CHROMA - Annual Report 2018 | 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: Director, Investor Relation & Corporate Investment, 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: 20F, Taipei Nan Shan Plaza, No. 100, Songren Rd., Xinyi Dist., Taipei 11073, Taiwan

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

TEL: (02)2725-9988

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$ millions


	2016	2017	2018
Consolidated operating revenue	11,624	14,901	16,931
Net income (attributable to the owner of the parent	1,720	2,558	2,546
company)
Earnings per share, EPS (NT$)	4.53	6.41	6.22
Capital stock	3,899	4,119	4,168
Total assets	18,633	22,018	23,202
Total equity	10,788	13,463	14,690
Return on total assets	10.12	12.68	11.37
Return on total equity	17.18	21.46	18.42

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Consolidated revenue for the 5
most recent years
18000 16931
17000
16000 14901
15000
14000
13000 11624
1200011000 10307 9692
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2014 2015 2016 2017 2018
Unit: million NT$
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Net income after tax for the Earnings per share for the 5
5 most recent years most recent years
3000 6.41 6.22
2800 2558 2546
2600
2400
2200 4.53
2000
1720
18001600 1318 3.51 3.28
1400 1237
1200
1000
800
600
400
200
0
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
Unit: million NT$ Unit: NT$
----- End of picture text -----

		Table of Contents	Table of Contents
Chapter	1	Report to Shareholders ................................................................................................ 1
Chapter	2	Company Introduction
		I.	Date of founding ................................................................................................ 2
		II.	Company overview ............................................................................................ 2
Chapter	3	Corporate Governance Report
		I.	Organization ....................................................................................................... 4
		II.	Directors, CEO, general managers, vice presidents, assistant managers,
			and supervisors at various departments and branches ....................................... 6
		III.	Operation of corporate governance .................................................................. 15
		IV.	CPA fees .......................................................................................................... 43
		V.	Replacement of CPAs ...................................................................................... 44
		VI.	The Corporation's Chairman, CEO, or any managerial officer in charge
			of finance or accounting matters who has held a position at the
			accounting firm of its CPAs or at an affiliated company in the most recent
			year ................................................................................................................... 44
		VII.	Equity transfer or changes in equity pledged by directors, managerial
			officers, or shareholders holding more than 10% of the Corporation's
			shares in the most recent year up to the publication date of this annual
			report ................................................................................................................ 45
		VIII.	Information on the 10 largest shareholders who are related parties or each
			other's spouses and relatives within the second degree of kinship .................. 47
		IX.	Number and percentage of shares held by the Corporation, its directors,
			managerial officers and directly or indirectly controlled reinvestment
			companies in the same reinvestment companies ............................................. 48
Chapter	4	Financing Status
		I.	Capital and shares ............................................................................................ 49
		II.	Corporate bond ................................................................................................. 57
		III.	Preferred shares ................................................................................................ 58
		IV.	Overseas depositary receipt ............................................................................. 58
		V.	Employee stock warrant ................................................................................... 58
		VI.	New restricted employee shares ....................................................................... 60
		VII.	Issuance of new shares in connection with the merger or acquisition of other
			companies ........................................................................................................ 63
		VIII.	Implementation of capital utilization plan ....................................................... 63

Chapter	5	Operation Summary	Operation Summary
		I.	Business content ............................................................................................... 65
		II.	Market, production and sales summary ........................................................... 74
		III.	Employee information in the two most recent years up to the publication
			date of this annual report .................................................................................. 81
		IV.	Environmental protection expenditure ............................................................. 81
		V.	Labor relations ................................................................................................. 82
		VI.	Important contracts .......................................................................................... 84
Chapter	6	Financial Summary
		I.	Condensed balance sheet and statement of comprehensive income in the
			five most recent years ...................................................................................... 85
		II.	Financial analysis in the five most recent years ............................................... 88
		III.	Audit Committee's audit report on financial statements in the most recent
			year ................................................................................................................... 92
		IV.	Financial statements in the most recent year ................................................... 92
		V.	The Corporation's parent company-only financial statements audited and
			attested by CPAs in the most recent year ......................................................... 92
		VI.	Financial condition of the Corporation and affiliated companies .................... 92
Chapter	7	Review and Analysis of Financial Condition and Performance, and Relevant Risk
		Events
		I.	Financial condition ........................................................................................... 93
		II.	Financial performance ..................................................................................... 94
		III.	Cash flow ......................................................................................................... 95
		IV.	Impact of material expenditures on the Corporation's finances and
			operations in the most recent year ................................................................... 95
		V.	Policy on investment in other companies, main reasons for profit/losses
			resulted therefrom, improvement plans, and investment plans for the
			coming year ...................................................................................................... 96
		VI.	Risk analysis and assessment for the most recent year up to the
			publication date of this annual report ............................................................... 97
		VII.	Other important matters ................................................................................. 102
Chapter	8	Special Notes
		I.	Information on affiliated companies .............................................................. 103
		II.	Private placement of securities in the most recent year up to the
			publication date of this annual report ............................................................. 110
		III.	Holding or disposition of the Corporation's shares by subsidiaries in the
			most recent year up to the publication date of this annual report .................. 110
		IV.	Other supplementary matters ......................................................................... 110
		V.	Any event that results in substantial impact upon 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
			annual report .................................................................................................. 110

Chapter 1 Report to Shareholders

Business results

The global economy begins to slow down from second half of year 2018. The trade war between US and China has been a great source of uncertainty for market. Several Chinese manufacturing companies were moving abroad to outside of China, which slow down the capacity expansion plan and reduce capital spending. The Company’s sales revenues of testing equipment business in 2018 were weakened due to the US-China Trade War impact. Chroma ATE Inc. the consolidated sales revenues in year 2018 was NTD 16.9 billion, while the parent company sales revenues were 7.5 billion, with net income of 2.5 billion equals to earnings per share of NTD 6.22.

In year 2018, Chroma consolidated testing equipment business was declined 1%. The test instruments & automatic testing system sector was increased by 4%, due to the demand of high power testing equipment from EV related components / modules and battery cell / pack testing remain strong. However, the semiconductor / photonics testing solution were declined 23%, mainly due to IC market headwinds demand decreased. For other consolidated entity MAS automation business was outstanding performance, presented a sales growth of 92%, which the consolidated sales revenues in 2018 to grow 14% year-on-year. Other consolidated financial ratio stated as below:

Financial Performance for Year 2017 ~ 2018

Financial Performance for Year 2017 ~ 2018	Financial Performance for Year 2017 ~ 2018
Item		2018	2017
Capital Structure Analysis	Debt Ratio(%)	36.69	38.85
	Long-term Fund to Fixed Assets Ratio(%)	508.27	566.49
Liquidity Analysis	Current Ratio(%)	221.54	203.76
	Quick Ratio(%)	163.98	161.87
Profitability Analysis	Return on Total Assets(%)	11.37	12.68
	Return on Equity Attributable to Shareholders of the Parent(%)	18.42	21.46
	Net Profit Margin(%)	15.04	17.17

Business plan, development strategies, external competition and environment, legal environment, and macro-business environment

Look forward to year 2019, US trade protectionism policy appreciated US market, but global economy uncertainty remains from US-China Trade War. To face wakening global economy headwinds and fast market turnover, we expect to adopt following strategies to commit a good sales growth and returns to our shareholders.

Increasing North America market penetration and sales force.
Close attention on Southeast Asia market development due to China supply chain moving abroad.
Active development of related testing equipment needs for megatrend of AI, 3D Imaging Sensing and 5G communication.

Finally, we would like to express our gratitude to all our shareholders for their unstinted support and encouragement. We wish everyone good health and all the best.

Chairman & CEO Leo Huang

Chapter 2 Company Introduction

I. Date of founding: November 8, 1984

II. Company overview

November 8, 1984	Founded in Taipei city with a capital of NT$2 million.
	The first Chinese-invented programmable video signals generator (65MHz)
	was officially launched.
November 1986	The world's first synchronous parallel test architecture developed to
	automatically test switching power supplies.
February 1993	Invested in Chroma ATE Inc., a subsidiary in the US to set up the
	Corporation's sales office based in the United States.
December 1993	Official opening and operation of the new Wugu factory.
February 1993	Invested in Neworld Electronics Ltd., a subsidiary in Hong Kong to expand
	the Corporation’s base in the Mainland China market.
December 1994	Granted the ISO9002 quality certification.
November 1995	Successfully obtained the Chinese National Laboratory Accreditation (CNLA)
	from the Central Bureau of Standards.
December 1996	The Corporation was listed in the stock market for trading on December 21.
August 1997	Granted the ISO9001 quality certification.
December 1997	The 9107 Uninterruptible Power Supply and the 3203 Memory IC Tester won
	the 6th Taiwan Excellence Award.
April 1998	Honored with the 6th Industrial Technology Development Outstanding
	Performance Award from the Ministry of Economic Affairs (MOEA).
	Invested in DynaScan Technology Corp.
July 1998	The 7100 Color Analyzer won the Outstanding Photonics Product Award
	during the 2nd Photonics Festival in Taiwan.
September 1998	Invested in Adlink Technology Inc.
December 1998	The 2225 and 2235 Series Video Pattern Generators and the 9105
	Uninterruptible Power Supply won the 7th Taiwan Excellence Award.
May 1999	The 9105/9107 Uninterruptible Power Supply won the Excellent Product
	Design Award.
June 1999	Acquired Hita Technology Co., Ltd.
September 1999	Invested in Chroma ATE Europe B.V., a subsidiary in the Netherlands to set
	up the Corporation's sales office based in Europe.
November 1999	Official opening and operation of the new Linkou factory.
June 2000	First issuance of unsecured convertible corporate bonds in Taiwan worth NT$
	1.5 billion.
August 2000	Invested in EVT Technology Co., Ltd.
January 2001	Acquired ZentechTech Inc.
March 2003	Set up a branch office in Hsinchu Science Park.
September 2003	Set up the Global Corporate HQ in Taiwan.
March 2004	Donated a 360-degree LED display to National Chiao Tung University, the
	first of its kind in a Taiwanese university.
December 2004	20th Anniversary of the Corporation and grand opening of the Linkou
	Operational HQ.
June 2005	Expiration and delisting of the first unsecured convertible corporate bonds
	issued in Taiwan
August 2006	Spun off the Special Material Business Unit (BU) to form a new subsidiary,

	Chroma New Material Corp.
September 2006	Grand opening of the Chroma ATE Suzhou plant in China.
January 2007	Invested in Wei Kuang Automatic Equipment (Nanjing) Co., Ltd., Mou Kuan
	Technologies (Nanjing) Co., Ltd., Sajet Technology Co., Ltd., and MAS
	Automation Corp.
February 2007	Invested in Wei Kuang Automation (Xiamen) Co., Ltd.
March 2007	Invested in Testar Electronics Corp.
April 2007	Established Manufacturing Execution System (MES) Business Unit.
March 2008	Simplified merger with subsidiary Silver Town Electronic Co., Ltd.
May 2008	Established Chroma Japan Corp.
March 2009	Granted the ISO 9001:2008 certification.
September 2009	Established Kaohsiung branch.
September 2009	Invested in Chroma Systems Solutions, Inc. to set up a sales location in the US.
August 2010	Acquired several prestigious awards from Finance Award in 2010, including the
	Best Managed Corporation Award, the Best Corporate Governance Award, and
	the Best Medium-sized Enterprise in Taiwan.
October 2010	Granted the ISO/TS 16949 certification.
August 2011	Acquired Wise Life Technology Co., Ltd.
January 2012	Successfully acquired the tender for the Industrial Development Zone (Tender A)
	in the Taoyuan International Airport Access MRT Station A7 Transit-Oriented
	Development Zone.
January 2012	The 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 from MOEA.
November 2012	Simplified merger of subsidiary Novatest Electronics Co., Ltd.
December 2012	Successfully acquired the world’s first SAE J1772 certification from UL for
	automated communication protocol testing system.
February 2013	Honored with the 1st Taiwan Mittelstand Award from the Industrial
	Development Bureau, MOEA.
February 2013	Invested in Adivic Technology Co., Ltd.
May 2014	Second issuance of unsecured convertible corporate bonds in Taiwan worth NT$
	2 billion.
January 2016	Invested in Quantel Private. Ltd. in Singapore to establish a sales location in
	Southeast Asia
January 2017	Received the Distinguished Enterprise Innovation Award, the highest honor from
	the 5th National Industrial Innovation Award.
August 2017	Established Innovative Nanotech, Inc.
September 2017	Established a subsidiary in Germany.
October 2017	Invested in Touch Cloud Inc.
October 2017	Honored with the “Best Trade Contribution Award” delivered by MOEA.
January 2018	The 61800 Series Regenerative Grid Simulator and the 3160C Tri-Temp Quad-
	Site Handler won the 26th Taiwan Excellence Award.
February 2018	Established Chroma Korea, a branch office in South Korea.
May 2018	Chroma Germany GmBH was granted the ISO 9001 certification.
January 2019	The 17040 Regenerative Battery Pack Test System and the 2238 Video Pattern
	Generator won the 27th Taiwan Excellence Award.
February 2019	Invested in Camtek Ltd.

