of the said gaps
	Yes	No	Summary
(3) Has the Corporation established preventive measures for the items prescribed in Article 7, Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed corporations or business activities with a higher risk of being involved in an unethical conduct within the Corporation’s scope of business?			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 "Code of Integrity Practice Rules", 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.
2. Implementing ethical corporate management (1) Has the Corporation evaluated ethical records of its counterparty? Does the contract signed by the Corporation and its trading counterparty clearly provide terms on ethical conduct? (2) Has the Corporation established an exclusively (or concurrently) dedicated unit for promoting ethical corporate management that answer 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 Corporation established policies preventing conflict of interests, provided proper channels of appeal, and enforced these policies and channels accordingly? (4) Has the Corporation established effective accounting systems and internal control systems for	   		(1) To ensure that mutual trust and integrity form the basis of all business dealings, the Corporation’s management regulations have provided for suppliers to sign a letter of commitment towards business integrity, which clearly prohibited any improper or unethical conduct in business activities and immediate blacklisting of any violators. Standard purchasing / sales contracts of the Corporation also clearly stipulate terms for business integrity and prohibition of unethical dealings and conduct. (2)The Corporation designated the Auditing Office directly under the Board of Directors as the responsible owner for revising, implementing, interpreting, providing counselling services, reporting, registering, and filing the contents of the "Code of Integrity Practice Rules", supervising the implementation of these rules, and providing regular reports to the Board of Directors. (3)The corporation stipulated "Code of Integrity Practice Rules" policy clearly to prevent conflicts of interest, the official website provides independent e-mail and private hotline for making a report as a conduit for the internal and external personnel of the corporation, and any report shall be immediately handled by the responsible unit. (4)To achieve ethical corporate management, the corporation has established an effective accounting system and internal control system	No differences

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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 corporations, and the cause of the said gaps
	Yes	No	Summary
enforcing ethical corporate management? Are regular audits carried out by the Corporation’s internal audit unit or commissioned to a CPA? (5) Does the Corporation regularly organize internal and external training for ethical corporate management?			according to the constituent elements of the internal system, and the internal auditing unit shall conduct audits according to the annual audit plan. (5)New recruits are regularly taught with the corporation's organizational, cultural, and internal workplace morality and ethics, emphasizing the importance of individual and work integrity, in the meantime, conducts internal awareness programs conveying the importance of integrity.
3. Status for enforcing whistle-blowing systems in the Corporation (1) Has the Corporation established concrete whistle-blowing and reward systems and accessible whistle-blowing channels? Does the Corporation assign a suitable and dedicated individual for the case being exposed by the whistle- blower? (2) Has the Corporation stipulated standard operating procedures (SOP) and relevant systems of confidentiality for investigating the case being exposed by the whistle- blower? (3) Has the Corporation 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 of this 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 identity of the whistle-blower 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 identity of the whistle-blower and the content of the reported case.	No differences
4. Improvement of information disclosure (1) Has the Corporation disclosed the contents of its best practices for ethical corporate management and the effectiveness of relevant activities upon 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 upon this Corporation’s official website.	No differences
5. If the corporation has formulated its own principles of integrity operation based on "Code of Integrity Practice Rules for TWSE/GTSM Listed corporations", please state the difference between itsprinciples and its operation:

If the corporation has formulated its own principles of integrity operation based on "Code of Integrity Practice Rules for TWSE/GTSM Listed corporations", please state the difference between its principles and its operation:
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Items assessed	State of operations	State of operations	State of operations
	Yes	No	Summary
No difference.
6. Other helpful information to understand the operation of code of integrity of the corporation: (for example, the corporation’s amendment of the code of integrity practices): (1) The corporation has a "Code of Integrity Practice Rules", "Operating Code of the Integrity Practice" and "Code of Ethical Conduct". For the operation and implementation of the corporation's integrity management, please refer to this year's report. III. Corporate Governance Operations (6) The corporation performed good faith management and adoption measures. For details on this "Code of Integrity Practice Rules", Standards for Ethical Conduct, and Operational Rules for Best Practices for Ethical Corporate Management please visit the MOPS or this Corporation's official website. (2) With the establishment of the Audit Committee, the corporation revised the Code of Integrity Practice on November 2,2017 to complywith the statusquo.

(7) If the Corporation 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 improving information transparency.

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

The corporation has stipulated "Prevention Management of Insider Trading" as the basis of the corporation's major news and information disclosure mechanism. It is also inspected irregularly to ensure compliance to statutory laws and regulations and is published in the corporation's internal website for inquiries.

(9) Protective measures for the safety of the work environment and personal safety of the employees
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 corporations to maintain building sanitation and implement sterilization processes.
- Commissioned qualified security firms to enforce access controls and security operations.
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.
Physical and mental healthcare for employees:
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Entrust qualified medical institutions to regularly perform employee health checks that are superior to laws and regulations, and setup a sound health management system to safeguard employees' 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.
Set up a nursing room to form a complete breastfeeding environment and equipment to provide a quality breastfeeding environment for women who need breastfeeding and maintain their privacy.
Carry out four cancer screenings and special health check-ups every year to promote employee health care and early detection of diseases.
Automatic external defibrillators (AED), first aid kits and qualified first aid personnel were set up at each factory site, and first aid and AED education training courses were conducted. The branch office also reached the level of application for peace of mind and workplace safety.
Established employee recreation centers with swimming pools, SPA, gyms, dance classrooms, equipment and other materials for employee use.
From time to time, health promotion courses such as emotional management, interpersonal communication, parenting, healthy eating, and health care are organized.
Regularly organizes health promotion activities, promotes healthy meals, diverse sports instruction courses, health promotion lectures, and health testing activities, etc. Every year, it provides measures for the physical and mental relaxation, physical management, and weight control of disease prevention and health promotion.
Actively promote smoke-free workplaces and provide for a total ban on smoking outside the designated smoking areas within the perimeter of the factory.
Established an Occupational Welfare Committee to regularly organize various employee welfare activities. The corporation has diverse and several clubs to provide various recreational health activities for employees.
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(10) State and implementation of the internal control system
The Statement of Internal Control System

To Chroma ATE Inc. Internal control system statement Date: February 22, 2018

This Statement of Internal Control System is issued based on the self-assessment of the corporation for the year 2017.

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 managers, 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, changes to the environment and situation may also affect the effectiveness of the internal control system. 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 corporations (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 subitems. 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.
Based on the above assessment, the corporation has assessed that the internal control system (covering monitoring and management of its subsidiaries) as of December 31, 2017 is effectively designed and implemented and is sufficient to ensure that the following objectives are achieved, including understanding the degree of achievement of operational effectiveness and efficiency objectives, reliable, timely and transparent reporting and compliance of applicable rules, laws, regulations and bylaws.
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.
This statement has been approved by the Board of Directors on February 22, 2018, amongst the 7 directors that attended the meeting, none objected, and the remaining have all agreed with the contents of this statement.

To Chroma ATE Inc.

Chairman: Leo Huang CEO: 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 2017 Annual Shareholders’ Meeting convened 2017.06.08 1.Attest the 2016 business report and financial statements. Execution process: Approved by resolution. 2. Approved 2016 surplus allocation. Implementation: The resolution was passed and July 30, 2017 is the base date of ex-dividend. Cash dividend for the shareholders was completely paid in August 17, 2017. (Dividend per share: NT$ 3.2208648) 3. Approved of the amendments to the articles of association of this Corporation. State of implementation: Approved by resolution. Amendments were made to the articles of associations. 4. Approve amended "Procedure for Acquisition and Disposal of Assets" of the corporation. Execution process: The resolution is passed and the “Procedure for Acquisition and Disposal of Assets” is implemented after the amendment. 5. Adopted amendments to the corporation's "Endorsement Operating Procedures" case. Execution process: The resolution is passed and the “Endorsement Operating Procedures” is applied after the amendment. 6. Approve amended "Finance and Other Operating Procedures" of the corporation. Execution process: The resolution was passed and the revised "finance and Other Operating Procedures" was implemented. 7. Adoption of the amendment to the "Procedure for Engaging in Transaction Processing of Derivative Commodities". Execution process: The resolution was passed and the “Procedures for Engaging in Derivative Commodity Trading Processes” were implemented after revision. 8. Approve title change and amended "Directors and Supervisors Election Procedure" of the corporation. Execution process: The resolution was passed and the “Directors and Supervisors Election Procedure” after the amendment was implemented. 9. Director election. Elected list: Directors: Leo Huang, I-Shih Tseng, Tsun-I Wang, Chung-Ju Chang Independent Directors: Tsung-Ming Chung, Quincy Lin, Tai-Jen George Chen 10. Approve the lifting of non-competition restriction for newly appointed directors and their representatives. State of implementation: Approved by resolution. 2. Key resolutions of the Board of Directors 2017.2.21 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. Resolved the amendments to the Articles of Association. 6. Approved amendments to Procedure for the Acquisition and Disposal of Assets,

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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 those for independent directors). 9. Eliminated an anti-competition restriction for newly appointed directors and their representatives. 10. Approved the scheduling for the annual shareholders’ meeting for 2017 and items raised by the shareholders to be reviewed. 11. Composed The Statement on Internal Control System of 2016 of this Corporation. 12. Approved capital loans to Chroma Japan Corp. 13. Approved the Business Plan of 2017 for this Corporation. 14. Approved salary adjustments for managers for 2017. 2017.04.26 1. First quarter of 2017 Business performance report 2. Pass the qualification test of director candidates. 3. Second issuance of insecure convertible corporate bonds in the country in exchange for new shares, executive stock option and equity security for the corporation's capital increase. 4. Approve endorsement for CHROMA ATE INC. 5. Approve capital increase for Adivic Technology Co.,Ltd. 6. Approve line of credit extension proposal from financial institution of the corporation. 7. Approve the establishment of "Auditor Committee Charter" of the corporation. 8. Approve amended "Board of Director Meeting Procedure" of the corporation. 9. Pass the donation case of National Chiao Tung University. 2017.06.19 1. Elected the current chairman. 2. Appointed a member of the third salary compensation committee of the corporation. 3. Approve the second issuance of new restricted employee shares of 2016. 4. The base day for the reduction of shares by setting new shares to limit employee rights. 5. 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 2017 for this Corporation. 6. Turning over the surplus to the capital increase through the Sajet System Technology (Suzhou) Co., Ltd. 7. Approve endorsement for Chroma Electronics (Suzhou) Co., Ltd. 2017.07.31 1. Second issuance of insecure convertible corporate bonds in the country in exchange for new shares, executive stock option and equity security for the corporation's capital increase. 2. Approve employee bonus allocated for managers in 2016. 3. Approve the 2017 annual remuneration of the corporation's auditor and attended the Audit Committee's fee case. 4. Approve capital loan for Chroma Systems Solutions, Inc. 5. Approve endorsement for Chroma Japan Corp. 6. Approve endorsement for Chroma Ate Europe BV. 7. Approve investment in Touch Cloud Co., Ltd. 8. Approve investment in Innovative Nanotech Inc. 9. Approve the credit limit of Taishin International Commercial Bank. 2017.11.02 1. Third quarter of 2017 financial report. 2. Second issuance of insecure convertible corporate bonds in the country in

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exchange for new shares, executive stock option and equity security for the corporation's capital increase. 3. Approve capital loans to Chroma Japan Corp. 4. Approve endorsement to Quantel Private Ltd. 5. Approve capital increase for Adivic Technology Co.,Ltd. 6. Adopted amendments to the "Regulations of the Payroll Compensation Committee Organization," "Integrity Code of Practice," and "Code of Practice for Corporate Governance." 7. It is advisable to pass the amendments to the "Board of Director Meeting Procedure" and "Organizational Rules of the Audit Committee" of the corporation. 2017.12.27 1. Implemented the audit report for ethical corporate management. 2. The corporation is responsible for insurance coverage of all directors. 3. Approve 2018 audit plan. 4. Revised the corporation's "internal control system", "Implementation Rules for Internal Auditing," and the "Code of Integrity Practice Rules". 5. Approve replacement and independent assessment of visa certified public accountants. 6. Approve capital loans of Chroma Systems Solutions, Inc. 7. Second issuance of insecure convertible corporate bonds in the country in exchange for new shares, executive stock option and equity security for the corporation's capital increase. 8. Approve bank credit limit case. 9. Approve Chroma Korea establishment of Korea Branch. 10. Approve investment in Taiwan Advanced Nanotech. 2018.02.22 1. The report of the corporation's external endorsement guarantee in 2017. 2. Report of assessment results that IFRS16 may affect. 3. Approve the annual remuneration of the directors and supervisors of the corporation and attending the board meeting attendance fee. 4. Approve the audit committee members in 2018 cum rewards and attended the audit committee meeting attendance fees. 5. Approve 2018 manager salary adjustment of the corporation 6. Approve 2017 corporation's issuance employee bonus of the corporation. 7. Approve 2017 business report and financial statement of the corporation. 8. Approve 2017 surplus allocation for the corporation. 9. Approve 2017 internal control system statement of the company. 10. Approve capital loans for Chroma Japan Corp. 11. Approve endorsement for the investment in mainland corporation's subsidiaries. 12. Approve amended articles of association of the corporation. 13. Approve 2018 operational plan of the corporation. 14. Approve scheduling of the 2018 annual shareholders' meeting and the issues raised by the shareholders.

(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 Corporation'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.

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4. Certified public accountant fees

(1) Payments to CPA, accounting firm and affiliated company 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	Audit period	Notes
Deloitte & Touche	I-Wen Wang	Wen-Chi Kuo	2017.01.01~2017.09.30	In line with the needs of internal adjustment of Deloitte & Touche
	Chen-Ming Lee	Wen-Chi Kuo	2017.10.01~2017.12.31

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$

Professional charge Fee range	Professional charge Fee range	Accounting charge	Non-accounting charge	Total
1	Less than NT$2,000,000		1,627	1,627
2	NT$2,000,000(inclusive)to NT$4,000,000
3	NT$4,000,000(inclusive)to NT$6,000,000	5,940		5,940
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: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$
Name of the accounting firm	Name of the CPA (Note 1)	Accounting charges		Non-accountingcharge				Period of CPA audit	Notes
			System design	Commercial registration	Personnel resources	Others (Note 2)	Subtotal
Deloitte & Touche	I-wen, Wang Wen-chi,Kuo	4,670				1,050	1,050	2017.01.01~ 2017.09.30
	Chen-ming Li Wen-chi,Kuo	1,270				577	577	2017.10.01~ 2017.12.31

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: Paying for disbursement fees, Subsidiary Checks, Submissions, English Reports, Direct Deduction Checks, Taxation Interpretations, and IFRS 9 & 15 Consulting Fees.

(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.

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5. Replacement of accountants

(1) Information on the previous CPA

(1) Information on the	previous CPA	previous CPA	previous CPA	previous CPA	previous CPA	previous CPA
Date of replacement	Approved bythe Board of Directors on December 27, 2017.
Cause and details of the replacement	In order to meet the needs of the internal position adjustment of Deloitte & Touche, it is proposed to change the visa accountants of the corporation from Yi- Wen Wang Accountant and Wen-Chi kuo Accountant to Cheng-Ming Lee Accountant and Wen-Chi Kuo Accountant since theyear of 2017.
Any details for the termination or rejection of the commissioner or CPA	Party Status				CPA	Authorizer
	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		Generallyaccepted accounting principles(GAAP)or activities
			Disclosure of financial reports
			Scope orprocedure of audits
			Others
	None	
	Details
Other items to be disclosed (items to be disclosed as prescribed by Article 10, Subparagraph 6, Item 1-4 to 1-7)	Not applicable
(2)About the successor CPA
Name of the accountingform Name of the CPA Date of commission 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 reportprior to formal engagement Successor CPA to former CPA Written views on disagreements				Deloitte & Touche
				Cheng- MingLee,Wen-Chi Kuo
				Approved by the Board of Directors on December 27,2017.
				None.
				None.

(3) Response of the former CPAs regarding Article 10, Subparagraph 6, Items 1 and 2-3 of these standards: None.

Corporation's chairperson, General Manager, or any manager 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, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report

7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report	7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report	7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report	7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report	7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report	7. Equity transfer or changes to equity pledge of directors, supervisors, managers, or shareholders holding more than 10% of Corporation shares in the most recent year to the publication date of this report
1. Changes to the equity of directors, supervisors, managers, and major shareholders
Title	Name	2017		For the current year up to April 10, 2018
		Additional (reduction) of ownership	Additional (reduction) of hypothecation	Additional (reduction) of ownership	Additional (reduction) of hypothecation
Chairman and General Manager	Leo Huang	(2,976,000)	0	0	0
Independent director	Quincy Lin	0	0	0	0
Independent director	Tsung-Ming Chung	0	0	0	0
Independent director	Tai-Jen George Chen (Note 1)	0	0	0	0
Director and General Manager of Integrated Systems Division	I-shih Tseng	10,000	0	0	0
Director	Tsun-I Wang	0	0	0	0
Director	Chung-Ju Chang	0	0	0	0
Corporate Director	Fer Mo Investment Co., Ltd. (Note 2)	0	0	-	-
Corporate Director	Chroma Investment Corporation (Note 2)	0	0	-	-
Supervisor	Chi-Jen Chou (Note 2)	0	0	-	-
Corporate Supervisor	Kason Investment Corporation (Note 2)	0	0	-	-
General Manager of the Test & Measurement BU	David Yang	10,000	0	0	0
General Manager of the Business Department	C.C. Ho	(80,000)	0	0	0
Manager of the Intelligent Manufacturing System BU	Joe Lin	9,800	0	(5,000)	0
General Manager, Semiconductor Test Equipment BU	George Chang	43,000	0	20,000	0
Vice president, Finance & Administration Center	Paul Ying	(8,000)	0	0	0
Vice president, Advanced Technology Research Center	Mark Fong (Note 3)	(294,000)	0	-	-
Vice president, Corporate Manufacturing	Steven Liu	8,000	0	0	0
Vice president of the Operation Management Center	Benjamin Huang	(7,000)	0	(12,000)	0
Vice president, R&D Department, Semiconductor Test Equipment BU	Max Chang	(15,000)	0	(20,000)	0
Vice president, Sales Department 1, Integrated System Solution BU	Herbert Tsai	(18,000)	0	0	0
Vice president, General Manager’s Office	C.C. Fan	(44,000)	0	(12,000)	0
Vice president, Planning Department, Test & Measurement BU	Bobby Tseng	(4,000)	0	(45,000)	0
Vice president, Greater China Area Sales Department, Test & Measurement BU	Vincent Chen	(14,000)	0	0	0
Vice president, Technical Service Department, Test & Measurement BU	Tony Yang	6,000	0	0	0
Vice president, R&D Department, Test & Measurement BU	Vincent Wu	(13,000)	0	(10,000)	0
Vice president, R&D Department 1, Integrated System Solution BU	Lance Ouyang	(23,000)	0	0	0
Vice president, Sales Department 2, Integrated System BU	Jeff Lee	17,000	0	0	0

Note 1: 2017.6.8 regular shareholders will re-election to a new office. Therefore, the changes in shareholdings from that date will be provided. Note 2: 2017.6.8 regular shareholders will resign from office, so provide changes in the shareholding up to that date. Note 3: 2018.1.1 was dismissed due to dismissal of the position, so the change in shareholding as of that date was provided.

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2. The relative affiliate of convertible equity for counterparty:

Name (Note 1)	Reason for transfer	Date of Transaction	Counterparty	Relationship between trading counterparties and corporations, directors, supervisors and shareholders with shareholding percentage exceeding 10%	Number of shares	Transaction price
Leo Huang	Gift	2017.12.19	Shu-Chuan Chen	Spouse	3,000,000	Not applicable

Note 1: Fill in the name of the corporation's directors, supervisors, managers and shareholders with shareholding percentage exceeding 10%.

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

Relationship information between the 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 affiliated, spouses, or relatives within the second degree of kinship. (Note 2)	Title or name and relationships of the 10 largest shareholders where they are affiliated, 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	Name	Relations
Leo Huang	20,443,897	4.94%	12,117,362	2.93%	0	0	Shu-Chuan Chen	Spouse
Chun-sheng Chen	15,113,308	3.65%	11,074,646	2.67%	0	0	Yu-Mei Hsueh	Spouse
FIDELITY SELECT PORTFOLIOS:TECHNOLOGY PORTFOLIO	12,638,644	3.05%	0	0	0	0	None.	None.
Shu-Chuan Chen	12,117,362	2.93%	20,443,897	4.94%	0	0	Leo Huang	Spouse
Yu-Mei Hsueh	11,074,646	2.67%	15,113,308	3.65%	0	0	Chun-sheng Chen	Spouse
JPMorgan Chase Bank N.A. Taipei Branch in custody for Universities Superannuation Scheme Limited	9,689,724	2.34%	0	0	0	0	None.	None.
JPMorgan Chase Bank N.A., Taipei Branch in custody for Schroder International Selection Fund-Asian Absolute Return	9,363,000	2.26%	0	0	0	0	None.	None.
JPMorgan Chase Bank N.A. Taipei Branch in custody for Fidelity Central Investment Portfolios LLC: Fidelity Information Technology Central Fund	9,091,018	2.20%	0	0	0	0	None.	None.
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 Emerging Stars Equity Fund	7,262,000	1.75%	0	0	0	0	None.	None.
VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS	6,380,000	1.54%	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.

45 -
Number of shares held and percentage of stake of investment in other corporations by the Corporation, the Corporation’s director, supervisor, managerial officer, or an entity directly or indirectly controlled by the Corporation, 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 corporations invested by this Corporation (Note 1)	Investments by this Corporation		Investments by the Directors, Supervisors, managers, and corporations directly or indirectly controlled by this Corporation		Total investments
	Number of shares	Shareholding percentage (%)	Number of shares	Shareholding percentage (%)	Number of shares	Shareholding percentage (%)
NeworldElectronicsLtd.	64,013	100.0	0	0	64,013	100.0
ADLINK TechnologyInc.	24,502	11.3	0	0	24,502	11.3
ChromaNew MaterialCorp.	25,000	100.0	0	0	25,000	100.0
ChromaInvestment Co.,Ltd.	14,000	100.0	0	0	14,000	100.0
Dynascan Technology Corp.	9,841	27.3	4,841	13.4	14,682	40.7
SENSATIONAL HOLDINGLTD.	1,200	100.0	0	0	1,200	100.0
CHROMA ATE EUROPE BV	1	100.0	0	0	1	100.0
CHROMA ATE INC.	1,000	100.0	0	0	1,000	100.0
CHROMASYSTEMS SOLUTIONS,INC. (Note2)	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 Corp.	20,160	67.2	914	3.1	21,074	70.3
MAS Automation Corp.	10,000	100.0	0	0	10,000	100.0
DeepRed HoldingCo.,Ltd.	215	100.0	0	0	215	100.0
Chroma Japan Corp.	9	100.0	0	0	9	100.0
Chih Ho Shun Development Co.,Ltd.	1,750	35.0	0	0	1,750	35.0
Adivic TechnologyCo.,Ltd.	12,240	51.0	0	0	12,240	51.0
EVT TechnologyCo.,Ltd.	6,644	73.8	112	1.2	6,756	75.0
QUANTEL PRIVATE LTD.	1,914	60.0	0	0	1,914	60.0
Innovative Nanotech Inc.	7,000	89.3	0	0	7,000	89.3
Touch Cloud Co.,Ltd.	5,700	78.1	0	0	5,700	78.1
ADIVIC HOLDING CORPORATION	0	0	1,000	100.0	1,000	100.0
Wei Da 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
Quantel Technologies India Private Ltd.	0	0	65	100.0	65	100.0
Quantel Global Vietnam Co.,Ltd.(Note 3)	0	0	US200	100.0	US200	100.0
Chroma GermanyGmbH	0	0	30	100.0	30	100.0
Sajet System Technology (Suzhou) Co., Ltd. (Note 3)	0	0	US1,200	100.0	US1,200	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 Automation (Nanjin) Co., Ltd. (Note 3)	0	0	US1,338	100.0	US1,338	100.0
Wei Kuang Automation (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's corporation has unissued shares, thus, only sum and the ratio of capital contribution are listed here.

46 -

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	Notes
		Number of shares (thousand shares)	Sum (thousand dollars)	Number of shares (thousand shares)	Sum (thousand dollars)	Source of shares	Equity contributions made in the form of assets other than cash	Others
1996.08	10	70,000	700,000	54,365	543,650	Recapitalization of retained earnings	None.	Note 1
1997.08	10	100,000	1,000,000	79,300	793,000	Recapitalization of retained earnings: NT$ 149,350,000 Cash capital increase: NT$ 100,000,000	None.	Note 2
1998.06	10	150,000	1,500,000	115,200	1,152,000	Recapitalization of retained earnings: NT$ 259,000,000 Cash capital increase: NT$ 100,000,000	None.	Note 3
1999.05	10	200,000	2,000,000	152,160	1,521,600	Recapitalization of retained earnings: NT$ 312,000,000 Recapitalization of capital reserve: 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 reserve: 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 reserve: 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 reserve: 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 reserve: 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	None.	Note 16

47 -

						warrants: NT$ 12,760,000
2006.10	10	360,000	3,600,000	285,154	2,851,542	Stocks converted from stock warrants:NT$ 8,100,000	None.	Note 15
2007.01	10	360,000	3,600,000	286,378	2,863,779	Stocks converted from stock warrants:NT$12,240,000	None.	Note 15
2007.03	10	360,000	3,600,000	287,410	2,874,099	Stocks converted from stock warrants: NT$ 10,320,000	None.	Note 15
2007.08	10	400,000	4,000,000	302,311	3,023,114	Recapitalization of retained earnings: 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$ 40,000	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 convertedfromstock	None.	Notes 22 and 23

48 -

						warrants: NT$ 9,350,000
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
2017.05	10	450,000	4,500,000	405,090	4,050,904	Stocks converted from convertible corporate bonds: NT$ 149,580,000 Stocks converted from stock warrants: NT$ 2,450,000	None.	Notes 22 and 23
2017.06	10	450,000	4,500,000	405,275	4,052,754	New restricted employee equities: NT$1,850,000	None.	Note 24
2017.07	10	450,000	4,500,000	405,263	4,052,631	Write-off limit employee rights newsharesNT$120,000	None.	Note 24
2017.08	10	450,000	4,500,000	408,051	4,080,513	Stocks converted from convertible corporate bonds: NT$ 27,220,000 Stocks converted from stock warrants: NT$ 670,000	None.	Notes 22 and 23
2017.11	10	450,000	4,500,000	409,410	4,094,101	Stocks converted from convertible corporate bonds: NT$ 4,300,000 Stocks converted from stock warrants:NT$ 9,290,000	None.	Notes 22 and 23
2018.01	10	450,000	4,500,000	411,894	4,118,942	Stocks converted from convertible corporate bonds: NT$ 20,420,000 Stocks converted from stock warrants: NT$ 4,430,000	None.	Notes 22 and 23
2018.04	10	450,000	4,500,000	414,079	4,140,791	Stocks converted from convertible corporate bonds: NT$ 220,000 Stocks converted from stock warrants:NT$21,630,000	None.	Note 25

Note 1. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (85) Taiwan-Finance-Securities (I) 41514 of July 8, 1996 Note 2. Approved by the Securities and Exchange Commission, Ministry of Finance per letter Ref. No. (86) Taiwan-Finance-Securities (I) 45915 of June 25, 1997

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

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

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-Finance-Securities (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-Finance-Securities (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-Finance-Securities (I) 143348 of July 16, 2001; Taiwan-Finance-Securities (I) 0910132478 of June 14, 2002; and Taiwan-Finance-Securities (I) 0920127281 of June 19, 2003.

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-Securities-Corporate-0980027677 of June 5, 2009.

Note 20. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities-Corporate-0990029749 of June 9, 2010.

Note 21. Approved by the Financial Supervisory Commission, Executive Yuan per letter Ref. No. Financial-Supervisory-Securities-Corporate-1000028222 of June 20, 2011.

Note 22. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1030012130 of April 17, 2014. Note 23. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1010042558 of September 17, 2012. Note 24. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1050024281 of June 27, 2016. Note 25. Approved by the Financial Supervisory Commission per letter Ref. No. Financial-Supervisory-Securities-Corporate-1030012130 of April 17, 2014, 1010042558 of September 17, 2012, 1040036382 of September 7, 2015. (Changes to capital sum not yet implemented)

49 -

Unit: Shares April 10, 2018

				Unit: Shares April 10,2018
Category of shares	Authorized stock			Notes
	Outstanding shares (listed)	Unissued shares	Total
Common shares	414,079,105	35,920,895	450,000,000	30,000,000 shares were reserved for employee purchase of stock warrants.

Information on the shelf registration system: None.

(2) Shareholder structure

(2) Shareholder structure	(2) Shareholder structure
		April 10,2018
Shareholder structure Quantity	Government agencies	Financial institutions	Other artificial persons	Individuals	Overseas institutions and individuals	Total
Number of individuals	5	97	48	9,375	502	10,027
Shares held	4,549,000	29,927,492	17,487,486	101,578,123	260,537,004	414,079,105
Shareholding percentage	1.10%	7.23%	4.22%	24.53%	62.92%	100.00%

(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 10,2018
Shareholdingrange	Number of shareholders	Shares held	Shareholding percentage
1 to 999	4,302	798,843	0.19%
1,000 to 5,000	4,142	7,648,196	1.85%
5,001 to 10,000	519	3,962,426	0.96%
10,001 to 15,000	218	2,694,695	0.65%
15,001 to 20,000	97	1,757,696	0.42%
20,001 to 30,000	115	2,873,607	0.69%
30,001 to 50,000	113	4,532,277	1.10%
50,001 to 100,000	133	9,988,946	2.41%
100,001 to 200,000	118	17,355,019	4.19%
200,001 to 400,000	106	31,202,689	7.54%
400,001 to 600,000	31	15,250,445	3.68%
600,001 to 800,000	35	24,698,784	5.97%
800,001 to 1,000,000	12	10,610,207	2.56%
1,000,001 or more	86	280,705,275	67.79%
Total	10,027	414,079,105	100.00%

Preferred shares: None.
50 -

(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:

(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:	(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:	(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 10,2018
Shares Name of major shareholder	Shares held	Shareholding percentage
Leo Huang	20,443,897	4.94%
Chun-sheng Chen	15,113,308	3.65%
FIDELITY SELECT PORTFOLIOS:TECHNOLOGY PORTFOLIO	12,638,644	3.05%
Shu-Chuan Chen	12,117,362	2.93%
Yu-Mei Hsueh	11,074,646	2.67%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Universities Superannuation Scheme Limited	9,689,724	2.34%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Schroder International Selection Fund-Asian Absolute Return	9,363,000	2.26%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Fidelity Central Investment Portfolios LLC: FidelityInformation TechnologyCentral Fund	9,091,018	2.20%
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Nordea 1 Emerging Stars EquityFund	7,262,000	1.75%
VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS	6,380,000	1.54%

51 -

(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	2016	2017	From current year to March 31,2018
Market price (Note 1)	Maximum		90.80	188.00	186.00
	Minimum		58.40	75.40	140.00
	Average		78.08	121.12	166.06
Net asset value per share (NAVPS)	Before issuance		27.23	32.12	-
	After issuance		23.86	-	-
Earnings per share (EPS)	Weighted average		379,930,027	399,051,822	-
	Earnings per share (EPS)		4.53	6.41	-
Dividend per share (DPS)	Cash dividend		3.3	4.5(Note 5)	-
	Free Allotment	Surplus allotment	-	-	-
		Capital reserve allotment	-	-	-
	Cumulative	unpaid dividends	-	-	-
Return on investment Remuneration Analysis	Price-to-earning (P/E) ratio (Note 2)		17.24	18.90	-
	Price-to-dividend (P/D) ratio (Note 3)		23.66	26.92	-
	Cash dividendyield(Note 4)		4.23	3.72	-

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 2017 shall be finalized according to the resolutions of the annual shareholders’ meeting of 2018.

(6) Dividend policy of the Corporation 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. Where such legal reserve amounts to the total authorized capital, this provision shall not apply. 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 Corporation has no surplus.

Where this Corporation 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 pay-out shall be implemented according to the business condition of this Corporation and consider both future capital budgets and capital requirements of future development plans of this Corporation as well as the shareholders’ interests. The Board of Directors shall formulate the category and sum of dividend pay-out which shall, by principle, be no less than 60% of the net income after tax (NIAT) of the year. Dividend

52 -

pay-out ratios of the corporation were 70% and 73% for the 2017 and 2016 respectively. Since this Corporation is still in the growing phase, capital requirements of future development plans of this Corporation 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 pay-out plans proposed during the most recent shareholder's meeting
Surplus distribution plans 2017 for this Corporation was reviewed by the Board of
Directors on February 22, 2018 to propose a shareholder cash bonus of NT$ 4.5 dollars per share. This proposal was passed in the 2018 shareholder's meeting and distributed accordingly.

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 pay-out 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 Corporation'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 corporation 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) According to provisions of the corporation's articles of association as well as past experience on the sum that may be distributed, in 2017, the sum for the employees’ compensation and the directors’ and supervisors’ compensation amounted to NT$ 310,000,000 and NT$ 9,600,000 respectively, making up for 9.73% and 0.35% of net income before taxes (deduct the employees’, the directors’ and supervisors’ compensation) thus, 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,
53 -

and disposition of the discrepancy shall be disclosed:

On February 21, 2018, the Board of Directors of the corporation has approved cash distributions of NT$ 310,000,000 and NT$ 9,600,000 for employees’ compensation and the directors’ and supervisors’ compensation respectively. There was no discrepancy with the recognized expenses 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.

Previous year's 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: 2016 actual cash bonus from the corporation is NT$ 300,000,000 for employees

and NT$ 8,000,000 for directors and supervisors, no discrepancy between the actual sum distributed and the recognized sum.

(9) Repurchase by the Corporation of its own shares: None.
54 -

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		NT$ 100,000
Place of issuance and transaction (Note 1)		Taiwan
Issuing price		Issued at par value
Sum		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 Corporation, or refer to Article 19 to exercise the right to put the bond, or refer to Article 18 and request this Corporation to redeem the bond before expiration, or buy back cancelled 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$100,500,000(as of April 10, 2018)
Articles for redemption or early liquidation		Please refer to the regulations governing the issuance and conversion of the second unsecured convertible corporate bonds of this Corporation
Restricting provisions (Note 2)		None.
Name of credit rating agency (CRA), rating date, and results of corporate bond ratings		None.
Other rights	Total value of bonds already converted to common shares, overseas depositary receipt, or other marketable securities up to the publication date of this report	From the issuing date to April 10, 2018, creditors have requested the conversion of corporate bonds into 28,181,841 common shares of the corporation.
	Regulations for distribution and conversion	Please refer to the regulations governing the issuance and conversion of the second unsecured convertible corporate bonds of this Corporation.
Possible dilution of equity or impact to the shareholders’ equity caused by regulations on the issuance and conversion, exchange, or subscription to stocks		A total of two billion New Taiwan Dollars (NT$ 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 Corporation’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 Corporation’s operation privileges and earnings per share (EPS).
Name of commissioned custodian of exchangeable underlying		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.