Chapter 3 Corporate Governance Report I. Organization

(I)Organizational structure

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(II) Responsibilities andfunctions of majordepartments	(II) Responsibilities andfunctions of majordepartments
Department	Responsibilities
CEO Office	Establish the Corporate Marketing Department, the Legal Affairs Department, and the Safety and Health Center. Formulate company-wide administrative and business objectives, implement communication and coordination, product planning, new business development and planning, patent management and contract review, environmental protection, and occupational safetyand health(OSH)management.
Internal Auditor	Establish, update, and revise internal audit and control systems. Review,revise,and audit internal control systems.
Semiconductor Testing Equipment BU	Responsible for the planning, research, and development (R&D), and marketing of semiconductor test equipment and products.
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.
Manufacturing Center	Responsible for the raw material purchasing and production for the entire corporation. Responsibleforthe planning andmaintenance ofproduct quality system.
Advanced Technology ResearchCenter	New technology planning and development, and supporting various BUs in understanding the future development of new industries.
Finance & Administration Center	Consist of the Financial Department, the Accounting Department, the Human Resources Department, the General Affairs Department, and the Facilities Department. Financial Department: Responsible for capital planning and utilization for the entire corporation, assessing investment plans, and providing support for certain operations. Accounting Department: Responsible for establishing and implementing an accounting system, and handling various taxation and accounting affairs. Human Resources Department: Responsible for planning HR resources, organizational development, and training for the entire corporation. General Affairs Department: Responsible for the purchase of routine equipment and items, as well as the management of equipment and fixed assets for the entire corporation. Facilities Department:Responsible for factorymaintenance and safety.
Operation Management Center	Responsible for building and managing the Corporation's operations management system. Establish the IT Department (including the IT System Development Section, the IT System Management Section, and the Data Control Section), carry out planning and safety controls for IT equipment and application systems throughout the entire corporation, and issuance and control of rules and regulations.

II. Directors, CEO, general managers, vice presidents, assistant managers, and supervisors at various departments and branches (I) Director Information

																As of April 20,2019	As of April 20,2019	As of April 20,2019
Title	Nationalit y or place of registratio n	Name	Gender	Date elected	Final date of the term of office	Date of first election	Number of shares held when elected		Number of 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 the Corporation or other companies	Any managerial officer, director, or supervisor who is a spouse or relative within the second degree of kinship
							Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage				Title	Name	Relation
Chairman	Republic of China	Leo Huang	Male	2017.06.08	2020.06.07	1984.10.23	23,419,897	5.78%	20,491,897	4.90%	11,794,362	2.82%	0	Bachelor of Electronics Engineering, National Chiao Tung University	CEO of the Corporation Director, I-Sheng Electric Wire & Cable Co., Ltd. Director, Leadtek Research Inc. Independent Director, Member of Audit Committee and Member of Remuneration Committee, Ichia Technology Inc. Representative of Corporate Director, Tian Zheng International Precision Machinery Co., Ltd. Director, Twoway Communications Inc. Chairman, DynaScan Technology Corp. Refer to Page 106 to 108 for details on positions assumed in affiliated companies	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 of Business Administration, National Chengchi University Certified Public Accountant, 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, Dynapack Corp. Representative of Corporate Director, Far Eastern International Bank Director, Unity Opto Technology Co., Ltd. Independent Director, Member of Audit Committee, Member of Risk Management Committee, and Member of Remuneration Committee, Fubon Hyundai Life Insurance (South Korea) 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	Ph.D. in Business Administration, University of Kentucky, USA Senior Vice President, Taiwan Semiconductor Manufacturing Corporation Chairman, Neo Solar Power Corporation	Director, Rafael Microelectronics Inc. Chairman, DynaScan Technology Corp. Director, Co-founder and Strategy Consultant, United Renewable Energy Co., Ltd. Independent Director, Member of Audit Committee, and Member of Remuneration Committee, Power 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	Ph.D. in Atmospheric Science, State University of New York, USA Chair Professor, National Taiwan University Executive Vice President, National Taiwan University Vice President for Academic Affairs, National Taiwan University Chair, Department of Atmospheric Sciences, National Taiwan University President,Chinese Geoscience Union	Chair Professor, National Taiwan University Independent Director, Member of Audit Committee and Member of Remuneration Committee, 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%	397,548	0.09%	238,722	0.06%	0	Ph.D. in Mechanical Engineering, Pennsylvania State University, USA Project Manager,Institute for Information Industry	President of the Corporation Refer to Page 106 to 108 for details on positions assumed in affiliated companies	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	Ph.D. in Photonics, National Chiao Tung University Vice President, Tailyn Technologies, Inc. Vice President, Champion-Lighting Technologies Limited	Chief Technology Officer, DynaScan Technology Corp. Independent Director and Member of Remuneration Committee, Dynapack Corp. Refer to Page 106 to 108 for details on positions assumed in affiliated companies	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	Ph.D.in Electrical Engineering, National Taiwan	Director, Ting-Shiun Telecommunication Development Foundation Director, National Information Infrastructure Enterprise Promotion Association	None	None	None
														University
														Vice President for R&D, Office of Research and
														Development, National Chiao Tung University
														Chairman and Director, the Institute of Communications
														Engineering, National Chiao Tung University
														Lifetime Chair Professor, Department of Electrical Engineering,National Chiao TungUniversity

Director Information

Criteria Name	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Currently serving as an independent director in other public companies
	Currently serving as an instructor or in higher positions 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, certified public accountant or other professional or technician that must undergo national examinations and specialized license.	Professional experience necessary for business administration, legal affairs, finance, accounting or company sales	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 fulfills the relevant condition(s) two years before being elected or during the term of office, please tick the field under the corresponding condition(s).

(1) Not employed by the Corporation or its affiliated companies.

(2) Not serving as a director or supervisor of the Corporation or any affiliated company (However, this does not apply to cases where the person is an independent director of the Corporation, its parent company or subsidiaries established in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary).

(3) Not a natural person shareholder who holds more than 1% of the total number of shares issued or is ranked top 10 in terms of the total number 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 preceding three items.
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds more than 5% of the total number of shares issued by the Corporation or is ranked top 5 in terms of the number of shares held.

(6) Not a director (member of the Board of Directors), supervisor (member of the Board of Supervisors), managerial officer or shareholder holding more than 5% of the shares of a specific company or institution that has a financial or business relationship with the Corporation.

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

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

(9) Where none of the circumstances specified in Article 30 of the Company Act applies.
(10)Where the person is not elected in the capacity of the government, a juristic person or a representative thereof as provided in Article 27 of the Company Act.

(II) CEO, general managers, vice presidents, assistant managers, and supervisors at various departments and branches

													As of April 20,2019	As of April 20,2019	As of April 20,2019
Title	Nationality	Name	Gender	Date of appointment	Number of 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 other companies	Any managerial officer who is a spouse or a relative within the second degree of kinship
					Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage			Title	Name	Relation
CEO	Republic of China	Leo Huang	Male	1984.11.08	20,491,897	4.90%	11,794,362	2.82%	0	0	Bachelor of Electronics Engineering, National Chiao Tung University	Director, I-Sheng Electric Wire & Cable Co., Ltd.; Director, Leadtek Research Inc.; Independent Director, Member of Audit Committee and Member of Remuneration Committee, Ichia Technology Inc.; Representative of Corporate Director, Tian Zheng International Precision Machinery Co., Ltd.; Director, Twoway Communications, Inc.; Chairman, DynaScan Technology Corp. Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
General Manager, Test & Measurement BU	Republic of China	David Yang	Male	1992.08.14	45,352	0.01%	70,002	0.02%	0	0	Bachelor of Electronics Engineering, National Chiao Tung University Teaching Assistant, Department of Information Technology, College of Engineering, Chung Hua University	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
General Manager, Integrated System Solution BU	Republic of China	I-Shih Tseng	Male	1998.07.16	397,548	0.09%	238,722	0.06%	0	0	Bachelor of Mechanical Engineering, Pennsylvania State University, USA Project Manager,Institute for Information Industry	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
General Manager of the Business Department	Republic of China	C. C. Ho	Male	2001.12.10	60,088	0.01%	0	0	0	0	Bachelor of Electrical Engineering, Tatung University General Manager, Global Operations Management Department,TatungCompany	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
General Manager, Intelligent Manufacturing System BU	Republic of China	Joe Lin	Male	2007.04.01	107,943	0.03%	0	0	0	0	Bachelor of Information Sciences, Cal Poly Pomona, USA General Manager,Sajet TechnologyCo.,Ltd.	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
General Manager, Semiconductor Testing Equipment BU	Republic of China	George Chang	Male	2006.08.01	82,000	0.02%	0	0	0	0	Master of Electrical and 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	222,969	0.05%	0	0	0	0	Master of Business Administration, New York Institute of Technology Vice President of Finance, Hsin Yu Energy Development Co.,Ltd.	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
Vice President, Operation Management Center	Republic of China	Benjamin Huang	Male	1992.06.22	100,723	0.02%	0	0	0	0	Bachelor of Electrical Engineering, National Taiwan University Vice President, R&D Department, Test & Measurement BU of the Corporation	None	None	None	None
Vice President, Manufacturing Center	Republic of China	Steven Liu	Male	1991.08.22	139,012	0.03%	738	0	0	0	Bachelor of Information & Communications, Chinese Culture University Department Manager, Property and Product Management Department of the 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	Department of Machinery and Automation Engineering, Nanya Institute of Technology Vice President,Dasike TechnologyCompany	None	None	None	None
Vice President, CEO Office	Republic of China	C. C. Fan	Male	2010.08.01	321,235	0.08%	0	0	0	0	Bachelor of Industrial Engineering and Management, Minghsin University of Science and Technology Vice President, R&D Department, MAS Automation Corp.	None	None	None	None
Vice President, Planning Department, Test & Measurement BU	Republic of China	Bobby Tseng	Male	2001.01.01	34,000	0.01%	0	0	0	0	Bachelor of Electrical Engineering, Waseda University Manager, Product Planning Department, Test & Measurement BU of the Corporation	None	None	None	None
Vice President, Greater China Area Sales Department, Test & Measurement BU	Republic of China	Vincent Chen	Male	2001.01.01	48,260	0.01%	0	0	0	0	Bachelor of Electrical Engineering, Lunghwa University of Science and Technology Department Manager, Greater China Area Sales Department,Test & Measurement BU	Refer to Page 106 to 108 for details on positions assumed in affiliated companies	None	None	None
Vice President, Technical Service Department, Test & Measurement BU	Republic of China	Tony Yang	Male	2003.07.01	56,554	0.01%	0	0	0	0	Department of Electrical Engineering, National Taitung Junior College Manager, Engineering Department, Tiger Power Co.,Ltd.	None	None	None	None

Title	Nationality	Name	Gender	Date of appointment	Number of shares held	Number of shares held	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	Major experience/academic background	Positions currently assumed in other companies	Any managerial officer who is a spouse or a relative within the second degree of kinship	Any managerial officer who is a spouse or a relative within the second degree of kinship	Any managerial officer who is a spouse or a relative within the second degree of kinship
					Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage	Number of shares held	Shareholding percentage			Title	Name	Relation
Vice President, R&D Department, Test & Measurement BU	Republic of China	Vincent Wu	Male	2003.07.16	116,465	0.03%	903	0	0	0	Master of Electrical and Control Engineering, National Chiao Tung University Department Manager, R&D Department, Test & Measurement BU of the Corporation	None	None	None	None
Vice President, R&D Department 1, Integrated System Solution BU	Republic of China	Lance Ouyang	Male	2009.07.01	17,000	0	0	0	0	0	Master of Mechanical Engineering, National Chiao Tung University Vice President,Global Target Company	None	None	None	None
Vice President, Sales Department 2, Integrated System Solution BU	Republic of China	Jeff Lee	Male	2007.01.01	55,000	0.01%	0	0	0	0	Department of Electrical Engineering, Hsinpu Institute of Technology Department Manager, Product Planning Department, Integrated System Solution BU of the Corporation	None	None	None	None
Vice President, Planning Department, Test & Measurement BU	Republic of China	Kenny Wang	Male	1993.04.23	423,528	0.10%	0	0	0	0	Department of Electrical Engineering, Hsinpu Institute of Technology Manager, Product Planning Department, Test & Measurement BU of the Corporation	None	None	None	None
Manager, Product Planning Department, Test & Measurement BU	Republic of China	Cindy Tai	Female	2009.11.01	59,536	0.01%	0	0	0	0	Bachelor of Chemical Engineering Manager, Product Planning Department, Test & Measurement BU of the Corporation	None	None	None	None
Vice President, Planning Department, Test & Measurement BU	Republic of China	Galen Chou	Male	1996.07.01	6,000	0	0	0	0	0	Master of Electrical and Control Engineering, National Chiao Tung University Manager, Product Planning Department, Test & Measurement BU of the Corporation	None	None	None	None

(III) Remuneration paid to directors, CEO, general managers and vice presidents in the most recent year 1. Remuneration for directors (including independent directors)

												Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Title	Name (Note 1)	Director’s remuneration								Proportion of NIAT after summing four items: A, B, C, and D (Note 4)		Remuneration paid to concurrent employee								Proportion of NIAT after summing seven items: A, B, C, D, E, and F (Note 4)		Whether or not the person receives remuneration from reinvestment companies other than the Corporation's subsidiaries (Note 7)
		Remuneration (A)		Retirement pension (B)		Bonus for directors (C) (Note 2)		Allowances (D) (Note 3)				Salaries, bonuses, and special expenses (E) (Note 5)		Retirement pension (F)		Employee bonus (G) (Note 6)
		The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation	All companies listed in the financial statements (Note 8)	The Corporation		All companies listed in the financial statements (Note 8)		The Corporation	All companies listed in the financial statements (Note 8)
																Amount of cash	Amount of shares	Amount of cash	Amount of shares
Chairman	Leo Huang	0	0	0	0	9,600	10,800	585	585	0.40%	0.45%	10,818	10,818	294 (Note 9)	294 (Note 9)	13,955	0	18,820	0	1.38%	1.62%	7,522
Independent director	Tsung-Ming Chung
Independent director	Quincy Lin
Independent director	Tai-Jen George Chen
Director	I-Shih Tseng
Director	Chung-Ju Chang
Director	Tsun-I Wang
*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												all companies listed in the financial statements: None.

Remuneration range

	Remuneration range	Remuneration range	Remuneration range	Remuneration range
Remuneration range for each director in the 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)
	The Corporation	All reinvestment companies(Note 7)	The Corporation	All reinvestment companies(Note 7)
Less than NT$2,000,000	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen,Tsun-I Wang,Chung-Ju Chang,I-Shih Tseng	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen,Tsun-I Wang,Chung-Ju Chang,I-Shih Tseng	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen,Tsun-I Wang,Chung-Ju Chang	Quincy Lin, Tsung-Ming Chung, Tai-Jen George Chen,Chung-Ju Chang
NT$2,000,000(inclusive)to NT$5,000,000(not inclusive)	Leo Huang	Leo Huang
NT$5,000,000(inclusive)to 10,000,000(not inclusive)			I-Shih Tseng	I-Shih Tseng,Tsun-I Wang
NT$10,000,000(inclusive)to NT$15,000,000(not inclusive)			Leo Huang
NT$15,000,000(inclusive)to NT$30,000,000(not inclusive)				Leo Huang
NT$30,000,000(inclusive)to NT$50,000,000(not inclusive)
NT$50,000,000(inclusive)to NT$100,000,000(not inclusive)
NT$100,000,000 and above
Total	7	7	7	7

Note 1: Name of directors shall be listed separately, and the amount of remuneration paid to them shall be disclosed collectively.

Note 2: It refers to bonus distributed to directors upon approval by the Board of Directors in 2018.

Note 3: It refers to business expenses paid to directors in the most recent year (including transport, special expenses, various allowances, accommodation, and provision of physical items such as vehicles)

Note 4: Net income after taxes (NIAT) refers to net income after taxes in the most recent year. If the International Financial Reporting Standards (IFRS) has been adopted, NIAT refers to net income after taxes stated in the parent company-only financial statements for the most recent year. Note 5: Remuneration for directors concurrently holding positions (including CEO, general manager, vice president, other managerial officers, or employee) in the Corporation shall include salaries, job remuneration, severance pay, various bonuses, rewards, transportation allowance, special expenses, various allowances, accommodation, and provision of physical items such as vehicles. Salary expenses recognized under IFRS 2 - “Share-based Payment”, including employee stock warrant, new restricted employee shares, and participation in subscription of stocks in cash capital increase, shall also be included in the calculation of remuneration.

Note 6: Employee bonus for directors in 2018 shall be distributed this year according to the actual distribution percentage in the previous year.

Note 7: a. If a director receives remuneration from reinvestment companies that are not subsidiaries of the Corporation, the said remuneration shall be included in the remuneration range table. The name of the column shall also be changed to “All reinvestment companies”.

b. The aforesaid remuneration refers to compensation, bonuses (including bonuses for employees, directors, and supervisors) and business expenses received by directors of the Corporation who serve as directors, supervisors or managerial officers of reinvestment companies other than subsidiaries of the Corporation.

Note 8: The total amount of remuneration paid to directors of the Corporation by all companies (including the Corporation) as listed in the financial statements shall be disclosed. Note 9: It refers to the amount of retirement pension contributed.

2. Remuneration for CEO, general managers and vice presidents

Unit: NT$ thousands

														Unit: NT$thousands
Title	Name	Salary (A)		Retirement pension (B)		Bonuses and special expenses (C)(Note 1)		Employee bonus (D)(Note 2)				Proportion of NIAT after summing four items: A, B, C, and D(%) (Note 6)		Whether or not the person receives remuneration from reinvestment companies other than the Corporation's subsidiaries (Note 3)
		The Corporation	All companies listed in the financial statements (Note 4)	The Corporation	All companies listed in the financial statements (Note 4)	The Corporation	All companies listed in the financial statements (Note 4)	The Corporation		All companies listed in the financial statements(Note 4)		The Corporation	All companies listed in the financial statements (Note 4)
								Amount of cash	Amount of shares	Amount of cash	Amount of shares
CEO	Leo Huang	37,415	38,327	2,180 (Note 5)	2,180 (Note 5)	23,429	25,029	53,000	0	60,640	0	4.56%	4.89%	None
General Manager, Test & Measurement BU	David Yang
General Manager, Integrated System Solution BU	I-Shih Tseng
General Manager of the Business Department	C. C. Ho
General Manager, Intelligent ManufacturingSystem BU	Joe Lin
General Manager, Semiconductor TestingEquipment BU	George Chang
Vice President, Finance & Administration Center	Paul Ying
Vice President, Operation Management Center	Benjamin Huang
Vice President, Manufacturing Center	Steven Liu
Vice President, R&D Department, Semiconductor TestingEquipment BU	Max Chang (Note 9)
Vice President, Sales Department 1, Integrated System Solution BU	Herbert Tsai
Vice President, CEO 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, Technical Service 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 Solution BU	Jeff Lee

Remuneration range

	Remuneration range	Remuneration range
Remuneration range for CEO, general managers and vice presidents in the Corporation	Name of CEO, general manager, and vice president
	The Corporation (Note 7)	All companies listed in the financial statements (Note 8)
Less than NT$2,000,000
NT$2,000,000 (inclusive) to NT$5,000,000 (not inclusive)	Herbert Tsai, C. C. Fan, Bobby Tseng, Vincent Chen, Tony Yang, Vincent Wu, Lance Ouyang,Jeff Lee,Max Chang	Herbert Tsai, C. C. Fan, Bobby Tseng, Vincent Chen, Tony Yang, Vincent Wu, Lance Ouyang,Jeff Lee,Max Chang
NT$5,000,000 (inclusive) to NT$10,000,000 (not inclusive)	David Yang, I-Shih Tseng, C. C. Ho, Joe Lin, George Chang, Paul Ying, Benjamin Huang,Steven Liu	David Yang, I-Shih Tseng, C. C. Ho, Joe Lin, George Chang, Paul Ying, Benjamin Huang,Steven Liu
NT$10,000,000 (inclusive) to NT$15,000,000 (not inclusive)	Leo Huang
NT$15,000,000 (inclusive) to NT$30,000,000 (not inclusive)		Leo Huang
NT$30,000,000 (inclusive) to NT$50,000,000 (not inclusive)
NT$50,000,000 (inclusive) to NT$100,000,000 (not inclusive)
NT$100,000,000 and above
Total	18	18

Note 1: It includes the amount of various bonuses, rewards, transport fees, special expenses, various allowances, accommodation, provision of physical items such as vehicles, and other types of remuneration for CEO, general managers, and vice presidents in the most recent year. Salary expenses recognized under IFRS 2 - “Share-based Payment”, including employee stock warrant, new restricted employee shares, and participation in subscription of stocks in cash capital increase, shall also be included in the calculation of remuneration. Note 2: Employee bonus for CEO, general managers and vice presidents as approved by the Board of Directors in 2018 is to be distributed according to the percentage of actual bonus distribution percentage in the previous year.

Note 3: a. If the CEO, a general manager or a vice president receives remuneration from reinvestment companies that are not subsidiaries of the Corporation, the said remuneration shall be included in the remuneration range table. The name of the column shall also be changed to “All reinvestment companies”.
b. The aforesaid remuneration refers to compensation, bonuses (including bonuses for employees, directors, and supervisors) and business expenses received by CEO, general managers and vice presidents of the Corporation who serve as directors, supervisors or managerial officers of reinvestment companies other than subsidiaries of the Corporation.

Note 4: The total amount of remuneration paid to CEO, general managers and vice presidents of the Corporation by all companies (including the Corporation) as listed in the financial statements shall be disclosed. Note 5: It refers to the amount of retirement pension contributed. Note 6: Net income after taxes (NIAT) refers to net income after taxes in the most recent year. If the International Financial Reporting Standards (IFRS) has been adopted, NIAT refers to net income after taxes stated in the parent company-only financial statements for the most recent year.

Note 7: The name of CEO, general managers, and vice presidents shall be disclosed in the remuneration ranges to which the amount of remuneration paid to CEO, each general manager and each vice president by the Corporation correspond, respectively. Note 8: The name of CEO, general managers, and vice presidents shall be disclosed in the remuneration ranges to which the amount of remuneration paid to CEO, each general manager and each vice president by all the companies (including the Corporation) listed in the financial statements correspond, respectively.

Note 9: Mr. Max Chang resigned on January 31, 2019.

(IV) Compare and analyze the total remuneration paid to the directors, supervisors, CEO, general managers, and vice presidents of the Corporation in the two most recent years by all companies listed in the Corporation's parent company-only and consolidated financial statements as a percentage of NIAT listed in the parent company-only financial statements, and describe the policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its connection to business performance and future risk exposure.
Analysis of the total remuneration paid to the Corporation’s directors, supervisors, CEO, general managers, and vice presidents as a percentage of NIAT in the two most recent years:

NIAT inthe twomostrecent years:	NIAT inthe twomostrecent years:
Total remuneration paid to directors, supervisors, CEO, general managers, and vice presidents as a percentage of NIAT in 2017		Total remuneration paid to directors, CEO, general managers, and vice presidents as a percentage of NIAT in 2018
The Corporation	All companies listed in the financial statements	The Corporation	All companies listed in the financial statements
6.02%	6.37%	4.96%	5.34%

Policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its connection to business performance and future risk exposure:
(1) Directors: Bonus paid by the Corporation mainly comprises bonus for directors. According to Article 34 of the Corporation's Articles of Incorporation, bonus distributed to directors shall not be greater than 1.5% of the Corporation's net income before taxes before deducting bonus distributed to employees and directors in the current year. The directors' bonus distribution policy not only takes into account the operating performance of the entire corporation, but also individual director's contributions to the performance of the Corporation. Directors' compensation shall be approved by the Remuneration Committee and the Board of Directors. The remuneration system shall be reviewed at any time depending on the actual operating status of the Corporation.
- In 2018 and 2017, the fixed amount of bonus for directors and supervisors was NT$9,600,000 respectively, accounting for approximately 0.3% of the Corporation's net income before taxes each year. The Corporation also paid attendance fees to directors each time a Board of Directors' meeting is convened.
(2) CEO, general managers, and vice presidents: The Corporation has established the "Regulations Governing Compensation for Senior Executives", which stipulates that when a CEO, a general manager or a vice president is appointed, he/she shall be paid a fixed monthly salary based on the pay standards for similar positions in the industry. Any proposal to change employee bonus shall be made according to the Corporation's operational performance for the current year and by taking into individual performance appraisal. Such proposal shall first be submitted to the Remuneration Committee for review before it is delivered to the Board of Directors for resolution.
(3) The 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

compensation paid to managerial officers.