55 -

(2) Information of the convertible corporate bonds

Type of corporate bond		Second issuance of unsecured convertible corporate bonds in Taiwan	Second issuance of unsecured convertible corporate bonds in Taiwan	Second issuance of unsecured convertible corporate bonds in Taiwan
Year Item		2016	2017	From this year to April 10,2018
Market price of the convertible corporate bond	Maximum	129.50	265.00	282.00
	Minimum	104.00	113.80	255.00
	Average	119.54	136.10	267.41
Conversionprice		69.3~67.2	67.2~64.9	64.9
Conversion price at the date of issuance (placement)and duringissuance		2014.05.23 NT$74.2
Method for exercising conversion obligations		Issuance of new shares

Preferred shares: None.
Overseas depositary receipt: None.
Operations of evidence of executive stock option
(1) Status of employee stock warrants of the Corporation that have yet to mature

		April 10,2018
Category of employee stock warrant	Employee stock warrant for 2012	Employee stock warrant for 2015
Date of effective registration	September 17,2012	September 7,2015
Issuance Date	July8,2013	March 25,2016
Quantityissued	6,000,000 units	7,900,000 units
Ratio of subscription shares to total issued and outstandingshares(%)	1.4567	1.9180
Warrant exerciseperiod	6 Years	6 Years
Method for exercisingthe warrant	Issuance of new shares	Issuance of new shares
Restrictions on the warrant exercise period and exercise ratio (%)	Exercise period and ratio that	Exercise period and ratio that
	may be exercised 2 years 40% 3 years 70% 4years 100%	may be exercised 2 years 40% 3 years 70% 4years 100%
Number of shares already obtained through exercise of warrant rights	3,942,400 shares	1,922,300 shares
Total value of shares already obtained through exercise of warrant rights	NT$189,573,550	NT$121,873,820
Cumulative expired subscriptions	384,800 shares	350,000 shares
Number of unsubscribed shares	1,672,800 shares	5,627,700 shares
Subscription price per share of the unsubscribed shares	NT$ 46.7	NT$ 63.4
Proportion of unsubscribed shares Ratio of issued shares(%)	0.4061	1.3663
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 equity would 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 equity would be limited.

56 -
(2) Names, acquisition, and subscription of managers 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

	publication of the prospectus	publication of the prospectus	publication of the prospectus	publication of the prospectus
					April 10,2018
	Title (Note 1)	Name	Stock subscriptions obtained (thousand shares) (Note 2)	Proportion of subscribed shares acquired of total issued and outstanding shares (%) (Note 4)	Implemented				Notyet implemented
					Number of subscribed shares (thousand shares)	Price of subscribed shares (NT$) (Note 5)	Total value of subscribed shares (thousand NT$)	Proportion of the quantity of subscribed shares of total issued and outstanding shares (%) (Note 4)	Quantity of unsubscribed shares (thousand shares)	Price of unsubscribed shares (NT$) (Note 6)	Total value of unsubscribed shares (thousand NT$)	Proportion of the quantity of unsubscribed shares of total issued and outstanding shares (%) (Note 4)
Managers	General Manager	Leo Huang	1,350	0.3278	350	46.7~ 49.9	16,892	0.0850	1,000	46.7	46,700	0.2428
	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 (Note 7)
	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	Chin-Fu Huang	993	0.2411	473	46.7~ 63.4	24,369	0.1148	520	46.7~ 63.4	31,298	0.1262
	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 managers 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 16, 2018 indicated 411,894,236 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. Note 7: Retired on 2018.3.31.

57 -

6. Operations of restricted employee shares

(1) Implementation of new restricted employee shares

April 10, 2018

		April 10, 2018
New restricted employee equities and categories	1st issuance of new restricted employee shares of 2016	2nd issuance of new restricted employee shares of 2016
Date of effective registration	June 27,2016	June 27,2016
First issued	July 8, 2016	June 20, 2017
Number of Restricted employee shares Issued	3,100,000 shares	185,000 shares
Price at issuance	NT$10	NT$10
Proportion of new restricted employee equities issued as part of total equities that have been issued(%)	0.7526	0.0449
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 fulfil overall financial performance of this Corporation and personal performance assessment indicators. The proportion of shares that may be issued according to the fulfilment 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% 4years: 40%	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 fulfil overall financial performance of this Corporation and personal performance assessment indicators. The proportion of shares that may be issued according to the fulfilment 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% 4years: 40%
Restrictions and privileges for receiving new restricted employee equities	1. An employee may not sell, pledge, transfer, and provide as a gift to other party, set up or using other means to dispose the new restricted employee shares. 2. New restricted employee shares may partake in dividend pay-outs and cash capital increase subscriptions. Dividend pay-out that may be acquired is not subject to vesting period restrictions. Dividend pay-out 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 fulfil vesting conditions, attendance, proposal,speech,votingrights,and	1. An employee may not sell, pledge, transfer, and provide as a gift to other party, set up or using other means to dispose the new restricted employee shares. 2. New restricted employee shares may partake in dividend pay-outs and cash capital increase subscriptions. Dividend pay-out that may be acquired is not subject to vesting period restrictions. Dividend pay-out 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 fulfil vesting conditions, attendance, proposal,speech,votingrights,and

58 -

	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.	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.	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.	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	66,300 shares	0
Quantity of new restricted equities that were extinguished	297,700 shares	0
Quantity of new restricted equities notyet extinguished	2,736,000 shares	185,000 shares
Ratio of Restricted rights shares to total Issued shares	0.6642	0.0449
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, and will not significantly affect the stockholders' equity.	According to the period and ratio of vesting conditions listed in the Issuance Methods, the overall assessment of the corporation's earnings per share from year 2017 to 2021 is still limited, which will not have a significant impact on stakeholders' equity.

59 -

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

					April 10,2018	April 10,2018	April 10,2018	April 10,2018	April 10,2018	April 10,2018	April 10,2018	April 10,2018
	Title (note 1)	Name (Note 1)	New restricted employee shares acquired (thousan d shares)	Proportion of new restricted employee equities issued as part of total equities that have been issued (%) (Note 3)	Restricted equities that were extinguished				Restricted equities notyet extinguished
					Quantity of shares that were no longer restricted (thousand shares)	Publisher Price (NT$)	Publisher Sum (thousand dollars)	Proportion of shares that were no longer restricted as part of total equities that have been issued (%) (Note 3)	Quantity of shares that have remained restricted Number of shares (thousand shares)	Publisher Price (NT$)	Publisher Sum (thousand dollars)	Proportion of shares still restricted as part of total equities that have been issued (%) (Note 3)
Managers	General Manager	Leo Huang	1,340	0.3253	133	10	1,328	0.0322	1,152	10	11,520	0.2797
	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 (Note 4)
	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	0.1262	50	10	496	0.0120	468	10	4,680	0.1136
	Employee	Amy 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) (Change registry information at the MOEA on January 16, 2018 indicated 411,894,236 shares) Note 4: Retired on 2018.3.31.

60 -
Status of mergers and acquisitions or issuance of new shares for the purpose of acquiring the shares of another Corporation: None.
Implementation of capital application of funds
(1) Contents of the plan
- Where various issuance or private placement of securities have yet to be completed, or have been completed in the 3 most recent 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: 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$
Item	~~E~~xpected ~~d~~ate of ompletion	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
Constructi on factory buildings	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 Corporation. Expected increase in production volume, value, profitability, and net operating profit are provided in the following:

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

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(2) Status of implementation

Unit: Thousand NT$

					Unit: Thousand NT$
Project items	Status of implementation		The season of the first quarter of 2018	until 2018 Quarter 1	Progress is ahead of schedule or behind schedule, and improvement plans
Construction factory buildings	Expenses	Expected	－	2,180,372	Due to the delay of land requisition by the government, the land will be transferred by stages after negotiated in the third quarter of 2015. The factory began the construction afterwards. At present, it has passed the application for construction, and in the first quarter of 2018, the corporation paid for the construction project, the fourth phase of the project supervision, the first to third phase of the electrical and mechanical engineering, the application fee for the green building mark, and green building consultant fee, etc. The corporation's factory building is expected to be completed in 2019. Although the progress falls behind, the construction of the factory building is still going according to plan and no serious complications for now.
		Actual	179,850	613,688
	Progress	Expected	`－`	100.00%
		Actual	8.24%	28.14%
Total	Expenses	Expected	`－`	2,180,372
		Actual	179,850	613,688
	Progress	Expected	`－`	100.00%
		Actual	8.24%	28.14%

The second issuance of the domestic non-guaranteed convertible corporate bond plan for the construction of the factory was delayed due to land requisition by the Ministry of the Interior. After negotiation, the land was transferred to the phased point and the plant construction plan was started in the third quarter of 2015. In the first quarter of 2018, the corporation paid for the construction project, the fourth period of construction supervision, the first to third period of the electromechanical engineering, the application fee for the green building mark, and the green building consultant payment, etc. NTD.613, 688,000, the cumulative progress of the implementation of funds was 28.14%.

(3) Gap analysis for expected and actual benefits

Due to delays in the land requisition by the Ministry of Interior, after negotiations, the land will be transferred by stages. As of the end of 2018 Quarter 1, the construction progress of the factory has now obtained the license issued by the competent authority, and construction of the license has started. Therefore, the actual funds are used and the reason for the delay in the benefits compared with the scheduled benefits is still reasonable.

62 -

V. Operation summary

1. Business content

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

The corporation and its subsidiaries are principally engaged in the design, assembly, manufacture, sale, repair and maintenance of computers and peripheral hardware and software, automation test systems, electronic test equipment, signal generators, power supplies and communication power supply equipment. , corrections and agency, special materials trading, automation transportation engineering equipment design, manufacturing and installation. Current production lines include: 1. Measurement instruments and equipment; 2. Special materials; 3. Automatic conveying and engineering equipment.

Proportion of each business Consolidated revenue:

	Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$	Unit: Thousand NT$
Year Product category	2016		2017
	Sum	Proportion of revenue(%)	Sum	Proportion of revenue(%)
Measurement instrument and equipment	8,587,377	73.87	9,872,816	66.25
Special materials	2,269,057	19.52	2,054,568	13.79
Automatic conveying and engineering equipment	382,288	3.29	2,538,348	17.03
Others	385,647	3.32	435,614	2.93
Total net operating revenue	11,624,369	100.00	14,901,346	100.00

Current products of the Corporation
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. Automatic testing system for power supplies
7. High voltage DC power supplies
8. Computer Graphical User Interface
Video and color testing solution
1. Video signal image generator
2. Color analyzer
3. Video colorimeter and brightness meter
4. Video source imaging goniometer
5. Two-axis goniometer
6. Display testing solution
7. LED screen correction system
8. Illuminated keyboard testing
Passive components testing solutions
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LCR meter / automatic testing system for transformers
Electrolytic capacitor tester
High frequency AC tester
Milliohm meter
Component Test Scanner
Passive Component ATS
Microchip inductor production testing
HIOKI (TOA-DKK)
Flat panel display testing solutions
Flat panel display tester
OLED test system
Display testing solution
8K SHV testing solution
Electrical regulatory testing solution
Multi-purpose 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
LED / illumination & driver test solutions
LED total power test system
ESD 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 cooling chip controller
Temperature recorder
Hybrid 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
1.Automatic diagnostics and testing system for power electronics and devices
2.Battery test system
3.DC power source
4.AC power source
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5.Electronic load
6.Motor test
7.Automatic transformer test system / automatic component analyser
Automated optical inspection solution
1.Optical profiler
2.Solar cell AOI system
3.Automatic optical testing system
4.LCD / display AOI system
Photonics Test Solutions
1.Chip level testing
2.Packaging level testing
Smart manufacturing system solutions
Manufacturing execution system (MES) solution
-Turnkey measurement and automated solutions
Production line automation assembly and testing
-PXI measurement and test solution
General PXI equipment
PXI semiconductor / IC test system
PXI LED test system
-RF and wireless measurement and test solutions
Wireless test solutions
RF recorder / player
GPS signal simulator
Other solutions and services
Electric vehicle powertrain solution
General purpose test equipment
New products under development
－ Next generation high power/high speed Solar Array Simulator
－ Next generation high power density and constant power DC Source
－ Next generation bi-direction DC cross-cutting module platform
－ Next generation high power Energy Recycling AC Load Simulator
－ Ultra-high precision coulombic efficiency measurement system
－ High bandwidth hybrid type recycling Linear Load
－ Next generation 10K5K flat panel display tester
－ Third generation 8.1G video pattern generator for DP1.3
－ Next generation bi-direction charger for battery cell testing.
－ Next Generation Super Capacitor Automatic Burn-in System
－ High speed and high current Insulation Tester with partial discharge measurement function.
－ Semiconductor advanced packaging optical metrology system
(2) State of the industry
Current state and development of the industry
A. Instruments business
Information and electronic technology continues to develop, and its application area continues to expand, from home appliances to the internet, bicycle navigation, electric vehicles to smart driving and even unmanned vehicles. The financial industry transferred money from ATM to Internet to mobile payment, to the issuance of virtual currency, face identification from fingerprint recognition to 3D sensing, many
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applications thrived, resulting in a shortage of raw materials. The industry has accelerated the investment in new product replacement equipment, which has led to an increase in demand for instrumentation and automation equipment. In particular, integrated automation equipment is a tool for the manufacturing industry to decrease Labor costs and increase efficiency, boosting the willingness of manufacturers to expand, and the instrument industry following this development trend has introduced test automation to help the industry improve test efficiency and test reliability. It is also hopes that product upgrades will drive the demand for manufacturing equipment upgrades and create a new high in 2017 for the instrument and automation industry.

Power electronics testing solution
Power supplies represent a basic and core component of electronic equipment and are widely employed in various electronic products such as PC, servers, rechargers, displays, and industrial power supplies.
Mobile communications, mobile power, mobile charging and battery industries are all booming. Also, for the LED industry, solar photovoltaic and automotive electronics, power supplies are of critical components for them, leading to emergence demand for related power supply test equipment. Power supply test equipment provided by this Corporation and its subsidiaries could be used for PC / servo / Telecom power sources, rechargers, backlight inverter, LED lighting, photovoltaic, and electric vehicle rechargers. In response to the increasingly ubiquitous automation of manufacturing, this Corporation also independently developed automatic testing systems for power supply as well as a software platform with powerful functions. These solutions were in-built with common test items and can be employed to create production lines with competitive advantages. Due to the fact that the product is widely used, it is able to maintain a stable development in the manufacturing lines.
Video and color testing solutions
As Japan's NHK began testing its Super 8K (Super-Hi Vision) ultra-high-definition resolution video in August 2016, the display area will officially enter the 8K era in the 2020 Tokyo Olympics. The video and color test solution must be launched by the panel industry to meet the needs of the 8K SHV resolution (7680x4320 / 8192 x 4320). At the same time, a modular architecture design must be adopted to flexibly collaborate with different signals or power modules to freely combine the required test conditions. The flexibility is high and the scalability is strong. It supports a variety of mainstream industry communication interfaces to cope with the development of the industry.
Passive Component Test Solution
After many years of consolidation and conservative expansion, the passive component industry has experienced severe supply shortages as demand has increased, prompting manufacturers to accelerate capacity expansion, reduce labor costs, human errors, and improve data management, quality, and efficiency. Therefore, it provides a new automated test technology for passive components and safety test. It consolidates multiple test machines into one, such as the 11022 LCR Meter dual-frequency test function. For electrolytic capacitors and plastic film capacitors, a single unit can complete different frequency measurements. Reduce test stations. The automatic component testing system provides multi-step and multi-channel test programs to meet diverse test applications.
Semiconductor / IC testing solutions
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Semiconductor products are the locomotives of the telecommunications industry. As a result, China has been developing the semiconductors industry in recent years. The demand for semiconductor-related test equipment in the Chinese market has increased significantly, and with the expansion of semiconductor applications in recent years, the demand for semiconductor equipment has greatly increased. Therefore, a variety of test programs are available in order to carry out the parallel tests that will be increasing the amount of output per unit of time and this is a test equipment manufacturer's R&D trend. Therefore, the customized test equipment can directly meet the needs of replacing expensive general-purpose testers to achieve the goal of low cost.

Battery Test & Automation Solution
When air pollution seriously harms life, how to reduce waste has become an important issue for urban development. In order to solve the air pollution problem, China has developed the electric vehicle industry on a large scale in recent years. With the support of national policies for electric vehicles, the market demand for power batteries are in huge increase, but related accidents are also common, so the issue of battery safety will become even more important. The corporation has long been committed to the field of new energy, and continues to work hard for testing automation and efficiency of the battery industry to provide customers with battery cells, modules, and batteries. Group and battery system performance, environmental reliability and security test testing and certification services. The key factor in the evolution of electric vehicles depends on the advancement of battery function. Battery reliability became increasingly important, the quality and stability of the batteries not only affects the range of electric vehicles, but also their safety, thus battery automation testing is an important part of the current development for electric vehicles.
－ Solar Photoelectric Test Solution
The solar energy industry has been affected by EU anti-dumping duties in the EU in recent years. The development has been unsatisfactory. However, in 2017, China actively developed green energy policies, promoted solar power generation, and the solar energy industry expanded its factory response. As a result, the demand for solar automation equipment increased significantly. The corporation and its subsidiaries in response to the development of trends, the efficiency lar automated test equipment has been continuously improved to respond to this development.
B. Special materials
In recent years, the technical problems with copper wire encapsulation have gradually been overcome and improved, and the downstream package manufacturers have accelerated the introduction and attestation of copper wire packages. Most of the packaging wire materials have been replaced by copper wires instead of gold wires. The subsidiary corporation, Chroma New Material Corp. will combine the technical services from Japan's NIPPON MICROMETAL CORPORATION to enhance the value-added of its products in order to consolidate the market share of the high-tech threshold packaging products in the Taiwan market.
Correlation with upstream, midstream, and downstream sections of the industry
A. Measurement instrument and equipment
Such products would be part of the test instrument 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
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Corporation and its subsidiaries, and the final products are then marketed and sold to customers under this Corporation’s brand name. This Corporation and its subsidiaries offer an extensive selection of solutions for product testing and validation purposes to customers from many fields such as video surveillance, passive components., LCD modules, LED, semiconductor, photovoltaic (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
- The main products in special materials business are gold wires, copper wires, leadfree solder balls, bonding wires of gold wire and copper wires for semiconductor packaging and wire bonding, the primary business engaged by subsidiary corporation, Chroma New Materials Corp., is special materials trading industry, and the downstream industry would be IC packaging industry.
C. Automatic conveying and engineering equipment
- With the combination of metrology equipment, automation systems, and MES software capabilities to provide customers with automation solutions (Turnkey Solution). The various main products of MAX Automation Corp., a subsidiary corporation, are photovoltaic (PV) automated production and system integration, TFT-LCD automated production and system integration, and cleanroom equipment planning and system integration.
Development trends and competition for various products
A. Development trends of various products
- (A) Instruments business
  - Power electronics testing industry

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

Low voltage load characteristics and high current switching technology in response to point-of-load converter power supply and fast switching properties.
Input distortion simulations and electrical grid distortion simulations in response to statutory requirements for the testing of power supplies.
Discontinuous, low power measurements in response to energy saving requirements of power supplies under standby mode.
AC power supply with high potential and high current to reduce the requirement for DC power supply with DC/DC converter input, helping to reduce testing costs.
High potential, high frequency testing technology and low parasitic
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capacitance testing jigs for LCD Inverter testing are capable of greatly improving testing speed and stability.

Network data capture functions to that manufacturers can promptly enact production capacity controls and analyses quality statistics.
Video testing
The display industry continues to develop with high resolution. With the NHK's 8K (Super-Hi Vision) ultra-high-definition video broadcasting test started in August 2016, the display area will officially enter the 8K era in the 2020 Tokyo Olympics. Therefore, the display's resolution and interactive functions are important, and thus rely on test equipment to provide quality assurance. Product development trend adopt modular architecture design, match different signal or power module, freely combine required test conditions, high elasticity, strong expandability, support multiple mainstream industry communication interfaces, provide panel industry and display industry 8K ultra high definition resolution (7680x4320/8192x4320) to fulfill he need for testing solutions to meet the needs of today's and future video-industry applications.
Passive components testing
Electronic products are becoming lighter, thinner, and smaller. As a result, the manufacturing, R&D, and quality of passive components within these products also focused upon high efficiency and precision levels. The following describes the trends for 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 fulfil their testing requirements, as well as provision of comprehensive technical support.
Providing network data capture functions to that manufacturers can promptly enact production capacity controls and analyses quality statistics.
Electric vehicle / battery test equipment
The most important components of mobile devices and electric vehicles are battery modules. The reliability of battery modules is related to safety issues. Therefore, battery reliability testing is very important, and battery production is extremely energy-consuming. Therefore, it provides energy-saving, highefficiency, and high-efficiency. The stability and safety of automated instrument products have become an important trend in the development of the instrument industry.
Semiconductor / IC testing solutions
Since the manufacturing industry began to develop the trend of intelligent manufacturing of Industry 4.0, the combination of integrated test equipment and automation has become a challenge for the instrument industry. The corporation and its subsidiaries have actively integrated electronics, motors, machinery, and software in order to respond to the development of trends. Integrated technologies in various fields such as information and communications provide comprehensive test solutions for different semiconductor products in
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production and process. 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.

Photonics Test Solutions
- Since Apple Computer released the facial recognition function into the IPhone X, it has shocked the scientific community. Its key laser diode has become an important element for 3D sensing and has recently been widely used, especially in face recognition. In the field of unmanned vehicles and current optical communications, as the demand for laser diodes increases, the quality and reliability of laser diodes are relatively focused. Therefore, the demand for various related test instruments is in the ascendant. The photonics test solution mainly includes a laser diode chip section and an optical communication active component packaging section.
(B) Special materials

The following lists major development trends in IC packaging wire materials and technologies in response to 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 of the final product.

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

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

  - B. Product competition

     - 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 Corporation and its subsidiaries to achieve leading positions in various product technologies. However, as new products were constantly released, this Corporation must also improve its R&D technologies for its instruments and products to maintain certain advantages for these products. However, many electronic industries had moved their bases overseas and there was an increasingly severe issue of counterfeiting in the 3rd district. Products of this Corporation and its subsidiaries became subject to price competitions from these counterfeit goods. To maintain competitive advantages, this Corporation and its subsidiaries invested significant efforts to apply for patents and safeguard the value of the brand. As production processes become increasingly automated, integrated testers and automatic equipment will provide instrumentation industries with high levels of competitive advantages.

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

		Unit: Thousand NT$
Item/ year	2016	2017
R&D expenses	1,034,541	1,212,383
Net operatingrevenue	11,624,369	14,901,346
Proportion of R&D expenses of net operatingrevenue
	9%	8%

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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 LED die tester

◎63200A/63200E high power DC electronic load

◎58158 high speed LED luminaires in-line test system

◎61509/61609 programmable AC power source

◎58212-C LED mapping probe tester

◎63200 digital power meter

◎58690/58691 TO-CAN laser diode burn-in test system model

◎7925 TO-CAN package inspection system

◎7940 water inspection system

◎8000 electric vehicle AC charging compatibility ATS

◎8700 battery module production line automatic testing system

◎11050 high frequency LCR meter

◎19301A impulsing winding tester

◎17011 programmable regenerative battery charge / discharge test system

◎17020/17040 regenerative battery pack test system

◎1870D inductance test packager

◎3730-E solar cell automated inspection test and efficiency sorting system

◎7200 automatic optical solar cell water / battery cell inspection module

◎1871 automatic inductance-layer short-circuit tester

◎3380D VLSI test system
◎3680 SoC / Analog test system
◎3110-FT full-range active thermal control handler
◎58604 TO-CAN/CoC burn-in test system
◎3160C full-range four-station terminal thermal control handler
◎33010PXIe digital IO Card
Future R&D plans

Trends of recent IT developments include 3D applications, smart communications, and the development of the Internet of Things, using wireless communications to support various devices, going in to the era of electric vehicles, unmanned vehicles, and smart cities. Thus, the manufacturing industry has 4.0 and the financial industry has 3.0 various industries hopes to employ the latest technologies to improve performance and generate additional profits.

Therefore, the corporation's research and development plan has also evolved with

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various industries, promoting the related automation equipment of Industry 4.0 and the development and integration of Turnkey Solution products, and the establishment of Industry 4.0 smart manufacturing related solutions. In response to the trend of the Internet of Things (IoT), electric vehicle-related equipment and test equipment, battery testing equipment, wireless communication testing equipment, as well as test equipment that meets VR and AR requirements are developed. This Corporation and its subsidiaries are also dedicated to the R&D of products related to Clean Technology with the aim of developing relevant automatic test equipment.

(4) Long- and short-term business development plans
Short-term development plans
(1) Deepening global customers and increasing market share of each product. The corporation knows that marketing products to customers at the global level and obtains the certification of the first-class customers is a strong guarantee for the corporation's product quality, which helps open the product's popularity, facilitates the promotion of the product to the market, and enhances the market share of each product.
(2) Accelerate innovation, develop turnkey solution products, and establish solutions related to Industry 4.0 and smart manufacturing Major industrial countries are promoting the emergence of industrial 4.0 smart manufacturing, and the Industry 4.0 smart manufacturing offers much more possibilities for manufacturing to the United States. Therefore, the corporation will invest in big data analysis in 2017. Touch Cloud will deepen its efforts in machine learning and deep learning. It will use AI technology to intelligence measurement equipment, alert the health status of equipment, and combine AI technology with smart manufacturing. Intelligent Manufacturing System helps customers execute big data analysis and forecast during manufacturing to improve the process, accelerate the development of "precision, reliable and unique" measurement solutions and Turnkey Solution to meet future market demands.
(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 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 operational scale.
Long-term development plans
The long-term goal of the corporation is to “proactively develop world-class products and strive to become a world-class enterprise” and it is the vision for the corporation's growth. World-class products are "precise, reliable and unique", providing customers with more valuable test solutions to various electronic technology industries, while world-class corporations are advancing toward the three major principles of "innovative technologies, private brands, and internationalization." . Thus, the corporation invests a lot in R&D each year to ensure that it's leading key technologies and highly integrated capabilities are in optics, machinery, electronics, temperature control and software in
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order to maintain the corporation's competitive advantages and growth, and achieve the goal of sustainable development.

(1) Marketing plans
Global specialization of industries meant that the production centers of IT industries have started to expand outwards. In order to provide customers with the services of the highest quality, this corporation and its subsidiaries also 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 corporation's brand name products. Meanwhile, this corporation also worked with sales networks and formed strategic alliances with renowned global brands to provide agency services and sales to professional equipment and improve overall resource efficiency.
(2) Human resource plans
This Corporation and its subsidiaries have been developing niche products for its business development objectives and can thus be considered 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 with the field of testing of electronic products for many years, and provide stable product development strategies that are aligned with the development of the industry. In addition to test products developed for semiconductors and flat panel displays, this Corporation 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 upon 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.

Market, production, and sales
(1) Market analysis

1. Major products by sales area

Area		2016	2016
		Sum	Proportion of net operating revenue (%)			Sum
Internal sales External sales Total		$3,887,330 7,737,039 $11,624,369	33 67 100		$4,157,800 10,743,546 $14,901,346

State of the market

In 2017, with the support of multi-year monetary easing policies, the global economy has shaken away from the gloom to a steady recovery. Although President Trump’s administration took office differently from the past, triggering a national trade

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exchange rate barrier, the nature of its tax reduction is still Stimulating economic growth, and thus moderate inflation, the Fed began to adopt mild monetary tightening policies, but the European and Chinese markets still implement monetary easing policies, especially the Chinese market in its implementation of the One Belt and One Road policy, changing the industrial structure to a steady growth, and promoting the world Trade growth.

The information electronics industry puts the face recognition function on smartphones in Apple Computer, launches IPhone X, and greatly expands the use of 3D applications, plus the virtual currency driving industry demand, unmanned vehicles, smart driving, Internet of Things, and industrial 4.0 smart manufacturing, etc. The promotion of the information electronics industry has created a peak demand for industry-related equipment and equipment.

State and growth of market supply and demand

In 2017, the information electronics industry saw another peak. With a large increase in demand, the shortage of spare parts was serious. Manufacturers increased their capacity to meet demand. With the recognition of the face recognition mobile phone function led by Apple Computer, it is estimated that it will continue to be fermented on many application surfaces, including the introduction of non-Apple camps, access control, unmanned vehicles, smart driving, etc., will further promote 3D sensing requirements, and the Internet of things. The development of concept of car networking, wireless charging, battery life, technology development of VR and AR, and promotion of unlimited imagination of application surface expansion, so, the information technology industry has expanded into all areas of life, taking advantage of intelligence, energy saving, and automation. The demand for various product components will increase greatly. The shortage of materials in 2017 will cause difficulties in achieving full satisfaction in 2018, prompting manufacturers to expand plant investment, increase equipment expenditure, and drive the demand for related test instruments and automation equipment for the coming years.

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

The global layout of the corporation, a variety of equipment quality are recognized by the world's first-tier manufacturers, and maintain good interaction with the leading manufacturers of various products, it can immediately grasp the industry pulse, immediate investment in research and development, timely launch of new measurement products to provide customer research and development And the best quality solution in production. The corporation has invested heavily in research and development over the years, accumulating a variety of key technologies, and developing a number of technologically advanced products, allowing the corporation and its subsidiaries to stay ahead of the test market. Competitive niches of this Corporation and its subsidiaries include effective control over sales channels, acquisition of the latest information about the industry, and ownership over key technologies. The business group have ample resources in the sectors of testing, automation, and factory management systems to provide customers with Turnkey Solutions required, providing this Corporation and its subsidiaries with various advantages to maintain market competitiveness.

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

(C) Response strategies:

Since products are offered in many models and required in small quantities, this Corporation and its subsidiaries adopted modular designs during product research and development (R&D) phases. Differences in specifications were concentrated in a single module during the production process. Shared characteristics and designs were adopted into general modules in order to improve production volume for general modules while reducing the materials required for the unique parts. Besides, in order to strengthen production and inventory management by improving the management efficiency, the corporation and its subsidiary IMS Division and Information Center also built a complete information management system for the corporation and its subsidiaries

B. Special materials

(A) Competitive niche and positive factors:

The corporation's subsidiaries are the largest domestic suppliers, providing customers with the overall value of competitiveness, including quality, price, delivery, technical support and other services. These offer important competitive niches and were responsible for helping the corporation and its subsidiaries secure a growing market share.

(B) Disadvantages:

Key materials had to be imported, which offer a certain degree of uncertainty.

(C) Response strategies:

To safeguard business development, Chroma New Material Corp., a subsidiary of this Corporation, has built a long-term partnership with NIPPON MICROMETAL Corp. 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. were also employed in hybrid vehicles, LED lighting, solar power, fuel cells, and other energy saving products that were 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. Soft panel (an exclusive graphic operating software) and NI Labview drivers were also provided to help users conveniently employ these solutions.

This Corporation and its subsidiaries independently developed an automatic testing system which would include a software platform that come with powerful inbuilt functions and general tests which can then be integrated with the desired hardware instrument to independently edit the test items and to acquire and

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analyses 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) were included within the scope of applications. Also, this Corporation 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 jigs.

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 would provide various international standard signal testing screens for testing purposes to analyses the performance of the display in processing video signals. Precision would be a key requirement since output signals of the video pattern generator would be the standard source.

Color analyzers employ advanced digital signal processors and photoelectric conversion technology and combined them with precision optical components and circuit design to accurate 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 could 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 could be carried out quickly using single button operations, making it the most competitive video and color testing solution available.

- Passive Component Test Solution

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 were assembled using these components (such as wound components, communication and power source filters) or have similar properties (such as switches, connectors, conducting wires, metallic materials, dielectric materials, magnetic materials, and semiconductor components). Tests could be used to analyses 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 are widely employed 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,

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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 were 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 for various defects of the panel and implement laser correction. After module assembly, different panel dimensions and backlight sources (CCFL or LED BLU) were 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 analyses image bright spots, defective spots, color, and resolution. Automated conveyor belt production line designs and system-based controls will also provide integrated network-based management functions for data analysis.

Semiconductor / IC testing solutions

The corporation has been deeply cultivating for many years in the field of semiconductor wafer testing and has a large number of product lines. The equipment required from the R&D to mass production stages such as ATE large-scale test system, IC sorter, and PXI/PXIe miniaturization test platform are all complete. Corresponding products provide customers with the most suitable choice. Semiconductor solutions cover different wafer test applications such as: consumer wafers (microprocessors, audio chips, peripherals for computers/mobile devices, etc.), power management chips (linear regulators, DC converters, AC converters, LEDs Drivers, etc.), RF chips (wireless networks, Bluetooth, mobile communications, etc.), and specific areas of testing (image sensors, radio frequency identification, etc.). Handlers used in backend production of ICs could also work with different IC packaging types and 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.

LED / illumination test solutions

LED test equipment of this Corporation would 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) could 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 were primarily lifespan tests for LED Flash Lights, LED Light Bars, and OLEDs. Customized test solutions for electrical properties of LEDs and optical testing were 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 could be used to measure cell conversion efficiency of solar cells and sort these cells according to conversion efficiency.

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Automatic optical testing would 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 would then be used to implement relevant sorting. When assembling PV systems, system inverters would 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.

－ Battery test and automation solution

The corporation's battery testing and automation solutions cover a wide range of products, including dynamic charge and discharge, energy recovery battery module test systems for real-world current simulation applications, battery discharge energy recovery and reuse, power saving, environmental protection, and low thermal output. , Save electricity and air conditioning costs, reduce production costs. The applicable industry scope includes electric vehicle manufacturers, energy storage system vendors, and battery module plants, which are suitable for battery management system testing, battery pack endurance testing, product shipment inspection, design verification research, and battery pack production line capacity learning ( Learning) and DC internal group testing and other purposes. - Photonics Test Solutions

The photonics test solution mainly includes a laser diode chip section and an optical communication active component packaging section. Chroma’s superior power electronics and optical measurement technology, coupled with the integration of institutions and temperature control, the optical components can be burned at different ambient temperatures burned and tested. The semiconductor laser characteristic detection system is designed specifically for laser diodes, and the All-In-One design concept is used for automatic detection. It can be used for simultaneous testing of different test items; it can be used together with highcapacity vehicle designs. A large number of chips are used to perform a large number of tests. In addition, AOI can increase the speed and reliability of automated inspections. The design of a highly stable temperature control platform enables R&D personnel to accurately understand the laser. The relationship between semiconductor characteristics and temperature.

Manufacturing execution system (MES)

This solution provides an integrated system for collecting various manufacturing data from the production floor. Various 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 could rapidly acquire the needed information to boost production efficiency.

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2. Production process

==> picture [435 x 158] 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 Semi-finished Inspection of PCB test
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 quantity 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
FPGA IC	Galaxy Far East Corp., Weikeng, and Answer Technology	These 3 suppliers are product agents for world renowned manufacturers and have long-term collaborative relationships with this Corporation, providing stable quality and supplyvolumes.
Power converter IC	Answer, Mao Xuan, Shi Ping	These 3 suppliers are product agents for world renowned manufacturers and have long-term collaborative relationships with this Corporation, providing stable quality and supplyvolumes.
Memory IC	Weikeng, Transcend, and Arrow Electronics	These 3 suppliers are product agents for world renowned manufacturers and have long-term collaborative relationships with this Corporation, providing stable quality and supplyvolumes.
Relay	SUMCHIP, IC-Hi Technology, Bright Toward Industry	These 3 suppliers are product agents for world renowned manufacturers and have long-term collaborative relationships with this Corporation, providing stable quality and supplyvolumes.
Mechanical Component	Chyuan Jyh Industry Co.,Ltd., GAO JING JHUN METAL CO. LTD., Chang Yang	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 Corporation.
Circuit board	Lin Genius Enterprise Co., Speedy-Circuits, Golden sum	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 Corporation.
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 Corporation.