Names of managerial officers who receive employee bonus, and distribution of employee bonus As of March 31, 2019 (Unit: NT$ thousands)

	Title	Name	Amount of shares	Amount of cash (Note 2)	Total	Total amount of bonus as a percentage of NIAT(%)
Managerial officer	CEO	Leo Huang	0	53,000	53,000	2.08%
	General Manager,Test & Measurement BU	David Yang
	General Manager, Integrated System Solution BU	I-Shih Tseng
	General Manager of the Business Department	C. C. Ho
	General Manager, Intelligent ManufacturingSystem BU	Joe Lin
	General Manager, Semiconductor Testing Equipment BU	George Chang
	Vice President, Finance & Administration Center	Paul Ying
	Vice President, Operation Management Center	Benjamin Huang
	Vice President,ManufacturingCenter	Steven Liu
	Vice President, Sales Department 1, Integrated System Solution BU	Herbert Tsai
	Vice President,CEO Office	C. C. Fan
	Vice President, Product Marketing, 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 Solution BU	Jeff Lee
	Vice President, Product Marketing, Test & Measurement BU	Kenny Wang (Note 1)
	Vice President, Product Marketing t, Test & Measurement BU	Cindy Tai (Note 1)
	Vice President, Product Marketing, Test & Measurement BU	Galen Chou (Note 1)

Note 1: Mr. Kenny Wang, Miss Cindy Tai and Mr. Galen Chou were promoted to the position of Vice President on January 1, 2019.

Note 2: Employee bonus for managerial officers as approved by the Board of Directors in 2018 is to be distributed according to the percentage of actual bonus distribution percentage in the previous year.

III. Operation of corporate governance (I) Operation of Board of Directors

A total of six meetings were held by the Board of Directors in 2018, with the directors' attendance listed as follows:

Title	Title	Name	Name	Attendance in person	Attendance by proxy	Percentage of attendance inperson(%)	Percentage of attendance inperson(%)	Percentage of attendance inperson(%)
Chairman		Leo Huang		6	-	100%
Independent director		Tsung-Ming Chung		6	-	100%
Independent director		Quincy Lin		4	2	67%
Independent director		Tai-Jen GeorgeChen		6	-	100%
Director		I-Shih Tseng		5	-	83%
Director		Chung-Ju Chang		6	-	100%
Director		Tsun-IWang		6	-	100%
Other matters to be noted: I. If any of the following applies to the operation of Board of Directors, the date and session of the Board of Directors' meeting, the content of proposals, independent directors’ opinions and the Corporation's actions in response to independent directors’ opinions shall be stated. (I) Items listed in Article 14-3of theSecurities and Exchange Act: Date of meeting Session Proposal All independent directors' opinions The Corporation's actions in response to independent directors’ opinions 2018.02.22 1st meeting in 2018 (1)Annual remuneration for directors and supervisors, and attendance fees for directors and supervisors who attended the Board of Directors' meetings (2)2018 remuneration for members of the Audit Committee, and attendance fees for members who attended Audit Committee meetings (3)2018 salary adjustment for managerial officers (4)Issue the Corporation's 2017 Statement on Internal Control System (5)Capital loan for Chroma Japan Corp. (6)Propose to provide endorsement and guarantee for a reinvestment company in MainlandChina No opinion Proposals approved 2018.05.03 2nd meeting in 2018 (1)Endorsement and guarantee for Chroma ATE Inc. (USA). No opinion Proposal approved 2018.06.12 3rd meeting in 2018 (1)Endorsement and guarantee for Chroma ATE (Suzhou) Co., Ltd. (2)Endorsement and guarantee for Chroma ATE Europe B.V. (3)Capital loan for wholly-owned overseas subsidiaries (4)Capital increase for TFBS Bioscience, Inc. (5)Propose to distribute 2017 employee bonus No opinion Proposals approved
Date of meeting	Session		Proposal				All independent directors' opinions	The Corporation's actions in response to independent directors’ opinions
2018.02.22	1st meeting in 2018		(1)Annual remuneration for directors and supervisors, and attendance fees for directors and supervisors who attended the Board of Directors' meetings (2)2018 remuneration for members of the Audit Committee, and attendance fees for members who attended Audit Committee meetings (3)2018 salary adjustment for managerial officers (4)Issue the Corporation's 2017 Statement on Internal Control System (5)Capital loan for Chroma Japan Corp. (6)Propose to provide endorsement and guarantee for a reinvestment company in MainlandChina				No opinion	Proposals approved
2018.05.03	2nd meeting in 2018		(1)Endorsement and guarantee for Chroma ATE Inc. (USA).				No opinion	Proposal approved
2018.06.12	3rd meeting in 2018		(1)Endorsement and guarantee for Chroma ATE (Suzhou) Co., Ltd. (2)Endorsement and guarantee for Chroma ATE Europe B.V. (3)Capital loan for wholly-owned overseas subsidiaries (4)Capital increase for TFBS Bioscience, Inc. (5)Propose to distribute 2017 employee bonus				No opinion	Proposals approved

		to managerial officers.
	2018.07.31 4th meeting (1)Endorsement and guarantee for Chroma No opinion Proposals
		in 2018 Systems Solutions, Inc. approved
		(2)Endorsement and guarantee for Chroma
		Japan Corp.
		(3)2018 CPA fees
		(4)Capital increase for EVT Technology Co.,
		Ltd.
	2018.10.30 5th meeting (1)Capital loan for Chroma Japan Corp. No opinion Proposals
		in 2018 (2)Endorsement and guarantee for Quantel approved
		Private Ltd.
	2018.12.27 6th meeting (1)Amendments to the Corporation's Internal No opinion Proposals
		in 2018 Control System and Implementation Rules approved
		for Internal Audit
		(2)Capital loan for Chroma Systems
		Solutions,Inc.
		(II) 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 has been
		recorded or stated in writing: None.
II.		For the implementation and state of director’s recusal for conflict of interest, the director's name,
		contents of the topic, reasons for the required recusal, and participation in the voting process: None.
III.		Goals for enhancing the functions of the Board of Directors (such as establishing an Audit Committee
		or increasing information transparency) for the current year and most recent year as well as the
		assessment of the actions implemented:
		The Corporation has set up the Audit Committee, and has formulated the “Audit Committee Charter”.
		The operation of the Audit Committee complies with the relevant laws and regulations. The
		Corporation's website also discloses important resolutions of the Board of Directors in the most recent
		year to safeguard the rights and interests of the shareholders.
		In addition, the Corporation has established and operated the Remuneration Committee in accordance
		with the law. This committee assesses the salary and remuneration policy and system for directors
		and managerial officers, and provides recommendations to the Board of Directors for reference
		during decision-making. For the operation of corporate governance, refer to “3. Operation of
		corporategovernance -(4) Operationof RemunerationCommittee”.

Note 1: Where a director resigns before the end of the fiscal year, the "Remark" column shall filled with the director's resignation date, whereas his/her percentage of attendance in person (%) shall be calculated based on the number of Board of Directors' meetings held and the actual attendance in person during the period during his/her term of office.
Note 2: If directors are re-elected before the end of the fiscal year, former and new directors shall be listed accordingly, and the "Remark" column shall indicate whether the status of a director is "Former", "New" or “Re-elected”, and the date of re-election. The director's percentage of attendance in person (%) shall be calculated based on the number of Board of Directors' Meetings held and the actual attendance in person during his/her term of office.

(II) Operation of Audit Committee

A total of 6 meetings were convened by the Audit Committee in 2018, with the attendance of independent directors listed as follows:

Title	Name	Attendance in person	Attendance by proxy	Percentage of attendance in person (%)
Chairperson	Tsung-Ming Chung	6	-	100%
Member	Quincy Lin	4	2	67%
Member	Tai-Jen George Chen	6	-	100%
Other matters to be noted: I. If any of the following applies to the operation of Audit Committee, the date and session of the Board of Directors' meeting, the content of proposals, resolutions of the Audit Committee and the Corporation's actions in response to opinions from the Audit Committee shall be stated. (I) Items listed in Article 5 of the Securities and Exchange Act: Date of meeting Session Proposal Audit Committee Voting results The Corporation's actions in response to the opinions of the Audit Committee 2018.02.22 1st meeting in 2018 (1) 2017 business report and financial statements (2) Issue the Corporation's 2017 Statement on Internal Control System (3) Capital loan for Chroma Japan Corp. (4) Propose to provide endorsements and guarantees for reinvestment companies in Mainland China. The proposals were unanimously approved during the 5th meeting of the 1st Audit Committee (February 22, 2018). Proposals approved 2018.05.03 2nd meeting in 2018 (1) Endorsement and guarantee for Chroma ATE Inc (USA) The proposal was unanimously approved during the 6th meeting of the 1st Audit Committee (May3,2018). Proposal approved 2018.06.12 3rd meeting in 2018 (1)Endorsement and guarantee for Chroma ATE (Suzhou) Co., Ltd. (2)Endorsement and guarantee for Chroma ATE Europe B.V. (3)Capital loans for wholly-owned overseas subsidiaries (4)Capital increase for TFBS Bioscience,Inc. The proposals were unanimously approved during the 7th meeting of the 1st Audit Committee (June 12, 2018). Proposals approved 2018.07.31 4th meeting in 2018 (1)2018 Q2 financial statements (2)Capital loan for Chroma Systems Solutions, Inc. (3)Endorsement and guarantee for Chroma Japan Corp. (4)2018 CPA fees (5)Capital increase for EVT Technology Co., Ltd. The proposals were unanimously approved during the 8th meeting of the 1st Audit Committee (July 31, 2018). Proposals approved 2018.10.30 5th meeting in 2018 (1)Capital loan for Chroma Japan Corp. (2)Endorsement and guarantee for Quantel Private Ltd. The proposals were unanimously approved during the 9th meeting of the 1st Audit Committee (October 30,2018). Proposals approved

	2018.12.27	6th meeting in 2018	(1)Amendments to the Corporation's Internal Control System and Implementation Rules for Internal Audit (2) Capital loan for Chroma Systems Solutions, Inc.	The proposals were unanimously approved during the 10th meeting of the 1st Audit Committee (December 27, 2018).	Proposals approved

Note: *If independent directors are re-elected before the end of the year, new and former independent directors shall be listed accordingly and the "Remark" column shall indicate whether the status of an independent director is “Former”, “New” or “Re-elected” and the date of re-election. Percentage of attendance in person (%) shall be calculated based on the number of meetings held by the Audit Committee and the actual number of meetings attended during his/her term of office.

(III) Implementation of corporate governance, discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies
	Yes	No	Summary
I. Has the company formulated and disclosed its corporate governance best practice principles in accordance with the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies?	`ˇ`		The Corporation has stipulated the Corporate Governance Best Practice Principles. For details on the principles, visit the Market Observation Post System (MOPS) or the official website of the Corporation.	No discrepancies
II. Shareholder structure and shareholders' rights and interest (I) Has the company established an internal operating procedure for handling matters related to shareholders' recommendations, doubts, disputes and lawsuits, and implemented them accordingly? (II) Does the company maintain a list of major shareholders who have actual control over the company and persons who have ultimate control over the major shareholders? (III) Has the company established and implemented risk control and firewall mechanisms among its affiliated companies? (IV) Has the company formulated internal regulations that prohibit insiders of the company from trading securities using undisclosed information in the market?	`ˇ` `ˇ` `ˇ` `ˇ`		(I) The Corporation has established a system of spokespersons and deputy spokespersons for handling shareholders' proposals, inquiries, and other relevant matters. (II) The Corporation has delegated a dedicated person to manage the relevant information in order to effectively assess shareholding by the Corporation’s directors, managerial officers, and major shareholders holding more than 10% of the Corporation's shares, and disclosed this information in accordance with the relevant regulations. (III) The Corporation has established regulations for the monitoring of subsidiaries and delegated personnel for supervising the financial operations of these subsidiaries. (IV) The Corporation has established regulations for the prevention of insider trading, which prohibit the Corporation’s directors, employees, and other insiders from using information not yet disclosed to the market for trading shares. These Regulations may be downloaded from the Corporation’s official website.	No discrepancies
III. Composition and				No discrepancies

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies
	Yes	No	Summary
responsibilities of Board of Directors: (I) Has the Board of Directors drawn up policies on the diversity of its members and implemented them? (II) Has the company voluntarily established other functional committees, other than the remuneration committee and audit committee that are established in accordance with the law? (III) Has the company established any rules for evaluating the performance of the Board of Directors and methods for evaluating them? Does the company perform such evaluations every year? (IV) Does the company regularly evaluate the independence of CPAs?	`ˇ` `ˇ` `ˇ`	`ˇ`	(I) The Corporation has formulated the Corporate Governance Best Practice Principles, which stipulate that the composition of the Board of Directors must take in consideration diversity, as well as the principles of diversity, including basic criteria, professional knowledge, and skills which correspond to the operations, business and development of the Corporation. The composition of the Corporation’s Board of Directors shall take into account the members’ professional background, skills and experiences required for the Corporation’s businesses, as well as the principles of diversity. The Board of Directors comprises a total of 7 members, including 3 independent directors. (II) The Corporation has established the Remuneration Committee and the Audit Committee in accordance with the law. (III)The Remuneration Committee shall formulate and regularly review the policy, system, standards, and structure for the performance appraisal, salary, and remuneration of directors and managerial officers, and shall submit its recommendations to the Board of Directors' for deliberation. (IV)In addition to obtaining the statement on CPA independence, the Corporation conducts regular assessments on the independence of CPAs every year. The main assessment targets are employees who are yet to take up the position of director and supervisor, who are not a shareholder of the Corporation, who are yet toreceive salaryfrom

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies
	Yes	No	Summary
			the Corporation, who are not major stakeholder of the Corporation, who are not a manager involved in the Corporation's decision making, and who have not served the Corporation in the past two years. Results of these assessments will be submitted to the Board of Directors. Assessment results for the most recent year have been submitted to the Board of Directors on December 27,2018.
IV. Does the TWSE or TPEx listed company have a dedicated full- time (or part-time) corporate governance unit or personnel 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 of Directors' meetings and Shareholders’ meetings, handling company registration and change registration, and producing minutes of Board of Directors' meetings and Shareholders’ meetings)?	`ˇ`		The financial department of the Corporation has appointed a dedicated person to take charge of corporate governance-related affairs. This person possesses more than three years of experience engaging in finance, stock affairs and meetings-related affairs at public companies. The main responsibilities of this person are to provide the information needed by the directors to carry out corporate affairs, handle matters related to Board of Directors' meetings and Shareholders' meetings, prepare meeting minutes, handle company registration and other relevant matters. The implementation of these matters in the most recent year is listed as follows: (1) Assisted the Board of Directors and the Shareholders' Meeting in meeting proceedings and compliance with resolutions. (2) Drafted meeting agendas, informed the directors 7 days prior to the meeting and provided meeting information to the directors, reminded directors beforehand to recuse themselves beforehand in particular proposals, and completed meeting minutes within 20 days after a meeting. (3) Handled matters related to the announcement of major messages concerning important resolutions of the Board of Directors after the meeting to ensure the lawfulness and correctness of the content of major messages so as to protect information symmetry for investortransactions. (4)Registered the	No discrepancies

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies
	Yes	No	Summary
			date of Board meetings within the regulatory period, prepared meeting notice, annual reports, meeting handbooks and meeting minutes within the specified time limit, and handled change registration for amendments to theArticles of Incorporation.
V. Has the company established channels of communication with stakeholders (including but not limited to shareholders, employees, customers, and suppliers), dedicated a section of the company's website for stakeholder affairs and adequately responded to stakeholders' inquiries on material corporate social responsibility (CSR)issues?	`ˇ`		The Corporation has established a CSR section on its official website which 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 the Corporation.	No discrepancies
VI. Does the company commission a professional shareholder services agency to handle shareholders' meetings and other relevant affairs?	`ˇ`		The Corporation has appointed Taishin International Bank to handle affairs of the Board of Shareholders.	No discrepancies
VII. Information disclosure (I) Has the company established a website to disclose information on financial operations and corporate governance? (II) Has the company adopted other means of information disclosure (such as establishing a website in English, appointing specific personnel to collect and disclose company information, implementing a spokesperson system, and disclosing the process of investor conferences on the company’s website)?	`ˇ` `ˇ`		(I) The Corporation has established a website with specific pages on investor services and regular updates on financial operations and corporate governance. Website: (www.chromaate.com) (II) The Corporation has set up Chinese and English language websites as well as a special section for investor services. A professional has been charged with collecting information and providing regular updates for financial operations. The Corporation has delegated a spokesperson and deputy spokesperson. Investor conferences are held on a regular basis, and relevant information has been disclosed using the Corporation's official website.	No discrepancies
VIII. Does the company provide other important information that can help establisha better	`ˇ`		1. Employee rights and interests: According to the Labor Standards Act and the Corporation's personnel	No discrepancies

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Corporate Governance Best Practice Principles for TWSE or TPEx Listed Companies, and reasons for such discrepancies
	Yes	No	Summary
understanding of the state of corporate governance (including but not limited to employee rights, employee care, investor relations, supplier relations, stakeholders’ rights, continuing education among directors and supervisors, implementation of risk management policies and risk measurement standards, implementation of customer policies, and purchase of liability insurance for directors and supervisors of the company)?			regulations; the Corporation takes employee rights and interests seriously and so sets up the employees' feedback mailbox, communication 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 also available for the employees and their family members during weekends and public holidays. Various health seminars and subsidies to societies and clubs are also available to provide employees with a selection of recreational activities after work. 3. Investor relations: The Corporation's website has an investors' service page, a spokesperson and a deputy spokesperson, specifically responsible for public disclosure of company matters. The Corporation also organizes road show regularly to disclose relevant information on the Corporation's operations, and update the information in the Corporation's website at the same time. 4. Supplier relations: The business strategy adopted by the Corporation upholds trust as the highest guiding principle and respects every commitment made with both suppliers and stakeholders. The Corporation aims at building positive and interactive relationships with suppliers and will not delay payments without

Assessment item	Status of implementation	Status of implementation	Status of implementation
	Yes	No	Summary
			proper cause. 5. Stakeholders’ rights: To provide public investors with information transparency and prompt notification, financial and business information posted in the Corporation’s website shall be regularly updated. 6. Progress of training for directors: All directors of the Corporation have academic backgrounds and practical experiences in business management applicable to the business scope of the Corporation. The following lists financial, business, and professional courses recently taken by the Corporation directors and managerial officers (refer to Note 1). 7. Implementation of risk management policy and risk evaluation standards: The Corporation has carefully stipulated various internal control regulations to manage and evaluate various risks. 8. Execution of customer policies: The 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. Purchase of liability insurance for directors: The Corporation has purchase liability insurance for all the directors and important staff. This action was reported to the Board of Directors on December 27,2018.
IX. 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 companies not listed for evaluations) 1. Improvementsmadeinthemostrecent year:

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Status of implementation Discrepancies
between its
implementation
and the Corporate
Governance Best
Practice
Assessment item
Yes No Summary Principles for
TWSE or TPEx
Listed
Companies, and
reasons for such
discrepancies
(1) The implementation of the diversity policy in the Board of Directors is disclosed on the
official website of the Corporation.
(2) This annual report reveals the resolutions passed by the Audit Committee on major
proposals and the Corporation's actions in response to the opinions of the Audit
Committee.
2. Prioritized matters and measures yet to be improved:
----- End of picture text -----

Note 1: Progress of training for the Corporation's directors in 2018 up to the publication date of this annual report.

report.
Title	Name	Training date	Organizer	Course title	Course hours
Chairman	Leo Huang	July 3, 2018	Taiwan Institute of Directors	2018 Annual Meeting of Taiwan Institute of Directors	3
Independent director	Tsung- Ming Chung	July 24, 2018	Taiwan Academy of Banking and Finance	Seminar on the Applied Operations of the Board of Directors and Supervisors and Corporate Governance	3
		December 24, 2018	Taiwan Academy of Banking and Finance	Seminar on the Applied Operations of the Board of Directors and Supervisors and Corporate Governance	3
Director	Tsun-I Wang	August 21, 2018	Accounting Research and Development Foundation	Trend of the "E-Commerce" Profit Model in the Era of Financial Technology and Mindset Required During Internal Audit	6

Corporate governance training for managerial officers of the Corporation in 2018 up to the publication date of this annual report:

Title	Name	Training date	Organizer	Course title	Course hours
Accounting Manager	Paul Ying	July 19, 2018 to July 20, 2018	Accounting Research and Development Foundation	Continuing Training Course for Principal Accounting Officers of Issuers, Securities Firms and SecuritiesExchanges	12

(IV) Composition, duties and operation of the Remuneration Committee
Information on the members of the Remuneration Committee

Identity	Criteria Name	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Does the individual have more than 5 years of professional experience and the following qualifications?	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Meets the criteria for independence (Note 1)	Number of salary and remuneration committee memberships concurrently held in other public companies
		Currently serving as an instructor or in higher positions 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, certified public accountant or other professional or technician that must undergo national examinations and specialized license	Has professional experience necessary for business administratio n, legal affairs, finance, accounting or company sales	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 any member who fulfills the relevant condition(s) two years before being elected or during the term of office, please tick (ü) the field under the corresponding condition(s). 

(1) Not employed by the Corporation or its affiliated companies.

(2) Not serving as a director or supervisor of the Corporation or any affiliated company. However, this does not apply to cases where the person is an independent director of the Corporation, its parent company or subsidiaries established in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.

(3) Not a natural person shareholder who holds more than 1% of the total number of shares issued or is ranked top 10 in terms of the total number 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 preceding three items.
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds more than 5% of the total number of shares issued by the Corporation or is ranked top 5 in terms of the number of shares held.
(6) Not a director (member of the Board of Directors), supervisor (member of the Board of Supervisors), managerial officer, or shareholder holding more than 5% of shares of a specified company or institution that has a financial or business relationship with the company.
(7) Not a professional individual or owner, partner, director (member of the Board of Directors), supervisor (member of the Board of Supervisors), or managerial officer of a sole proprietorship, partnership, company, 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 specified in Article 30 of the Company Act applies.

Operation of the Remuneration Committee
(1) The Corporation's Remuneration Committee comprises 3 members. (2) Duration of the current term of service: June 19, 2017 to June 7, 2020. A total of 2 meetings (A) were held by the Remuneration Committee in 2018, with the members' qualifications and attendance listed as follows:

Title	Name	Attendance in person (B)	Attendance by proxy	Percentage of attendance in person (%)(B/A) (Note)
Chairperson	Tai-Jen George Chen	2	-	100%
Member	Tsung-Ming Chung	2	-	100%
Member	Quincy Lin	1	1	50%
Other matters to be noted: I. If the Board of Directors does not adopt or amend the recommendations made by the Remuneration Committee, the date and session of the Board of Directors' meeting, resolutions, voting results and handling of opinions from the Remuneration Committee by the Company shall be disclosed (if the remuneration approved by the Board of Directors is better than that recommended by the Remuneration Committee, the discrepancies and related reasons shall be stated): None. II. If members of the Remuneration Committee have any dissenting opinion or qualified opinion on the resolutions of the Remuneration Committee, where such opinions are documented or issued through written statements, the date and session of the meeting of the Remuneration Committee, resolutions, all the members' opinions and handlingof these opinions shall be stated: None.

I. If the Board of Directors does not adopt or amend the recommendations made by the Remuneration Committee, the date and session of the Board of Directors' meeting, resolutions, voting results and handling of opinions from the Remuneration Committee by the Company shall be disclosed (if the remuneration approved by the Board of Directors is better than that recommended by the Remuneration Committee, the discrepancies and related reasons shall be stated): None.
II. If members of the Remuneration Committee have any dissenting opinion or qualified opinion on the resolutions of the Remuneration Committee, where such opinions are documented or issued through written statements, the date and session of the meeting of the Remuneration Committee, resolutions, all the members' opinions and handling of these opinions shall be stated: None.
Note: Where a member of the Remuneration Committee resigns before the end of the fiscal year, the "Remark" column shall be filled with the member's resignation date, whereas his/her percentage of attendance in person (%) shall be calculated based on the number of meetings held by the Remuneration Committee and the actual number of meetings attended during his/her term of office.