Given the large variety of raw materials and components needed by this Corporation and its subsidiaries to manufacture precision instruments, all local and overseas purchases were handled by a single purchasing unit. Where possible, 2 or more suppliers were selected to ensure supplier replace ability, acquire competitive pricing, distribute purchasing risks, achieve reasonable cost reductions, and provide better services. The

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

(4) A list of any suppliers and customers accounting for 10 percent or more of the Corporation’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 Corporation's total procurements in either of the 2 most recent years

Information of major suppliers in the 2 most recent years

Unit: Thousand NT$

	Information of major suppliers	Information of major suppliers	Information of major suppliers	Information of major suppliers	in the 2 most recent years Unit: Thousand NT$	in the 2 most recent years Unit: Thousand NT$	in the 2 most recent years Unit: Thousand NT$	in the 2 most recent years Unit: Thousand NT$
Item	2016				2017
	Name	Sum	Proportion of total procurement value for the entireyear(%)	Relationship with the issuer	Name	Sum	Proportion of total procurement value for the entireyear(%)	Relationship with the issuer
1	NMC	1,203,234	20.69	None.	NMC	1,164,136	13.99	None.
2	NMC (Philippines)	956,431	16.45	None.	NMC (Philippines)	780,296	9.38	None.
	Others	3,654,495	62.86	-	Others	6,378,055	76.63	-
	Net procurement	5,814,160	100.00		Net procurement	8,322,487	100.00

Explanation for any changes:

NMC is the main supplier of the corporation's subsidiary, Sunmao New Materials, which was mainly due to the decrease in the ratio of consolidated sales of special materials sold in 2017. Therefore, the ratio of purchases was relatively reduced, but the corporation is still the top two most important purchasers of the corporation.

List of customers accounting for 10 percent or more of the Corporation'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$
	2016				2017
Item	Name	Sum	Proportion of total sales value for the entireyear(%)	Relationship with the issuer	Name	Sum	Proportion of total sales value for the entireyear(%)	Relationship with the issuer
1	Others	11,624,369	100.00	-	Others	14,901,346	100.00	-

	Net sales	11,624,369	100.00		Net sales	14,901,346	100.00

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

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

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

Year Production value Primarycommodity	2016	2016	2016	2017	2017	2017
	Production capacity (Note 1)	Production volume	Production value	Production capacity (Note 1)	Production volume	Production value
Measurement instrument and equipment	-	91,594	2,433,991	-	82,080	3,098,167
Special materials	-	-	-	-	-	-
Automatic conveying and engineeringequipment	-	220	435,432	-	203	2,504,014
Others	-	-	-	-	21	971
Total	-	91,814	2,869,423	-	82,304	5,603,152

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 single product has an exclusive product line. Hence, general assessments for capacity utilization rates cannot be used for such production models. Production processes were based upon the processes required and work hours provided by the testers. Machinery and equipment were then used to assemble a flexible manufacturing 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$

					Unit: KM, M, feet, g, units, sets, thousand NT$	Unit: KM, M, feet, g, units, sets, thousand NT$	Unit: KM, M, feet, g, units, sets, thousand NT$	Unit: KM, M, feet, g, units, sets, thousand NT$
Year Sales Volume and Value Primarycommodity	2016				2017
	Internal sales		External sales		Internal sales		External sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Measurement instrument and equipment	14,374	1,181,074	124,415	7,406,303	13,887	1,774,895	104,278	8,097,921
Special materials	2,722,204,609	2,241,265	61	27,792	2,920,789,389	2,028,001	71	26,567
Automatic conveying and engineeringequipment	196	148,399	24	233,889	133	30,209	70	2,508,139
Others	-	316,592	-	69,055	-	324,695	-	110,919
Total	2,722,219,179	3,887,330	124,500	7,737,039	2,920,803,409	4,157,800	104,419	10,743,546

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

report
	Year	2016	2017	From the current year until February 28, 2018
Members	Sales management	1,070	1,258	1,271
	Production	750	856	868
	R&D	677	757	761
	Total	2,497	2,871	2,900
	Average age	35.53	35.26	35.29
Average work tenure		5.83	5.88	5.96
Academic background	PhD	0.77%	0.91%	0.94%
	Masters	20.22%	20.37%	20.40%
	University / college degree	63.65%	63.97%	63.68%
	High school diploma	13.42%	13.14%	13.38%
	Below high school	1.94%	1.61%	1.60%

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

In 2017, there were no environmental violations regarding environmental pollution after inspections, nor were there any external or internal personnel or property losses caused by environmental pollution.

(2) Future coping strategies

This corporation is situated at the Huaya Technology Park in Linkou, is a high tech and low polluting industry in IT sector. No public hazards or pollution issues generated during the production process. Hence, no need for establishing polluting facilities licenses. For waste water and sewage issues, this Corporation 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 waste is cleared and disposed of properly by the waste removal and treatment corporation approved by the competent environmental protection agency. The business waste is also entrusted to the waste removal and treatment corporation approved by the competent environmental protection authority for proper removal or disposal. 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 Corporation 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 fulfil laws and requirements related to RoHS and toxic chemical substances of the customers and countries where the products are being sold. These laws and requirements were also used as guidelines to achieve continuous improvements and sustainable management to achieve the final objective of green industries.

When pursuing and maintaining the overall ecology and sustainable development, this Corporation and its subsidiaries were committed towards technical improvements and breakthrough while upholding corporate responsibilities such as compliance with the law, social duties, and environmental protection. Stringent approaches were adopted 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.

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5. Labor relations

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

This 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 a relative, 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.

Continuing education and training

To promote the employees’ competence, knowledge, and management skills required of their duties, this Corporation stipulated the Education and Training Management Regulations. This Corporation's business objectives as well as results of departmental surveys were compiled to formulate the annual training plan. Newly hired staff were provided with work orientation training. On-job training, specialization training, or professional external training were 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$)
8,849	2,150

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. 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, to promote the efficiency for internal communication and encourage fellow employees to propose various recommendations. In addition to regular internal communication meetings between various units, communication channels for employee relations were also established. Any employee inquiry or recommendations could be communicated using Employee Communication Helpline, Employee Communication Email, and Employee Communication Feedback Mailbox were offered to prevent any possible employeeemployer 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.

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(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.

6. Important contracts

Nature of the contract	Party	Starting and final date of the contract	Major contents	Restrictive terms
Land purchasing / sales contract	Ministry of the Interior	From April 18, 2012 (date of signing the contract) until the date when notice registration of all projected land have been cancelled.	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$ 10,088,889,999) and included a total land area of 222,300 square meters. Shares held by each member of the tender: Chroma ATE Inc. 35%, HERAN Co., Ltd. 35%, and Dynapack Corp. 30%.	When transferring land property rights, the seller requested the buyer to agree to the condition of providing notice land registration to these land as undeveloped and unused land.
Joint credit extension contract	E. Sun Commercial Bank and 6 other financial institutions	Signed on August 28, 2012 From the date of the first date of use until the date of expiry of five years.	Mid-term loans for paying for developing the Business Exclusive Zone of the development area of the A7 Station of the Taoyuan International Airport MRT.	Financial ratios must be compliant with the standards stipulated within the contract.
Construction contract	New Spring Construction Corp.	(1) February 24, 2017 to the project acceptance date. (2) August 15, 2017 to the project acceptance date.	(1)New construction of the corporation's A7 building. (2)Electrical and mechanical engineering of the corporation's A7 building.	None.
Construction contract	Evergreen Steel Corp.	March 2017 to the project acceptance date.	The corporation's A7 building new construction steel structureproject	None.
Construction contract	Lead- Fu Industrials Corp.	August 15, 2017 to the project acceptance date.	The corporation's A7 building new projectglass curtainproject	None.
Medium- term loan contract	Taishin International Bank	2017.9.4~2020.9.4	Mid-term loan	During the duration of the credit line, the financial ratio must meet the agreed criteria.
Medium and long-term loan contract	E. SUN Commercial Bank	2017.12.14~2022.12.14	Medium and long-term loan	None.
Medium- term loan contract	Bank of Taiwan	2017.12.29~2020.12.29	Mid-term loan	None.
Medium and long-term loan contract	Mega International Commercial Bank	2018.3.1~2023.3.1	Medium and long-term loan	Credit lines cannot be used to purchase real estate.

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VI. Financial summary

Condensed balance sheet and statement of comprehensive income for the 5 most recent years (1) 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
		2013 (Note 1)		2014 (Note 1)		2015 (Note 1)		2016		2017
Current assets		7,005,438		9,184,704		9,632,600		11,212,692		14,105,784
Property, plant, and equipment		2,695,664		2,712,962		2,767,608		2,714,127		2,664,584
Intangible assets		201,079		200,472		200,576		227,503		278,036
Other assets		2,868,238		2,871,838		3,459,655		4,478,456		4,969,208
Total assets		12,770,419		14,969,976		16,060,439		18,632,778		22,017,612
Current liability	Before allotment	3,052,669		2,870,775		3,112,654		4,723,411		6,922,901
	After allotment	3,989,780		3,853,214		4,020,607		6,037,618		(Note 2)
Non-current liability		1,021,103		2,726,113		3,416,489		3,121,516		1,631,882
Total liabilities	Before allotment	4,073,772		5,596,888		6,529,143		7,844,927		8,554,783
	After allotment	5,010,883		6,579,327		7,437,096		9,159,134		(Note 2)
Equity attributable to the owner of the parent Corporation		8,557,696		9,252,948		9,410,104		10,616,627		13,230,679
Capital stock		3,767,599		3,787,821		3,791,699		3,898,872		4,118,942
Capital reserve		960,198		1,256,654		1,302,269		1,960,159		3,187,289
Reserved Surplus	Before allotment	3,386,999		3,737,083		3,952,185		4,735,275		5,972,296
	After allotment	2,449,888		2,754,644		3,044,232		3,421,068		(Note 2)
Other equity		478,800		507,104		399,665		58,035		(12,134)
Treasury stock		(35,900)		(35,714)		(35,714)		(35,714)		(35,714)
Uncontrolled equity		138,951		120,140		121,192		171,224		232,150
Equity Sum	Before allotment	8,696,647		9,373,088		9,531,296		10,787,851		13,462,829
	After allotment	7,759,536		8,390,649		8,623,343		9,473,644		(Note 2)

Item		Year	Financial information of the 5 most recent fiscal years
			2013(Note 1)		2014 (Note 1)		2015 (Note 1)		2016		2017
Businessincome			10,170,631		10,307,085		9,692,365		11,624,369		14,901,346
Gross profit (Note 3)			3,750,820		4,046,270		4,221,340		5,428,322		7,068,872
Operating profit andloss			1,168,499		1,221,400		1,219,999		2,013,181		3,043,081
Non-operatingrevenue and expenses			248,537		302,113		262,673		28,876		78,986
NetProfit (before tax)			1,417,036		1,523,513		1,482,672		2,042,057		3,122,067
Continuing operation’snetincomeinthis period			1,179,156		1,295,985		1,194,542		1,695,566		2,548,823
Discontinued operation’sloss			─		─		─		─		─
Net profit (loss)inthis period			1,179,156		1,295,985		1,194,542		1,695,566		2,548,823
Comprehensive income or loss (net value after tax)inthis period			287,363		4,567		(131,740)		(223,152)		(138,228)
Totalcomprehensiveincomeinthis period			1,466,519		1,300,552		1,062,802		1,472,414		2,410,595
Net profit attributable to the owner of the parent Corporation			1,204,892		1,318,373		1,236,557		1,719,935		2,558,401
Net profit attributable to uncontrolled equity			(25,736)		(22,388)		(42,015)		(24,369)		(9,578)
Total comprehensive income attributable to the ownerofthe parent Corporation			1,491,388		1,320,288		1,102,621		1,501,612		2,425,174
Total comprehensive income attributable to uncontrolled equity			(24,869)		(19,736)		(39,819)		(29,198)		(14,579)
Earningsper share(NT$)			3.21		3.51		3.28		4.53		6.41

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: Distribution for the 2017 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.

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

Unit: Thousand NT$

Reporting Standards	Reporting Standards	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
		2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016	2017
Current assets		3,607,432	6,015,641	5,999,691	7,709,289	8,212,509
Property, plant, and equipment		1,924,727	1,907,429	1,844,215	1,805,031	1,789,099
Intangible assets		94,424	94,424	94,424	94,424	94,424
Other assets		5,363,903	5,274,245	6,026,586	6,977,507	8,463,667
Total assets		10,990,486	13,291,739	13,964,916	16,586,251	18,559,699
Current liability	Before allotment	1,551,520	1,455,362	1,310,706	3,037,002	3,877,087
	After allotment	2,493,420	2,442,795	2,220,906	4,351,427	(Note 2)
Non-current liability		881,270	2,583,429	3,244,106	2,932,622	1,451,933
Total liabilities	Before allotment	2,432,790	4,038,791	4,554,812	5,969,624	5,329,020
	After allotment	3,374,690	5,026,224	5,465,012	7,284,049	(Note 2)
Equity attributable to the owner of the parent Corporation		8,557,696	9,252,948	9,410,104	10,616,627	13,230,679
Capital stock		3,767,599	3,787,821	3,791,699	3,898,872	4,118,942
Capital reserve		960,198	1,256,654	1,302,269	1,960,159	3,187,289
Reserved Surplus	Before allotment	3,386,999	3,737,083	3,952,185	4,735,275	5,972,296
	After allotment	2,445,099	2,749,650	3,041,985	3,420,850	(Note 2)
Other equity		478,800	507,104	399,665	58,035	(12,134)
Treasury stock		(35,900)	(35,714)	(35,714)	(35,714)	(35,714)
Uncontrolled equity		─	─	─	─	─
Equity Sum	Before allotment	8,557,696	9,252,948	9,410,104	10,616,627	13,230,679
	After allotment	7,615,796	8,265,515	8,499,904	9,302,202	(Note 2)

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
	2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016	2017
Business income	3,926,480	5,135,199	4,539,441	7,233,315	8,018,006
Gross profit (Note 3)	2,153,911	2,752,917	2,519,834	3,763,579	4,116,862
Operating profit and loss	741,590	1,052,145	825,721	1,726,398	1,759,378
Non-operating revenue and expenses	563,197	431,832	548,464	281,123	1,106,336
Net Profit (before tax)	1,304,787	1,483,977	1,374,185	2,007,521	2,865,714
Continuing operation’s net income in this period	1,204,892	1,318,373	1,236,557	1,719,935	2,558,401
Discontinued operation’s loss	─	─	─	─	─
Netprofit(loss)in thisperiod	1,204,892	1,318,373	1,236,557	1,719,935	2,558,401
Comprehensive income or loss (net value after tax)inthis period	286,496	1,915	(133,936)	(218,323)	(133,227)
Total comprehensive income in this period	1,491,388	1,320,288	1,102,621	1,501,612	2,425,174
Net profit attributable to the owner of the parent Corporation	1,204,892	1,318,373	1,236,557	1,719,935	2,558,401
Net profit attributable to uncontrolled equity	─	─	─	─	─
Total comprehensive income attributable to the ownerofthe parent Corporation	1,491,388	1,320,288	1,102,621	1,501,612	2,425,174
Total comprehensive income attributable to uncontrolled equity	─	─	─	─	─
Earnings per share (NT$)	3.21	3.51	3.28	4.53	6.41

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.

86 -
(3) Names of CPA and audit opinion for the past five years
Name of the CPA for the 5 most recent years and audit opinions

Year	Accounting firms	Name of the CPA	Audit opinions
2013	Deloitte & Touche	Wen- Chin Lin and Cheng- Ming Lee	Unqualified opinion
2014	Deloitte & Touche	Cheng- Ming Lee and Li-Wen Kuo	Unqualified opinion
2015	Deloitte & Touche	I-Wen Wang and Wen-Chi Kuo	Unqualified opinion
2016	Deloitte & Touche	I-Wen Wang and Wen-Chi Kuo	Unqualified opinion
2017	Deloitte & Touche	Cheng- Ming Lee and Wen-Chi Kuo	Unqualified opinion

Accounting firms, former and successor CPAs, and reasons for the replacement for any replacement of CPAs in the 5 most recent years
①Reasons for changing 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.
②Reasons for changing 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.
③Reasons for changing CPAs in 2017
a. Names of former and successor CPAs:

Former: CPA I-Wen Wang and CPA Wen-Chi Kuo

Successor: CPA Cheng- Ming Lee and CPA Wen-Chi Kuo

b. Reasons for change: To meet the needs of internal adjustment of Deloitte & Touche.
c. Date of incident: December 27, 2017
d. Any disagreement relating to accounting principles or auditing items between the former and successor CPAs: None.
87 -

2. Financial analysis for the 5 most recent years

(1) Consolidated financial analysis - International Financial and Accounting Reporting Standards

Year Itemanalyzed (Note2)	Year Itemanalyzed (Note2)	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
		2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016	2017
Financial structure (%)	Liability to asset ratio	31.90	37.39	40.65	42.10	38.85
	Proportion of long-term capital in property, plant, and equipment	360.50	445.98	467.83	512.48	566.49
Dept-paying ability (%)	Current ratio	229.49	319.94	309.47	237.39	203.76
	Quick ratio	177.19	258.74	248.58	190.86	161.87
	Interest coverage ratio	100.66	49.67	39.02	49.56	138.04
Operating ability	Receivables turnover ratio (times)	3.41	3.25	3.23	3.92	4.04
	Average collection days	107	112	113	93	90
	Inventory turnover ratio (times)	3.79	3.46	2.73	2.77	3.11
	Payables turnover ratio (times)	4.14	4.77	4.02	3.62	3.15
	Average inventory turnover days	96	105	134	132	117
	Property, plant, and equipment turnover ratio (times)	3.71	3.81	3.54	4.24	5.54
	Total asset turnover ratio (times)	0.84	0.74	0.62	0.67	0.73
Return on investments	Return on assets (%)	10.11	9.69	8.18	10.12	12.68
	Return on equity (%)	14.73	14.80	13.25	17.18	21.46
	Ratio of pre-tax income to paid-incapital(%)	37.61	40.22	39.10	52.38	75.80
	Net profit rate (`％`)	11.85	12.79	12.76	14.80	17.17
	Earnings per share (NT$)	3.21	3.51	3.28	4.53	6.41
Cash flow	Cash flow ratio (%)	30.80	42.76	72.88	42.36	39.71
	Cash flow adequacy ratio (%)	100.44	103.43	89.78	84.19	92.23
	Cash re-investment ratio (%)	1.91	2.31	9.82	8.31	10.36
Degree of leverages	Degree of operating leverage (DOL)	1.27	1.25	1.27	1.17	1.10
	Degree of financial leverage (DFL)	1.01	1.03	1.03	1.02	1.01
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. Increase in interest coverage ratio: Mainly due to increase of revenue and profit before tax in 2017 compared to the previous period. 2. Increase in the revenue rate of real estate, plant and equipment (times): Mainly due to the increase in sales revenue in the year 2017 from the previous period. 3. Increase in return on asset and return on equity: Mainly due to increase in net profit in 2017 compared to the previous period, leading to an increase in relevant ratios. 4. Increase in net profit before tax and paid-up capital: Mainly due to increase in revenue and net profit before tax in 2017 compared to the previous period. 5. Earnings per share increase: Mainly due to the significant growth in operating income and profit for the year 2017, and the increase in earnings per share over the same period of last year. 6. The increase in cash reinvestment ratio: mainly due to the increase in net cash inflows from operating activities for theyear 2017 over thepreviousperiod,resultingin an increase in the cash reinvestment ratio.

88 -

Note 2: The following lists the formulas used for performing the financial analysis:

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).
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.
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.
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 Corporation - 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 operating revenue - operating change costs and expenses) / Operation profit.
(2) Degree of financial leverage (DFL) = Operating profit / (Operating profit - interest expenses).
Note 3: 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.
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.
Any recapitalization of retained earnings or recapitalization of capital reserve 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 4: 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 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 Corporation 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 Corporation of the asset balance sheet.
89 -

(2) Individual financial analysis - International Financial and Accounting Reporting Standards

Year Item analyzed (note 3)	Year Item analyzed (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
		2013 (Note 1)	2014 (Note 1)	2015 (Note 1)	2016	2017
Financial structure (%)	Liability to asset ratio	22.14	30.39	32.62	35.99	28.71
	Proportion of long-term capital in property, plant, and equipment	490.41	620.54	686.16	750.64	820.67
ability investments (%)	Current ratio	232.51	413.34	457.74	253.85	211.82
	Quick ratio	155.16	325.04	354.57	204.82	161.19
	Interest coverage ratio	263.22	69.62	48.66	74.97	230.44
Operating investments	Receivables turnover ratio (times)	2.41	2.54	2.25	3.58	2.91
	Average collection days	151	144	162	102	125
	Inventory turnover ratio (times)	1.42	1.73	1.34	2.13	2.07
	Payables turnover ratio (times)	4.30	5.07	3.55	3.94	3.01
	Average inventory turnover days	257	211	272	171	176
	Property, plant, and equipment turnover ratio (times)	2.00	2.68	2.42	3.96	4.46
	Total asset turnover ratio (times)	0.39	0.42	0.33	0.47	0.46
Return on investments	Return on assets (%)	11.94	11.01	9.25	11.41	14.62
	Return on equity (%)	14.73	14.80	13.25	17.18	21.46
	Ratio of pre-tax income to paid-in capital (%)	34.63	39.18	36.24	51.49	69.57
	Net profit rate (`％`)	30.69	25.67	27.24	23.78	31.91
	Earnings per share (NT$)	3.21	3.51	3.28	4.53	6.41
Cash flow	Cash flow ratio (%)	39.92	56.54	116.19	65.03	17.05
	Cash flow adequacy ratio (`％`)	87.62	82.31	74.59	72.41	61.09
	Cash re-investment ratio (`％`)	(Note 2)	(Note 2)	4.46	8.88	(Note 2)
Degree of leverages	Degree of operating leverage (DOL)	1.23	1.16	1.24	1.14	1.12
	Degree of financial leverage (DFL)	1.01	1.02	1.04	1.02	1.01
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.Debt-to-asset ratio decrease: Mainly due to the increase of non-current assets in 2017 from the previous period of NTD.1, 470,228 thousand, resulting in a decrease in the ratio of liabilities to assets. 2.The decrease in quick ratio: Mainly due to the increase in current liabilities for year 2017 from the previous period. 3.Increase in interest coverage ratio: Mainly due to increase of revenue and decrease in interest expense in 2017 compared to the previous period. 4.Increase in average collection days: Mainly due to increase of revenue and balance of average receivables in 2017. 5.Decrease in payables turnover rate: Mainly due to increase for unpaid payables in 2017. 6.Increase in return on asset and return on equity: Mainly due to increase in net profit in 2017 compared to the previous period, leading to an increase in relevant ratios. 7.Increase in net profit: Mainly due to increase in net profit after tax in 2017. 8. Increase in net profit before tax and paid-up capital: Mainly due to increase in revenue and net profit before tax in 2017 compared to the previous period. 9. Decrease in cash flow rate: Mainly due to decrease in operating activities cash and increase in Current liability.

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.Debt-to-asset ratio decrease: Mainly due to the increase of non-current assets in 2017 from the previous period of NTD.1, 470,228 thousand, resulting in a decrease in the ratio of liabilities to assets.
2.The decrease in quick ratio: Mainly due to the increase in current liabilities for year 2017 from the previous period.
3.Increase in interest coverage ratio: Mainly due to increase of revenue and decrease in interest expense in 2017 compared to the previous period.
4.Increase in average collection days: Mainly due to increase of revenue and balance of average receivables in 2017.
5.Decrease in payables turnover rate: Mainly due to increase for unpaid payables in 2017.
6.Increase in return on asset and return on equity: Mainly due to increase in net profit in 2017 compared to the previous period, leading to an increase in relevant ratios.
7.Increase in net profit: Mainly due to increase in net profit after tax in 2017.
8.Increase in net profit before tax and paid-up capital: Mainly due to increase in revenue and net profit before tax in 2017 compared to the previous period.
9.Decrease in cash flow rate: Mainly due to decrease in operating activities cash and increase in Current liability.
90 -
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:
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).
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.
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 Corporation - 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 operating revenue - operating change costs and expenses) / Operation 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: 1. 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.

  3. Any recapitalization of retained earnings or recapitalization of capital reserve 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 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 Corporation 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 Corporation of the asset balance sheet.
91 -

3. Audit Committee's Audit Report of financial report for the most recent fiscal year

Chroma ATE Inc.

Audit Committee’s Audit Report

This review report was generated after a complete review of the corporation's business report, individual and consolidated financial statements, and surplus allocation proposal for 2017 submitted by the Board of Directors, where the individual and consolidated financial statements have been completely audited by CPAs Cheng- Ming Lee and Wen-Chi Kuo of Deloitte & Touche. The list of all books opened was reviewed by the Audit Committee and it was considered that there were no discrepancies. The 14th Article of the Securities Exchange Act and Article 219 of the corporation Law were submitted for verification.

Sincerely,

Chroma ATE Inc.

2018 Shareholders' Meeting

Chairman of the Audit Committee: Tsung-Ming Chung

February 22, 2018

92 -
Financial report from the most recent year: Please peruse pages 113 to 197 of this Report.
Corporation-only financial report audited and attested by a CPA from the most recent year: Please peruse pages 198 to 272 of this Report.
Any financial difficulties experienced by the Corporation and its affiliated company 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 Corporation: None.
93 -

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
Item		December 31, 2017	December 31, 2016	Sum	%
Current assets		14,105,784	11,212,692	2,893,092	26
Property, plant, and	equipment	2,664,584	2,714,127	(49,543)	(2)
Intangible assets		278,036	227,503	50,533	22
Other assets		4,969,208	4,478,456	490,752	11
Total assets		22,017,612	18,632,778	3,384,834	18
Current liability		6,922,901	4,723,411	2,199,490	47
Non-current liability		1,631,882	3,121,516	(1,489,634)	(48)
Total liabilities		8,554,783	7,844,927	709,856	9
Capital stock		4,118,942	3,898,872	220,070	6
Capital reserve		3,187,289	1,960,159	1,227,130	63
Retained earnings		5,972,296	4,735,275	1,237,021	26
Other equity		(12,134)	58,035	(70,169)	(121)
Treasury stock		(35,714)	(35,714)	-	-
Uncontrolled equity		232,150	171,224	60,926	36
Total stockholders' equities		13,462,829	10,787,851	2,674,978	25

Any material change to the Corporation'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 current assets: Mainly due to the increase in cash and cash, accounts receivable and inventory. (2) Increase in intangible assets: It was mainly due to the acquisition of the technology authorization and patent transfer of the ITRI by the subsidiary Innovative Nanotech Inc.

(3) Increase in circulating liability: Mainly due to increase in accounts payable and the conversion of long-term loans acquire for land exclusively for A7 Business Zone into one-year long-term loans.
(4) Decrease in non-current liabilities: Mainly due to the conversion of convertible corporate bonds to common stock and land prices in the A7 industrial zone, and long-term borrowings were transferred to long-term loans due within one year.
(5) Increase in capital surplus: Mainly due to the conversion of convertible corporate bonds to common shares and issuance of the new executive stock option.
(6) Increase in retained earnings: Mainly due to significant increase in revenue in 2017 compared to previous period.
(7) Decrease in other equity: Mainly due to the exchange difference in the translation of financial statements of foreign operating agencies and the decrease in unrealized profit or loss of financial assets available for sale.
(8) Increase in non-controlling interest: Mainly due to increase in non-controlling interests from the subsidiary corporations.
(9) Increase in total shareholders' equity: Mainly due to the increase in capital reserve and retained earnings for the year 2017.
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 Corporation and its subsidiaries.
Futures response plans: Not applicable.
94 -

2. Financial performance

Financial performance analysis

			Units: Thousand NT$;%	Units: Thousand NT$;%
Year			Sum of the	Proportion of
	2017	2016
Item			changes	the changes(%)

Business income	14,901,346	11,624,369	3,276,977	28
Operating gross profit (note)	7,068,872	5,428,322	1,640,550	30
Operating profit and loss	3,043,081	2,013,181	1,029,900	51
Non-operating revenue and
	78,986	28,876	50,110	174
expenses

Net Profit (before tax)	3,122,067	2,042,057	1,080,010	53
Net profit of this period	2,548,823	1,695,566	853,257	50
comprehensive income or loss
(net value after tax) in this	(138,228)	(223,152)	84,924	(38)
period
Total comprehensive income in
	2,410,595	1,472,414	938,181	64
thisperiod

Net profit attributable to the
owner of the parent	2,558,401	1,719,935	838,466	49
Corporation
Total comprehensive income
attributable to the owner of the	2,425,174	1,501,612	923,562	62
parent Corporation
1. Any material change to operating 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 operating income: The main growth momentum of the consolidated operating revenue in
2017 came from the measurement instrument business and the MAS Automation business, which grew
by 15% and 564% respectively compared with 2016.
(2) Increase in business profitability and business loss/gain: Mainly due to significant increase in revenue in
2017 compared to previous period.
(3) Increase in non-operating income and expenses: Mainly due to increase in interest earned and other
earnings compared to previous period.
(4) Increase in net profit before tax and net profit for this period: Mainly due to significant increase in
revenue in 2017.
(5) Increase in other comprehensive income: Mainly due to increase in exchange rate for the translation of
financial statements in foreign operation.
(6) Increase in total comprehensive income, net profit attributable to the owner of the parent Corporation,
and total comprehensive income attributable to the owner of the parent Corporation:
Mainly due to the growing and increasing revenue in 2017 compared to previous period.
2. Expected sales volume and relevant data, possible impact to the Corporation’s financial operations, and
response plans:
The corporation has invested in integration of test technology and automation equipment for many years.
In recent years, automation equipment has emerged in various fields one after another, creating new sales
performance. Despite being applied in different sectors, these solutions have been attested and employed
by many leading manufacturers. Looking forward to 2018, thanks to the expansion of 3D sensing
applications, smart manufacturing, and the vigorous development of the electric vehicle industry, it will
boost the demand for related inspection equipment such as electronics and power supplies. The increase in
the demand for test automation equipment and the sales contribution from the new test equipment for LD
laser diodes will increase the sales of semiconductors, batteries and photonics automated test solutions. It
is expected that the corporation will bringin more substantial operatingresults.

Note: Net amounts listed are calculated based on net realized operating gross profit after deducting the unrealized operating profit.

95 -

3. Cash flow

Cash liquidity analysis

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

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 theyear(Note)	Cash surplus (inadequacy)	Remedial measures for cash inadequacy	Remedial measures for cash inadequacy
				Investment plan	Financing plan
3,149,970	2,749,361	(822,920)	5,076,411	─	─
Note: Includes net cash outflow from investment and capitalization activities of (721,569) thousand and impact of currency exchange rate amounting to (101,351) thousand. 1. Analysis of changes in cash flow in the most recent year: (1) Operating activities: Net cash inflow resulting from business activities since 2017 amounted to NT$ 2,749,361 thousand, mainly from business profits. (2) Investment activities: The net cash inflow from investing activities for 2017 was NT$162,366 thousand, which was mainly due to the cash inflows arising from the disposal of financial assets for sale. (3) Financing activities: Net cash outflow resulting from financing activities since 2017 amounted to NT$ 883,935 thousand, mainly from the issuance of cash dividends. 2. Remedial measures and liquidityanalysis for cash inadequacy: Not applicable.

(2) Cash liquidity analysis for the following year

(2) Cash liquidity analysis for the following year	(2) Cash liquidity analysis for the following year	(2) Cash liquidity analysis for the following year	(2) Cash liquidity analysis for the following year
				Unit: Thousand NT$
Initial cash balance	Expected net cash inflow resulting from business activities throughout the year	Expected total net cash inflow (outflow) from investment and capitalization activities throughout theyear	Expected sum of cash surplus (inadequacy)	Remedial measures for expected cash inadequacy
				Investment plan	Financing plan
5,076,411	3,436,000	(3,524,424)	4,987,987	─	─
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.

Material expenditures of the most recent year and impact to the Corporation'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 corporations, main reasons for profit / losses resulting therefrom, improvement plan, and investment plans for the upcoming fiscal year
(I)The most recent annual transfer of investment was mainly to increase the capital of the original investment corporation, and to invest in Singapore Quantel to establish marketing positions in Southeast Asia and South Asia. The establishment of a subsidiary in Germany and a subsidiary in South Korea will also provide better and faster services to all locations in the
96 -

world in order to increase the scale of operations. (2) Profitability or loss analysis of invested corporations

world in order to increase the scale of operations. ) Profitability or loss analysis of invested corporations	world in order to increase the scale of operations. ) Profitability or loss analysis of invested corporations	world in order to increase the scale of operations. ) Profitability or loss analysis of invested corporations	world in order to increase the scale of operations. ) Profitability or loss analysis of invested corporations
December 31,2017 Unit: Thousand NT$
Corporation name	Shareholding percentage	Investment gain(loss)	Details
Neworld Electronics Ltd.	100.0%	212,326	Profits resultingfrom excellent sales.
Chroma New Material Corp.	100.0%	23,234	Profits resultingfrom excellent sales.
Chroma Investment Co.,Ltd.	100.0%	1,336	Mainlydue to dividend income.
ADLINK Technology Inc.	11.3%	42,960	Good R&D capabilities and business performance.
SAN EAGLE DEVELOPMENT CORP.	100.0%	115,884	Mainly derived from investment profits calculated using the recognized equity method.
MAS Automation Corp.	100.0%	609,616	Sales have grown significantly and profits have increased.
CHI INCORPORATION LTD.	100.0%	33,536	Mainly derived from investment profits calculated using the recognized equity method.
Testar Electronics Corp.	67.2%	13,075	Profits resultingfrom excellent sales.
CHROMA ATE INC.(USA)	100.0%	40,871	Establishment of a comprehensive sales network with good business performance.
SENSATIONAL HOLDING LTD.	100.0%	1,209	Primarilyderived from rental income.
CHROMA SYSTEMS SOLUTIONS, INC.	25.0%	13,107	Establishment of a comprehensive sales network with good business performance.
CHROMA ATE EUROPE BV	100.0%	18,553	Establishment of a comprehensive sales network with good business performance.
CHEN HWA TECHNOLOGY INC.	100.0%	2,610	Mainlydue to dividend income.
Dynascan TechnologyCorp.	27.3%	6,211	Profits resultingfrom excellent sales.
Deep Red Holding Co., Ltd.	100.0%	12,609	Mainly derived from investment profits calculated using the recognized equity method.
Chroma Japan Corp.	100.0%	1,129	Profits resultingfrom excellent sales.
Chih Ho Shun Development Co.,Ltd.	35.0%	33	Mainly derived from recognized interest income.
Adivic Technology Co.,Ltd.	51.0%	(30,314)	R&D for new products not yet complete. High R&D costs have led to operational loss.
EVT Technology Co., Ltd.	73.8%	(8,252)	Losses arose due to product conversion and new product validation that have yet to be completed.
QUANTEL PRIVATE LTD.	60.0%	5,360	Profits resultingfrom excellent sales.
Innovative Nanotech Inc.	89.3%	(2,434)	The newly established corporation in 2017 is still in the product development stage.
Touch Cloud Co., Ltd.	78.1%	(1,658)	The new investment corporation in 2017 is still in the product development stage.

(3) Improvement plan

ADIVIC: ADIVIC has invested in R&D WIFI test equipment in 2017 to provide customer verification while some products can be integrated with the corporation's products.
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After the customer's verification is completed, it is expected to increase the takings and improve business performance.

  2. EVT Technology: EVT is now working with our corporation to develop production lines for electric vehicles' parts, expected improvement in business performance upon completion and release of R&D product in the market.