(V) Fulfillment of corporate social responsibility

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
I. Implementation of corporate governance (I) Has the company established CSR policies or systems and reviewed its effectiveness? (II) Does the company routinely promote and hold CSR training? (III) Has the company established a dedicated full-time (or part-time) unit to promote CSR? Has the Board of Directors authorized senior management to handle such matters and report its implementation to the Board of Directors? (IV) Has the company established a fair	`ˇ` `ˇ` `ˇ` `ˇ`		(I) The Corporation has established the Corporate Social Responsibility Best Practice Principles, and issued its fourth CSR report in 2018. The Corporation also entrusted BSI to carry out verification based on moderate-level assurance using the AA1000 Assurance Standards, and successfully obtained third-party certifications. (II) The environmental protection, safety and health (ESH) unit holds seminars on safety and hygiene, environmental protection and health care from time to time every year. Starting 2018, the Corporation has strengthened collaboration with Buy Nearby by regularly purchasing vegetables and fruits produced by small farmers in Taichung on the platform and using them in the dishes prepared by the Corporation's canteen to provide employees with lunch meals so that employees can enjoy high-quality and healthy organic fresh vegetables and fruits. (III) The ESH unit shall concurrently implement CSR activities, integrate various CSR efforts and results from other departments, and provide summary reports on CSR activities to upper management on a regular basis. A total of 4 meetings were convened by the CSR Committee in 2018. The topics discussed during these meetings include energy management, social welfare, employee care, corporate sustainability, various CSR plans and project implementation reports. The implementation of CSR in the most recent year has been reported to the Board of Directors on October 30, 2018. (IV) 1. The Corporation has established a comprehensiveperformance	No discrepancies

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
compensation policy and linked employee performance evaluation with CSR policy, as well as established a precise and effective reward and disciplinary system?			assessment system linked with the Regulations Governing Employee Rewards and Punishments which are then implemented accordingly. 2. Article 34 of the Corporation's Articles of Incorporation: If the Corporation posts a profit (i.e. the amount of profit before deducting employee rewards and directors' rewards from profit before taxes) in a particular year, 5% to 20% of this amount of profit shall be allocated as employee rewards.
II. Fostering a sustainable environment (I) Is the company committed to improving the efficiency of using various resources, and to the use of recycled materials with reduced environmental impact? (II) Has the company established an appropriate environmental management system based on the characteristics of the industry to which it belongs? (III) Is the company concerned with the effects of climate change on its business activities? Has the Company implemented greenhouse gas (GHG) inventoryaudit,and	`ˇ` `ˇ` `ˇ`		(I) The Corporation is committed to developing green products, reducing the use of hazardous substances, and generating lead-free production processes. Suitable recycling processes are applied according to the attributes of waste. Waste sorting is implemented through policy announcement and promotion, lectures, labeling, posting and secondary sorting to reduce waste and increase resource recovery rate in fulfilling the environmental protection responsibility. (II) All environmental safety operations are regulated in accordance with laws and regulations. The Corporation regularly tracks and declares the amount of waste generated, sets targets for waste reduction, carries out ideas for resource recycling and sets various energy saving programs to achieve the goal of energy conservation and the love for earth. The Corporation has currently obtained the ISO 14064 carbon footprint certification. (III) To address the issue of climate change, the Corporation has enhanced the efficiency of ice storage air- conditioning systems, improved energy consuming hardware in promoting air-conditioning temperature control,replaced	No discrepancies

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
formulated strategies for energy conservation, carbon reduction and GHG reduction?			refrigerant flow meters and strengthened power usage monitoring, used water-saving gasket devices and replaced public lighting equipment in the entire plant area with LED lights in order to achieve energy conservation and carbon reduction, and reduce energy consumption and carbon emission intensity, thus fulfilling the responsibility of environmental protection.
III. Preserving public welfare (I) Has the company formulated relevant management policies and procedures in accordance with relevant laws and regulations and the International Bill of Human Rights? (II) Has the company established employee complaint and grievance mechanisms and channels, and handled employee complaints and grievances appropriately? (III) Does the company provide a safe and healthy work environment for its employees, and regularly offer safety and health education to its employees?	`ˇ` `ˇ` `ˇ`		(I) The Corporation is committed to fulfilling its corporate social responsibility, safeguarding the basic human rights of all colleagues, customers and interested parties, and respecting internationally recognized basic human rights, including freedom of association, care for disadvantaged groups, prohibition of child labor, elimination of all forms of forced labor, elimination of employment and employment discrimination, etc. In addition, the Corporation abides by labor-related laws and regulations set in the Corporation's location, as well as establishes regulations governing employee appointment, attendance, remuneration and other personnel to protect employee rights and interests. (II) To improve internal communication, the Corporation has established employee complaint helpline and email address. A dedicated personnel has been assigned to handle and file these complaints. (III) The ESH Center administers regular safety and health education training courses. The Corporation conducts regular inspections of the working environment, conducts fire drills, and contractor management in compliance with regulatory deadlines. In addition, the Corporation also organizes annual physical and mental health checks for	No discrepancies

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
(IV) Has the company established mechanisms to regularly communicate with its employees and appropriately notified its employees of operational changes that may result in material effects? (V) Has the company established an effective career developmental plan for its employees? (VI) Has the company established relevant customer rights policies and customer complaint and grievance procedures for R&D, purchasing, production, operations and service processes? (VII) Does the company comply with relevant laws and international regulations governing the marketing and labeling of its products and services? (VIII)Has the company evaluated anyrecord of a	`ˇ` `ˇ` `ˇ` `ˇ` `ˇ`		employees, holds diversified health promotion and care talks, sets up special health and safety management units, medical care rooms, and provides Chinese and Western doctor consultation services. Each factory area is equipped with first aid personnel, first aid kits, and automatic external defibrillators (AED) to provide all employees with a safe and healthy working environment. (IV) To improve the efficiency of internal communication and encourage fellow employees to provide recommendations, the Corporation has established various communication channels such as employee communication helpline, email address, and physical opinion boxes. Various activities and events have also been announced through electronic bulletin boards. (V) The Corporation has established the "Guidelines for Education and Training Management", and conducts employee training in accordance with these guidelines and career planning to develop the professional competence of employees. (VI) The Corporation has stipulated internal regulations on various processes such as R&D, 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. (VII) All marketing and labeling of the Corporation's products and services are compliant to the relevant laws and international standards. (VIII)The Corporation has established the "Regulations GoverningSupplier

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
supplier about its impact to the environment and society? (IX) Do contracts between the company and its major suppliers include terms where the company may terminate or rescind the contract at any time if the said suppliers violate the company's corporate social responsibility policy and have caused significant effects on the environment and the society?	`ˇ`		Management", which stipulate supplier assessments before any commercial dealings. The scope of the said assessments includes 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. (IX) Suppliers are required to sign the "Statement on Environmental Protection", which includes terms stipulating that the Corporation may terminate contractual agreements if a supplier violates environmental protection-related laws and requirements.
IV. Enhancing information disclosure (I) Does the company disclose relevant and reliable information related to CSR on its official website and MOPS?	`ˇ`		The Corporation has established an electronic bulletin board to promptly report any of its activities. CSR reports and information relating to social responsibility activities are also disclosed on the official website of the Corporation. The Corporation's CSR reports have also been disclosed on MOPS.	No discrepancies
V. Where the company has stipulated its own Corporate Social Responsibility Best Practice Principles in accordance with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, describe any discrepancy between the prescribed best practices and actual activities taken by the Corporation: The Corporation has stipulated the "Corporate Social Responsibility Best Practices", which specify various specifications on environmental management, community services, human rights, stakeholder interest and community participation, can be downloaded from the official website of the Corporation. For details regarding the implementation of CSR at the Corporation, refer to the CSR reports prepared bythe Corporation.
VI. Other important information that facilitates understanding of the implementation of CSR: (I) The Corporation promotes corporate social responsibility in a long-term manner. Every year, the Corporation reveals its sustainable development status and business philosophy through CSR reports,and reports the implementation of CSR to thepublic based on the concept andpractice of

The Corporation has stipulated the "Corporate Social Responsibility Best Practices", which specify various specifications on environmental management, community services, human rights, stakeholder interest and community participation, can be downloaded from the official website of the Corporation. For details regarding the implementation of CSR at the Corporation, refer to the CSR reports prepared by the Corporation.

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation	Discrepancies between its implementation and the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
transparency, openness and corporate social sustainability. The Corporation's risk issues related to the implementation of human rights are described below: 1. Diversity, inclusiveness and equal opportunities:  The Corporation does not exhibit language, attitude and behavior which engage in differential treatment due to gender, race, social status, age, marital status, family status, language, religion, party affiliation, nationality, appearance, facial features, mental/physical handicap, etc.  The Corporation ensures equal opportunity employment policy and fairness in terms of employment, salary benefits, training, evaluation, and promotion opportunity, as well as provides effective and appropriate complaint mechanism to avoid violation of employee human rights. In addition, the Corporation is committed to creating equal employment, as well as eliminating prejudice and harassment in the workplace. 2. Healthy and safe workplace:  The Corporation conducts a full range of employee health management, establishes a professional and warm medical room, and provides employees with a wealth of medical resources. The Corporation shows concern for employees' health at all times via the cloud health management system. Besides, the Corporation also holds a wide 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 has been set up to review the safety and health-related issues and plans regularly on a quarterly basis. In addition, the Corporation conducts regular occupational safety promotion and training for colleagues, while successfully obtaining safe workplace certification. 3. Reasonable working hours: The regulations of the Corporation stipulate the specifications for working hours and extension of working hours. The Corporation also regularly cares for and manages employee attendance. 4. Freedom of association: The Corporation encourages employees to cultivate interest, strengthen physical and mental health. In addition, the Corporation has formulated the regulations governing subsidies for clubs and societies, where all colleagues can apply for the establishment of societies in accordance with these regulations. 5. Labor-management consultation: The Corporation has established a smooth communication channel, and holds regular labor-management conferences to maintain the rights and interests of both parties. 6. Privacy protection: In order to fully protect the privacy of clients and stakeholders, the Corporation has established a comprehensive information security management system, and complies with strict control specifications and protective measures. (II) Environmental obligations • Increase responsibilities for environmental protection, actively promote clean energy technologies, and provide automated testing solutions for the green industry. • Actively introduce lead-free production processes and the use of green materials to strengthen green supply chain. • Actively reduce energy wastage in office environments. • Promote the paperless initiative, waste paper recycling, as well as monitor and record the use of printer paper. (III) Implementation of CSR in 2018 In 2018, the Corporation made donations totaled NT$30.1 million to the following parties: National Chiao TungUniversityTainan Campus,new buildingconstruction at National Chiao Tung

Reasonable working hours: The regulations of the Corporation stipulate the specifications for working hours and extension of working hours. The Corporation also regularly cares for and manages employee attendance.
Freedom of association: The Corporation encourages employees to cultivate interest, strengthen physical and mental health. In addition, the Corporation has formulated the regulations governing subsidies for clubs and societies, where all colleagues can apply for the establishment of societies in accordance with these regulations.
Labor-management consultation: The Corporation has established a smooth communication channel, and holds regular labor-management conferences to maintain the rights and interests of both parties.
Privacy protection: In order to fully protect the privacy of clients and stakeholders, the Corporation has established a comprehensive information security management system, and complies with strict control specifications and protective measures.
Increase responsibilities for environmental protection, actively promote clean energy technologies, and provide automated testing solutions for the green industry.
Actively introduce lead-free production processes and the use of green materials to strengthen green supply chain.
Promote the paperless initiative, waste paper recycling, as well as monitor and record the use of printer paper.