  3. Innovative Nanotech Inc.: Continue to invest in R&D to make the product more perfect for the market.

  4. Touch Cloud: Integrate their software with our corporation's hardware to achieve expected revenue and profit.

(4) Investment plans for the following year: By principle, this Corporation shall continue to raise capital for other corporations that this Corporation had already invested in and establishing new sales networks, and shall continue to carefully review investment plans in other corporations.
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
- (1) Changes to interest rates and resulting impact to this Corporation's gain or loss as well as future response measures
  1. Changes to interest rates and impact to the gain or loss of this Corporation and its subsidiaries

ct this Corporation’s gain or loss as well as future response measures hanges to interest rates and resulting impact to this Corporation's gain or loss as well as future response measures . Changes to interest rates and impact to the gain or loss of this Corporation and its subsidiaries	ct this Corporation’s gain or loss as well as future response measures hanges to interest rates and resulting impact to this Corporation's gain or loss as well as future response measures . Changes to interest rates and impact to the gain or loss of this Corporation and its subsidiaries	ct this Corporation’s gain or loss as well as future response measures hanges to interest rates and resulting impact to this Corporation's gain or loss as well as future response measures . Changes to interest rates and impact to the gain or loss of this Corporation and its subsidiaries
Unit: Thousand NT$
Item / year	2016	2017
Interest expense	42,052	22,782
Net operating revenue	11,624,369	14,901,346
Operating profit	2,013,181	3,043,081
Interest expense / operatingrevenue(%)	0.36	0.15
Interest expense / operating profit(%)	2.09	0.75

Interest expenses for the corporation and its subsidiaries in 2016 and 2017 were NT$42,052 thousand and NT$22,782 thousand respectively, the interest expenses and operating profit ratio were 2.09% and 0.75%, change of interest expenses is of no significant influence to the corporation and its subsidiaries.

Future response measures

Capital budgeting of this Corporation and its subsidiaries shall continue to uphold the conservative principles of stability, focusing primarily on safety and liquidity. Measures undertaken by this Corporation 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 Corporation 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 Corporation’s profitability as a result of changing interest rates.

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

and its subsidiaries	and its subsidiaries	and its subsidiaries
Unit: Thousand NT$
Item / year	2016	2017
Netprofit(loss)on exchange	(110,497)	(133,637)
Net operating revenue	11,624,369	14,901,346
Operating profit	2,013,181	3,043,081
Net Profit (before tax)	2,042,057	3,122,067
Ratio of net profit (loss) on exchange net to operating revenue (%)	(0.95)	(0.90)
Ratio of net profit (loss) on exchange to operating profit (%)	(5.49)	(4.39)
Ratio of net profit (loss) on exchange to earnings before tax(EBT) (%)	(5.41)	(4.28)

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. The exchange losses for the year 2016 and 2017 were NT$110,497 and RMB133,637 respectively, and their exchange losses before taxation were approximately (5.41) % and (4.28) %, respectively.

2. Future response measures

The corporation and its subsidiaries offset the risk of exchange rate changes by directly increasing foreign currency receivables through US dollar transactions and offsetting foreign currency payables by the purchases and short-term bank borrowings in foreign currencies in order to create a natural hedge effect; The financial affairs department also collects information of the exchange rate daily, to fully understand the changes in exchange rates, timely adjustment of foreign currency positions, and in accordance with the relevant provisions of "procedures for dealing with derivative commodity transactions" and timely start the operation of foreign currency hedging instruments in order to reduce the impact of exchange rate fluctuations

(3) Inflation and its impact on this Corporation’s gain or loss as well as future response measures
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, and 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
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This Corporation and its subsidiaries has 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
(1) Reasons for providing loans to other parties, endorsements, and guarantees
Loans, endorsements, and guarantees shall be, by principle, provided to
affiliated company or corporations that this Corporation and its subsidiaries have business deals. Interest rates of loans provided by this Corporation and its subsidiaries shall be, by principle, higher than short-term loan interest rates provided by financial institutions to this Corporation 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 derivatives 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.

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

Research and Development Project	Current progress	Expected completion time	Additional investments required
Next generation high power and high speed Solar Array Simulator	Design validation phase	2018/Q3	7 million
Next generation high power density and constant power DC Source	Design planning phase	2019/Q1	9 million
Next generation bi-direction DC cross-cutting module platform	Design validation phase	2018/Q4	30 million
Next generation high power Energy Recycling AC Load Simulator	Design planning phase	2018/Q4	11 million
Ultra-high precision coulombic efficiency measurement system	Design validation phase	2018/Q3	7 million
High bandwidth hybrid type recyclingLinear Load	Designplanning phase	2018/Q4	8 million
Nextgeneration 10K5K flatpanel displaytester	Design validationphase	2018/Q3	4.5 million
Thirdgeneration 8.1G videopatterngenerator for DP1.3	Design validationphase	2018/Q2	9 million
Nextgeneration bi-direction charger for batterycell testing.	Design validationphase	2018/Q4	4 million
Next Generation Super Capacitor Automatic Burn-in System	Designplanning phase	2018/Q4	6.5 million
High speed and high current Insulation Tester with partial discharge measurement function.	Design validation phase	2018/Q3	5.5 million
Semiconductor advancedpackagingoptical metrologysystem	Designplanning phase	2018/Q4	10 million

(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 Corporation and its subsidiaries.

(5) Changes in the technology and industry that will impact the corporation's financial operation with counter 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 in the corporate image that will impact the corporation's risk management with counter 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, possible risks and response measures for merger and acquisition

In 2017, the corporation invested in Touch Cloud Corp., expecting to invest in the corporation, strengthen and integrate the software R&D capabilities of the product line, and enhance the marketing opportunity and scale of operations. Another investment in the establishment of Sapphire Nano Technology (stock) corporation, the future hopes to promote the semiconductor test program to the front-end process, to provide customers more comprehensive semiconductor / IC test solutions.

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

Factory building expansions allow this Corporation 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 expansion undertaken by this Corporation 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
Purchasing risks
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Purchases from NMC by the corporation and its subsidiaries amounted to 37.14% and 23.27% of total purchases in 2016 and 2017 respectively, showing that there was a consolidation of purchasing from NMC. The major reason was that the gold wire, copper wire, and other special materials provided by NMC are of higher quality compared to those provided by Japanese or Korean corporations such as Tanaka, NKE, and Heesung, thus, they better meet the product quality requirements of downstream semiconductor packaging clients. Purchasing values of this corporation 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 replace ability, acquire competitive pricing, distribute purchasing risks, achieve reasonable cost reductions, and provide better services. Also, this Corporation 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 Corporation 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 Corporation and its subsidiaries and their main suppliers, no major nonconformities have been identified so far. Since establishment, this Corporation and its subsidiaries have achieved positive interaction with their main suppliers. Hence, no material shortage or supply interruption has yet to occur.

2. 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 Corporation and its subsidiaries. Hence, this Corporation and its subsidiaries are actively developing new customers to achieve business stability and growth. Currently, most customers were listed corporations or renowned corporations in Taiwan and other countries. For the merger corporations in 2016 and 2017, no single client was responsible for more than 10% of total income of this corporation. Therefore, there is no risks of consolidated revenue.

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

From 2017 until the publication date of this report, the corporation and its subsidiaries did not encounter any major equity transfer or replacement of directors, supervisors, or shareholders holding more than 10% of the corporation’s shares

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

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 Corporation and Corporation directors, supervisors, General Managers, person with actual responsibility in the Corporation, and major shareholders holding more than 10% of the Corporation's shares who have been concluded through final judgment or still under

102 -

litigation, to be a party thereof, and where the results thereof could materially affect the shareholders’ equity or prices of the Corporation’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

Affiliated company
(1) Consolidated Business Report up till December 31, 2017
1. Diagram of affiliated company

1	. Diagram ofaffiliated company	ram ofaffiliated company
CHROMA	Chroma ATE Europe B.V. Shares held: 100% Chroma Investment Co., Ltd. Shares held: 100% MAS Automation Corp. Shares held: 100% San Eagle Development Corp. Shares held: 100% Chroma Japan Corp. Shares held: 100% Chen Hwa Technology Inc. Shares held: 100% Chroma New Material Corp Shares held: 100% Testar Electronics Corp. Shares held: 67.2% Sensational Holding Ltd. Shares held: 100% CHI Incorporation Ltd. Shares held: 100% Deep Red Holding Co., Ltd. Shares held: 100% Adivic Technology Co.,Ltd Shares held: 51% EVT Technology Co., Ltd. Shares held: 73.8% Chroma Systems Solutions, Inc. Shares held: 25% Neworld Electronics Ltd. Shares held: 100% Chroma ATE Inc.(USA) Shares held: 100% Quantel Private Ltd. Shares held: 60% Innovative Nanotech Inc. Shares held: 89.3% Touch Cloud Co., Ltd. Shareholding ratio: 78.1%	Neworld Electronics Ltd. Shares held: 100%	Sajet System Technology (Suzhou) Co., Ltd. Shares held: 100% Chroma (Shanghai) Trading Co., Ltd. Shares held: 100% Wei Kuang Mech Eng Inc. Shares held: 100% Chroma ATE (Suzhou) Co., Ltd. Shares held: 100% Wei Kuang Automation (Nanjin) Co., Ltd. Shares held: 100% Wei Kuang Automation (Xiamen) Co., Ltd. Shares held: 100% Mou Kuan Technologies (Nanjin) Co., Ltd. Shares held: 100% Shares Held: 50`%` Chroma Electronics (Shenzhen) Co., Ltd. Shares held: 100% Chroma Electronics (Shanghai) Co., Ltd. Shares held: 100% Adivic Holding Corporation Shares held: 100% Wei Da Electric Vehicle Co., Ltd. Shares held: 75% Quantel Global Vietnam Co., Ltd. Shares held: 100% Quantel Technologies India Pvt Ltd Shares held: 100% Chroma Germany GmbH Shares held: 100%

					Chroma Germany GmbH Shares held: 100%

		CHI Incorporation Ltd. Shares held: 100%		Chroma ATE (Suzhou) Co., Ltd. Shares held: 100%
			Sajet System Technology (Suzhou) Co., Ltd. Shares held: 100% Chroma (Shanghai) Trading Co., Ltd. Shares held: 100% Wei Kuang Mech Eng Inc. Shares held: 100% Adivic Holding Corporation Shares held: 100%
				Chroma (Shanghai) Trading Co., Ltd. Shares held: 100%			Mou Kuan Technologies (Nanjin) Co., Ltd. Shares held: 100%

						Wei Kuang Automation (Nanjin) Co., Ltd. Shares held: 100%
						Wei Kuang Automation (Xiamen) Co., Ltd. Shares held: 100%
				Adivic Holding Corporation Shares held: 100%
		EVT Technology Co., Ltd. Shares held: 73.8%		Wei Da Electric Vehicle Co., Ltd. Shares held: 75%
		Quantel Private Ltd. Shares held: 60%		Quantel Global Vietnam Co., Ltd. Shares held: 100%

		Innovative Nanotech Inc. Shares held: 89.3%		Quantel Technologies India Pvt Ltd Shares held: 100%

		Touch Cloud Co., Ltd. Shareholding ratio: 78.1%

104 -

2. Basic information of various affiliated company

December 31, 2017. Unit: Thousand NT$ or other foreign currency

Corporation 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,HK	HK$ 64,013	Sales and maintenance of electronic measuring 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 measuring instruments
Chroma ATE Europe BV	1999.09.17	Morsestraat 32,6716 AH Ede,The Netherlands	EUR$45	Sales and maintenance of electronic measuring instruments
Chroma Germany GmbH	2017.09.04	Südtiroler Str. 9 86165 Augsburg Germany	EUR$30	Sales and maintenance of electronic measuring 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 Corp.	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 POBox 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 measuring instruments
CHI Incorporation Ltd.	1998.04.03	PO 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	PO 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, simpleprocessingfor

105 -

				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,Nanjin 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 Automation (Nanjin) Co., Ltd.	2005.06.30	No 811,Hushan Road,Jiangning District,Nanjin City, China	RMB$11,871	Assembly, sales, and post-sales services for electronic production equipment and conveyingsystems
Wei Kuang Automation (Xiamen) Co., Ltd.	2007.02.01	Floor 1, Building A4, No. 20, Jinhua 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 measuring 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$8,374	R&D and design of computer network safety systems and data management systems
Adivic Technology Co.,Ltd.	2009.04.07	6F, No. 345, Xinhu 2nd Road, Neihu District,Taipei City	NT$240,000	R&D and sales of RF equipment
Adivic Holding Corp	2015.01.15	Offshore Chambers, PO Box 217, Apia,Samoa.	US$1,000	R&D and sales of RF equipment
EVT Technology Co., Ltd.	1999.10.26	No. 68, Huaya 1st Road, Guishan District,Taoyuan City	NT$90,000	Manufacturing of vehicles andparts
Wei Da 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
Quantel Global Vietnam Co., Ltd	2017.01.03	Floor 6th, HL Tower No. 6 Lane 82, Duy Tan Road, Dich Vong Hau Ward, Cau GiayDistrict,Hanoi,Vietnam	VND4,446,000	Testing and Measuring Instruments Sales, International Trade
Quantel Technologies	2016.10.05	K-13 Ground Floor,Lajpat Nagar-II,	INR6,500	Sales of testingand

106 -

India Pvt Ltd		New Delhi 110024		measurement instrument
Innovative Nanotech Inc.	2017.08.09	5, No. 6, Du Sing Rd, East District, Hsinchu City,Taiwan	NT$78,360	Nanoparticles monitoring equipment
Touch Cloud Co., Ltd.	2016.02.03	4, No. 148, Section 4, Zhongxiao East Road, Da’an District, Taipei City, Taiwan	NT$72,995	Cloud Platform Development and IoT System Integration

Information of shareholders with corporate governance power while working in the Corporation: None.
Overall business scope of every affiliated company

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

107 -

5. Directors, supervisors, and General Managers of Chroma ATE Inc. and affiliated company

			December 31, 2017	December 31, 2017
Corporation name	Title	Name or representative	Shares held
			Number of shares	Shareholding percentage
Neworld Electronics Ltd.	Director	Chroma (Representatives: Leo Huang and MingChang)	64,012,815 shares	100%
Chroma Electronics (Shenzhen) Co., Ltd.	Director Director Director General Manager	Neworld (Representative: Leo Huang) Vincent Chen Jackie Liao Vincent Chen	(Note 1) - - -	100% - - -
Chroma Electronics (Shanghai) Co., Ltd.	Director Director Director General Manager	Neworld (Representative: Leo Huang) Paul Ying Vincent Chen Paul Ying	(Note 1) - - -	100% - - -
Chroma ATE Inc.(USA)	Director Director Director	I-Shih Tseng Paul Ying Yi-Shen Wang	Chroma holds 1,000,000 shares	100%
Chroma ATE Europe BV	Director	Chroma (Representatives:David Yang, Paul Ying ,and I-Shih Tseng )	1,000 shares	100%
Chroma Germany GmbH	Director	Paul Ying	(Chroma BV holds 30,000 shares)	100%
Chroma Investment Co., Ltd.	Director Supervisor	Chroma (Representative: Ming Chang, Paul Ying, Amy Huang) Leo Huang	13,999,994 shares -	100% -
Chroma New Material Corp.	Director Supervisor General Manager	Chroma (Representatives: Leo Huang, C.C. Ho, Amy Huang) Chroma (representative: Paul Ying) C.C. Ho	25,000,000 shares -	100% -
Testar Electronics Corp.	Director Director Supervisor General Manager	Chroma (Representatives: Leo Huang, C.C. Ho) WI HARPER (Representative: Yung-kuang Chu) I-shih Tseng C.C. Ho	20,159,600 shares 4,500,000 shares - 350,000 shares	67.2% 15.0% - 1.2%
Sensational HoldingLtd.	Director	Chroma(Representative: Leo Huang)	1,200,000 shares	100%
Chroma Systems Solutions ,Inc.	Director Director Director	Fred Joseph Sabatine Paul Ying David Yang	120,000 shares Chroma holds 120,000 shares CHROMA USA holds 240,000 shares	25% 25% 50%
CHI Incorporation Ltd.	Director	Leo Huang	(Chroma holds 3,830,000 shares)	100%
Chroma ATE (Suzhou) Co., Ltd.	Director 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 holds 3,085,000 shares)	100%
Chroma (Shanghai) TradingCo.,Ltd.	Director	Chen Hwa (Representative: Leo Huang)	(Note 1)	100%
San Eagle Development Corp.	Director	Chroma (Representative: Leo Huang)	2,050,000 shares	100%
Wei KuangMech Eng	Director	San Eagle(Rrepresentative: Leo Huang)	4,475,000 shares	100%
		- 108 -

Corporation name	Title	Name or representative	Shares held	Shares held
			Number of shares	Shareholding percentage
Inc.
Mou Kuan Technologies (Nanjin) Co., Ltd.	Director Director Director	Wei Kuang (Representative: Leo Huang) Chin-Fu Huang AmyHuang	(Note 1) - -	100% - -
Wei Kuang Automation (Nanjin) Co., Ltd.	Director Director Director	Wei Kuang (Representative: Leo Huang) Chin-Fu Huang AmyHuang	(Note 1) - -	100% - -
Wei Kuang Automation (Xiamen) Co., Ltd.	Director Director Director	Wei Kuang (Representative: Leo Huang) Chin-Fu Huang AmyHuang	(Note 1) - -	100% - -
MAS Automation Corp.	Director Supervisor General Manager	Chroma (Representative: Leo Huang, Chin-Fu Huang, I-Shih Tseng) Chroma (Representative: Amy Huang) Chin-Fu Huang	10,000,000 shares -	100% -
Chroma Japan Corp.	Director	Leo Huang	(Chroma holds 8,980 shares)	100%
Deep Red Holding Co., Ltd.	Director	Leo Huang	(Chroma holds 215,000 shares)	100%
Sajet System Technology (Suzhou) Co., Ltd.	Director Directors Directors Supervisor General Manager	Deep Red Holding. (Representative: Joe Lin) Arno Wu Paul Ying Amy Huang Joe Lin	(Note 1) - - - -	100% - - - -
Adivic Technology Co.,Ltd.	Director Director Supervisor General Manager	Chroma (Representative: I-Shih Tseng, Leo Huang) AIT group (Representative: Frank Yeh) Michael Sheu Jason Huang	12,240,000 shares 11,760,000 shares - -	51% 49% - -
Adivic Holding Corporation	Director	ADIVIC Technology (Representative: I-shih Tseng)	1,000,000 shares	100%
EVT Technology Co., Ltd.	Director Director Director Supervisor General Manager	Leo Huang Joey Chang Tsun-I Wang Chroma (Representative: Paul Ying) Leo Huang	81,034 shares 1,147 shares 29,861 shares 6,644,039 shares 81,034 shares	0.9% - 0.3% 73.8% 0.9%
Wei Da Electric Vehicle Co., Ltd.	Director Supervisor General Manager	EVT (Representatives: Leo Huang, Huang Yuqi, Joey Chang) Bill Shiau Leo Huang	375,000 shares - -	75% - -
Quantel Private Ltd.	Director Director	Chroma (Representative: Leo Huang, Paul Ying) YipHin Lay	1,914,000 shares 1,276,000 shares	60% 40%
Quantel Global Vietnam Co.,Ltd	Director	Phan Sy Dung	Quantel Private holds 100%	100%
Quantel Technologies India Pvt Ltd	Director	Yip Hin Lay	Quantel Private holds 64,999 shares	100%
Innovative Nanotech Inc.	Director Supervisor General Manager	Chroma (Representatives: Leo Huang, I-Shih Tseng, Tsun-I,Wang) Amy Huang Wu Boren	7,000,000 shares - -	89.3% - -
Touch Cloud Co., Ltd.	Director	Chroma(Representatives: Leo Huangand	5,700,000 shares	78.1%

109 -

Corporation name	Title	Name or representative	Shares held	Shares held
			Number of shares	Shareholding percentage
	Director Director Director Supervisor Supervisor	Zhan Wenxuan) Leadtek (Representative: Lu Kunshan) Hexin Optoelectronics (Representative: Liao Xianren) Li Chengxun National ticket venture (Representative: Huang Zhiwen) AmyHuang	499,500 shares 250,000 shares 360,000 shares 250,000 shares -	6.8% 3.4% 4.9% 6.8% -

Note 1: Limited liability Corporation

110 -

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

6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company	6. Business operating conditions of Chroma ATE Inc. and its affiliated company
December 31,2017. Unit: Thousand NT$
Corporation 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)	243,697	3,115,233	2,082,636	1,032,597	4,593,632	241,964	212,326	3.32
Chroma Electronics (Shenzhen) Co.,Ltd.	114,210	1,435,101	854,220	580,882	1,826,131	162,028	129,943	Not applicable
Chroma Electronics (Shanghai) Co.,Ltd.	89,280	291,037	185,320	105,716	466,961	49,746	38,063	Not applicable
Chroma ATE Inc.(USA)	29,760	773,075	615,726	157,349	1,365,230	26,042	40,769	40.77
Chroma Systems Solutions, Inc.	143	654,153	388,198	265,955	817,416	88,209	52,426	Not applicable
Chroma Investment Co.,Ltd.	140,000	424,398	120	424,278	1,000	(231)	7,506	0.54
Chroma New Material Corp.	250,000	1,035,341	614,736	420,605	2,054,568	38,334	23,234	0.93
Chroma ATE Europe BV (Note 1)	1,614	460,747	297,710	163,037	434,885	28,959	18,553	Not applicable
Chroma (Shanghai) Trading Co., Ltd.	80,352	89,492	3,830	85,662	13,950	(3,481)	(152)	Not applicable
Chroma ATE (Suzhou) Co., Ltd.	113,088	561,285	358,298	202,987	736,988	37,389	33,556	Not applicable
MAS Automation Corp.	100,000	2,336,205	1,475,530	860,675	2,504,014	717,074	609,624	60.96
Mou Kuan Technologies (Nanjin) Co.,Ltd.	7,929	19,489	5,243	14,247	9,823	1,219	1,145	Not applicable
Wei Kuang Automation (Nanjin) Co.,Ltd.	54,191	538,549	280,385	258,164	171,940	25,001	42,960	Not applicable
Wei Kuang Automation (Xiamen) Co.,Ltd.	52,119	711,306	391,222	320,084	268,926	78,449	70,743	Not applicable
Sajet System Technology (Suzhou) Co.,Ltd.	38,227	65,368	4,461	60,907	64,905	8,648	15,237	Not applicable
Testar Electronics Corp.	300,000	333,871	264,907	68,964	372,445	16,429	19,459	0.65
Chroma Japan Corp.	26,268	241,942	268,093	(26,151)	282,387	1,453	1,131	Not applicable
Sensational HoldingLtd.	35,712	50,705	285	50,420	0	(1,057)	1,209	1.01
Chen Hwa TechnologyInc.	91,810	105,919	20	105,899	0	(390)	2,610	0.85
CHI Incorporation Ltd.	113,981	202,534	0	202,534	0	(27)	33,536	8.76
San Eagle Development Corp.	61,008	669,767	20	669,747	0	(91)	115,884	56.53
Wei KuangMech.Eng.Inc.	133,176	662,547	20	662,527	0	(111)	115,961	25.91
DeepRed HoldingCo.,Ltd.	6,398	60,772	0	60,772	0	(6)	12,609	58.65
Adivic TechnologyCo.,Ltd.	240,000	136,254	24,913	111,341	20,099	(48,333)	(55,499)	(2.31)
Adivic HoldingCorporation	29,760	12,023	865	11,158	0	(5,825)	(5,811)	(5.81)
EVT TechnologyCo.,Ltd.	90,000	46,757	16,058	30,699	2,320	(13,459)	(13,961)	(1.55)
Wei Da Electric Vehicle Co.,Ltd.	5,000	1,272	1,219	53	0	(5)	18	0.04
Quantel Private Ltd.(Note 1)	71,009	213,600	62,596	151,004	283,931	13,413	10,797	3.38
Innovative Nanotech Inc.	78,360	121,789	45,916	75,873	0	(2,487)	(2,487)	(0.32)
Touch Cloud Co., Ltd.	72,995	57,398	1,556	55,842	5,962	(10,222)	(2,123)	(0.29)

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$29.76; HKD$1 = NT$ 3.807; EUR$ 1 = NT$ 35.57; RMB$ 1 = NT$ 4.565; JPY$ 1 = NT$ 0.264; SGD$ 1 = NT$ 22.26 The following lists the exchange rates for the profit and loss statement:

US$ 1 = NT$30.432; HKD$1 = NT$ 3.905; EUR$ 1 = NT$ 34.35; RMB $1 = NT$ 4.507; JPY$ 1 = NT$ 0.271; SGD $1 = NT$ 22.04

111 -
(2) Consolidated financial statements of affiliated company

The corporation's “Guidelines for the Compilation of Business Reports Concerning Corporate Consolidation, Concerning Corporate Consolidated Financial Statements and Relationship Reports” for the 2017 (from January 1 to December 31, 2017) should be included in the corporation’s consolidated financial statements. The corporation and the subsidiaries that are included in the consolidated financial statements of the parent and subsidiary corporations in accordance with the International Financial Reporting Standards No. 10 are the same, and the disclosure of related information in the consolidated corporate financial statements has been disclosed in the previous consolidated financial statements of the parent and subsidiary corporations. Hence, consolidated financial statements of affiliated businesses were therefore not generated separately.

(3) Affiliation report

According to Article 369(12) of the Corporation Act, separate affiliation reports were not required for subsidiaries of this Corporation 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 Corporation 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$;shares;%	Unit: Thousand NT$;shares;%
Subsidiary Name	Actual paid-in capital	capital capital	Shareholding of this Corporation	Date of acquisition or disposal	Quantity and value of shares acquired	Quantity and value of shares disposed of	Return on investment gain or 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 Corporation	Loans provided to subsidiaries by this Corporation
Chroma Investment Co., Ltd.	140,000	Own capital	100%	2017	0	0	0	1,915,579 shares 321,817 thousand	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$ 168 of April 10, 2018.

4. Other items that must be included: None.

Any event that results in substantial impact upon the shareholders’ equity or prices of the Corporation’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.
112 -

Chroma ATE Inc. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016 and Independent Auditors’ Report

113 -

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, 2017 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 22, 2018

114 -

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, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2017 and 2016, 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, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2017 and 2016, 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 (FSC) of the Republic of China.

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 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, 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, 2017. 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.

115 -

Key audit matters for the consolidated financial statements for the year ended December 31, 2017 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.

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 Group’s operation performance and financial status. We have performed the audit procedures, including reviewing the impairment assessment of property, plant and equipment prepared by the managements and assessing the rationale of underlying information used, to evaluate the appropriateness of the impairment indication assessment performed by the management.

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 adjust the product portfolio in response to the rapid change in the market and business fluctuation. The market competition or technique replacement may result in the risk of inventories becoming unmarketable or prices slump due to lack of demand in the market. As stated in Note 5, 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 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 Republic of China 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.

116 -

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 audit committee, 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 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, 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.
117 -

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, 2017 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 Cheng-Ming Lee and Wen-Chi Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China February 22, 2018

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 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.

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

118 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Available-for-sale financial assets - current (Note 8) Debt investments with no active market - current (Notes 10 and 32) Notes receivable Trade receivables, net (Note 11) Trade receivables - related parties (Notes 11 and 31) Construction contracts receivable (Note 12) Inventories (Note 13) Prepayments Other current assets (Note 31) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Note 8) Financial assets measured at cost - non-current (Note 9) Investments accounted for using equity method (Note 15) Property, plant and equipment (Notes 16, 24 and 32) Goodwill (Note 17) Other intangible assets (Note 18) Deferred tax assets (Note 25) Prepayments for land and equipment (Note 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) Notes payable Notes payable - related parties (Note 31) Trade payables Trade payables - related parties (Note 31) Construction contracts payable (Note 12) Other payables (Note 21) Current tax liabilities (Note 25) Receipts in advance Current portion of long-term borrowings (Notes 19 and 32) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Note 20) Long-term borrowings (Notes 19 and 32) Deferred tax liabilities (Note 25) Net defined benefit liabilities (Note 22) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 23) Ordinary share capital 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		2017 Amount % $ 5,076,411 23 8,794 - 1,043,387 5 899,368 4 249,785 1 3,717,254 17 47,702 - 202,535 1 2,431,074 11 265,944 1 163,530 1 14,105,784 64 268,582 1 193,571 1 641,567 3 2,664,584 12 225,408 1 52,628 - 230,408 1 3,505,669 16 27,439 - 6,489 - 95,483 1 7,911,828 36 $ 22,017,612 100 $ 471,638 2 298,289 1 17,502 - 2,575,261 12 39,434 - 552,527 3 1,166,453 5 308,357 2 247,122 1 1,216,042 6 30,276 - 6,922,901 32 99,703 - 1,061,693 5 303,822 1 165,826 1 838 - 1,631,882 7 8,554,783 39 4,118,942 19 3,187,289 14 1,896,570 9 86,888 - 3,988,838 18 5,972,296 27 (12,134) - (35,714) - 13,230,679 60 232,150 1 13,462,829 61 $ 22,017,612 100		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 1 853,070 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

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

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 12 and 31) Sales Less: Sales returns Sales allowances Net operating revenue OPERATING COSTS (Notes 13, 24 and 31) GROSS PROFIT REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES REALIZED GROSS PROFIT OPERATING EXPENSES (Note 24 ) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Interest income Rental income (Note 31) Dividend income Other income Finance costs (Note 24) Gain on disposal of property, plant and equipment, net Gain on disposal of investments, net Valuation gain on financial assets (liabilities) at fair value through profit or loss, net Other expenses Exchange loss, net (Note 34) Impairment loss on financial assets (Note 9) Share of profits of associates and joint ventures, net (Note 15) Total non-operating income and expenses		2017 Amount % $ 15,089,109 101 (15,133) - (172,630) (1) 14,901,346 100 7,832,539 53 7,068,807 47 65 - 7,068,872 47 1,857,495 13 955,913 6 1,212,383 8 4,025,791 27 3,043,081 20 35,090 - 22,356 - 27,610 - 82,399 1 (22,782) - 3,141 - 15,050 - 1,858 - (1,194) - (133,637) (1) (109) - 49,204 1 78,986 1		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 19,323 - 22,487 - 52,101 - 22,888 - (42,052) - 1,126 - 2,442 - 2,219 - (3,140) - (110,497) (1) - - 61,979 1 28,876 - (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 25) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive income (loss) of associates and joint ventures accounted for using equity method Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Share of the other comprehensive income of associates and joint ventures accounted for using equity method Total other comprehensive income (loss), net of tax TOTAL COMPREHENSIVE INCOME NET PROFIT ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (NT$; Note 26) Basic Diluted		2017 Amount % $ 3,122,067 21 573,244 4 2,548,823 17 (7,289) - 251 - (69,618) (1) (53,513) - (8,059) - (138,228) (1) $ 2,410,595 16 $ 2,558,401 17 (9,578) - $ 2,548,823 17 $ 2,425,174 16 (14,579) - $ 2,410,595 16 $6.41 $6.18		2016
				Amount % $ 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 $ 1,719,935 15 (24,369) - $ 1,695,566 15 $ 1,501,612 13 (29,198) - $ 1,472,414 13 $4.53 $4.23

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

121 -

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

	Equity Attributable to O	Equity Attributable to O	wners of the Corporation
Ordinary Share Capital Capital Surplus $ 3,791,699 $ 1,302,269 - - - - - 27,978 - - - - - - 59,823 326,205 47,350 299,162 - 4,545 - - 3,898,872 1,960,159 - - - - - (8,326 ) - - - - - - 201,515 1,101,453 - 6,170 18,678 127,833 - - (123 ) - - - $ 4,118,942 $ 3,187,289	Retained Earnings	Total $ 3,952,185 - (910,200 ) - 1,719,935 (26,645) 1,693,290 - - - - 4,735,275 - (1,314,425 ) - 2,558,401 (6,955) 2,551,446 - - - - - - $ 5,972,296		Other Equity	Total Treasury Shares $ 399,665 $ (35,714 ) - - - - - - - - (191,678) - (191,678) - - - (149,952 ) - - - - - 58,035 (35,714 ) - - - - - - - - (126,272) - (126,272) - - - - - 56,103 - - (123 ) - 123 - - $ (12,134) $ (35,714)
			Exchange U Differences on Translating A Foreign Operations F $ 127,968 - - - - (152,882) (152,882) - - - - (24,914 ) - - - - (72,719) (72,719) - - - - - - $ (97,633)	nrealized Gain (Loss) on vailable-for- sale Unearned inancial Assets Employee Benefit $ 271,697 $ - - - - - - - - - (38,796) - (38,796) - - - - (149,952 ) - - - - 232,901 (149,952 ) - - - - - - - - (53,553) - (53,553) - - - - - - 56,103 - - - - - - $ 179,348 $ (93,849)
	Unappropriated Legal Reserve Special Reserve Earnings $ 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 2,923,811 171,994 - (171,994 ) - - (1,314,425 ) - - - - - 2,558,401 - - (6,955) - - 2,551,446 - - - - - - - - - - - - - - - - - - $ 1,896,570 $ 86,888 $ 3,988,838

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, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation Amortization Provision (reversal of provision) for bad debts expense Net gain on fair value changes of financial assets (liabilities) designated as at fair value through profit or loss Finance costs Interest income Dividend income Compensation costs of share-based payment Share of profit of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment, net Gain on disposal of investments, net Impairment loss on financial assets (Reversal of impairment) impairment loss on non-financial assets Realized gain on transactions with associates and joint ventures Net loss on foreign currency exchange Net changes in operating assets and liabilities Notes receivable Trade receivables Construction contracts receivable Inventories Prepayments Other current assets Notes payable Trade payables 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 Payments to acquire financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Payments to acquire available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets	2017 $ 3,122,067 310,239 3,552 43,667 (1,858) 22,782 (35,090) (27,610) 121,593 (49,204) (3,141) (15,050) 109 (38,384) (65) 186,671 (188,016) (910,358) 12,281 (590,366) (189,529) (42,662) 257,395 643,218 322,669 269,406 (43,652) (818) (9,729) 3,170,117 (420,756) 2,749,361 - 1,000 (556,000) 1,809,889	2016 $ 2,042,057 336,514 2,849 (4,675) (2,219) 42,052 (19,323) (52,101) 86,941 (61,979) (1,126) (2,442) - 16,619 (203) 39,114 19,252 (550,370) (38,953) (413,050) 7,361 (19,653) 35,622 626,284 (25,360) 193,355 60,819 (13,817) (7,406) 2,296,162 (295,067) 2,001,095 (229) - (650,000) 423,410 (Continued)

123

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

Payments to acquire debt investments with no active market Proceeds from disposal of debt investments with no active market Proceeds from disposal financial assets measured at cost Cash returned of capital reduction of financial assets measured at cost Payments to acquire investments accounted for using equity method Increase in prepayments for investments Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment (Increase) decrease in refundable deposits Payments to acquire intangible assets Net cash inflows (outflows) from business combination (Increase) decrease in other non-current assets Increase in prepayments for equipment Interest received Dividends received Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Increase in guarantee deposits Cash dividends paid Exercise of employee stock options Payments for buy-back of ordinary shares Interest paid Increase in non-controlling interests Proceeds from issuance of employee restricted shares 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 AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2017 $ (522,222) - 2,552 23,111 - (6,489) (178,674) 20,592 (7,219) (3,158) 3,514 (66,735) (469,319) 39,690 71,834 162,366 281,772 900,000 (847,748) - (1,314,207) 79,128 (123) (42,109) 57,502 1,850 (883,935) (101,351) 1,926,441 3,149,970 $ 5,076,411	2016 $ - 163,274 1,521 9,587 (82,821) (20,000) (201,999) 29,306 19,791 - (56,249) 16,728 (891,976) 21,203 110,904 (1,107,550) (122,606) 770,000 (14,951) 3 (907,953) 80,049 - (39,795) 53,225 31,000 (151,028) (81,836) 660,681 2,489,289 $ 3,149,970

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

(Concluded)

124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHROMA ATE INC. AND SUBSIDIARIES

1. GENERAL INFORMATION

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

The consolidated financial statements are presented in the Corporation’s functional currency, 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 22, 2018.

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

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

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

1) Amendment to IFRS 2 “Share-Based Payment” in Annual Improvements to IFRSs of 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 Corporation or another entity in the same group or the market price of the equity instruments of the Corporation 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 are accounted for differently, and the aforementioned amendment should be applied prospectively to those share-based payments granted on or after January 1, 2017. Refer to Note 27 for information on the share-based payments granted in 2017.

125 -
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 and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include an emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

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 of the Group, 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 relationships with whom the Group has significant transactions. If the transaction amount or balance with a specific related party is 10% or more of the Group’s respective total transaction amount or balance, such transactions 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 retrospective application of the amendments on January 1, 2017 enhanced the disclosures of related party transaction. Refer to Note 31 for related disclosures.

b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018

New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle

Amendments 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”

IFRS 15 “Revenue from Contracts with Customers”

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

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
January 1, 2018
January 1, 2018
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.

Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendments to IAS 28 are retrospectively applied for annual periods beginning on or after January 1, 2018.
126 -

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:

IFRS 9 “Financial Instruments” and related amendment -

Classification, measurement and impairment of financial assets

With regard 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.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

1) For debt instruments, if they are held within a business model whose objective is to collect contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with any impairment loss recognized in profit or loss. Interest revenue is recognized in profit or loss by using the effective interest method;
2) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gains or losses shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other 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.

Based on the facts and circumstances of the Group’s financial assets as at December 31, 2017, the Group has performed a preliminary assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:

1) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be classified as at fair value through profit or loss or designated as at fair value through other comprehensive income. When it is designated as at fair value through other comprehensive income, the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal. Besides this, unlisted shares measured at cost will be measured at fair value instead;
2) Mutual funds classified as available-for-sale will be classified as at fair value through profit or loss because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments;
3) Investments classified as debt investments with no active market and measured at amortized cost will be classified as measured at amortized cost under IFRS 9 because, on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect contractual cash flows.
127 -

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. A loss allowance is required for financial assets measured at amortized cost, investments in debt instruments 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 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.

The Group elects not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9 and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9.

The anticipated impact of retrospective application of the requirements for the classification, measurement and impairment of financial assets is set out below:

		Carrying	Adjustments	Adjustments	Adjusted
		Amount,	Arising from		Carrying
	December 31,			Initial	Amount,
		2017	Application		January 1, 2018
Impact on assets, liabilities and equity
Financial assets at fair value through profit or
loss - current	$	8,794	$	1,043,387	$ 1,052,181
Available-for-sale financial assets - current		1,043,387		(1,043,387)	-
Financial assets measured at amortized cost -
current		-		899,368	899,368
Debt investments with no active market -
current		899,368		(899,368)	-
Financial assets at fair value through profit or
loss - non-current		-		6,013	6,013
Financial assets at fair value through other
comprehensive income - non-current		-		564,031	564,031
Available-for-sale financial assets - non-
current		268,582		(268,582)	-
Financial assets measured at cost - non-
current		193,571		(193,571)	-
Investments accounted for using equity
method		641,567		(245)	641,322
	$	3,055,269	$	107,646	$ 3,162,915
Unappropriated earnings		3,988,838		135,130	4,123,968
Other equity		(12,134)		(27,484)	(39,618)
	$	3,976,704	$	107,646	$ 4,084,350

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Except for the above impacts, the Group had assessed that the application of above standards and interpretations and believed it would not have any material impact on the Group’s financial position and financial performance.

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

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

IFRS 16 “Leases”

IFRS 17 “Insurance Contracts”

Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”

Amendments to IAS 28 “Long-term Interests in Associates and
Joint Ventures”

IFRIC 23 “Uncertainty Over Income Tax Treatments”

Effective Date
Announced by IASB (Note
1)

January 1, 2019
January 1, 2019
To be determined by IASB
January 1, 2019 (Note 2)
January 1, 2021
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.
Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on right-ofuse assets separately from the interest expense accrued on lease liabilities; interest is computed by using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within financing activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application.

129 -

2) Annual Improvements to IFRSs 2015-2017 Cycle

Several standards, including IFRS 3, IFRS 11, IAS 12 and IAS 23 “Borrowing Costs”, were amended in this annual improvement. IAS 23 was amended to clarify that, if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. The amendment shall be applied prospectively.

3) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The amendment shall be applied prospectively.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and 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 and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

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 an 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 an asset or liability.

Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

a.Assets held primarily for the purpose of trading;

b.Assets expected to be realized within 12 months after the reporting period; and

130 -

c.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.

Current liabilities include:

a.Liabilities held primarily for the purpose of trading;

b.Liabilities due to be settled within 12 months after the reporting period; and

c.Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

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

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Corporation and the 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 dates of acquisitions up to the effective dates of disposals, 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 Corporation and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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

Refer to Note 14, Tables 8 and 9 for the detail information of subsidiaries, including the equity interest and main business.

Business Combinations

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

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any 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.

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.

131 -

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.

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.

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 currencies 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, or an associate that includes a foreign operation of which the retained interest becomes a financial asset), 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.

Goodwill and fair value adjustments on identifiable assets and liabilities of acquired foreign operations are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences are recognized in other comprehensive income.

Inventories

Inventories consist of raw materials, semifinished goods, work-in-process, finished goods 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.

132 -

Investments in Associates and Joint Ventures

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture. Joint venture is a joint arrangement whereby the Group and other parties that have joint control of arrangement have right 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. The Group also recognizes the changes in the Group’s share of equity of associates and joint venture attributable to the Group.

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 an 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 capital surplus from investments in associates and joint ventures accounted for using equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the 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 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 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 that interests in the associate and the joint venture are not related to the Group.

Property, Plant and Equipment

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

Property, 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 assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation of property, plant and equipment 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

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.

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 the 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.

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b.Intangible assets acquired in a business combination

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

c.Derecognition of intangible assets

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

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, excluding goodwill, to determine whether there is any indication that those assets have suffered any 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 cash-generating unit to which the asset belongs. Corporate assets are allocated to the smallest group of cash-generating units on a reasonable and consistent basis of allocation.

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

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

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

Financial Instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance 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.

a.Financial assets

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

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1) 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.

a) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when such financial assets are held for trading and 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 dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 30.

b) Available-for-sale 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.

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 measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

c) Loans and receivables

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

2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, 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

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affected.

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

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

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

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

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets 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 is 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 measured 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 trade receivables and other receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

3) Derecognition of financial assets

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

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

b. Equity instruments

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

Equity instruments issued by 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, issuance or cancellation of the Corporation’s own equity instruments.

c. Financial liabilities
1) Subsequent measurement

Except for financial liabilities at fair value through profit or loss, all the financial liabilities are measured at amortized cost using the effective interest method.

Financial liabilities at fair value through profit or loss 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 30.

2) Derecognition of financial liabilities

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

d. Convertible bonds

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

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

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

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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.

Warranty Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products at the management’s best estimate of the expenditure required to settle the obligations.

Revenue Recognition

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

a. Sale of goods

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

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

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

b. Dividend and interest income

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

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

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.

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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 receipt in advance. Amounts billed for work performed but not yet paid by the customer are recognized as trade receivables in the consolidated balance sheet.

Borrowing Costs

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

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

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

Government Grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions 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 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 receivable as compensation 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.

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 expenses when employees have rendered service entitling them to the contributions.

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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 net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. 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 it 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 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.

Share-based Payment Arrangements

Employee share options and restricted shares for employees granted to employee 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 and other equity - unearned employee benefits. It is recognized as an expense in full at the grant date if vested immediately.

When restricted shares for employees are issued, other equity - unearned employee benefits are 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 the expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - employee share options and capital surplus - restricted shares for employees.

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 to the extent that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

c. Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the 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 estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revisions affect both current and future periods.

a. Impairment of tangible and intangible assets other than goodwill

In the valuation of assets for impairment, 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

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value was based on current market conditions and the historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

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6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits with maturities less than 3 months Repurchase agreements collateralized by bonds		December 31	December 31
		2017 $ 5,439 4,251,592 819,380 - $ 5,076,411	2016 $ 6,098 2,768,658 245,315 129,899 $ 3,149,970

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Nonderivative financial assets Domestic listed stocks Investment in debt instrument Derivative instruments Call and put option of convertible bonds payable (Note 20)		December	31
		2017 $ 8,763 - 8,763 31 $ 8,794	2016 $ 7,453 983 8,436 725 $ 9,161

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Current Domestic open-end beneficiary certificates Non-current Domestic listed stocks		December 31	December 31
		2017 $ 1,043,387 $ 268,582	2016 $ 2,291,504 $ 314,233

9. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT

Domestic unlisted common stocks Foreign unlisted common stocks Foreign open-end beneficiary certificates Classification by measurement of financial instruments Available-for-sale financial assets		December 31	December 31
		2017 $ 157,762 25,657 10,152 $ 193,571 $ 193,571	2016 $ 162,131 26,366 10,152 $ 198,649 $ 198,649

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The above investments were measured at cost less impairment at the balance sheet date. Management believed the fair value of these investments could not be estimated reliably because the range of reasonable fair value estimates was significant and the probabilities of various estimates could not be reasonably assessed.

In order to expand the market of biotechnology equipment, the Group’s board of directors resolved to invest in TFBS Bioscience Inc. of $20,000 thousand in November 2016.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET - CURRENT

Time deposits with maturities more than 3 months Pledge deposits (Note 32)		December 31	December 31
		2017 $ 407,921 491,447 $ 899,368	2016 $ 372,437 6,078 $ 378,515

11. TRADE RECEIVABLES

Trade receivables Less: Allowance for impairment loss Trade receivables - related parties		December 31	December 31
		2017 $ 3,844,961 (127,707) 3,717,254 47,702 $ 3,764,956	2016 $ 3,159,134 (170,361) 2,988,773 7,890 $ 2,996,663

The average credit period for sales of goods is 60 to 90 days from the date when the goods were inspected and accepted by customers, and no interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date when credit was initially granted to the end of the reporting period. Allowances for impairment loss are based on the estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

Past due but not impaired trade receivables are trade receivables balances that were past due at the end of the reporting period but allowance for impairment loss was not recognized because their credit quality remained satisfactory and the amounts were still considered recoverable. The Group does not hold any collateral or other credit enhancements for these balances.

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 irregularly every year. Most of the trade receivables that are neither past due nor impaired have the best credit score under the external credit scoring system used by the Group.

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The aging of receivables was as follows:

Less than 60 days 61-180 days Over 180 days		December 31	December 31
		2017 $ 3,083,281 429,499 332,181 $ 3,844,961	2016 $ 2,536,446 396,642 226,046 $ 3,159,134

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

The aging 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
		2017 $ 447,305 415,515 231,913 $ 1,094,733	2016 $ 381,176 385,443 131,886 $ 898,505

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

The movements of the allowance for doubtful trade receivables were as follows:

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2016
$ 152,272
$ 33,405

Add: Impairment losses recognized
(reversed) on receivables
(18,529)
13,854
Add: Addition through business
combinations (Note 28)
-
1
Less: Amounts written off during the year
as uncollectible
(3,057)
(2,261)
Reclassification of impairment loss from
collective assessment to individual
assessment
9,804
(9,804)
Foreign exchange translation gains

(4,794)

(530)

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

Balance at January 1, 2017
$ 135,696
$ 34,665

Add: Impairment losses recognized on
receivables
2,407
41,260
Less: Amounts written off during the year
as uncollectible
(83,378)
(401)

Reclassification of impairment loss from
collective assessment to individual
assessment
31,071
(31,071)
Foreign exchange translation gains

(1,017)

(1,525)

Balance at December 31, 2017
$ 84,779
$ 42,928

Total
$ 185,677
(4,675)
1
(5,318)
-
(5,324)
$ 170,361
$ 170,361
43,667
(83,779)
-
(2,542)
$ 127,707

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The allowance for impairment loss assessed individually on customers in liquidation or in severe financial difficulties amounted to $84,779 thousand and $135,696 thousand as of December 31, 2017 and 2016, respectively. The Group did not hold any collateral over these balances.

12. CONSTRUCTION CONTRACTS RECEIVABLE (PAYABLE)

Construction contracts receivable Construction costs incurred plus recognized profits (less recognized losses) to date Less: Progress billings Due from customers for construction contracts Construction contracts payable Progress billings Less: Construction costs incurred plus recognized profits less recognized losses to date Due to customers for construction contracts Receipts in advance		December 31	December 31
		2017 $ 316,677 (114,142) $ 202,535 $ 1,149,807 (597,280) $ 552,527 $ 10,434	2016 $ 217,326 (2,510) $ 214,816 $ 346,218 (116,360) $ 229,858 $ -

The Group recognized construction contract revenue of $2,538,348 thousand and $382,288 thousand for the years ended December 31, 2017 and 2016, respectively.

13. INVENTORIES

Finished goods Semi-finished products Work in process Raw materials Inventory in transit		December 31	December 31
		2017 $ 482,724 390,533 686,539 842,094 29,184 $ 2,431,074	2016 $ 494,715 342,056 472,453 597,017 255 $ 1,906,496

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 was $6,280,658 thousand and $5,689,455 thousand, respectively. Cost of goods sold included the reversal of inventory write-downs of $38,384 thousand and inventory write-downs of $16,619 thousand, respectively.

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14. SUBSIDIARIES

Subsidiaries 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 Electronics 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.
Innovative Nanotech Incorporated
Monitoring instruments of nanoparticles
Touch Cloud Incorporation
Development of could platform and Internet of
Things systems
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.
Adivic Holding Corporation
Sale and research of RF device
Quantel Private Ltd.
Quantel Technologies India Private Ltd.
Sale and maintenance of test instruments, etc.
Quantel Global Vietnam Co., Ltd.
Sale and maintenance of test instruments, etc.
Chroma ATE Europe B.V.
Chroma Germany GmbH
Sale and maintenance of electronic test
instruments, etc.

Percentage of Ownership
as of December 31
2017
2016
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,
2017, 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
73.8
53.2
Note 3
60.0
60.0
Note 4
89.3
-
Note 5
78.1
-
Note 6
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
100.0
100.0
100.0
-
Note 7
100.0
-
Note 7
100.0
-
Note 8

Note 1: The Corporation and the Corporation’s subsidiary, Chroma USA, held 75% equity interest in Chroma Systems Solutions, Inc.
Note 2: In April 2017, Adivic Technology Co. (“Adivic”) decreased its capital by $140,000 thousand to make up for losses and increased its capital by cash injection of $100,000 thousand to strengthen its financial structure. The Corporation’s board of directors decided to participate in the capital injection at the same percentage as originally owned. The Corporation’s equity interest in Adivic remained the same.
Note 3: In December 2017, EVT Technology Co., Ltd. (“EVT”) increased its capital by cash injection of $40,000 thousand to strengthen its financial structure. The Corporation’s board of directors participated in the capital injection. The Corporation’s equity interest in EVT rose to 73.8% after the cash injection.
147 -
Note 4: To expand its market share and spread its sales network in Southeast Asia, the Corporation’s board of directors resolved in December 2015 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 response to the demand for new-generation solutions and to provide customer with most advanced electronic test service, the Corporation’s board of directors resolved in July 2017 to invest in Innovative Nanotech Incorporated. In December 2017, Innovative Nanotech Incorporated increased its capital by cash injection of $50,000 thousand. The Corporation participated in the cash injection and held 89.3% equity as of December 31, 2017.
Note 6: To strengthen and integrate the software research capability of product lines and raise marketing opportunities, the Corporation’s board of directors resolved to participate in the cash injection of Touch Cloud Incorporation and acquired equity interest of 78.1%. Refer to Note 28 for details of the investment in Touch Cloud Incorporation.
Note 7: To lay out sales network in Southeast Asia, Quantel Private Ltd. resolved to set up Quantel Technologies India Private Ltd. and Quantel Global Vietnam Co., Ltd. in the fourth quarter of 2017 to be engaged in the sale of test instruments.
Note 8: Chroma ATE Europe B.V. resolved to set up Chroma Germany GmbH in the fourth quarter of 2017 to be engaged in the sale and maintenance of electronic instruments.

15. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates Investments in joint ventures		December 31	December 31
		2017 $ 623,941 17,626 $ 641,567	2016 $ 623,904 17,593 $ 641,497

a.Investments in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2017 Amount Percentage of Equity Interest (%) $ 529,538 11.3 94,403 27.3 $ 623,941		2016
				Amount Percentage of Equity Interest (%) $ 535,490 11.3 88,414 27.3 $ 623,904

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Aggregate information of associates that are not individually material:

The Corporation’s share of: Profit from continuing operations Other comprehensive loss Total comprehensive income for the year		For the Years December	Ended 31
		2017 $ 49,171 (7,808) $ 41,363	2016 $ 61,891 (25,820) $ 36,071

Refer to Table 8 “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.

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
		2017 $ 1,568,144	2016 $ 1,497,088

Except for Adlink Technology Inc., the investments in associates accounted for using equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on financial statements which have been audited. Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statements of Adlink Technology Inc., which have not been audited.

b.Investment in joint venture

Joint venture that is not individually material Chih Ho Shun Development Co., Ltd.		December 31	December 31	December 31
		2017 Amount Percentage of Equity Interest (%) $ 17,626 35.0		2016
				Amount Percentage of Equity Interest (%) $ 17,593 35.0

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Aggregate information of joint venture that is not individually material:

The Corporation’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year		For the Years December	Ended 31
		2017 $ 33 - $ 33	2016 $ 88 - $ 88

Refer to Table 8 “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 resolved to invest jointly with Dynapack International Corporation and Heran Co., Ltd. to set up Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”). The Corporation invested $17,500 thousand for a 35% entity interest in Chih Ho Shun but did not have control over this investee.

The investments in joint venture accounted for using the equity method and the share of profit or loss and other comprehensive income of the investments for the years ended December 31, 2017 and 2016 was based on the joint venture’s financial statements audited by auditors for the same years.

16. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2016 Additions Disposals Acquisition through business combinations (Note 28) Transferred from inventories Reclassification Exchange differences Balance, December 31, 2016 Accumulated depreciation Balance, January 1, 2016 Depreciation Disposals Acquisition through business combinations (Note 28) Reclassification Exchange differences Balance, December 31, 2016 Carrying value at December 31, 2016	Land $ 526,506 - - - - - (891) $ 525,615 $ - - - - - - $ - $ 525,615	Buildings $ 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 Total $ 1,069,581 $ 1,342,772 $ 5,405,932 14,486 112,000 186,509 (167,185) (64,985) (238,557) 2,777 18,129 61,866 20,483 100,964 121,447 (6,723) 6,723 - (2,756) (30,199) (61,251) $ 930,663 $ 1,485,404 $ 5,475,946 $ 783,998 $ 964,444 $ 2,638,324 120,458 119,165 336,514 (156,935) (49,987) (210,377 ) 2,777 15,037 21,737 (4,632) 4,632 - (2,083) (18,798) (24,379) $ 743,583 $ 1,034,493 $ 2,761,819 $ 187,080 $ 450,911 $ 2,714,127 (Continued)

150 -

Cost Balance, January 1, 2017 Addition Disposals Acquisition through business combinations (Note 28) Intercompany transfer Exchange differences Balance, December 31, 2017 Balance, January 1, 2017 Depreciation Disposals Acquisition through business combinations (Note 28) Reclassification Exchange differences Balance, December 31, 2017 Carrying value at December 31, 2017	Land $ 525,615 - - - - (5,268) $ 520,347 $ - - - - - - $ - $ 520,347	Buildings $ 2,534,264 13,622 (32) - - (21,459) $ 2,526,395 $ 983,743 92,412 (29) - - (2,698) $ 1,073,428 $ 1,452,967	Machinery Miscellaneous Equipment Total $ 930,663 $ 1,485,404 $ 5,475,946 23,430 141,826 178,878 (186,480) (80,708) (267,220) 371 751 1,122 22,842 103,325 126,167 (5,928) (5,256) (37,911) $ 784,898 $ 1,645,342 $ 5,476,982 $ 743,583 $ 1,034,493 $ 2,761,819 84,455 133,372 310,239 (185,362) (64,378) (249,769) 56 182 238 (1,217) - (1,217) (3,834) (2,380) (8,912) $ 637,681 $ 1,101,289 $ 2,812,398 $ 147,217 $ 544,053 $ 2,664,584 (Concluded)

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Building

Primary buildings 55 years Mechanical and electrical equipment 10years Clean room equipment 10years Others 2-50years Machinery 2-6 years Miscellaneous equipment 2-16 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 (Note 28) Net effect of exchange differences Balance, end of the year		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 220,236 11,737 (6,565) $ 225,408	2016 $ 196,052 25,219 (1,035) $ 220,236

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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, 2017 and 2016.

18. OTHER INTANGIBLE ASSETS

Cost Balance, January 1, 2016 Acquisition through business combinations (Note 28) Balance, December 31, 2016 Accumulated amortization Balance, January 1, 2016 Amortization expenses Balance, December 31, 2016 Carrying value at December 31, 2016 Cost Balance, January 1, 2017 Additions Exchange differences Balance, December 31, 2017 Accumulated amortization Balance, January 1, 2017 Amortization expenses Exchange differences Balance, December 31, 2017 Carrying value at December 31, 2017	Patents Licenses and Franchises Core Technology Customer Relationships $ - $ - $ 317,931 $ - - - - 5,592 $ - $ - $ 317,931 $ 5,592 $ - $ - $ 313,407 $ - - - 2,010 839 $ - $ - $ 315,417 $ 839 $ - $ - $ 2,514 $ 4,753 $ - $ - $ 317,931 $ 5,592 16,088 - 32,662 - - - - - - - - - $ 16,088 $ 32,662 $ 317,931 $ 5,592 $ - $ - $ 315,417 $ 839 268 136 2,011 1,118 - - - - $ 268 $ 136 $ 317,428 $ 1,957 $ 15,820 $ 32,526 $ 503 $ 3,635	Computer Software $ - - $ - $ - - $ - $ - $ - 162 - 2 $ 164 $ - 19 1 $ 20 $ 144	Total $ 317,931 5,592 $ 323,523 $ 313,407 2,849 $ 316,256 $ 7,267 $ 323,523 48,912 2 $ 372,437 $ 316,256 3,552 1 $ 319,809 $ 52,628

The Group signed an agreement with Industrial Technology Research Institute in 2017 and obtained technique licenses and patents.

Other intangible assets were amortized on a straight-line basis over their estimated useful lives as follows:

Patents	5 years
Licenses and franchises Core technology	20 years 5 years
Customer relationships	5 years
Computer software	10 years

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19. BORROWINGS

Short-term Borrowings

Secured borrowings Bank loans (a) Unsecured borrowings Bank loans (b)		December 31	December 31
		2017 $ - 471,638 $ 471,638	2016 $ 25,000 171,705 $ 196,705

a.Secured by the Group’s property, plant and equipment (refer to Note 32). As of December 31, 2016, the interest rate on the bank loans was 1.32%.

b.As of December 31, 2017 and 2016, the interest rate on the bank loans was 0.85%-4.50% and 1.23%-3.50% per annum, respectively.

Long-term Borrowings

Secured borrowings Bank loans (a) (Note 32) Unsecured borrowings Syndicated bank loans (b) Bank loans (c) Less: Current portions Long-term borrowings		December 31	December 31
		2017 $ 177,735 1,200,000 900,000 2,277,735 1,216,042 $ 1,061,693	2016 $ 176,058 2,000,000 7,344 2,183,402 815,317 $ 1,368,085

a. Secured by the Group’s debt investments with no active market and property, plant and equipment. The final repayment period of those bank loans will be due in November 2019 to April 2025. As of December 31, 2017 and 2016, the effective interest rate on the bank loans were 0.90%-8.88% and 0.90%-10.88% per annum, respectively.
b. 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 will be repaid from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per installment), the remaining $800,000 thousand will be repaid on the due date, September 3, 2018, and the interest is paid monthly. As of December 31, 2017 and 2016, the interest rate per annum was all 1.58% on a floating basis.
153 -
c. The bank loan is for the purpose of general operation with due date on December 29, 2020. As of December 31, 2017 and 2016, the interest rate on the bank loan was 1.17%-1.20% and 1.72% per annum, respectively.

20. BONDS PAYABLE

Unsecured domestic convertible bonds Less: Discount on bonds payable		December 31	December 31
		2017 $ 101,900 2,197 $ 99,703	2016 $ 1,450,500 53,360 $ 1,397,140

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 Taipei Exchange at the same date. Except for the period when books are closed for share transaction, bondholders are entitled to convert bonds into the Corporation’s common stock at $74.2 (conversion price) per share from June 24, 2014 to May 13, 2019. Due to distribution of cash dividends of NT$3.3 and NT$2.4 per share in 2017 and 2016, the conversion price was adjusted to NT$64.9 and NT$67.2 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 the 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 “capital surplus - option”. The liability components were recognized into derivative and nonderivative liabilities, separately.

Proceeds of the issue (less transaction costs $5,320 thousand) Equity component Deferred tax assets Financial liability component Liability component at the date of issue Interest charged at an effective interest rate of 1.57% Conversion of bonds payable Liability component as of December 31, 2017	$ 1,994,680 (141,487) 904 (4,989) 1,849,108 77,157 (1,826,562) $ 99,703

21. OTHER PAYABLES

Salaries and bonus (including employee’s compensation and remuneration of directors and supervisors) Others		December 31	December 31
		2017 $ 872,526 293,927 $ 1,166,453	2016 $ 689,305 163,765 $ 853,070

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22. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

The Corporation and its subsidiaries in ROC 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 the retirement benefit plans to fund the benefits. 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.

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 6 months before retirement. The Corporation and its 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 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 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 Group has no right to influence the investment policy and strategy.

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2017 $ 459,640 (293,814) $ 165,826	2016 $ 443,230 (274,964) $ 168,266

Movements in net defined benefit liabilities were as follows:

	Present Value
	of the Defined	Fair Value of	Net Defined
	Benefit	the Plan	Benefit
	Obligation	Assets	Liability
Balance at January 1, 2016	$ 409,891	$(260,200)	$ 149,691
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
			(Continued)

155 -

	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)	$	-	$	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
Current service cost		4,185		-		4,185
Net interest expense (income)		6,102		(3,885)		2,217
Recognized in profit or loss		10,287		(3,885)		6,402
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-		1,166		1,166
Actuarial loss - changes in demographic
assumptions		3,625		-		3,625
Actuarial loss - changes in financial
assumptions		(5)		-		(5)
Actuarial loss - experience adjustments		2,503		-		2,503
Recognized in other comprehensive income		6,123		1,166		7,289
Contributions from the employer		-		(16,131)		(16,131)
Balance at December 31, 2017	$	459,640	$(293,814)		$	165,826
					(Concluded)

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

a. Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.
156 -

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
	2017 2016 0.88%- 1.63% 0.88%- 1.50% 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
		2017 $(14,066) $ 14,697 $ 14,293 $(13,752)	2016 $(14,234) $ 14,898 $ 14,490 $(13,919)

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.

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
	2017 2016 $ 16,338 $ 15,211 13.5 years 15.0 years

23. EQUITY

a. Ordinary share capital

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2017 450,000 $ 4,500,000 411,894 $ 4,118,942	2016 450,000 $ 4,500,000 389,887 $ 3,898,872

The authorized shares include 30,000 thousand shares allocated for the exercise of employee share options.

157 -

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 share transactions From merger May be used to offset a deficit only Employee share options expired Share of changes in capital surplus of associates or joint ventures May not be used for any purpose Convertible bonds options Employee share options Employee restricted shares		December 31	December 31
		2017 $ 2,514,454 171,229 146,976 5,874 44,377 7,209 116,389 180,781 $ 3,187,289	2016 $ 1,209,905 165,059 146,976 5,239 52,703 102,614 90,459 187,204 $ 1,960,159

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 dividends policy

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

Under the dividend policy as set forth in the amended Articles, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’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 after amendment, please refer to c. employees’ compensation and remuneration of directors of the Corporation in Note 24.

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.

An appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Corporation’s paid-in capital. The legal 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.

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Items referred to 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” should be appropriated to or reversed from a special reserve by the Corporation.

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 2016 and 2015 have been approved in the annual shareholders’ meeting on June 8, 2017 and June 7, 2016, respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2016 For Fiscal Year 2015 $ 171,994 $ 123,656 1,314,425 910,200	Dividend Per Share (NT$)
		For Fiscal Year 2016 For Fiscal Year 2015 $3.3 $2.4

The appropriations of earnings for 2017 had been proposed by the Corporation’s board of directors on February 22, 2018. The appropriations and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Legal reserve	$ 255,840
Cash dividends	1,854,424	$4.5

The appropriations of earnings for 2017 are subject to the resolution in the shareholders’ meeting to be held on June 8, 2018.

d. Special reserves

If a special reserve appropriated on the first-time adoption of IFRSs relates to exchange differences on translation of the financial statements of foreign operations (including the subsidiaries of the Corporation), the special reserve will be reversed on a proportionate basis according to the Corporation’s disposal of foreign operations; on the Corporation’s loss of significant influence, however, the entire special reserve will be reversed. Additional special reserve should be appropriated for the amount equal to the difference between net debit balance reserves and the special reserve appropriated on the first-time adoption of IFRSs. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and, thereafter, distributed.

e. 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
		2017 $ (24,914) (64,660) (8,059) $ (97,633)	2016 $ 127,968 (127,798) (25,084) $ (24,914)

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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
		2017 $ 232,901 (53,553) $ 179,348	2016 $ 271,697 (38,796) $ 232,901

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.

Balance, beginning of the year Issuance of shares Share-based payment expenses recognized Balance, end of the year Non-controlling interests Balance, beginning of the year Share of non-controlling interests Net loss Exchange differences on the translation of foreign financial statements Remeasurement on defined benefit plans Unrealized gains or loss on available-for-sale financial assets Capital increase of subsidiaries in cash Non-controlling interest arising from acquisition of subsidiaries (Note 28) Adjustment relating to changes in percentage of equity interest Cash dividends Compensation cost of employee share options - subsidiaries (Note 27) Balance, end of the year		For the Years Ended December 31	For the Years Ended December 31
		2017 2016 $(149,952) $ - (13,772) (188,311) 69,875 38,359 $ (93,849) $(149,952) For the Years Ended December 31
		2017 $ 171,224 (9,578) (4,958) (83) 40 57,502 12,701 11,254 (5,952) - $ 232,150	2016 $ 121,192 (24,369) (4,757) (72) - 53,225 30,520 - (4,838) 323 $ 171,224

f. Non-controlling interests

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g. Treasury stock

The Corporation’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Subsidiaries Number of Shares Held (In Thousand Shares) December 31, 2017 Chroma Investment Co., Ltd. 1,916 December 31, 2016 Chroma Investment Co., Ltd. 1,916	Carrying Amount Market Price $ 35,714 $ 310,324 $ 35,714 $ 144,435

Forfeited employee restricted shares of 12 thousand were returned to the Corporation and canceled during this year.

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

24. ADDITIONAL INFORMATION ON EXPENSES

a. Finance costs

Interest on borrowings Interest on convertible bonds Less: Amount included in the cost of qualifying assets Capitalized interest Capitalization rate b. Depreciation and amortization expense Property, plant and equipment Intangible assets			For the Years Ended December 31
			2017 2016 $ 40,313 $ 41,056 6,764 25,751 47,077 66,807 (24,295) (24,755) $ 22,782 $ 42,052 $ 24,295 $ 24,755 1.58% 1.58%-1.60% For the Years Ended December 31
		2017 2016 $ 310,239 $ 336,514 $ 3,552 $ 2,849 (Continued)

b. Depreciation and amortization expense

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An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses		For the Years Ended December 31
		2017 2016 $ 95,716 $ 131,819 214,523 204,695 $ 310,239 $ 336,514 $ 3,552 $ 2,849 (Concluded)

c. Employee benefits expense

Short-term benefits Share-based payments Retirement benefits (Note 22) Defined contribution plans Defined benefit plans Other employee benefits Summarized by function Operating costs Operating expenses		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 3,079,813 121,593 77,504 6,402 64,457 $ 3,349,769 $ 594,855 2,754,914 $ 3,349,769	2016 $ 2,647,345 86,941 70,037 6,702 59,001 $ 2,870,026 $ 516,029 2,353,997 $ 2,870,026

d. Employees’ compensation and remuneration of directors and supervisors

The Corporation accrued its appropriation of employees’ compensation and remuneration of 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 of directors and supervisors. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2017 and 2016, which have been approved by the Corporation’s board of directors on February 22, 2018 and February 21, 2017, respectively, were as follows:

Employee’s compensation Remuneration of directors and supervisors	For the Years Ended December 31	For the Years Ended December 31
	2017 Amount Rate % $ 310,000 9.73 9,600 0.30	2016
		Amount Rate % $ 300,000 12.96 8,000 0.35

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.

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There was no difference between the amounts of the employee’s compensation and the remuneration of directors and supervisors and the respective amounts recognized in the consolidated financial statements for the years ended December 31, 2016 and 2015.

Information on the employee’s compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2018 and 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

25. INCOME TAXES

a. Major components of income tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 485,085 20,687 (34,220) 471,552 101,692 $ 573,244	2016 $ 358,555 17,620 (28,629) 347,546 (1,055) $ 346,491

A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax Income tax expense calculated at the statutory rate Adjustment items in determining taxable income Tax-exempt income Income tax on unappropriated earnings Investment tax credits Others (temporary differences) Effect of different tax rates of the Group entities Adjustments for prior years Income tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 3,122,067 $ 530,751 (28,509) (118,652) 20,687 (67,191) 25,114 245,264 (34,220) $ 573,244	2016 $2,042,057 $ 347,150 (13,544 ) (6,215 ) 17,620 (32,329 ) (1,055 ) 63,493 (28,629) $ 346,491

The applicable corporate income tax rate used by the group entities in ROC is 17%, 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.