In 2018, the Corporation made donations totaled NT$30.1 million to the following parties: National Chiao Tung University Tainan Campus, new building construction at National Chiao Tung

Assessment Item	Status of Implementation	Status of Implementation	Status of Implementation
	Yes	No	Summary
University, Go Far Foundation, Boyo Social Welfare Foundation, Cho Chia Ting Towel Co., Ltd., Chew's Culture Foundation, Taoyuan Friends of the Police Association, Guishan Friends of the Police Association, and Yunlin County Friends of the Police Association. For issues related to social care, the Corporation’s support for clean energy policy can also reflect its concern for environmental sustainability and environmentally friendly attitude. As a developer of clean energy equipment, the Corporation needs to respond to this policy even more so. At present, the Corporation is currently evaluating the conversion of the carbon footprint of products to learn about the amount of GHG emissions on a daily basis. In addition, the Corporation calculates the amount of carbon dioxide produced from the production stage to the elimination stage through life cycle assessment,andplans subsequent emission reductionplans.
VII. Descriptions shall be provided if the Company's CSR report complies with verification standards of relevant certification bodies: The Corporation issued a CSR report in 2018, and entrusted BSI to carry out verification based on moderate-level assurance usingthe AA1000 Assurance Standards.

University, Go Far Foundation, Boyo Social Welfare Foundation, Cho Chia Ting Towel Co., Ltd., Chew's Culture Foundation, Taoyuan Friends of the Police Association, Guishan Friends of the Police Association, and Yunlin County Friends of the Police Association. For issues related to social care, the Corporation’s support for clean energy policy can also reflect its concern for environmental sustainability and environmentally friendly attitude. As a developer of clean energy equipment, the Corporation needs to respond to this policy even more so. At present, the Corporation is currently evaluating the conversion of the carbon footprint of products to learn about the amount of GHG emissions on a daily basis. In addition, the Corporation calculates the amount of carbon dioxide produced from the production stage to the elimination stage through life cycle assessment, and plans subsequent emission reduction plans.

VII. Descriptions shall be provided if the Company's CSR report complies with verification standards of relevant certification bodies:

The Corporation issued a CSR report in 2018, and entrusted BSI to carry out verification based on moderate-level assurance using the AA1000 Assurance Standards.

(VI) Compliance with ethical corporate management and measures implemented

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Ethical Corporate Management Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
I. Formulating ethical corporate management policies and programs (I) Does the company specify ethical corporate management policies and programs in its regulations and external documents? Do the Board of Directors and the management team actively advocate and implement these policies? (II) Has the company formulated solutions to prevent unethical conduct from taking place, specified all the solutions in its operating procedures, conduct guidelines, punishments for violations and complaint and grievance channels, and implemented these solutions? (III) Does the company take preventive measures against operating activities stipulated in Article 7, Subparagraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE or TPEx Listed Companies or those with higher risks of unethical conduct in other scopes of business?	`ˇ` `ˇ` `ˇ`		(I) The Corporation has stipulated the "Ethical Corporate Management Best Practice Principles", "Operational Rules for Ethical Corporate Management Best Practice Principles", "Code of Ethical Conduct", "Regulations for Employee Rewards and Punishments", "Regulations Governing Supplier Management", and other relevant laws to actively enforce its ethical corporate management policies. (II) The Corporation's "Operational Rules for Ethical Corporate Management Best Practice Principles" 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. The Corporation formulated the "Regulations for Employee Rewards and Punishments" as the basis for rewarding and penalizing employee conduct, taking disciplinary actions taken against violations, and handling individual appeals. (III) In addition to communication to internal personnel of the Corporation regarding the importance of ethical conduct and prescribing various procedures for handling and forestalling unethical conducts within the "Operational Rules for Ethical Corporate Management Best Practice Principles", the Corporation also requires suppliers to sign the "Supplier Commitment towards Business Integrity" that clearly stipulates prohibition against improper or unethical conduct during the process of business transaction.	No discrepancies
II. Implementing ethical corporate management (I) Has the company			(I) To ensure that mutual trust and integrity	No discrepancies

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Ethical Corporate Management Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
evaluated the ethics records of counterparties to its business dealings, and specified ethical business policies in contracts with counterparties related to its business dealings? (II) Has the company established a full-time (or part-time) unit directly under the supervision of the Board, which is dedicated to promoting ethical corporate management and regularly reports its implementation to the Board of Directors? (III) Has the company established policies to prevent conflicts of interest, provided an appropriate channel for reporting such conflicts and implemented them? (IV) Has the company established an effective accounting system and international control systems to implement ethical corporate management, designated	`ˇ` `ˇ` `ˇ` `ˇ`		form the basis of all business dealings, the Corporation’s management regulations require 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. (II) The Corporation designated the Audit Office directly under the Board of Directors as the responsible owner for revising, implementing, interpreting, providing counseling services, reporting, registering, and filing the contents of the "Operational Rules for Ethical Corporate Management Best Practice Principles", supervising the implementation of these rules, and providing regular reports to the Board of Directors. The implementation and audit of ethical corporate management in the most recent year has been reported to the Board of Directors on December 27, 2018. (III)The Corporation has established the "Ethical Corporate Management Best Principles Practice", which clearly specify the policy to prevent conflicts of interest. The official website of the Corporation displays independent e-mail address and dedicated telephone line as channels for internal and external personnel of the Corporation to make whistleblower reports. Any report shall be immediately handled by the responsible unit. (IV)To implement ethical corporate management, the Corporation has established an effective accounting system and internal control system according to the constituent elements of the internal system, and the internal auditing unit shall conduct audits

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Ethical Corporate Management Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
its internal audit unit to perform regularly audits or commissioned CPAs to perform audit? (V) Does the company regularly hold internal and external training related to ethical corporate management?	`ˇ`		according to the annual audit plan. (V) New recruits are regularly taught about the Corporation's organizational, cultural, and internal workplace morality and ethics, emphasizing the importance of individual and work integrity. On the other hand, the Corporation conducts internal awareness programs, conveying the importance of integrity.
III. Implementation of the company’s whistleblowing system (I) Has the company established a specific whistleblowing and reward system, set up convenient whistleblowing channels and designated appropriate personnel to handle investigations against wrongdoers? (II) Has the company established standard operating procedures for investigating reported cases and related confidentiality mechanisms? (III) Has the company set up protection for whistleblowers to prevent them from being subjected to inappropriate measures as a result of reporting such incidents?	`ˇ` `ˇ` `ˇ`		(I) The Corporation has established and announced an independent whistleblowing email address ([email protected]) and a dedicated telephone line (03-3279999 ext. 8301) for whistleblowers to report cases to the Corporation's dedicated personnel. (II) The Corporation has established standard operating procedures for handling whistleblowing investigations and the relevant confidentiality mechanisms. The handling personnel shall investigate cases reported by whistleblowers, generate records, submit a report, file relevant documents, and maintain the confidentiality of whistleblowers' identities and the content of reported cases. (III) The Corporation has established the standard operating procedures for handling whistleblowing investigations and the relevant confidentiality mechanisms to maintain the confidentiality of whistleblowers' identities and the content of reported cases.	No discrepancies
IV. Enhancing information disclosure

Assessment item	Status of implementation	Status of implementation	Status of implementation	Discrepancies between its implementation and the Ethical Corporate Management Best Practice Principles for TWSE or TPEx Listed Companies and reasons for such discrepancies
	Yes	No	Summary
(I) Does the company disclose its ethical corporate management practices and the effectiveness of its implementation on its official website or MOPS?	`ˇ`		The Corporation has established an electronic bulletin board to provide prompt announcements related to relevant regulations and activities. Any regulations related to corporate governance as well as compliance with ethical conduct shall also be disclosed on the official website of the Corporation.	No discrepancies
V. If the Corporation has established its own Ethical Corporate Management Best Practice Principles in accordance with the Corporate Social Responsibility Best Practice Principles for TWSE or TPEx Listed Companies, state the discrepancies between these principles and its implementation: No discrepancies.
VI. Other important information that facilitates the understanding of the implementation of ethical corporate management: (such as review and amendment of the Corporation's Ethical Corporate Management Best Practice Principles) To ensure that employees at the Corporation comply with the Corporation's ethical standards, the Corporation has established the "Ethical Corporate Management Best Practice Principles", "Operational Rules for Ethical Corporate Management Best Practice Principles", and "Code of Ethical Conduct", so that every internal employee, supervisor and member of the Board of Directors better understand the ethical standards during performance of duties, and adheres to high demands on oneself. For details regarding the operations and implementation of ethical corporate management at the Corporation, refer to the published "Ethical Corporate Management Best Practice Principles", "Operational management and measures implemented”. For details regarding the Corporation's "Ethical Corporate Management Best Practice Principles", "Code of Ethical Conduct", and "Operational Rules for Ethical Corporate Management Best Practice Principles", visit MOPS or the official website of the Corporation.

To ensure that employees at the Corporation comply with the Corporation's ethical standards, the Corporation has established the "Ethical Corporate Management Best Practice Principles", "Operational Rules for Ethical Corporate Management Best Practice Principles", and "Code of Ethical Conduct", so that every internal employee, supervisor and member of the Board of Directors better understand the ethical standards during performance of duties, and adheres to high demands on oneself. For details regarding the operations and implementation of ethical corporate management at the Corporation, refer to the published "Ethical Corporate Management Best Practice Principles", "Operational management and measures implemented”. For details regarding the Corporation's "Ethical Corporate Management Best Practice Principles", "Code of Ethical Conduct", and "Operational Rules for Ethical Corporate Management Best Practice Principles", visit MOPS or the official website of the Corporation.

(VII) If the Corporation has established the corporate governance best practice principles and other relevant regulations, the means to search for these regulations shall be disclosed.

Refer to MOPS or the official website of the Corporation for details regarding the Corporate Governance Best Practice Principles formulated by the Corporation and specifications provided by these best practice principles with regard to protecting shareholders’ rights and interests, enhancing the functions of the Board of Directors, respecting stakeholders’ rights and interests, and enhancing information transparency.

(VIII) Other important information to enhance the understanding of the implementation of corporate governance at the Corporation

The Corporation has established the "Regulations Governing Prevention of Insider Trading" as the basis of major news and information disclosure mechanism at the Corporation. Besides, the Corporation conducts inspection from time to time to ensure compliance with the laws and regulations. These regulations can be found on the internal website of the Corporation.

(IX) Protective measures for the work environment and personal safety of employees (1) Employee safety:

Employee fire safety teams shall work with local fire departments to conduct fire safety and evacuation exercises, disaster prevention, and emergency drills.
Establish and enforce self-inspection plans to regularly inspect, maintain, and repair high- and low-voltage electrical equipment, elevators, air conditioning, fire safety equipment, potable water, water towers, and other forms of machinery and equipment to protect employee safety.
Commission professional cleaning companies to maintain building sanitation and implement sterilization processes.
Commission qualified security firms to enforce access controls and security operations.

(2)

Employee insurance:
Purchase labor and health insurance for employees in accordance with the regulations and insurance for different income brackets.
Purchase social insurances for personnel stationed overseas in accordance with local laws.
Provide employees with regular life insurance, accidental injury insurance, accident and health insurance, hospitalization insurance, cancer health care insurance, and workplace accident insurance.
(3) Physical and mental health care for employees:
Entrust qualified medical institutions to regularly perform employee health checks, apply health checks that are superior to laws and regulations, and establish a sound health management system to implement and implement health management to safeguard employees' health.
Incorporate the Sexual Harassment Prevention Act in employees’ work regulations, establish the Sexual Harassment Prevention Committee, and designate dedicated personnel for handling such matters.
Set up a nursing room equipped with a complete breastfeeding environment and equipment to offer a high-quality breastfeeding environment for breastfeeding employees and protect their privacy during breastfeeding.
Carry out four cancer screenings and special health check-ups each year to promote employee health care and early detection of diseases.
AED automatic external defibrillators, first-aid kits and qualified first-aid personnel are set up at each factory site, and first-aid and AED education training courses are conducted. Branch offices have also reached the level of safe workplace applied, thereby enhancing workplace safety.
Establish employee recreation centers, which are equipped with swimming pools, spa, gyms, dance classrooms, equipment and other materials for employee use.
Conduct health promotion courses from time to time, such as emotional management, interpersonal communication, parenting, healthy eating, and health care.
Regularly organize health promotion activities, promote healthy meals, conduct a diverse range of sports instruction courses, organize health promotion talks, and organize health testing activities, etc. every year, to provide employees with disease prevention and health promotion measures for physical and mental relaxation, physical management, and weight control.
Regularly organize health promotion activities, promote healthy meals, and conduct a diverse range of sports and dancing areas within the perimeter of the factory.
Establish the Employee Welfare Committee to regularly organize various employee welfare activities, such as domestic travel, festival vouchers or gift delivery, free movie tickets, etc. A total of 14 clubs and societies have been established at the Corporation, including hiking club, badminton club, movie club, dance club, board game club, basketball club, etc. to provide employees with different leisure and health channels.