In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

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As the status of 2018 appropriations of earnings is uncertain, the potential income tax consequences of the 2017 unappropriated earnings are not reliably determinable.

b. Deferred tax assets and liabilities

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

For the year ended December 31, 2017

	Balance,	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	$ 70,420	$ 21,876	$	-	$ 92,296
Tax losses	61,207	(18,065)		(3,506)	39,636
Inventory reserve	33,321	240		-	33,561
Impairment loss	16,030	3,435		-	19,465
Tax credit	16,263	3,834		(1,340)	18,757
Allowance for impaired
receivables	3,402	6,190		(30)	9,562
Net defined benefit liability	9,000	(9)		-	8,991
Unrealized exchange loss	4,367	935		-	5,302
Others	6,054	(2,828)		(388)	2,838
	$ 220,064	$ 15,608	$	(5,264)	$ 230,408
	Balance,	Recognized	Exchange
	Beginning of	in Profit or	Differences		Balance, End
Deferred Tax Liabilities	the Year	Loss	and	Other	of the Year
Unappropriated earnings of
foreign subsidiaries	$ 161,194	$ 111,442	$	-	$ 272,636
Goodwill	15,959	5,634		-	21,593
Unrealized exchange gain	945	(726)		-	219
Others	9,072	950		(648)	9,374
	$ 187,170	$ 117,300	$	(648)	$ 303,822

	$ 187,170	$ 117,300	$	(648)	$ 303,822
	For the year ended December	31, 2016
	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	$ 42,287	$ 28,133	$	-	$ 70,420
Tax losses	50,872	11,037		(702)	61,207
Inventory reserve	23,154	10,167		-	33,321
Tax credit	10,779	5,676		(192)	16,263
Impairment loss	14,158	1,872		-	16,030
Net defined benefit liability 9,199		(168)		(31)	9,000
Unrealized exchange loss -		4,367		-	4,367
Allowance for impaired
receivables	2,396	1,014		(8)	3,402
Others	3,806	2,303		(55)	6,054
	$ 156,651	$ 64,401	$	(988)	$ 220,064

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	Balance,	Recognized	Exchange	Exchange
	Beginning of	in Profit or	Differences		Balance, End
Deferred Tax Liabilities	the Year	Loss	and	Other	of the Year
Unappropriated earnings of
foreign subsidiaries	$ 101,879	$ 59,315	$	-	$ 161,194
Goodwill	10,096	5,863		-	15,959
Unrealized exchange gain	3,777	(2,832)		-	945
Others	8,075	1,000		(3)	9,072
	$ 123,827	$ 63,346	$	(3)	$ 187,170

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 Deductible temporary differences Impairment loss Valuation gain on financial assets		December 31	December 31
		2017 $ - 33,277 57,397 49,826 68,584 487,293 $ 696,377 $ 2,382 (2,095) $ 287	2016 $ 8,881 33,277 47,723 45,690 68,584 342,472 $ 546,627 $ 2,382 (776) $ 1,606

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

Loss carryforwards as of December 31, 2017 were as follows:

	Unused Amount Expiry Year $ 7,908 2018 9,258 2019 9,180 2020 12,884 2021 18,710 2022 12,196 2023 10,917 2024 16,635 2025 18,185 2026 10,850 2027 21,070 2033 8,876 2034 5,826 2036 $ 162,495

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As of December 31, 2017, profits attributable to the following expansion projects were exempted from income tax for a 5-year period:

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

e. Integrated income tax

Balance of imputation credit account (ICA) Creditable ratio for distribution of earnings		December 31
		2017 2016 $ 400,902 $ 302,877 For the Years Ended December 31
		2017 2016 Note 16.28%

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, no creditable ratio for distribution of earnings in 2018 is expected in 2017.

f. Income tax assessments

As of December 31, 2017, the Corporation’s tax returns through 2015 had been assessed by the tax authorities.

The tax returns through 2016 of the Corporation’s subsidiary - Adivic Technology Co., had been assessed by the tax authorities. The tax returns through 2015 of the Corporation’s subsidiaries - Chroma New Material Corp., Wei Kuang Automatic Equipment Co., Chroma Investment Co., Testar Electronics Corp., EVT Technology Co., and Wei Da Electric Vehicle Co. - had been assessed by the tax authorities.

26. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Interest on convertible bonds and valuation gain on conversion option Earnings used in the computation of diluted earnings per share		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 2,558,401 7,459 $ 2,565,860	2016 $ 1,719,935 23,543 $ 1,743,478

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(In Thousands of Shares)

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Convertible bonds Employee share options Employees’ compensation Employee restricted shares Weighted average number of ordinary shares used in the computation of diluted earnings per share		For the Years December	Ended 31
		2017 399,052 6,864 5,037 2,392 2,057 415,402	2016 379,930 26,336 1,788 4,272 - 412,326

Since the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the 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.

27. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan of the Corporation

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 6 years and exercisable at certain percentages subsequent to the second year of the grant date.

The related information for the units granted in March 2016 were as follow:

1) Number of options granted and exercise price:

Number of options (in thousands)	7,900
Exercise prices per share on grant date (market value on grant date)	$67.8
Exercise prices per share as of the report date (adjusted based on the
Corporation’s employee share options plan)	$63.4

2) The valuation inputs of Black-Scholes model were as follows:

Vested Period	2 Years	3 Years	4 Years
Expected volatility	31.64%	32.62%	33.08%
Risk-free interest rate	0.52%	0.55%	0.61%
Expected dividend rate	-	-	-
Expected life	4 years	4.5 years	5 years

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3) Fair value of stock options vested from grant date:

Vested Period	2 Years	3 Years	4 Years
Fair value (NT$ per unit)	$17.37	$18.97	$20.30

Information on 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$)	December 31	December 31
	2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 11,538 $ 60.2 - - (1,683) 47.0 (392) - 9,463 60.1 1,914 $ -	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

Information about outstanding options as of December 31, 2017 and 2016 is as follows:

December 31	December 31
2017 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $46.7 1.52 63.4 4.24	2016
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $48.4 2.52 65.7 5.24

Compensation costs recognized were $51,802 thousand and $48,259 thousand for the years ended December 31, 2017 and 2016, 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 and 185 thousand shares on July 8, 2016 and June 20, 2017, 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.
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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. Dividends from RSUs are not restricted during the vesting period and 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, 2017 and 2016 was as follows:

Restricted shares at the beginning of the year Shares granted Shares vested Shares canceled Restricted shares at the end of the year		For the Years December	Ended 31
		2017 3,100 185 (298) (12) 2,975	2016 - 3,100 - - 3,100

Compensations costs of share-based payment arising from the RSU Plan were $69,791 thousand (including deduction of 84 thousand for canceled shares) and $38,359 thousand for the years ended December 31, 2017 and 2016, respectively.

c. Employee share option plan of subsidiaries

Adivic Technology Co. granted its employees stock options of 1,360 thousand units in March 12, 2014, with each option eligible to subscribe for one common share of Adivic Technology Co. when exercised. The options are valid for 8 years and exercisable at certain percentages subsequent to the second year of the grant date.

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1) Information on employee share options was as follows:

Balance, beginning of the year Options forfeited Balance, end of the year Options exercisable, end of the year	December 31	December 31
	2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 785 $ 10.0 - - 785 10.0 -	2016
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 930 $ 10.0 (145) - 785 10.0 -

2) Information about outstanding options as of December 31, 2017 and 2016 is as follows:

December 31	December 31
2017			2016
Weighted-average			Weighted-average
Remained					Remained
Range of Exercise Contractual Life	Range	of Exercise		Contractual Life
Price (NT$) (Years)	Price (NT$)				(Years)
10.0 4.20		10.0			5.20
Compensation costs recognized was $323 thousand for the year		ended December		31, 2016
SINESS COMBINATION
Subsidiaries acquired
The Group bought 78.1% equity interest of Touch	Cloud Incorporation (“Touch Cloud”) in
the fourth quarter of 2017 and 60% equity interest of Quantel Private Ltd. (“Quantel”) in April
2016 and acquired control over Touch Cloud and Quantel;		these	subsidiaries are included in
the consolidated financial statements since the date	the Group acquired control over them.
Assets acquired and liabilities assumed at the date of acquisition
		Touch Cloud			Quantel
Current assets
Cash and cash equivalents (net of bank overdrafts of $0
thousand and $16,733 thousand, respectively)			$ 60,514		$ 20,341
Trade receivables (net of allowance for doubtful	accounts
of $0 thousand and $1 thousand, respectively)			790		42,177
Debt investments with no active market			-		9,567
Inventories			-		13,736
Prepayments			339		-
Other current assets			30		951
					(Continued)

28. BUSINESS COMBINATION

a. Subsidiaries acquired

The Group bought 78.1% equity interest of Touch Cloud Incorporation (“Touch Cloud”) in the fourth quarter of 2017 and 60% equity interest of Quantel Private Ltd. (“Quantel”) in April 2016 and acquired control over Touch Cloud and Quantel; these subsidiaries are included in the consolidated financial statements since the date the Group acquired control over them.

b. Assets acquired and liabilities assumed at the date of acquisition
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		Touch Cloud	Touch Cloud	Quantel
	Non-current assets
	Property, plant and equipment, net	$	884	$ 40,129
	Refundable deposits		175	800
	Other non-current assets		1	-
	Current liabilities
	Short-term borrowing		-	(19,601)
	Notes payable		(290)	-
	Trade payables		(443)	(10,066)
	Other payables		(20)	(2,359)
	Income tax payable		-	(1,380)
	Current portion of long-term borrowings		-	(6,259)
	Other current liabilities		(4,016)	(20)
	Non-current liabilities
	Long-term borrowings		-	(11,494)
	Deferred tax liabilities		-	(223)
		$	57,964	$ 76,299
				(Concluded)
c.	Intangible assets arising from acquisition
		Touch Cloud		Quantel
	Consideration transferred	$	57,000	$ 76,590
	Plus: Non-controlling interest		12,701	30,520
	Less: Fair value of identifiable net assets acquired	(57,964)		(76,299)
	Intangible assets arising from acquisition (Notes 17 and 18)	$	11,737	$ 30,811
	Goodwill	$	11,737	$ 25,219
	Customer relationships		-	5,592
		$	11,737	$ 30,811
d.	Net cash inflow (outflow) on acquisition of subsidiaries
		Touch Cloud		Quantel
	Consideration paid in cash	$(57,000)		$(76,590)
	Less: Cash and cash equivalent balances acquired		60,514	20,341
		$	3,514	$(56,249)

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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
		2017 $ 1,121 $ (2,123)	2016 $ 195,293 $ 13,897

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s revenue from operations would have been $14,906,187 thousand, and the income from operations would have been $2,542,377 thousand for the year ended December 31, 2017, and 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. This proforma 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 Touch Cloud and Quantel been acquired at the beginning of the current reporting period, the management performed the following:

1) Calculated depreciation of plant and equipment acquired on the basis of the fair values at the initial accounting for the business combination rather than the carrying amounts recognized in the preacquisition 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

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

Management believes the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values or their fair value could not be assessed reliably.

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

1) Fair value hierarchy

December 31, 2017 Financial assets at FVTPL Domestic securities Listed equity securities Derivative instruments Available-for-sale financial assets Domestic securities Listed equity securities Open-end beneficiary certificate December 31, 2016 Financial assets at FVTPL Domestic securities Listed equity securities Investment in debt instrument Derivative instruments Available-for-sale financial assets Domestic securities Listed equity securities Open-end beneficiary certificate	Level 1 $ 8,763 - $ 8,763 $ 268,582 1,043,387 $ 1,311,969 $ 7,453 983 - $ 8,436 $ 314,233 2,291,504 $ 2,605,737	Level 2 $ - 31 $ 31 $ - - $ - $ - - 725 $ 725 $ - - $ -	Level 3 $ - - $ - $ - - $ - $ - - - $ - $ - - $ -	Total $ 8,763 31 $ 8,794 $ 268,582 1,043,387 $ 1,311,969 $ 7,453 983 725 $ 9,161 $ 314,233 2,291,504 $ 2,605,737

There were no transfers between Levels 1 and 2 for the years ended December 31, 2017 and 2016.

2) Valuation techniques and inputs applied for level 2 fair value measurement:

Financial Instruments Valuation Techniques and Inputs

Derivatives - convertible Binomial tree valuation model of convertible bonds: The bonds 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.

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c. Categories of financial instruments

Financial assets Fair value through profit or loss Loans and receivables (1) Available-for-sale financial assets (2) Financial liabilities Amortized cost (3)	December 31
	2017 2016 $ 8,794 $ 9,161 10,150,213 6,701,119 1,505,540 2,804,386 6,946,853 6,672,482

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, trade receivables, other receivable (other current assets) and refundable deposits.
2) The balances included the carrying amount of available-for-sale financial assets measured at cost.
3) The balances included financial liabilities measured at amortized cost, which comprise short-term loans, notes payable, trade payables other payables, bonds issued, long-term loans (including current portion of long-term borrowings) and guarantee deposits received.
d. Financial risk management objectives and policies

The Group’s major financial instruments consist of equity and debts investment, cash and cash equivalents, receivables, long-term and short-term borrowings, trade payables and 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.

1) Market risk

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

a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are set out in Note 34.

Sensitivity analysis

The Group was mainly exposed to USD and RMB.

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Had the NTD strengthened/weakened by 5% against the relevant currency, the pre-tax profit would have decreased/increased by $292,951 thousand and $127,358 thousand for the years ended December 31, 2017 and 2016, 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.

b) Interest rate risk

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

The carrying amounts of the financial assets and liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2017 2016 $ 1,718,748 $ 753,729 673,710 1,709,000 4,250,952 2,768,557 2,175,366 2,068,247

Sensitivity analysis

The sensitivity analysis below has 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 was prepared assuming the amount of the liability outstanding at the balance sheet dates was outstanding for the whole year. A 50 basis point increase or decrease was 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 had been 50 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2017 and 2016 would decreased/increased by $10,378 thousand and $3,784 thousand, respectively, which was mainly attributable to the Group’s exposure to interest rates on its variable rate deposits and bank loans.

c) Price risk

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

a) Investment in available-for-sale financial assets (mainly investment in open-end beneficiary 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 listed stocks in Taiwan)

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

175 -

Sensitivity analysis

If equity prices had been 5% higher/lower, the income before tax would have increased/decreased by $438 thousand and $422 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, 2017 and 2016, respectively; and other comprehensive income would have increased/decreased by $65,598 thousand and $130,287 thousand because of changes in fair values of available-for-sale financial assets held by the Group for the years ended December 31, 2017 and 2016, respectively.

2) 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 could arise from:

a) The carrying amount of trade receivables from operating activities; and
b) 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.

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

The credit risk of bank deposits, fixed-income financial instruments and other financial instruments are evaluated, managed and controlled by the 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.

3) Liquidity risk

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

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the Group’s available unutilized bank loan facilities were $3,036,639 thousand and $3,332,475 thousand, respectively.

Liquidity and interest risk tables for non-derivative financial liabilities

The following tables detail the Group’s remaining contractual maturity for its non-derivative 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.

176 -

Bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

Non-derivative financial liabilities Non-interest bearing Convertible bonds Fixed interest rate instruments Floating interest rate instruments Non-derivative financial liabilities Non-interest bearing Convertible bonds Fixed interest rate instruments Floating interest rate instruments	December 31, 2017	December 31, 2017
	Within 1 Year 1-5 Years More Than 5 Years $ 4,096,939 $ - $ - - 101,900 - 482,332 98,794 3,057 1,233,271 981,261 7,462 $ 5,812,542 $ 1,181,955 $ 10,519 December 31, 2016
	Within 1 Year $ 2,899,218 - 204,260 837,435 $ 3,940,913	1-5 Years More Than 5 Years $ - $ - 1,450,500 - 116,998 4,640 1,238,436 35,383 $ 2,805,934 $ 40,023

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 immediately. 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 Group’s operating funds are sufficient to meet the cash flow demand, as a result, the Group does not use its overdraft limit.

31. TRANSACTIONS WITH RELATED PARTIES

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

Relationship with the Related Party Group 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. (“Dynascan Japan”) Associate Mou Kuan Industry Co., Ltd. (“Mou Kuan”) Other related party Quantel Co., Ltd. (“Quantel Thailand”) Other related party Quantel Sdn Bhd (“Quantel Malaysia”) Other related party Quantel Philippines Inc. (“Quantel Philippines”) Other related party PT Quantel (“Quantel Indonesia”) Other related party Quantel Pte Ltd Representative Office In Hanoi (“Quantel Other related party Vietnam”) Quantel Electronics (India) Private Limited (“Quantel India”) Other related party

177 -

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

Related Party Categories Associates Other related parties		For the Years December	Ended 31
		2017 $ 46,766 51,380 $ 98,146	2016 $ 19,056 - $ 19,056

c. Purchase

Related Party Categories Associates Other related parties		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 24,917 58,716 $ 83,633	2016 $ 35,600 9,525 $ 45,125

d. Receivables from related parties (excluding loans to related parties)

Line Item Related Party Categories Trade receivables - related Associates parties Other related parties		December	31
		2017 $ 4,075 43,627 $ 47,702	2016 $ 7,890 - $ 7,890

Outstanding trade receivables from related parties are unsecured.

e. Payables to related parties (excluding loans from related parties)

Line Item Related Party Categories Notes payable - related parties Other related parties Trade payables - related parties Associates Other related parties			December 31
	$	$	2017 2016 $ 17,502 $ 2,595 7,201 $ 11,753 32,233 60 39,434 $ 11,813

The outstanding trade payables from related parties were unsecured.

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f. Others

Line Item Related Party Categories Rental income Associates Rental cost Other related parties Administration expense Associates Other related parties Line Item Related Party Categories Other current assets Associates g. Compensation of key management personnel Short-term employee benefits Post-employment benefits		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 1,260 $ 12,600 $ 4,770 26,726 $ 31,496 December	2016 $ 1,260 $ 12,600 $ 3,460 - $ 3,460 31
		2017 $ 912 For the Years December	2016 $ 552 Ended 31
		2017 $ 132,893 2,247 $ 135,140	2016 $ 122,052 2,096 $ 124,148

The remuneration of directors and key executives is determined by the remuneration committee based on 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		December 31	December 31
		2017 $ 322,714 707,751 491,447 $ 1,521,912	2016 $ 359,796 715,395 6,078 $ 1,081,269

33. OTHER SIGNIFICANT EVENTS

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

179 -

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 by bid deposit $353,040 thousand and 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 transfercertificate 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.

180 -

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2017

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 171,009
29.760

RMB

658,102
4.565

Financial liabilities

Monetary items

USD

56,464
29.760

RMB

121,371
4.565

December 31, 2016
Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 103,269
32.250

RMB

210,140
4.617

Financial liabilities

Monetary items

USD

45,979
32.250

RMB

58,617
4.617

Carrying
Amount
$ 5,089,221
3,004,235
$ 8,093,456
$ 1,680,383
554,058
$ 2,234,441
Carrying
Amount
$ 3,330,406
970,216
$ 4,300,622
$ 1,482,824
270,634
$ 1,753,458

For the years ended December 31, 2017 and 2016, (realized and unrealized) net foreign exchange losses were $133,637 thousand and $110,497 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 of the group entities.

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35. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: Table 1 (attached)
2) Endorsements/guarantees provided: Table 2 (attached)
3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 3 (attached)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 4 (attached)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 6 (attached)
9) Trading in derivative instruments: Note 7 and Note 20
10) Others: Intercompany relationships and significant intercompany transactions: Table 7 (attached)
11) Information on investees: Table 8 (attached)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, 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 9 (attached)
2) Any of the following 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 (attached)
- 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.
182 -
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

Information reported to the Group’s chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on types of products delivered or services provided. The Group’s reportable segments are as follows:

a. Special materials department.
b. Test instrument department.
c. Automatic equipment department.
d. Other
1) Segment revenues and results

For the year ended December 31, 2017 Revenue from external customers Inter-segment revenue Segment revenue Consolidated revenue Segment income Non-operating income and expenses Profit before tax For the year ended December 31, 2016 Revenue from external customers Inter-segment revenue Segment revenue Consolidated revenue Segment income Non-operating income and expenses Profit before tax	Special Materials Department $ 2,054,568 - $ 2,054,568 $ 38,334 $ 2,269,057 - $ 2,269,057 $ 58,350	Test Instrument Department $ 9,872,816 6,679,445 $ 16,552,261 $ 2,204,131 $ 8,587,377 5,690,600 $ 14,277,977 $ 1,944,817	Automatic Equipment Department $ 2,538,348 416,355 $ 2,954,703 $ 815,601 $ 382,288 325,332 $ 707,620 $ 75,074	Other $ 435,614 25,219 $ 460,833 $ (67,607) $ 385,647 7,495 $ 393,142 $ (115,729)	Elimination $ - (7,121,019) $ (7,121,019) $ 52,622 $ - (6,023,427) $ (6,023,427) $ 50,669	Total $ 14,901,346 -
						14,901,346
						$ 14,901,346
						$ 3,043,081 78,986
						$ 3,122,067
						$ 11,624,369 -
						11,624,369
						$ 11,624,369
						$ 2,013,181 28,876
						$ 2,042,057

The sales between segments are based on fair value.

The above revenues were generated through transactions with external customers and among segments. The inter-segment revenues for the years ended December 31, 2017 and 2016 had been adjusted and eliminated from the consolidated financial statements.

183 -

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

2) Segment assets and liabilities

Segment assets Special materials department Test instrument department Automatic equipment department Other Adjustments and eliminations Total segment assets Investments and other unallocated assets Consolidated total assets Segment liabilities Special material department Test instrument department Automatic equipment department Other Adjustments and eliminations Total segment liabilities Borrowings and other unallocated liabilities Consolidated total liabilities		December 31	December 31
		2017 $ 935,074 19,209,748 2,703,688 599,309 (4,722,373) 18,725,446 3,292,166 $ 22,017,612 $ 614,525 6,330,287 2,001,270 277,289 (3,821,486) 5,401,885 3,152,898 $ 8,554,783	2016 $ 1,004,283 15,208,838 956,187 544,420 (3,154,573) 14,559,155 4,073,623 $ 18,632,778 $ 739,152 5,163,648 448,542 268,292 (2,739,124) 3,880,510 3,964,417 $ 7,844,927

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 equity method, other financial assets, and deferred tax assets. Goodwill was allocated to reportable segments.
b) All liabilities were allocated to reportable segments other than borrowings and deferred tax liabilities.
184 -

3) Revenue from major products

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
		2017 $ 2,054,568 9,872,816 2,538,348 $ 14,465,732	2016 $ 2,269,057 8,587,377 382,288 $ 11,238,722

4) Geographical information

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

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

Revenue from External Customers	Revenue from External Customers	Non-current Assets	Non-current Assets
For the Years Ended December 31
		December 31
2017 $ 7,843,613 4,650,547 2,407,186 $ 14,901,346	2016 $ 5,956,132 3,823,634 1,844,603 $ 11,624,369	2017 $ 5,605,770 507,384 458,057 $ 6,571,211	2016 $ 5,179,471 469,353 376,819 $ 6,025,643

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

5) Information about major customers

There was no revenue from any individual customer exceeded 10% of the Group’s revenue for the years ended December 31, 2017 and 2016.

185 -

CHROMA ATE INC. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing (Note 6)	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limits
													Item	Value
0	The Corporation	Chroma Systems Solutions, Inc. Chroma Japan Corp.	Other receivables Other receivables	Y Y	$ 115,664 49,435	$ 115,664 46,321	$ 115,664 38,993	3.25% -	a a	$ 389,189 170,781	- -	$ - -	- -	$ - -	$ 1,323,068 (Note 1) 1,323,068 (Note 1)	$ 2,646,136 (Note 2) 2,646,136 (Note 2)
1	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	15,252	-	-	-	a	9,414	-	-	-	-	58,088 (Note 3)	116,176 (Note 4)

Note 1: Based on 10% of the net value of the Corporation.

Note 2: Based on 20% of the net value of the Corporation.

Note 3: Based on 10% of the net value calculated on the latest financial statements of borrowing company that have been audited.

Note 4: Based on 20% of the net value calculated on the latest financial statements of borrowing company that have been audited.

Note 5: The amounts listed in the table were translated into New Taiwan dollars at the exchange rate of US$1=NT$29.760, RMB1=NT$4.565 and JPY1 = NT$0.264 as of December 29, 2017.

Note 6: Financing provided:

a. For transactions.
b. For short-term financing.
186 -

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note 1)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
0	The Corporation	Chroma USA Chroma Japan Corp. Quantel Private Ltd. Chroma ATE Europe B.V. Chroma ATE (Suzhou) Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 1,984,602 1,984,602 1,984,602 1,984,602 1,984,602	$ 59,520 34,100 44,520 53,355 91,300	$ 59,520 34,100 44,520 53,355 91,300	$ 59,520 10,560 - - -	$ - - - - -	0.45 0.26 0.34 0.40 0.69	$ 3,969,204 3,969,204 3,969,204 3,969,204 3,969,204	Y Y Y 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 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.

Note 3: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$29.760, JPY1=NT$0.264, RMB1=NT$4.565, EUR1=NT$35.570 as of December 29, 2017.

187 -

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

(EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) DECEMBER 31, 2017

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

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2017	December 31, 2017		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value (Note)
The Corporation Chroma New Material Corp. Chroma Investment Co., Ltd. Adivic Technology Co. Chen Hwa Technology Inc.	Fund The RSIT Enhanced Money Market Fund Yuanta Wan Tai Money Market Fund Mega Diamond Money Market Fund WI Harper INC Fund VII LP 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. TFBS Bioscience Inc. Fund Fuh Hwa You Li Money Market Fund The RSIT Enhanced Money Market Fund Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Adlink Technology Inc. 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 Financial assets measured at cost - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-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 Available for sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available for sale financial assets - current Financial assets measured at cost - non-current	24,722 18,863 20,372 - 6,050 412 26 4,614 3,561 2,220 1,152 903 2,000 6,829 734 5,768 85 68 1,916 4,174 26 111 3,402 -	$ 294,240 284,114 253,960 10,152 224,467 43,713 402 46,140 39,218 31,852 11,520 9,032 20,000 91,535 8,732 68,681 4,431 4,332 310,324 17,175 - - 42,125 8,482	- - - - 6.1 - - 4.6 4.4 9.4 1.9 1.4 15.7 - - - - - 0.5 7.6 1.5 5.1 - 19.0	$ 294,240 284,114 253,960 - 224,467 43,713 402 - - - - - 20,000 91,535 8,732 68,681 4,431 4,332 310,324 - - - 42,125 -	- - - - - - - - - - - - - - - - - - - - - - - -

Note: The fair value of open-end beneficiary certificates and listed market securities based on the net asset value and closing price as of December 31, 2017.

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TABLE 4

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterpart y	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares (Thousands)	Amount (Note)	Number of Shares (Thousands)	Amount	Number of Shares (Thousands)	Amount	Carrying Amount	Gain (Loss) on Disposal	Number of Shares (Thousands)	Amount (Note)
Chroma ATE Inc. (the “Corporation”)	Fund Mega Diamond Money Market Fund	Available for sale financial assets - current	-	-	36,520	$ 453,518	20,095	$ 250,000	36,243	$ 450,997	$ 450,000	$ 997	20,372	$ 253,960

Note: The beginning and ending balances included adjustments for financial assets valuation gain or loss.

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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, 2017

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

Company Name	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
The Corporation Neworld Electronics Ltd. The Corporation Chroma USA The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE Europe B.V. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Quantel Private Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd.	Neworld Electronics Ltd. The Corporation Chroma USA The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Inc. (Shenzhen) Co., Ltd. The Corporation Chroma ATE Europe B.V. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Quantel Private Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. Neworld Electronics Ltd.	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 Subsidiary Parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase	$ (1,880,032) 1,880,032 (898,453) 898,453 (389,189) 389,189 (544,060) 544,060 (344,865) 344,865 (233,685) 233,685 (170,781) 170,781 (136,967) 136,967 (211,563) 211,563 (842,342) 842,342	(23) 100 (11) 100 (5) 100 (7) 100 (4) 100 (3) 100 (2) 100 (2) 100 (3) 100 (37) 58	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 120 days after delivery Net 120 days after delivery Net 90 days Net 90 days	- - - - - - - - - - - - - - - - - - - -	- - Note Note - - - - - - - - - - - - - - - -	$ 870,209 (870,209) 363,520 (363,520) 110,169 (110,169) 186,932 (186,932) 184,154 (184,154) 121,743 (121,743) 163,825 (163,825) 35,422 (35,422) 104,538 (104,538) 463,578 (463,578)	28 (100) 12 (100) 4 (100) 6 (100) 6 (100) 4 (100) 5 (100) 1 (100) 3 (100) 43 (67)	- - - - - - - - - - - - - - - - - - - -

190 -

Company Name	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd.	Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd.	Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase	$ (153,887) 153,887 (105,152) 105,152 (147,309) 147,309 (110,036) 110,036 (121,214) 121,214	(7) 72 (5) 24 (6) 13 (6) 25 (46) 25	Net 90 days Net 90 days Net 90 days Net 90 days Net 180 days after delivery Net 180 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 120 days after monthly closing Net 120 days after monthly closing	- - - - - - - - - -	- - - - - - - - - -	$ 84,919 (84,919) 43,058 (43,058) 77,732 (77,732) 128,756 (128,756) 114,442 (114,442)	8 (59) 4 (14) 14 (8) 19 (42) 70 (13)	- - - - - - - - - -

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

191 -

TABLE 6

CHROMA ATE INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2017

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period (Note)	Allowance for Impairment Loss
					Amount	Action Taken
The Corporation Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd.	Neworld Electronics Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE Europe B.V. Chroma System Solutions, Inc. Chroma Japan Corp. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Same parent company Same parent company Same parent company	Trade receivables $ 870,209 Trade receivables 363,520 Trade receivables 186,932 Trade receivables 184,154 Trade receivables 110,169 Other receivables - financing provided 115,664 Trade receivables 163,825 Trade receivables 121,743 Trade receivables 104,538 Trade receivables 463,578 Trade receivables 128,756 Trade receivables 114,442	2.44 3.14 4.32 2.25 2.94 - 1.21 2.18 3.93 6.17 5.43 4.70	$ - - - - - - - - - - - -	- - - - - - - - - - - -	$ 400,434 7,933 101,687 31,603 55,858 - 28,620 79,821 29,352 43,842 9,533 114,442	$ - - - - - - - - - - - -

Note: As of February 22, 2018.

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TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Company Name	Counterparty	Flow of Transactions (Note 1)	Transaction Details	Transaction Details		Percentage to Consolidated Total Operating Revenue or Total Assets
				Account	Amount	Transaction Terms
0	Chroma ATE Inc. (the “Corporation”)	Neworld Electronics Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Chroma Systems Solutions, Inc. Chroma Europe Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Japan Quantel Private Ltd. Testar Electronics Co. Chroma USA Wei Kuang Automatic Equipment Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Testar Electronics Co. Chroma Electronics (Shanghai) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Neworld Electronics Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Chroma Europe Chroma Japan Chroma ATE (Suzhou) Co., Ltd. Chroma Systems Solutions, Inc. Chroma Electronics (Shanghai) Co., Ltd. Testar Electronics Co. Quantel Private Ltd. Chroma Systems Solutions, Inc. Chroma Japan Testar Electronics Co. Neworld Electronics Ltd.	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 costs Operating costs Operating costs Rental revenue Commissions expense Commissions expense Other revenue Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Other receivables - financing provided Other receivables - financing provided Other receivables Other receivables	$ 1,880,032 898,453 544,060 389,189 344,865 233,685 211,563 170,781 136,967 48,905 78,417 47,031 35,413 13,815 11,836 11,146 19,732 870,209 363,520 186,932 184,154 163,825 121,743 110,169 104,538 98,514 35,422 115,664 38,993 53,543 10,317	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 Note 3 Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	13 6 4 3 2 2 1 1 1 - 1 - - - - - - 4 2 1 1 1 1 1 - - - 1 - - -
1	Chroma USA	Chroma Japan Chroma Japan Chroma Systems Solutions, Inc. Chroma Japan Chroma Japan	b b a b b	Operating revenue Operating costs Dividends receivable Prepayments Trade payables	19,771 68,382 11,904 29,786 41,647	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	- - - - -
							(Continued)

193 -

No.	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
2	Neworld Electronics Ltd.	Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	a b b a b b a b a a b b a a b b b	Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating costs Commissions expense Commissions expense Commissions expense Trade receivables Trade receivables Trade receivables Trade receivables Other receivables Prepayments Trade payables Receipts in advance	$ 842,342 153,887 105,152 47,920 19,418 147,309 39,444 37,656 23,338 463,578 84,919 43,058 10,449 99,531 20,347 77,732 23,937	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	6 1 1 - - 1 - - - 2 - - - - - - -
3	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd.	b b b b b b b	Operating revenue Operating revenue Operating costs Operating costs Operating costs Trade receivables Trade receivables	110,036 76,345 30,476 16,064 15,832 128,756 61,034	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	1 1 - - - 1 -
4	Chroma Electronics (Shanghai) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd.	b b	Operating costs Trade payables	26,970 16,123	Based on regular terms Based on regular terms	- -
5	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	b b b b b	Operating revenue Operating revenue Operating costs Trade receivables Trade receivables	121,214 34,128 33,182 114,442 24,227	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	1 - - 1 -
6	Wei Kuang Automatic Equipment (Nanjin) Co., Ltd.	Wei Kuang Automatic Equipment Co., Ltd.	b	Operating costs	24,092	Based on regular terms	-

Note 1: a. From parent to subsidiary.

b. Between subsidiaries.

Note 2: The prices were determined after taking the selling and post-sale service expenses into consideration. Note 3: The collection periods of about 12 months were longer than those for third parties.

(Concluded)

194 -

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2017

(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, 2017	as of December 31, 2017	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2017	December 31, 2016	Shares (Thousands)	Percentage of Ownership	Carrying Amount
The Corporation Chroma USA San Eagle Development Corp. EVT Technology Co., Ltd. Adivic Technology Co., Ltd. Quantel Private Ltd Chroma ATE Europe B.V.	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 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 Electronics Corporation EVT Technology Co., Ltd. Innovative Nanotech Incorporated Touch Cloud Incorporation Chroma Systems Solutions, Inc. Wei Kuang Mech. Eng. Inc. Wei Da Electric Vehicle Co., Ltd. Adivic Holding Corporation Quantel Technologies India Private Ltd. Quantel Global Vietnam Co., Ltd. Chroma Germany GmbH	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 Taoyuan, Taiwan Taipei, Taiwan U.S.A. Mauritius Pingtung, Taiwan Samoa India Vietnam Germany	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 Monitoring instruments of nanoparticles Development of cloud platform and Internet of Things Systems Sale and maintenance of electronic test instruments, etc. Investments Sale and lease of motorcycles Sale and research of RF device Sale and maintenance of test instruments, etc. Sale and maintenance of test instruments, etc. Sale and maintenance of electronic test instruments, etc.	$ 271,873 186,514 165,146 480,715 533,000 122,884 112,328 98,217 80,000 54,026 238,746 29,895 38,301 193,800 147,125 29,628 12,217 17,500 247,096 67,481 70,000 57,000 64 185,686 3,750 42,245 3,056 6,219 1,073	$ 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 - - -	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 12,240 9 120 215 1,750 20,160 6,644 7,000 5,700 240 4,475 375 1,000 65 - 30	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 73.8 89.3 78.1 50.0 100.0 75.0 100.0 100.0 100.0 100.0	$ 817,757 669,747 529,538 420,605 860,666 156,232 115,153 105,899 113,954 73,859 99,403 118,957 50,420 56,290 (35,580) (31,012) 60,772 17,626 17,379 22,652 67,777 55,342 132,978 662,527 (3,906) 11,158 2,970 3,857 (4,263)	$ 212,326 115,884 380,332 23,234 609,624 33,536 10,797 2,610 7,506 18,553 22,751 40,769 1,209 (55,499) 1,131 52,426 12,609 94 19,459 (13,961) (2,487) (2,123) 52,426 115,961 18 (5,811) (68) (1,524) (5,147)	$ 212,326 115,884 42,960 23,234 609,616 33,536 5,360 2,610 1,336 18,553 6,211 40,871 1,209 (30,314) 1,129 13,107 12,609 33 13,075 (8,252) (2,434) (1,658) NA NA NA 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 Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

195 -

TABLE 9

CHROMA ATE INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017

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

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (Note 2)	Method of Investment (Note 1)	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2017 (Note 3)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017 (Note 3)	Net Income (Loss) of the Investee	Percentage of Ownership in Investment	Investment Gain (Loss) (Notes 4 and 5)	Carrying Amount as of December 31, 2017 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2017
						Outward	Inward
Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Hangzhou New Material Chroma Co., Ltd. Chroma ATE (Suzhou) Co., 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 computerized automatic test systems, peripherals and electronic test instruments Sale of computerized automatic test systems, peripherals and electronic test instruments International and transit trading, commercial simple processing and commercial consulting service and etc. Production and sale of semiconductor connecting materials Sale of computerized automatic test systems, peripherals and electronic test instruments 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		$ 114,210 (HK$ 30,000) 89,280 (US$ 3,000) 80,352 (US$ 2,700) 44,640 (US$ 1,500) 113,088 (US$ 3,800) 54,191 (RMB 11,871) 52,119 (RMB 11,417) 7,929 (RMB 1,737) 38,227 (RMB 8,374)	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)	$ 129,943 38,063 (152) 6,461 33,556 42,960 70,743 1,145 15,237	100 100 100 19 100 100 100 100 100	$ 129,943 38,063 (152) - 33,556 42,960 70,743 1,145 15,237	$ 580,830 105,707 88,056 8,482 202,520 257,260 320,090 45,602 60,767	$ - - - - - - - - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2017		Investment Amounts Authorized by the Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$635,051 (HK$1,200, US$19,312)		$725,060 (HK$1,400, US$22,076) (Note 6)		$7,938,408 (Note 7)

(Continued)

196 -

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 balance sheet date were translated into New Taiwan dollars at the rates of HK$1=NT$3.807, US$1=NT$29.760, RMB1=NT$4.565 prevailing on December 29, 2017.

Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2017 and December 31, 2017 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$3.905, US$1=NT$30.432, RMB1=NT$4.507 for the year ended December 31, 2017.

Note 6:

	Approval Letter		Approved Amount	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)
q.	Letter II-10600164500 of Investment Commission of MOEA	NT$	29,898	(US$	990)

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: The Corporation 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.

197 -

Chroma ATE Inc.

Financial Statements for the Years Ended December 31, 2017 and 2016 and Independent Auditors’ Report

198 -

NDEPENDENT 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, 2017 and 2016, 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, 2017 and 2016, 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, 2017. 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, 2017 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 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 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.

199 -

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, including 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 adjusts the product portfolio in response to the rapid change in the market and business fluctuation. The market competition or technique replacement may result in the risk of inventories becoming unmarketable or prices slump due to lack of demand in the market. As stated in Note 5, 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 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 audit committee, are responsible for overseeing the Corporation’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements

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

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.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2017 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 Cheng-Ming Lee and Wen-Chi Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China

February 22, 2018

Notice to Readers

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

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

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CHROMA ATE INC.

BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Available-for-sale financial assets - current (Note 8) Notes receivable Notes receivable - related parties (Note 26) Trade receivables, net (Note 10) Trade receivables - related parties (Notes 10 and 26) Other receivables - related parties (Note 26) Inventories (Note 11) Prepayments Other current assets (Note 26) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Note 8) Financial assets measured at cost - non-current (Note 9) Investments accounted for using equity method (Note 12) Property, plant and equipment (Notes 13 and 27) Goodwill (Note 14) Deferred tax assets (Note 21) Prepayments for land and equipment (Note 28) Refundable deposits Prepayments for investments Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Notes payable (Note 26) Trade payables Trade payables - related parties (Note 26) Other payables (Note 17) Current tax liabilities (Note 21) Receipts in advance (Note 26) Current portion of long-term borrowings (Note 15) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Note 16) Long-term borrowings (Note 15) Deferred tax liabilities (Note 21) Net defined benefit liabilities (Note 18) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 19) Ordinary share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity TOTAL		2017 Amount % $ 2,046,071 11 31 - 832,314 4 4,776 - 794 - 843,458 5 2,250,031 12 160,609 1 1,862,318 10 100,866 - 111,241 1 8,212,509 44 268,582 1 167,914 1 4,358,436 23 1,789,099 10 94,424 1 163,714 1 3,501,726 19 2,335 - - - 960 - 10,347,190 56 $ 18,559,699 100 $ 300,000 2 3,790 - 1,372,241 7 34,519 - 721,008 4 167,807 1 61,593 - 1,200,000 7 16,129 - 3,877,087 21 99,703 - 900,000 5 294,229 2 157,432 1 569 - 1,451,933 8 5,329,020 29 4,118,942 22 3,187,289 17 1,896,570 10 86,888 - 3,988,838 22 5,972,296 32 (12,134) - (35,714) - 13,230,679 71 $ 18,559,699 100		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

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

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CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Note 26) Sales Less: Sales returns Sales allowances Net operating revenue 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 Finance costs (Note 20) Share of profit of subsidiaries, associates and joint ventures, net (Note 12) Interest income (Note 26) Rental income (Note 26) Dividend income Other income (Note 26) Losses on disposal of property, plant and equipment, net Gain on disposal of investments, net Valuation gain on financial assets (liabilities) at fair value through profit or loss, net (Note 16) Other expenses Exchange loss, net (Note 29) Total non-operating income and expenses (Continued)		2017 Amount % $ 8,034,225 100 (13,935) - (2,284) - 8,018,006 100 (3,861,228) (48) 4,156,778 52 (39,916) (1) 4,116,862 51 771,907 10 500,298 6 1,085,279 13 2,357,484 29 1,759,378 22 (12,490) - 1,111,001 14 16,521 - 29,908 - 24,115 - 41,040 1 (106) - 13,792 - 539 - (33) - (117,951) (1) 1,106,336 14		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 (27,140) - 246,007 3 8,793 - 29,738 - 46,998 1 32,408 1 (3,387) - 2,431 - 2,884 - (29) - (57,580) (1) 281,123 4

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CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 21) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Share of the other comprehensive income (loss) of subsidiaries, associates and joint ventures accounted for using equity method Item that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Share of the other comprehensive income (loss) of subsidiaries, associates and joint ventures accounted for using equity method Total other comprehensive loss TOTAL COMPREHENSIVE INCOME EARNINGS PER SHARE (NT$; Note 22) Basic Diluted		2017 Amount % $ 2,865,714 36 307,313 4 2,558,401 32 (8,846) - 1,891 - (64,660) (1) (53,099) (1) (8,513) - (133,227) (2) $ 2,425,174 30 $6.41 $6.18		2016
				Amount % $ 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

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, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Amounts Per Share)

Ordinary Share Capital Capital Surplus BALANCE AT JANUARY 1, 2016 $ 3,791,699 $ 1,302,269 Appropriation of the 2015 earnings Legal reserve - - Cash dividends - NT$2.4 per share - - Other changes in capital surplus Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using equity method - 27,978 Net profit for the year ended December 31, 2016 - - Other comprehensive income (loss) for the year ended December 31, 2016 - - Total comprehensive income (loss) for the year ended December 31, 2016 - - Conversion of convertible bonds 59,823 326,205 Adjustment of capital surplus for corporation's cash dividends received by subsidiaries - 4,545 Share-based payment transaction 47,350 299,162 BALANCE AT DECEMBER 31, 2016 3,898,872 1,960,159 Appropriation of the 2016 earnings Legal reserve - - Cash dividends - NT$3.3 per share - - Other changes in capital surplus Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using equity method - (8,326 ) Net profit for the year ended December 31, 2017 - - Other comprehensive income for the year ended December 31, 2017 - - Total comprehensive income for the year ended December 31, 2017 - - Conversion of convertible bonds 201,515 1,101,453 Adjustment of capital surplus for corporation's cash dividends received by subsidiaries - 6,170 Share-based payment transaction 18,678 127,833 Buy-back of treasury shares - - Cancelation of treasury shares (123) - BALANCE AT DECEMBER 31, 2017 $ 4,118,942 $ 3,187,289		Retained Earnings	Total $ 3,952,185 - (910,200 ) - 1,719,935 (26,645) 1,693,290 - - - 4,735,275 - (1,314,425 ) - 2,558,401 (6,955) 2,551,446 - - - - - $ 5,972,296		Other Equity	Total Treasury Shares $ 399,665 $ (35,714 ) - - - - - - - - (191,678) - (191,678) - - - - - (149,952) - 58,035 (35,714 ) - - - - - - - - (126,272) - (126,272) - - - - - 56,103 - - (123 ) - 123 $ (12,134) $ (35,714)	Total Equity $ 9,410,104 - (910,200 ) 27,978 1,719,935 (218,323) 1,501,612 386,028 4,545 196,560 10,616,627 - (1,314,425 ) (8,326 ) 2,558,401 (133,227) 2,425,174 1,302,968 6,170 202,614 (123 ) - $ 13,230,679
					Exchange Differences on Unrealized Gain Translating (Loss) on Foreign Available-for-sale Unearned Operations Financial Assets Employee Benefit $ 127,968 $ 271,697 $ - - - - - - - - - - - - - (152,882) (38,796) - (152,882) (38,796) - - - - - - - - - (149,952) (24,914 ) 232,901 (149,952 ) - - - - - - - - - - - - (72,719) (53,553) - (72,719) (53,553) - - - - - - - - - 56,103 - - - - - - $ (97,633) $ 179,348 $ (93,849)
		Unappropriated Legal Reserve Special Reserve Earnings $ 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 2,923,811 171,994 - (171,994 ) - - (1,314,425 ) - - - - - 2,558,401 - - (6,955) - - 2,551,446 - - - - - - - - - - - - - - - $ 1,896,570 $ 86,888 $ 3,988,838

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, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation Provision for bad debts expense Net gain on fair value changes of financial assets (liabilities) designated as at fair value through profit or loss Finance costs Interest income Dividend income Compensation costs of share-based payments Share of profits of subsidiaries, associates and joint ventures accounted for using equity method Loss on disposal of property, plant and equipment Gain on disposal of investments (Reversal of impairment) impairment loss on non-financial assets Unrealized gain on the transactions with subsidiaries and associates Net loss on foreign currency exchange Net changes in operating assets and liabilities Notes receivable Trade receivables Inventories Prepayments Other current assets Notes payable Trade payables Other payables Receipts in advance Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Proceeds from disposal of financial assets measured at cost Cash returned of capital reduction of financial assets measured at cost Payments to acquire investments accounted for using equity method Increase in prepayments for investments Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits	2017 $ 2,865,714 168,141 36,000 (539) 12,490 (16,521) (24,115) 121,593 (1,111,001) 106 (13,792) (37,331) 39,916 137,192 (738) (943,125) (425,391) (69,871) (731) 3,280 271,543 60,306 (105,489) 5,478 (9,174) 963,941 (302,752) 661,189 (476,000) 1,678,988 2,552 23,111 (217,858) - (71,611) 3,875 (259)	2016 $ 2,007,521 157,159 11,000 (2,884) 27,140 (8,793) (46,998) 86,618 (246,007) 3,387 (2,431) 8,500 80,134 52,244 5,872 (684,082) (249,471) 20,839 2,969 475 586,054 196,817 138,971 (5,864) (7,457) 2,131,713 (156,902) 1,974,811 (600,000) 400,910 1,521 9,587 (225,749) (20,000) (32,068) 7,046 (133) (Continued)

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CHROMA ATE INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

(Increase) decrease in other receivables - related parties Decrease in other non-current assets Increase in prepayments for equipment Interest received Dividends received Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Increase in guarantee deposits Cash dividends paid Exercise of employee stock options Payments for buy-back of ordinary shares Interest paid Proceeds from issuance of employee restricted shares 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 AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2017 $ (10,108) - (465,376) 17,189 181,175 665,678 300,000 900,000 (800,000) - (1,314,425) 79,128 (123) (30,440) 1,850 (864,010) (41,624) 421,233 1,624,838 $ 2,046,071	2016 $ 5,594 8,006 (976,731) 7,905 353,099 (1,061,013) (100,000) 770,000 - 3 (910,200) 80,049 - (25,245) 31,000 (154,393) (13,459) 745,946 878,892 $ 1,624,838

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

(Concluded)

208

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHROMA ATE INC.

1. GENERAL INFORMATION

The parent company only financial statements are presented in the Corporation’s functional currency, the New Taiwan dollar (NTD).

2. APPROVAL OF FINANCIAL STATEMENTS

The parent company only financial statements were approved by the Corporation’s board of directors on February 22, 2018.

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

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

1) Amendment to IFRS 2 “Share-based Payment” in Annual Improvements to IFRSs of 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 Corporation or another entity in the same group or the market price of the equity instruments of the Corporation or another entity in the same group (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, nonmarket conditions or non-vesting conditions are accounted for differently, and the aforementioned amendment should be applied prospectively to those share-based payments granted on or after January 1, 2017. Refer to Note 23 for information on the share-based payments granted in 2017.

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

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 of the Corporation, 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 relationships with whom the Corporation has significant transactions. If the transaction amount or balance with a specific related party is 10% or more of the Corporation’s respective total transaction amount or balance, such transactions should be separately disclosed by the name of each related party.

b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018

New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle

Amendments 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”

IFRS 15 “Revenue from Contracts with Customers”

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

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
January 1, 2018
January 1, 2018
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.

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

IFRS 9 “Financial Instruments” and related amendment-Classification, measurement and impairment of financial assets

The Corporation’s 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 Corporation analyzed the facts and circumstances of its financial assets that exist at December 31, 2017 and performed the assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:

1) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be classified as at fair value through profit or loss or designated as at fair value through other comprehensive income. When it is designated as at fair value through other comprehensive income, the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal. Besides this, unlisted shares measured at cost will be measured at fair value instead;

2) Mutual funds classified as available-for-sale will be classified as at fair value through profit or loss because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments.

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.

The Corporation will elect not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9, but will recognize the cumulative effect of the initial application at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9.

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The anticipated impact on assets, liabilities and equity of retrospective application of the requirements for the classification, measurement and impairment of financial assets as of January 1, 2018 is set out below:

				Adjusted
	Carrying		Adjustments	Carrying
	Amount as of		Arising from	Amount as of
	December 31,		Initial	January 1,
		2017	Application	2018
Impact on assets, liabilities and equity
Financial assets at fair value through
profit or loss - current	$	31	$ 832,314	$ 832,345
Available-for-sale financial assets -
current		832,314	(832,314)	-
Financial assets at fair value through
profit or loss - non-current		-	6,013	6,013
Financial assets at fair value through other
comprehensive income - non-current		-	534,466	534,466
Available-for-sale financial assets - non-
current		268,582	(268,582)	-
Financial assets measured at amortized
cost - non-current		167,914	(167,914)	-
Investments accounted for using equity
method		4,358,436	3,663	4,362,099
	$	5,627,277	$ 107,646	$ 5,734,923
Unappropriated earnings	$	3,988,838	$ 135,130	$ 4,123,968
Other equity		(12,134)	(27,484)	(39,618)
Total effect on equity	$	3,976,704	$ 107,646	$ 4,084,350

Except for the above impacts, the Corporation has assessed that the application of above standards and interpretations will not have any material impact on the Corporation’s financial position and financial performance.

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date
Announced by IASB (Note
1)

January 1, 2019
January 1, 2019
To be determined by IASB
January 1, 2019 (Note 2)
January 1, 2021
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

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: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.
Note 3: The Corporation shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Corporation is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for low-value and short-term leases. The Corporation may elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to low-value and short-term leases. On the statements of comprehensive income, the Corporation should present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed by using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within financing activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Corporation as lessor.

When IFRS 16 becomes effective, the Corporation may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application.

2) Annual Improvements to IFRSs 2015-2017 Cycle

3) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

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

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of Preparation

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

c.Level 3 inputs are unobservable inputs for an asset or liability.

When preparing its parent company only financial statements, the Corporation used equity method to account for its investment in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only 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 the parent company only basis and the consolidated basis were made to investments accounted for using 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 these parent company only financial statements.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a.Assets held primarily for the purpose of trading;

b.Assets expected to be realized within 12 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 12 months after the reporting period.

Current liabilities include:

a.Liabilities held primarily for the purpose of trading;

b.Liabilities due to be settled within 12 months after the reporting period; and

c.Liabilities for which the Corporation does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

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

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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.

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 joint ventures are accounted for by the equity method.

a.Investment in subsidiaries

Subsidiaries are the entities that are controlled by the Corporation.

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

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

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 using 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.

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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 company. 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 resulting from upstream transactions and transactions between subsidiaries are recognized in the Corporation’s financial statements only to the extent of interests in the subsidiaries 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.

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 ventures attributable to the Corporation.

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 an 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 capital surplus from investments in associates and joint ventures accounted for using equity method. If the Corporation’s ownership interest is reduced due to the additional subscription of the new shares of the 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 equity method is insufficient, the shortage is debited to retained earnings.

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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 using equity method and long-term interests that, in substance, form part of the Corporation’s net investment in the associate and joint venture), the Corporation discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Corporation has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate and joint venture.

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

The Corporation discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that associate and 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 parent company only 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.

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

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

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

Goodwill

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

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Intangible Assets

a.Intangible assets acquired separately

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.

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, excluding goodwill, to determine whether there is any indication that those assets have suffered any 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 cash-generating units on a reasonable and consistent basis of allocation.

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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 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.

a. Financial assets

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

1) Measurement categories

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.

a)Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when such financial assets are held for trading, and 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 dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 25.

b)Available-for-sale financial assets

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

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

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c) Loans and receivables

Loans and receivables (including trade receivables and cash and cash equivalent) are measured at amortized cost using the effective interest method, less any impairment, except for shortterm receivables when the effect of discounting is immaterial.

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

2) Impairment of financial assets

For financial assets carried at amortized cost, such as trade receivables, such 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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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 to another party.

b.Equity instruments

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

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

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

c. Financial liabilities
1) Subsequent measurement

Except for financial liabilities at fair value through profit or loss, all the financial liabilities are measured at amortized cost using the effective interest method.

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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.

Warranty Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products based on the management’s best estimate of the expenditure required to settle the obligations.

Revenue Recognition

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

a. Sale of goods

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

1) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
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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

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 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 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 non-current assets are recognized as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Corporation 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.

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b. Retirement benefits

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

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.

Share-based Payment Arrangements

Employee share options and restricted shares for issue to employees that are 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 issue to employees is expensed on a straight-line basis over the vesting period, based on the Corporation's best estimate of the number of employee share options that will ultimately vest, with a corresponding increase in capital surplus - employee share options and other equity - unearned employee benefits. It is recognized as an expense in full at the grant date if vested 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 and capital surplus - restricted shares for employees.

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.

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b. Deferred tax

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.

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 based on the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred taxes for the year

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

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 estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revisions affect 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, 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

December 31 2017 2016 Cash on hand $ 2,602 $ 2,244 Checking accounts and demand deposits 1,448,269 1,412,520 Cash equivalent Time deposits with original maturities less than 3 months 595,200 210,074 $ 2,046,071 $ 1,624,838 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2017 2016 Financial assets at FVTPL-current Derivative instruments Call and put option of convertible bonds payable (Note 16) $ 31 $ 725 AVAILABLE-FOR-SALE FINANCIAL ASSETS December 31 2017 2016 Current Open-end beneficiary certificates $ 832,314 $ 2,030,362 Non-current Listed stocks $ 268,582 $ 314,233		December 31	December 31	December 31	December 31
			2017 $ 31 December		2016 $ 725 31
		2017 $ 832,314 $ 268,582		2016 $ 2,030,362 $ 314,233

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

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9. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT

Domestic unlisted common stocks Foreign open-end beneficiary certificates Classification by measurement of financial instruments Available-for-sale financial assets		December 31	December 31
		2017 $ 157,762 10,152 $ 167,914 $ 167,914	2016 $ 162,021 10,152 $ 172,173 $ 172,173

In order to expand the market of biotechnology equipment, the Corporation’s board of directors resolved to invest in TFBS Bioscience Inc. of $20,000 thousand in November 2016.

10. TRADE RECEIVABLES

Trade receivables Less: Allowance for impairment loss Trade receivables - related parties		December 31	December 31
		2017 $ 921,746 (78,288) 843,458 2,250,031 $ 3,093,489	2016 $ 727,915 (44,083) 683,832 1,604,262 $ 2,288,094

The average credit period for sales of goods is 60 to 90 days from the date when the goods were inspected and accepted by customers, and no interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Corporation considered any change in the credit quality of the trade receivable since the date when credit was initially granted to the end of the reporting period. Allowances for impairment loss are based on the estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

Past due but not impaired trade receivables are trade receivables balances that were past due at the end of the reporting period but, allowance for impairment loss was not recognized, because their credit quality remained satisfactory and the amounts were still considered recoverable. The Corporation does not hold any collateral or other credit enhancements for these balances.

The aging of receivables was as follows:

Less than 60 days 61-365 days Over 365 days		December 31	December 31
		2017 $ 552,162 276,090 93,494 $ 921,746	2016 $ 491,119 188,626 48,170 $ 727,915

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

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

December 31 2017 2016 Less than 60 days $ 142,353 $ 106,437 61-365 days 264,437 182,955 Over 365 days 31,373 13,057 $ 438,163 $ 302,449 The above aging schedule was based on the past due days from the end of credit term. The movements of the allowance for doubtful trade receivables were as follows: Individually Assessed for Impairment Collectively Assessed for Impairment Total Balance at January 1, 2016 $ 26,972 $ 9,168 $ 36,140 Impairment losses recognized on receivables - 11,000 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 year as uncollectible (3,057) - (3,057) Balance at December 31, 2016 $ 33,720 $ 10,363 $ 44,083 Balance at January 1, 2017 $ 33,720 $ 10,363 $ 44,083 Impairment losses recognized on receivables - 36,000 36,000 Reclassification of impairment loss from collective assessment to individual assessment 31,071 (31,071) - Amounts written off during the year as uncollectible (1,795) - (1,795) Balance at December 31, 2017 $ 62,996 $ 15,292 $ 78,288		December 31

The allowance for impairment loss assessed individually on customers in liquidation or in severe financial difficulties amounted to $62,966 thousand and $33,720 thousand as of December 31, 2017 and 2016, 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
		2017 $ 190,397 361,613 638,940 671,368 $ 1,862,318	2016 $ 200,538 317,900 471,511 468,083 $ 1,458,032

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 was $3,861,228 thousand and $3,389,602 thousand, respectively. Cost of goods sold included the reversal of inventory write-downs of $37,331 thousand and inventory write-downs of $8,500 thousand, respectively.

12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in subsidiaries Investments in associates Investments in joint venture		December 31	December 31
		2017 $ 3,716,869 623,941 17,626 $ 4,358,436	2016 $ 2,659,608 623,904 17,593 $ 3,301,105

a. Investments in subsidiaries

Unlisted company Neworld Electronics Ltd. San Eagle Development Corp. 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. Chroma ATE Inc. (“Chroma USA”) Sensational Holding Ltd. Adivic Technology Co. Chroma Japan Corp. Chroma Systems Solutions, Inc. Deep Red Holding Co., Ltd.	December 31	December 31
	2017 Amount Percentag e of Equity Interest (%) $ 817,757 100.0 669,747 100.0 420,605 100.0 860,666 100.0 156,232 100.0 115,153 60.0 105,899 100.0 113,954 100.0 73,859 100.0 118,957 100.0 50,420 100.0 56,290 51.0 (35,580) 100.0 (31,012) 25.0 60,772 100.0	2016
		Amount Percentag e of Equity Interest (%) $ 696,690 100.0 567,548 100.0 439,369 100.0 316,050 100.0 109,043 100.0 108,073 60.0 106,449 100.0 106,210 100.0 85,621 100.0 70,824 100.0 53,358 100.0 35,298 51.0 (36,904) 100.0 (43,893) 25.0 49,021 100.0 (Continued)

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Testar Electronics Corporation EVT Technology Co., Ltd. Innovative Nanotech Incorporated Touch Cloud Incorporation		December 31	December 31	December 31
		2017 Amount Percentag e of Equity Interest (%) $ 17,379 67.2 22,652 73.8 67,777 89.3 55,342 78.1 $ 3,716,869		2016
				Amount Percentag e of Equity Interest (%) $ (5,545) 67.2 2,396 53.2 - - - - $ 2,659,608

(Concluded)

To expand its market share and spread its sales network in Southeast Asia, the Corporation’s board of directors resolved in December 2015 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.

In April 2017, Adivic Technology Co. (“Adivic”) decreased its capital by $140,000 thousand to make up for losses and increased its capital by cash injection of $100,000 thousand to strengthen its financial structure. The Corporation’s board of directors decided to participate in the capital injection at the same percentage as originally owned. The Corporation’s equity interest in Adivic remained the same.

In December 2017, EVT Technology Co., Ltd. increased it capital by cash injection of $40,000 thousand to strengthen its financial structure. The Corporation’s board of directors resolved to participate in the capital injection. The Corporation’s equity interest in EVT Technology Co., Ltd. rose to 73.8% after the cash injection.

In response to the demand for new-generation solutions and to provide customers with most advanced electronic test service, the Corporation’s board of directors resolved in July 2017 to invest in Innovative Nanotech Incorporated. In December 2017, Innovative Nanotech Incorporated increased its capital by cash injection of $50,000 thousand. The Corporation participated in the cash injection and held 89.3% equity as of December 31, 2017.

To strengthen and integrate the software research capability of product lines and raise marketing opportunities, the Corporation’s board of directors resolved to participate in the cash injection of Touch Cloud Incorporation and acquired equity interest of 78.1%. Refer to Note 28 of the Corporation’s consolidated financial statements for details of the investment in Touch Cloud Incorporation.

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

Except for Innovative Nanotech Incorporated, the investments accounted for using equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements which have been audited. Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statement of Innovative Nanotech Incorporated, which have not been audited.

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b. Investment in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2017 Amount Percentage of Equity Interest (%) $ 529,538 11.3 94,403 27.3 $ 623,941		2016
				Amount Percentage of Equity Interest (%) $ 535,490 11.3 88,414 27.3 $ 623,904

Aggregate information of associates that are not individually material:

The Corporation’s share of: Profit from continuing operations Other comprehensive loss Total comprehensive income for the year		For the Years December	Ended 31
		2017 $ 49,171 (7,808) $ 41,363	2016 $ 61,891 (25,820) $ 36,071

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

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

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

Name of Associate Adlink Technology Inc.		December 31	December 31
		2017 $ 1,568,144	2016 $ 1,497,088

Except for Adlink Technology Inc., the investments in associate accounted for using equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on financial statements which have been audited. Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statements of Adlink Technology Inc., which have not been audited.

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c. Investment in joint venture

Joint venture that are not individually material Chih Ho Shun Development Co., Ltd.		December 31	December 31	December 31
		2017 Amount Percentage of Equity Interest (%) $ 17,626 35.0		2016
				Amount Percentage of Equity Interest (%) $ 17,593 35.0

Aggregate information of joint venture that is not individually material:

The Corporation’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year		For the Years December	Ended 31
		2017 $ 33 - $ 33	2016 $ 88 - $ 88

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

The investments in joint venture accounted for by the equity method and the share of profit or loss and other comprehensive income of the investment for the years ended December 31, 2017 and 2016 was based on the joint venture’s financial statements audited by auditors for the same years.

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2016 Additions Disposals Internal transfer Reclassification Balance, December 31, 2016	Land $ 450,575 - - - - $ 450,575	Buildings $ 2,000,540 8,978 (5,081) - - $ 2,004,437	Machinery Miscellaneous Equipment Total $ 102,848 $ 885,970 $ 3,439,933 7,810 49,241 66,029 (623) (28,740) (34,444) 4,556 57,823 62,379 (4,321) 4,321 - $ 110,270 $ 968,615 $ 3,533,897 (Continued)

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							Miscellaneous	Miscellaneous
		Land	Buildings		Machinery		Equipment		Total
Accumulated depreciation
Balance, January 1, 2016	$	-	$	826,455	$	88,292	$	680,971	$ 1,595,718
Disposals		-		(2,149)		(623)		(21,239)	(24,011)
Depreciation		-		81,953		8,718		66,488	157,159
Reclassification		-		-		(4,499)		4,499	-
Balance, December 31, 2016	$	-	$	906,259	$	91,888	$	730,719	$ 1,728,866
Carrying amount at December 31,
2016	$	450,575	$ 1,098,178		$	18,382	$	237,896	$ 1,805,031
Cost
Balance, January 1, 2017	$	450,575	$ 2,004,437		$	110,270	$	968,615	$ 3,533,897
Additions		-		10,554		8,772		55,329	74,655
Disposals		-		-		(34)		(29,869)	(29,903)
Internal transfer		-		-		5,850		75,685	81,535
Balance, December 31, 2017	$	450,575	$ 2,014,991		$	124,858	$	1,069,760	$ 3,660,184
Accumulated depreciation
Balance, January 1, 2017	$	-	$	906,259	$	(91,888)	$	730,719	$ 1,728,866
Disposals		-		-		(15)		(25,907)	(25,922)
Depreciation		-		77,560		10,057		80,524	168,141
Balance, December 31, 2017	$	-	$	983,819	$	101,930	$	785,336	$ 1,871,085
Carrying amount at December 31,
2017	$	450,575	$ 1,031,172		$	22,928	$	284,424	$ 1,789,099
								(Concluded)
The above items of property, plant		and equipment are depreciated on a straight-line basis							over their
estimated useful lives as follows:
Building
Primary buildings									55 years
Mechanical and electrical equipment									10 years
Clean room equipment									10 years
Others									2-50 years
Machinery									2-6 years
Miscellaneous equipment									2-16 years

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

14. GOODWILL

Cost		For the Years December	Ended 31
		2017 $ 94,424	2016 $ 94,424

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To reorganize the organization structure, save operating costs and improve the operating efficiency, the Corporation’s board of directors resolved to acquire Silver Town Electronic Co., Ltd. in February 2008. The goodwill was arisen from the premium acquisition.

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, 2017 and 2016.

15. BORROWINGS

Short-term Borrowings

Unsecured borrowings Bank loans Interest rate (%) Long-term Borrowings Unsecured loans Syndicated bank loans (a) Bank loans (b) Bank loans (c) Less: Current portions			December 31	December 31
			2017 2016 $ 300,000 $ - 0.85% - December 31
		2017 $ 1,200,000 500,000 400,000 2,100,000 1,200,000 $ 900,000		2016 $ 2,000,000 - - 2,000,000 800,000 $ 1,200,000

a. 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 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 will be repaid from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per installment), the remaining $800,000 thousand will be paid on the due date, September 3, 2018, and the interest is paid monthly. As of December 31, 2017 and 2016, the interest rate per annum was all 1.58% on a floating basis.
b. The Corporation obtained from Taishin International Bank a credit line loan for $500,000 thousand that will be used for repaying syndicated bank loans. Interest is on floating basis with basic interest rate of 1.17% per annum. The bank loan will be due in September 2020.
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c. The Corporation obtained from Bank of Taiwan a credit line loan for $400,000 thousand that will be used for repaying syndicated bank loans and short-term borrowings. Interest is on floating basis with basis interest rate of 1.20% per annum. The bank loan will be due in December 2020.

16. BONDS PAYABLE

Unsecured domestic convertible bonds Less: Discounts on bonds payable		December 31	December 31
		2017 $ 101,900 2,197 $ 99,703	2016 $ 1,450,500 53,360 $ 1,397,140

At the 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 was presented in equity under “capital surplus - options”. The liability components were recognized into derivative and non-derivative liabilities, separately.

Proceeds of the issue (less transaction costs $5,320 thousand) Equity component Deferred tax assets Financial liability component Liability component at the date of issue Interest charged at an effective interest rate of 1.57% Conversion of bonds payable Liability component as of December 31, 2017	$ 1,994,680 (141,487) 904 (4,989) 1,849,108 77,157 (1,826,562) $ 99,703

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17. OTHER PAYABLES

Salaries and bonus Employee’s compensation Remuneration of directors and supervisors Others		December 31	December 31
		2017 $ 283,762 325,622 9,600 102,024 $ 721,008	2016 $ 273,387 302,000 8,000 74,733 $ 658,120

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.

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 6 months before retirement. The Corporation contributes 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 Net defined benefit liabilities		December 31	December 31
		2017 $ 449,301 (291,869) $ 157,432	2016 $ 431,536 (273,776) $ 157,760

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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, 2016	$ 399,442	$(259,161)	$ 140,281
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
Current service cost	4,147	-	4,147
Net interest expense (income)	5,934	(3,868)	2,066
Recognized in profit or loss	10,081	(3,868)	6,213
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	1,162	1,162
Actuarial loss - changes in demographic
assumptions	3,599	-	3,599
Actuarial loss - experience adjustments	4,085	-	4,085
Recognized in other comprehensive income	7,684	1,162	8,846
Contributions from the employer	-	(15,387)	(15,387)
Balance at December 31, 2017	$ 449,301	$(291,869)	$ 157,432

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.
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Discount rate(s) Expected rate(s) of salary increase	December 31
	2017 2016 0.88%-1.38% 0.88%-1.38% 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
		2017 $(13,723) $ 14,340 $ 13,945 $(13,417)	2016 $(13,805) $ 14,449 $ 14,052 $(13,499)

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
		2017 $ 15,293 13 years	2016 $ 15,070 14 years

19. EQUITY

a.Ordinary share capital

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully received (in thousands) Shares issued		December 31	December 31
		2017 450,000 $ 4,500,000 411,894 $ 4,118,942	2016 450,000 $ 4,500,000 389,887 $ 3,898,872

The authorized shares include 30,000 thousand shares allocated for the exercise of employee share options.

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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 share transactions From merger May be used to offset a deficit only Employee share options expired Share of changes in capital surplus of associates or joint ventures May not be used for any purpose Convertible bonds options Employee shares options Employee restricted shares		December 31	December 31
		2017 $ 2,514,454 171,229 146,976 5,874 44,377 7,209 116,389 180,781 $ 3,187,289	2016 $ 1,209,905 165,059 146,976 5,239 52,703 102,614 90,459 187,204 $ 1,960,159

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

c. Retained earnings and dividends 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’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 after amendment, please refer to d. employees’ compensation and remuneration of directors of the Corporation in Note 20.

An appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Corporation’s paid-in capital. The legal reserve may be used to offset deficits. 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.

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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 2016 For Fiscal Year 2015 $ 171,994 $ 123,656 1,314,425 910,200	Dividends Per Share (NT$)
		For Fiscal Year 2016 For Fiscal Year 2015 $ 3.3 $ 2.4

The appropriations of earnings for 2017 had been proposed by the Corporation’s board of directors on February 22, 2018. The appropriations and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Legal reserve	$ 255,840
Cash dividends	1,854,424	$4.5

The appropriations of earnings for 2017 are subject to the resolution in the shareholders’ meeting to be held on June 8, 2018.

d. Special reserves

e. Treasury stock

The Corporation’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Subsidiaries Number of Shares Held (In Thousand Shares) December 31, 2017 Chroma Investment Co., Ltd. 1,916 December 31, 2016 Chroma Investment Co., Ltd. 1,916	Carrying Amount Market Price $ 35,714 $ 310,324 $ 35,714 $ 144,435

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Forfeited employee restricted shares of 12 thousand were returned to the Corporation and canceled during this year.

20. ADDITIONAL INFORMATION ON EXPENSES

a. Finance costs

Interest on borrowings Interest on convertible bonds Less: Amount included in the cost of qualifying assets Capitalized interest Capitalization rate		For the Years December	Ended 31
		2017 2016 $ 30,021 $ 26,144 6,764 25,751 36,785 51,895 (24,295) (24,755) $ 12,490 $ 27,140 $ 24,295 $ 24,755 1.58% 1.58%-1.60%

b. Depreciation and amortization expense

Property, plant and equipment Other assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 168,141 $ 960 $ 29,224 138,917 $ 168,141 $ 960	2016 $ 157,159 $ 9,996 $ 27,046 130,113 $ 157,159 $ 9,996

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c. Employee benefits expense

Short-term benefits Salary expenses Insurance expenses Share-based payments Retirement benefits Defined contribution plans Defined benefit plans Other employee benefits Total employee benefits expense			For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
			2017	Total $ 1,578,307 116,000 1,694,307 121,593 55,641 6,213 61,854 38,663 $ 1,916,417			2016
		Operating Costs $ 285,086 25,842 310,928 - 8,650 964 9,614 15,043 $ 335,585	Operating Expenses $ 1,293,221 90,158 1,383,379 121,593 46,991 5,249 52,240 23,620 $ 1,580,832			Operating Costs $ 234,523 21,099 255,622 - 7,518 999 8,517 12,866 $ 277,005	Operating Expenses $ 1,164,481 76,057 1,240,538 86,618 39,111 5,511 44,622 20,460 $ 1,392,238	Total $ 1,399,004 97,156 1,496,160 86,618 46,629 6,510 53,139 33,326 $ 1,669,243

As of December 31, 2017 and 2016, the Corporation had 1,728 and 1,570 employees, respectively. The basis of above calculations was the same with the basis which was used in the calculation on employee benefits expense.

d. Employees’ compensation and remuneration of directors and supervisors

The Corporation accrued its appropriation of employees’ compensation and remuneration of 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 of directors and supervisors. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2017 and 216, which have been approved by the Corporation’s board of directors on February 22, 2018 and February 21, 2017, respectively, were as follows:

Employee’s compensation Remuneration of directors and supervisors	For the Years Ended December 31	For the Years Ended December 31
	2017 Amount Rate (%) $ 310,000 9.73 9,600 0.30	2016
		Amount Rate (%) $ 300,000 12.96 8,000 0.35

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

There was no difference between the amounts of the employee’s compensation and the remuneration of directors and supervisors and the respective amounts recognized in the parent company only financial statements for the years ended December 31, 2016 and 2015.

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21. INCOME TAXES

a. Major components of income tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 233,681 20,687 (32,223) 222,145 85,168 $ 307,313	2016 $ 280,109 17,620 (28,753) 268,976 18,610 $ 287,586

A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax Income tax expense calculated at the statutory rate Tax-exempt income Nondeductible expenses in determining taxable income Income tax on unappropriated earnings Investment tax credits Adjustments for prior years Others (temporary differences) Income tax expense recognized in profit or loss		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 2,865,714 $ 487,171 (117,538) 972 20,687 (67,191) (32,223) 15,435 $ 307,313	2016 $ 2,007,521 $ 341,279 (26,685) 3,583 17,620 (32,329) (28,753) 12,871 $ 287,586

The applicable corporate income tax rate used by the Corporation is 17%.

As the status of 2018 appropriations of earnings is uncertain, the potential income tax consequences of the 2017 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, 2017

	Balance,
	Beginning of	Recognized in	Balance, End
	the Year	Profit or Loss	of the Year
Deferred tax assets
Temporary difference
Unrealized intercompany gain	$ 70,420	$ 21,876	$ 92,296
Inventory reserve	30,736	240	30,976
Impairment loss	16,030	3,435	19,465
Net defined benefit liability	8,251	209	8,460
Allowance for impaired receivables	2,962	4,935	7,897
Unrealized exchange loss	3,336	1,284	4,620
Others	71	(71)	-
	$ 131,806	$ 31,908	$ 163,714
Deferred tax liabilities
Temporary difference
Unappropriated earnings of subsidiaries	$ 161,194	$ 111,442	$ 272,636
Goodwill	15,959	5,634	21,593
	$ 177,153	$ 117,076	$ 294,229
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
Inventory reserve	21,104	9,632	30,736
Impairment loss	14,158	1,872	16,030
Net defined benefit liability	6,640	1,611	8,251
Unrealized exchange loss	-	3,336	3,336
Allowance for impaired receivables	1,948	1,014	2,962
Others	2,292	(2,221)	71
	$ 88,429	$ 43,377	$ 131,806
Deferred tax liabilities
Temporary difference
Unappropriated earnings of subsidiaries	$ 101,879	$ 59,315	$ 161,194
Goodwill	10,096	5,863	15,959
Unrealized exchange gain	3,191	(3,191)	-
	$ 115,166	$ 61,987	$ 177,153

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c. Information about tax-exemption

As of December 31, 2017, profits attributable to the following expansion projects were exempted from income tax for a 5-year period:

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

d. Integrated income tax

Balance of imputation credit account (ICA) Creditable ratio for distribution of earnings		December 31
		2017 2016 $ 400,902 $ 302,877 For the Years Ended December 31
		2017 2016 Note 16.28%

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, no creditable ratio for distribution of earnings in 2018 is expected in 2017.

e. Income tax assessments

As of December 31, 2017, the Corporation’s tax returns through 2015 had been assessed by the tax authorities.

22. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Interest on convertible bonds and valuation gain on conversion option Earnings used in the computation of diluted earnings per share		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 2,558,401 7,459 $ 2,565,860	2016 $ 1,719,935 23,543 $ 1,743,478

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(In Thousands of Shares)

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Convertible bonds Employee share options Employee’s compensation Employee restricted shares Weighted average number of ordinary shares used in the computation of diluted earnings per share		For the Years December	Ended 31
		2017 399,052 6,864 5,037 2,392 2,057 415,402	2016 379,930 26,336 1,788 4,272 - 412,326

Since the Corporation offered to settle compensation paid to employees in cash or shares, the Corporation assumed the entire amount of the 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. Employee share option plan

The related information for the units granted in March 2016 were as follow:

1) Number of options granted and exercise price:

Number of options (in thousands)		7,900
Exercise prices per share on grant date (market value on grant	date)	$67.8
Exercise prices per share as of the report date (adjusted based	on the
Corporation’s employee share options plan)		$63.4
The valuation inputs of Black-Scholes model were as follows:
Vested Period 2 Years	3 Years	4 Years
Expected volatility 31.64%	32.62%	33.08%
Risk-free interest rate 0.52%	0.55%	0.61%
Expected dividend rate -	-	-
Expected life 4 years	4.5 years	5 years

2) The valuation inputs of Black-Scholes model were as follows:
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3) Fair value of stock options vested from grant date:

Vested Period	2 Years	3 Years	4 Years
Fair value (NT$ per unit)	$17.37	$18.97	$20.30

Information on employee share options was as follows:

Balance at January 1 Options granted Options exercised Options forfeited Balance at December 31 Options exercisable, end of year Weighted-average fair value of options granted (NT$)	For the Years Ended December 31	For the Years Ended December 31
	2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 11,538 $ 60.2 - - (1,683) 47.0 (392) - 9,463 60.1 1,914 $ -	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

Information about outstanding options as of December 31, 2017 and 2016 is as follows:

December 31

2017 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $46.7 1.52 63.4 4.24	2016
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $48.4 2.52 65.7 5.24

Compensation costs recognized were $51,802 thousand and $48,259 thousand for the years ended December 31, 2017 and 2016, 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. Dividends from RSUs are not restricted during the vesting period, and 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, 2017 and 2016 was as follows:

Restricted shares at the beginning of the year Shares granted Share vested Shares canceled Restricted shares at the end of the year		For the Years December	Ended 31
		2017 3,100 185 (298) (12) 2,975	2016 - 3,100 - - 3,100

Compensation costs of share-based payment arising from the RSU Plan were $69,791 thousand and $38,359 thousand for the years ended December 31, 2017 and 2016, respectively

24. CAPITAL MANAGEMENT

The Corporation manages its capital to ensure that it 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 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

a. Fair value of financial statement not measured at fair value

Management believes the carrying amount of financial assets and financial liabilities recognized in the financial statements approximates their fair values or their fair value could not be assessed reliably.

b. Fair value of financial instrument measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2017 Financial assets at FVTPL Derivative instruments Available-for-sale financial assets Domestic securities Listed equity securities Open-end beneficiary certificate December 31, 2016 Financial assets at FVTPL Derivative instruments Available-for-sale financial assets Domestic securities Listed equity securities Open-end beneficiary certificate	Level 1 $ - $ 268,582 832,314 $ 1,100,896 $ - $ 314,233 2,030,362 $ 2,344,595	Level 2 $ 31 $ - - $ - $ 725 $ - - $ -	Level 3 $ - $ - - $ - $ - $ - - $ -	Total $ 31 $ 268,582 832,314 $ 1,100,896 $ 725 $ 314,233 2,030,362 $ 2,344,595

There were no transfers between Levels 1 and 2 for the years ended December 31, 2017 and 2016.

2) Valuation techniques and inputs applied for Level 2 fair value measurement

Financial Instruments Valuation Techniques and Inputs Derivatives - 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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c. Categories of financial instruments

Categories of financial instruments
Financial assets Fair value through profit or loss Loans and receivables (1) Available-for-sale financial assets (2) Financial liabilities Amortized cost (3)	December 31
	2017 2016 $ 31 $ 725 5,411,799 4,185,570 1,268,810 2,516,768 4,631,830 5,208,564

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables (other receivables - related parties and other current assets) and refundable deposits.
2) The balances included the carrying amount of available-for-sale financial assets measured at cost.
3) The balances included financial liabilities measured at amortized cost, which comprise short-term loans, notes payable, trade payables, other payables, bonds issued, long-term loans (including current portion of long-term borrowings) and guarantee deposits received.
d. Financial risk management objectives and policies

The Corporation’s major financial instruments consist of equity and debt investment, cash and cash equivalents, receivables, long-term and short-term borrowings, trade payables and convertible bonds. 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.

1) Market risk

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

a) Foreign currency risk

The carrying amounts of the Corporation’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 29.

250 -

Sensitivity analysis

The Corporation was mainly exposed to USD and RMB.

Had the NTD strengthened/weakened by 5% against the relevant currency, the pre-tax profit would have decreased/increased by $154,405 thousand and $100,301 thousand for the years ended December 31, 2017 and 2016, 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.

b) Interest rate risk

The Corporation is exposed to interest rate risk because it borrows 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 with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2017 2016 $ 595,200 $ 210,074 399,703 1,397,140 1,447,629 1,412,419 2,100,000 2,000,000

Sensitivity analysis

The sensitivity analysis below was 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 was prepared assuming the amount of the liability outstanding at the balance sheet dates was outstanding for the whole year. A 50 basis point increase or decrease was 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 had been 50 basis points higher/lower and all other variables were held constant, the Corporation’s pre-tax profit for the years ended December 31, 2017 and 2106 would have decreased/increased by $3,262 thousand and $2,938 thousand, respectively, which was mainly attributable to the Corporation’s exposure to interest rates on its variable rate deposits and bank loans.

c) Price risk

The Corporation is exposed to equity price risks mainly arising from investment in open-end beneficiary 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 investment portfolios and having every equity investment get prior approval from the Corporation’s management.

251 -

Sensitivity analysis

If equity prices had been 5% higher/lower, the other comprehensive income would have increased/decreased by $55,045 thousand and $117,230 thousand because of changes in fair values of available-for-sale financial assets held by the Corporation for the years ended December 31, 2017 and 2016, respectively.

2) 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 could arise from:

a) The carrying amount of trade receivables from operating activities; and
b) 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.

3) Liquidity risk

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

The Corporation relies on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the Corporation’s available unutilized bank loan facilities were $2,067,840 thousand and $2,540,250 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.

252 -

Bank loans with a repayment on demand clause were included in the earliest time bank regardless of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

Non-derivative financial liabilities Non-interest bearing Convertible bonds Floating interest rate instruments Non-derivative financial liabilities Non-interest bearing Convertible bonds Floating interest rate instruments	December 31, 2017	December 31, 2017
	Within 1 Year 1-5 Years $ 2,131,558 $ - - 101,900 1,521,820 919,379 $ 3,653,378 $ 1,021,279 December 31, 2016		More Than 5 Years $ - - - $ -
	Within 1 Year $ 1,810,855 - 824,278 $ 2,635,133	1-5 Years $ - 1,450,500 1,209,575 $ 2,660,075	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 immediately. In addition, management believes the operating funds of the Corporation 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, as a result, the Corporation does not use its overdraft limit.

26. TRANSACTIONS WITH RELATED PARTIES

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

Related Party
Chroma ATE Inc. (“Chroma USA”)

Neworld Electronics Ltd. (“Neworld Electronics”)

Chroma ATE Europe B.V. (“Chroma Europe”)

CHI Incorporation Ltd. (“CHI”)

Chroma Investment Co., Ltd. (“Chroma Investment”)

Chen Hwa Technology Inc. (“Chen Hwa”)

Sensational Holding Ltd. (“Sensational”)

Chroma New Material Corp. (“Chroma New Material”)

Chroma Japan Corp. (“Chroma Japan”)

Chroma System Solutions, Inc. (“CSS”)

Relationship with the
Corporation

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
(Continued)

253 -

Relationship with the Related Party Corporation 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 Electronics Corp. (“Testar Electronics”) 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 Adivic Holding Corp. (“Adivic Holding”) Subsidiary Chroma (Shanghai) Trading Co., Ltd. (“Chroma Shanghai Subsidiary Trading”) Chroma Electronics (Shanghai) Co., Ltd. (“Chroma Subsidiary Shanghai”) Chroma Electronics (Shenzhen) Co., Ltd. (“Chroma Subsidiary Shenzhen”) Chroma ATE (Suzhou) Co., 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. Subsidiary (“Wei Kuang Xiamen”) EVT Technology Co., Ltd. (“EVT”) Subsidiary Wei Da Electric Vehicle Co., Ltd. (“Wei Da Electric”) Subsidiary (EVT’s subsidiary) Innovative Nanotech Incorporated (“Innovative”) Subsidiary (the Corporation acquired control over the subsidiary since August 9, 2017) Touch Cloud Incorporation (“Touch Cloud”) Subsidiary (the Corporation acquired control over the subsidiary since 2017 Q4) Adlink Technology Inc. (“Adlink”) Associate DynaScan Technology Corp. (“DynaScan”) Associate Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”) Joint venture Mon Kuan Technologies Co., Ltd. (“Mon Kuan Tec.”) Other related party Quantel Technologies India Private Ltd. (“Quantel India”) Subsidiary (Quantel’s subsidiary) Quantel Global Vietnam Co., Ltd. (“Quantel Vietnam”) Subsidiary (Quantel’s subsidiary) Chroma Germany GmbH (“Chroma Germany”) Subsidiary (Chroma Europe’s subsidiary) Quantel Co., Ltd. (“Quantel Thailand”) Other related party Quantel Sdn., Ltd. (“Quantel Malaysia”) Other related party Quantel Philippines Inc. (“Quantel Philippines”) Other related party PT Quantel (“Quantel Indonesia”) Inc. Other related party Quantel Pte Ltd. Representative Office In Hanoi (“Quantel Other related party Vietnam”) Quantel Electronics (India) Private Limited (“Quantel Other related party India”) (Concluded)

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

254 -

The related-party transactions were as follows:

b. Sales

Related Party Categories Subsidiaries Neworld Electronics Chroma USA Others Associates Other related parties		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 1,880,032 898,453 2,087,363 14,068 1,240 $ 4,881,156	2016 $ 2,495,216 503,795 1,380,753 13,130 - $ 4,392,894

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.

c. Purchases

Related Party Categories Subsidiaries Associates Other related parties		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 181,239 20,761 6 $ 202,006	2016 $ 362,846 17,582 18 $ 380,446

d. Receivables from related parties (excluding loans to related parties)

Line Item Related Party Categories Notes receivable Subsidiaries Trade receivables Subsidiaries Neworld Electronics Chroma USA Others Associates Other related parties		December 31	December 31
		2017 $ 794 $ 870,209 363,520 1,011,983 4,015 304 $ 2,250,031	2016 $ 354 $ 672,460 208,527 715,384 7,891 - $ 1,604,262

255 -

e. Payables to related parties (excluding loans from related parties)

Line Item Related Party Categories Notes payable Other related parties Trade payables Subsidiaries Associates Loans to related parties 1) Other receivables - financing provided Related Party Categories Subsidiaries CSS Chroma Japan 2) Interest receivables Related Party Categories Subsidiaries 3) Interest revenue Related Party Categories Subsidiaries CSS		December 31	December 31
		2017 2016 $ 140 $ 90 $ 30,805 $ 73,114 3,714 8,496 $ 34,519 $ 81,610 December 31
		2017 2016 $ 115,664 $ 125,341 38,993 36,533 $ 154,657 $ 161,874 December 31
		2017 2016 $ 313 $ 675 For the Years Ended December 31
		2017 $ 3,827	2016 $ 4,071

f. Loans to related parties

Note: Refer to Table 1 (attached) for other information related to financing provided.

g Endorsement guarantees provided

Note:Refer to Table 2 (attached) for other information related to endorsement guarantees provided.

256 -

h. Others

1) Commission expense

Related Party Categories Subsidiaries Chroma Shanghai Chroma Suzhou Quantel Chroma Japan Others		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 11,836 11,146 8,322 5,893 2,094 $ 39,291	2016 $ 5,557 32,461 3,283 - 5,315 $ 46,616

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

2) Rental income

Related Party Categories Subsidiaries Testar Electronics Others Associates		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 13,815 1,074 1,260 $ 16,149	2016 $ 14,043 1,074 1,260 $ 16,377

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 collected monthly.

3) Management service income

Related Party Categories Subsidiaries Chroma New Material Others		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 6,000 600 $ 6,600	2016 $ 6,000 600 $ 6,600

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

257 -

4) Other income

Related Party Categories Subsidiaries Neworld Electronics Others		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 19,732 3 $ 19,735	2016 $ 14,146 349 $ 14,495

Other income is income from repairs and maintenance.

5) Other current assets - other receivable

Related Party Categories Subsidiaries Testar Electronics Neworld Electronics Others Associates		December 31	December 31
		2017 $ 53,543 10,317 8,028 666 $ 72,554	2016 $ 66,542 3,727 6,724 552 $ 77,545

Receivables were recognized from managerial services and building rentals.

6) Receipts in advance and other current liabilities

Related Party Categories Subsidiaries There were receipts in advance from selling.		For the Years Ended December 31	For the Years Ended December 31
		2017 $ -	2016 $ 702

i. Compensation of key management personnel

Short-term employee benefits Post-employment benefits		For the Years Ended December 31	For the Years Ended December 31
		2017 $ 123,231 2,247 $ 125,478	2016 $ 114,369 2,096 $ 116,465

258 -

27. ASSETS PLEDGED

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

Land and buildings, net		December 31	December 31
		2017 $ 707,751	2016 $ 715,395

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 by bid deposit $353,040 thousand and 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.

259 -

29. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Corporation’s significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2017
Foreign
Currencies
Exchange
Rate
Financial assets
Monetary items
USD
$ 87,600
29.760

RMB

168,862
4.565

Non-monetary items
Investments accounted for using equity
method
USD

44,127
29.760

HKD

271,236
3.807

Financial liabilities

Monetary items
USD

9,736
29.760

December 31, 2016
Foreign
Currencies
Exchange
Rate
Financial assets
Monetary items
USD
$ 51,400
32.250

RMB

115,665
4.617

Non-monetary items
Investments accounted for using equity
method
USD

35,362
32.250

HKD

205,118
4.158

Financial liabilities

Monetary items
USD

5,756
32.250

Carrying
Amount
$ 2,606,983
770,855
$ 3,377,838
$ 1,326,994
1,032,596
$ 2,359,590
$ 289,746
Carrying
Amount
$ 1,657,640
534,025
$ 2,191,665
$ 1,154,112
852,879
$ 2,006,991
$ 185,641

260 -

For the years ended December 31, 2017 and 2016, (realized and unrealized) net foreign exchange losses were $117,951 thousand and $57,580 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. SEPARATED DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: Table 1 (attached)
2) Endorsements/guarantees provided: Table 2 (attached)
3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 3 (attached)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 4 (attached)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 6 (attached)
9) Trading in derivative instruments: Note 7 and Note 16
10) Information on investees: Table 7 (attached)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, 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) Any of the following 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 (attached)
- 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)
261 -
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.
262 -

CHROMA ATE INC.

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing (Note 6)	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limits
													Item	Value
0	The Corporation	Chroma Systems Solutions, Inc. Chroma Japan Corp.	Other receivables Other receivables	Y Y	$ 115,664 49,435	$ 115,664 46,321	$ 115,664 38,993	3.25% -	a a	$ 389,189 170,781	- -	$ - -	- -	$ - -	$ 1,323,068 (Note 1) 1,323,068 (Note 1)	$ 2,646,136 (Note 2) 2,646,136 (Note 2)
1	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	15,252	-	-	-	a	9,414	-	-	-	-	58,088 (Note 3)	116,176 (Note 4)

Note 1: Based on 10% of the net value of the Corporation.

Note 2: Based on 20% of the net value of the Corporation.

Note 3: Based on 10% of the net value calculated on the latest financial statements of borrowing company that have been audited.

Note 4: Based on 20% of the net value calculated on the latest financial statements of borrowing company that have been audited.

Note 5: The amounts listed in the table were translated into New Taiwan dollars at the exchange rate of US$1=NT$29.760, RMB1=NT$4.565 and JPY1 = NT$0.264 as of December 29, 2017.

Note 6: Financing provided:

a. For transactions.

b. For short-term financing.

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TABLE 2

CHROMA ATE INC.

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note 1)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
0	The Corporation	Chroma USA Chroma Japan Corp. Quantel Private Ltd. Chroma ATE Europe B.V. Chroma ATE (Suzhou) Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 1,984,602 1,984,602 1,984,602 1,984,602 1,984,602	$ 59,520 34,100 44,520 53,355 91,300	$ 59,520 34,100 44,520 53,355 91,300	$ 59,520 10,560 - - -	$ - - - - -	0.45% 0.26% 0.34% 0.40% 0.69%	$ 3,969,204 3,969,204 3,969,204 3,969,204 3,969,204	Y Y Y Y Y	- - - - -	- - - - Y

Note 3: The amounts listed in columns were translated into New Taiwan dollars at the exchange rate of US$1=NT$29.760, JPY1=NT$0.264, RMB1=NT$4.565, EUR1=NT$35.570 as of December 29, 2017.

264 -

TABLE 3

CHROMA ATE INC.

MARKETABLE SECURITIES HELD

(EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) FOR THE YEAR ENDED DECEMBER 31, 2017

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

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2017	December 31, 2017		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value (Note)
The Corporation Chroma New Material Corp. Chroma Investment Co., Ltd. Adivic Technology Co. Chen Hwa Technology Inc.	Fund The RSIT Enhanced Money Market Fund Yuanta Wan Tai Money Market Fund Mega Diamond Money Market Fund WI Harper INC Fund VII LP 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. TFBS Bioscience Inc. Fund Fuh Hwa You Li Money Market Fund The RSIT Enhanced Money Market Fund Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Adlink Technology Inc. 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 Financial assets measured at cost - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Available for sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-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 Available for sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available for sale financial assets - current Financial assets measured at cost - non-current	24,722 18,863 20,372 - 6,050 412 26 4,614 3,561 2,220 1,152 903 2,000 6,829 734 5,768 85 68 1,916 4,174 26 111 3,402 -	$ 294,240 284,114 253,960 10,152 224,467 43,713 402 46,140 39,218 31,852 11,520 9,032 20,000 91,535 8,732 68,681 4,431 4,332 310,324 17,175 - - 42,125 8,482	- - - - 6.1 - - 4.6 4.4 9.4 1.9 1.4 15.7 - - - - - 0.5 7.6 1.5 5.1 - 19.0	$ 294,240 284,114 253,960 - 224,467 43,713 402 - - - - - 20,000 91,535 8,732 68,681 4,431 4,332 310,324 - - - 42,125 -	- - - - - - - - - - - - - - - - - - - - - - - -

Note: The fair value of open-end beneficiary certificates and listed market securities based on the net asset value and closing price as of December 31, 2017.

265 -

TABLE 4

CHROMA ATE INC.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterpart y	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares (Thousands)	Amount (Note)	Number of Shares (Thousands)	Amount	Number of Shares (Thousands)	Amount	Carrying Amount	Gain (Loss) on Disposal	Number of Shares (Thousands)	Amount (Note)
Chroma ATE Inc. (the “Corporation”)	Fund Mega Diamond Money Market Fund	Available for sale financial assets - current	-	-	36,520	$ 453,518	20,095	$ 250,000	36,243	$ 450,997	$ 450,000	$ 997	20,372	$ 253,960

Note: The beginning and ending balances included adjustments for financial assets valuation gain or loss.

266 -

TABLE 5

CHROMA ATE INC.

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

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

Company Name	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
The Corporation Neworld Electronics Ltd. The Corporation Chroma USA The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE Europe B.V. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Quantel Private Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd.	Neworld Electronics Ltd. The Corporation Chroma USA The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Inc. (Shenzhen) Co., Ltd. The Corporation Chroma ATE Europe B.V. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Quantel Private Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. Neworld Electronics Ltd.	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 Subsidiary Parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase	$ (1,880,032) 1,880,032 (898,453) 898,453 (389,189) 389,189 (544,060) 544,060 (344,865) 344,865 (233,685) 233,685 (170,781) 170,781 (136,967) 136,967 (211,563) 211,563 (842,342) 842,342	(23) 100 (11) 100 (5) 100 (7) 100 (4) 100 (3) 100 (2) 100 (2) 100 (3) 100 (37) 58	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 120 days after delivery Net 120 days after delivery Net 90 days Net 90 days	- - - - - - - - - - - - - - - - - - - -	- - Note Note - - - - - - - - - - - - - - - -	$ 870,209 (870,209) 363,520 (363,520) 110,169 (110,169) 186,932 (186,932) 184,154 (184,154) 121,743 (121,743) 163,825 (163,825) 35,422 (35,422) 104,538 (104,538) 463,578 (463,578)	28 (100) 12 (100) 4 (100) 6 (100) 6 (100) 4 (100) 5 (100) 1 (100) 3 (100) 43 (67)	- - - - - - - - - - - - - - - - - - - -

(Continued)

267 -

Company Name	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd.	Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd.	Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company Same parent company	(Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase (Sale) Purchase	(153,887) 153,887 (105,152) 105,152 (147,309) 147,309 (110,036) 110,036 (121,214) 121,214	(7) 72 (5) 24 (6) 13 (6) 25 (46) 25	Net 90 days Net 90 days Net 90 days Net 90 days Net 180 days after delivery Net 180 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 120 days after monthly closing Net 120 days after monthly closing	- - - - - - - - - -	- - - - - - - - - -	$ 84,919 (84,919) 43,058 (43,058) 77,732 (77,732) 128,756 (128,756) 114,442 (114,442)	8 (59) 4 (14) 14 (8) 19 (42) 70 (13)	- - - - - - - - - -

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

(Concluded)

268 -

TABLE 6

CHROMA ATE INC.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2017

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period (Note)	Allowance for Impairment Loss
					Amount	Action Taken
The Corporation Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment (Ximen) Co., Ltd.	Neworld Electronics Ltd. Chroma USA Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE Europe B.V. Chroma System Solutions, Inc. Chroma Japan Corp. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Same parent company Same parent company Same parent company	Trade receivables $ 870,209 Trade receivables 363,520 Trade receivables 186,932 Trade receivables 184,154 Trade receivables 110,169 Other receivables - financing provided 115,664 Trade receivables 163,825 Trade receivables 121,743 Trade receivables 104,538 Trade receivables 463,578 Trade receivables 128,756 Trade receivables 114,442	2.44 3.14 4.32 2.25 2.94 - 1.21 2.18 3.93 6.17 5.43 4.70	$ - - - - - - - - - - - -	- - - - - - - - - - - -	$ 400,434 7,933 101,687 31,603 55,858 - 28,620 79,821 29,352 43,842 9,533 114,442	$ - - - - - - - - - - - -

Note: As of February 22, 2018.

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TABLE 7

CHROMA ATE INC.

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2017

(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, 2017	as of December 31, 2017	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2017	December 31, 2016	Shares (Thousands)	Percentage of Ownership	Carrying Amount
The Corporation Chroma USA San Eagle Development Corp. EVT Technology Co., Ltd. Adivic Technology Co., Ltd. Quantel Private Ltd. Chroma ATE Europe B.V.	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 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 Electronics Corporation EVT Technology Co., Ltd. Innovative Nanotech Incorporated Touch Cloud Incorporation Chroma Systems Solutions, Inc. Wei Kuang Mech. Eng. Inc. Wei Da Electric Vehicle Co., Ltd. Adivic Holding Corporation Quantel Technologies India Private Ltd. Quantel Global Vietnam Co., Ltd. Chroma Germany GmbH	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 Taoyuan, Taiwan Taipei, Taiwan U.S.A. Mauritius Pingtung, Taiwan Samoa India Vietnam Germany	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 Monitoring instruments of nanoparticles Development of cloud platform and Internet of Things Systems Sale and maintenance of electronic test instruments, etc. Investments Sale and lease of motorcycles Sale and research of RF device Sale and maintenance of test instruments, etc. Sale and maintenance of test instruments, etc. Sale and maintenance of electronic test instruments, etc.	$ 271,873 186,514 165,146 480,715 533,000 122,884 112,328 98,217 80,000 54,026 238,746 29,895 38,301 193,800 147,125 29,628 12,217 17,500 247,096 67,481 70,000 57,000 64 185,686 3,750 42,245 3,056 6,219 1,073	$ 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 - - -	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 12,240 9 120 215 1,750 20,160 6,644 7,000 5,700 240 4,475 375 1,000 65 - 30	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 73.8 89.3 78.1 50.0 100.0 75.0 100.0 100.0 100.0 100.0	$ 817,757 669,747 529,538 420,605 860,666 156,232 115,153 105,899 113,954 73,859 99,403 118,957 50,420 56,290 (35,580) (31,012) 60,772 17,626 17,379 22,652 67,777 55,342 132,978 662,527 (3,906) 11,158 2,970 3,857 (4,263)	$ 212,326 115,884 380,332 23,234 609,624 33,536 10,797 2,610 7,506 18,553 22,751 40,769 1,209 (55,499) 1,131 52,426 12,609 94 19,459 (13,961) (2,487) (2,123) 52,426 115,961 18 (5,811) (68) (1,524) (5,147)	$ 212,326 115,884 42,960 23,234 609,616 33,536 5,360 2,610 1,336 18,553 6,211 40,871 1,209 (30,314) 1,129 13,107 12,609 33 13,075 (8,252) (2,434) (1,658) NA NA NA 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 Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

270 -

TABLE 8

CHROMA ATE INC.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017

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

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (Note 2)	Method of Investment (Note 1)	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2017 (Note 3)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017 (Note 3)	Net Income (Loss) of the Investee	Percentage of Ownership in Investment	Investment Gain (Loss) (Notes 4 and 5)	Carrying Amount as of December 31, 2017 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2017
						Outward	Inward
Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma (Shanghai) Trading Co., Ltd. Hangzhou New Material Chroma Co., Ltd. Chroma ATE (Suzhou) Co., 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 computerized automatic test systems, peripherals and electronic test instruments Sale of computerized automatic test systems, peripherals and electronic test instruments International and transit trading, commercial simple processing and commercial consulting service and etc. Production and sale of semiconductor connecting materials Sale of computerized automatic test systems, peripherals and electronic test instruments 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		$ 114,210 (HK$ 30,000) 89,280 (US$ 3,000) 80,352 (US$ 2,700) 44,640 (US$ 1,500) 113,088 (US$ 3,800) 54,191 (RMB 11,871) 52,119 (RMB 11,417) 7,929 (RMB 1,737) 38,227 (RMB 8,374)	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)	$ 129,943 38,063 (152) 6,461 33,556 42,960 70,743 1,145 15,237	100 100 100 19 100 100 100 100 100	$ 129,943 38,063 (152 ) - 33,556 42,960 70,743 1,145 15,237	$ 580,830 105,707 88,056 8,482 202,520 257,260 320,090 45,602 60,767	$ - - - - - - - - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2017		Investment Amounts Authorized by the Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$635,051 (HK$1,200, US$19,312)		$725,060 (HK$1,400, US$22,076) (Note 6)		$7,938,408 (Note 7)

(Continued)

271 -

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 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2017 and December 31, 2017 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$3.905, US$1=NT$30.432, RMB1=NT$4.507 for the year ended December 31, 2017.

Note 6:

Approval Letter Approved Amount a. Letter (1998) II-87710585 of Investment Commission of MOEA NT$ 5,852 (HK$ 1,400) b. Letter (2000) II-89014726 and 89037430 of Investment Commission of MOEA NT$ 63,180 (US$ 2,000) c. Letter (2001) II-89037430 of Investment Commission of MOEA NT$ 33,160 (US$ 1,000) d. Letter II-91048640 of Investment Commission of MOEA NT$ 63,984 (US$ 1,853) (Note 8) e. Letter II-90025170 of Investment Commission of MOEA NT$ 60,240 (US$ 1,750) f. Letter II-092020235 of Investment Commission of MOEA NT$ 19,230 (US$ 560) g. Letter II-092043358 of Investment Commission of MOEA NT$ 6,748 (US$ 200) h. Letter II-093004076 of Investment Commission of MOEA NT$ 3,158 (US$ 95) i. Letter II-094006092 of Investment Commission of MOEA NT$ 6,896 (US$ 219) j. Letter II-09500052120 of Investment Commission of MOEA NT$ 81,528 (US$ 2,500) k. Letter II-09600175700 of Investment Commission of MOEA NT$ 120,000 (US$ 3,699) l. Letter II-096000006020 of Investment Commission of MOEA NT$ 66,580 (US$ 2,000) m. Letter II-09600310110 of Investment Commission of MOEA NT$ 33,160 (US$ 1,000) n. Letter II-09700186010 of Investment Commission of MOEA NT$ 46,110 (US$ 1,500) o. Letter II-09700403210 of Investment Commission of MOEA NT$ 7,096 (US$ 210) (Note 9) p. Letter II-10400042770 of Investment Commission of MOEA NT$ 78,240 (US$ 2,500) q. Letter II-10600164500 of Investment Commission of MOEA NT$ 29,898 (US$ 990)

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: The Corporation 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.

272 -

AI assistant

CHROMA — Annual Report 2017

52029_rns_2018-06-14_475697e2-35b6-4548-bc77-9c02f2efe992.pdf

Critical financial indicators (consolidated)

Table of Contents

I. Reports to Shareholders

Business results

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

II. Corporation Introduction

III. Corporate Governance Report

1. Organization

(2) Responsibilities and functions of major departments

2. Directors, General Managers, Vice Presidents, Assistant Managers, and Supervisors of various branch organization

(1) Director Information

Directors

(2) General Managers, Vice Presidents, Assistant Managers, and Managers of various departments or branches.

(3) Remuneration paid out to Directors, Supervisors, the General Managers, and Vice Presidents

1. Remuneration for the director (including independent directors)

2. Supervisor’s remuneration

3. Remuneration for the General Manager and Vice President

3. Operations of Corporate Governance

(1) Implementation of board meetings

2. Supervisors’ participation in the board meeting

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

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

(5) Fulfilment of social responsibilities

(6) Compliance with ethical corporate management and measures implemented

4. Certified public accountant fees

Information on the CPA’s professional charge

5. Replacement of accountants

2. The relative affiliate of convertible equity for counterparty:

Relationship information between the 10 largest shareholders

Consolidated shareholding percentage

IV. Financing

1. Capital and shares

(2) Shareholder structure

(3) Dispersion of equity ownership

1. Common shares

(4) List of major shareholders

2. Corporate bond

(2) Information of the convertible corporate bonds

6. Operations of restricted employee shares

(1) Implementation of new restricted employee shares

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

(3) Anticipated possible effects

(2) Status of implementation

V. Operation summary

1. Business content

2. Major R&D outcomes

1. Major products by sales area

(C) Response strategies:

B. Special materials

(B) Disadvantages:

(C) Response strategies:

- Passive Component Test Solution

2. Production process

(3) Supply of primary raw materials

(5) Table of production volume in the 2 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

5. Labor relations

6. Important contracts

VI. Financial summary

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

2. Financial analysis for the 5 most recent years

(1) Consolidated financial analysis - International Financial and Accounting Reporting Standards

Note 2: The following lists the formulas used for performing the financial analysis:

3. Audit Committee's Audit Report of financial report for the most recent fiscal year

Chroma ATE Inc.

Audit Committee’s Audit Report

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

1. Financial condition

2. Financial performance

Financial performance analysis

3. Cash flow

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

(2) Cash liquidity analysis for the following year

(3) Improvement plan

2. Future response measures

2. Future response measures

CHROMA Annual Report 2017