(X) Implementation of internal control system 1. Statement on Internal Control System

Chroma ATE Inc. Statement on Internal Control System

Date: February 21, 2019

The Statement of Internal Control System is issued based on the self-assessment of the Corporation in 2018:

I. The Corporation acknowledges that the establishment, implementation, and maintenance of the internal control system are the responsibilities of the Corporation’s Board of Directors and managerial officers, and have established such a system. The objectives of this system are to meet various goals including achieving operational benefits and efficiency (including profitability, performance, as well as asset and safety protection), and ensuring the reliability, timeliness, transparency and regulatory compliance of reporting, thereby providing reasonable assurance.
II. An internal control system has inherent constraints. No matter how comprehensive its design may be, an effective internal control system is only capable of providing adequate assurance for achieving the abovementioned objectives. In addition, the effectiveness of an internal control system may change with the environment and under different situations. However, the Corporation's internal control system is equipped with self-monitoring mechanisms, thereby allowing the Corporation to take immediate remedial actions in response to any identified deficiency.
III. The Corporation determines whether or not the design and implementation of its internal control system is effective according to the items for determining the effectiveness of internal control system as stated in the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the "Regulations"). The internal control system is divided into 5 key components according to the process of management control to generate internal control system assessment items adopted by the Regulations, including: 1. control environment; 2. risk assessment; 3. control operations; 4. information and communications and; 5. monitoring operations. Each key component also includes a number of items. Refer to the Regulations for more information on the abovementioned items.
IV. The Corporation has adopted the aforementioned internal control system assessment items to evaluate the effectiveness of its ICS design and implementation.
V. Based on the abovementioned results, the Corporation believes that the design and implementation of its internal control systems (including the supervision and management of its subsidiaries), as of December 31, 2018, including understanding the level of goal achievement with regards to operational benefits and efficiency, as well as whether reporting is reliable, timely and transparent and whether reporting complies with the relevant laws and regulations, are effective and can reasonably assure the accomplishment of the abovementioned goals.
VI. The Statement shall be a major content of the Corporation that the design and implementation shall be publicly disclosed. Should the abovementioned content contain illegalities such as fraudulent and hidden information, the Corporation shall be subject to legal responsibilities provided in Article 20, Article 32, Article 171 and Article 174 of the Securities and Exchange Act.
VII. We hereby declare that the Statement has been approved by the Board of Directors on February 21, 2019. Among the 6 directors present in the meeting, none of the directors had dissenting opinions, and all the directors agreed with the contents of the Statement.

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Chroma ATE Inc . Chairman:Leo Huang CEO:Leo Huang

Where CPAs are commissioned to audit the Corporation's internal control system, the audit report prepared by the CPAs shall be disclosed: None.
(XI) Penalties imposed on the Corporation and its internal staff, penalties imposed on its internal staff by the Corporation for violation of internal control regulations, major deficiencies and status of improvements made in the most recent year up to the publication date of this annual report: None.
(XII) Major resolutions of the Shareholders' Meeting and the Board of Directors in the most recent year up to the publication date of this annual report

	recent year up to the publication date of this annual report
	1. Major resolutions of the Shareholders'Meeting and status of implementation
Date convened	2018 Annual General Meeting
2018.06.08	1. Recognized the 2017 business report and financial statements. Status of implementation: The resolution was passed. 2. Approved the proposal for distribution of 2017 profits. Status of implementation: The resolution was passed. Ex-dividend date was set for July 21, 2018, whereas cash dividends have been completely distributed to shareholders on August 3, 2018. (Dividend per share: NT$4.47539992) 3. Approved amendments to the Corporation's Articles of Incorporation. Status of implementation: The resolution was passed. On June 26, 2018, the Ministry of Economic Affairs approved the registration of these amendments. These amendments were announced on the official website of the Corporation.
	2. Keyresolutions of the Board of Directors
2018.2.22	1. Approved the annual rewards for directors and supervisors, and attendance fees for directors who attended Board of Directors' meetings 2. Approved the 2018 rewards for members of the Audit Committee, and attendance fees for members who attended Audit Committee meetings 3. Approved the 2018 salary adjustment for managerial officers 4. Approved the 2017 employee reward distribution plan. 5. Approved the 2017 business report and financial statements. 6. Approved the proposal for distribution of 2017 profits. 7. Approved the issuance of the 2017 Statement on Internal Control System. 8. Approved capital loan for Chroma Japan Corp. 9. Approved endorsements and guarantees for reinvestment companies in Mainland China. 10. Approved the amendments to the Corporation's Articles of Incorporation. 11. Approved the proposal for the 2018 business plan. 12. Approved the convening of the 2018 Annual General Meeting and the issues raised by the shareholders.
2018.05.03	1. Q1 2018 financial statements. 2. Set the date of capital increase through the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock warrants. 3. Set the date of capital decrease through the extinguishment of new restricted employee shares. 4. Approved the endorsement and guarantee for Chroma ATE Inc. (USA). 5. Approved credit extension with financial institution.
2018.06.12	1. Set the ex-dividend date, suspension of the conversion of convertible corporate bonds, adjustment of convertible bond prices, and adjustment of employee stock warrant prices in 2018. 2. Approved the endorsement and guarantee for Chroma Ate (Suzhou) Co., Ltd. 3. Approved the endorsement and guarantee for Chroma ATE Europe BV. 4. Approved capital loans for wholly-owned overseas subsidiaries. 5. Approved capital increase for TFBS Bioscience, Inc. 6. Approved the proposal to distribute the 2017 employee rewards to managerial officers.
2018.07.31	1. Q2 2018 financial statements. 2. Approved capital loan for Chroma Systems Solutions, Inc. 3. Approved the endorsement and guarantee for Chroma Japan Corp. 4. Approved the 2018 CPA fees.

	5. Approved capital increase for EVT Technology Co., Ltd. 6. Set the date of capital increase through the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock warrants. 7. Set the date of capital decrease through the extinguishment of new restricted employee shares. 8. Approved the application for credit extension to financial institution.
2018.10.30	1. Q3 2018 financial statements. 2. Corporate social responsibility implementation report. 3. Set the date of capital decrease through the extinguishment of new restricted employee shares. 4. Set the date of capital increase through the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock warrants. 5. Approved capital loan for Chroma Japan Corp. 6. Approved the endorsement and guarantee for Quantel Private Ltd. 7. Approved the establishment of the"Special Mergers and Acquisitions Committee".
2018.12.27	1. Implemented the audit report for ethical corporate management. 2. Report on the purchase of liability insurance for all directors. 3. Evaluated the report on the independence of CPAs. 4. Approved the 2019 audit plan. 5. Approved the amendments to the “Internal Control System” and the “Implementation Rules for Internal Audit”. 6. Approved capital loan for Chroma Systems Solutions, Inc. 7. Set the date of capital increase through the second issuance of unsecured convertible corporate bonds in exchange for new shares and employee stock warrants.
2019.02.11	Approved the investment in the shares of the Israeli company, Camtek Ltd.
2019.02.21	1. Approved the annual rewards for directors, and attendance fees for directors who attended Board of Directors' meetings 2. Approved the 2019 rewards for members of the Audit Committee, and attendance fees for members who attended Audit Committee meetings 3. Approved the 2019 salary adjustment for managerial officers. 4. Approved the 2018 employee reward distribution plan. 5. Approved the 2018 business report and financial statements. 6. Approved the proposal for distribution of 2018 profits. 7. Approved the issuance of the 2018 Statement on Internal Control System. 8. Approved capital loan for Chroma Japan Corp. 9. Approved the endorsement and guarantee for subsidiaries in Mainland China. 10. Approved the amendments to the "Procedures for Acquisition and Disposal of Assets" and the "Procedures for Derivatives Trading". 11. Approved the amendments to the Articles of Incorporation. 12. Approved the 2019 business plan. 13. Approved the date of capital decrease through the extinguishment of new restricted employee shares. 14. Approved the convening of the 2019 Annual General Meeting and the issues raised by the shareholders.

(XIII) Major contents of dissenting opinions or qualified opinions on resolutions passed by the Board of Directors that are made by directors, and are documented or issued through written statements, in the most recent year up to the publication date of this annual report: None.

(XIV) Resignation or dismissal of the Corporation's Chairman, CEO, accounting manager, finance manager, internal audit manager, and R&D manager in the most recent year up to the publication date of this annual report: None.

IV. CPA fees (I) Amount of audit and non-audit fees paid to CPAs, accounting firm and its affiliated companies, and content of non-audit services

Range of CPA fees

	Range of CPA fees	Range of CPA fees
Name of accountingfirm	Name ofCPA		Auditperiod	Remark
Deloitte & Touche	Cheng-Ming Lee	Wen-Chi Kuo	2018.01.01~2018.12.31

Note: If the Corporation has replaced the CPAs or accounting firm in the current year, the audit period shall be listed separately, and the reason for replacement shall be stated in the Remark column.

Unit: NT$ thousands

Fee	Fee item range	Audit fee	Non-audit fee	Total
1	Less than NT$2,000,000		1,508	1,508
2	NT$2,000,000 (inclusive) to NT$4,000,000 (not inclusive)
3	NT$4,000,000 (inclusive) to NT$6,000,000 (not inclusive)
4	NT$6,000,000 (inclusive) to NT$8,000,000 (not inclusive)	6 ,210		6,210
5	NT$8,000,000 (inclusive) to NT$10,000,000 (not inclusive)
6	NT$10,000,000 and above

Information on CPA fees

Unit: NT$ thousands

Name of CPA (Note 1)	Audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Non-audit fee		Audit period	Remark
		System design	Business registration	Human resources	Others (Note 2)	Subtotal
Cheng- Ming Lee Wen-Chi Kuo	6,210				1,508	1,508	2018.01.01~2018.12.31

Note 1: If the Corporation has replaced the CPAs or accounting firm in the current year, the audit period shall be listed separately, and the reason for replacement shall be stated in the Remark column. Information on the audit and non-audit fees paid shall also be disclosed in order.

Note 2: It refers to the payment of advance fees, advance audit fees involving subsidiaries, English reports, audit using the direct deduction method, consultation and accounting treatment fees.
(II) Where the accounting firm was replaced, and the audit fees for the year when replacement was made was less than that in the previous fiscal year before replacement, the amount of audit fees paid before replacement and the reasons for paying such an amount shall be disclosed: None.
(III) Where the audit fees for the year were reduced by more than 15% compared to the previous year, the amount and percentage of decrease in audit fees, as well as the reason for such decrease shall be disclosed: None.

V. Replacement of CPAs

(I) Information on previous CPAs

V. Replacement of CPAs (I) Information on	previous CPAs	previous CPAs	previous CPAs	previous CPAs	previous CPAs
Date of replacement	Approved bythe Board of Directors on December 27,2017.
Reason for replacement and related explanation	In order to meet the need for position adjustment at Deloitte & Touche, it was proposed to replace Yi-Wen Wang and Wen-Chi Kuo and appoint Cheng-Ming Lee and Wen-Chi Kuo as CPAs appointed to serve theCorporation.
Indicate whether the appointer or CPAs terminate or reject the appointment	Party Status			CPA	Appointer
	Terminate the appointment			Not applicable	Not applicable
	No longer accept (or continue with)the appointment			Not applicable	Not applicable
Opinion and reason for the issuance of audit reports containing opinions other than unqualified opinions in the two most recentyears	None
Disagreement with the issuer	Yes		Accounting principles orpractices
			Disclosure of financial statements
			Scope orprocedure of audit
			Others
	None	`ˇ`
	Details
Other items to be disclosed (where Article 10, Subparagraph 6, Item 1-4 to 1-7 of the Regulations shall be disclosed)	Not applicable

(II) About successor CPAs

(where Article 10, Subparagraph 6, Item 1-4 to 1-7 of the Regulations shall be disclosed) Not applicable (II) About successor CPAs
Name of accountingfirm	Deloitte&Touche
Name of CPA	Cheng-Ming Lee, Wen-Chi Kuo
Date of appointment	Approved by the Board of Directors on December 27,2017.
Subjects and outcomes of consultation on the accounting treatment of or application of accounting principles to specific transactions, or opinions that may be included on financial statements before the appointment of new CPAs	None
Written opinions from successor CPAs with regards to matters with which former CPAs disagreed	None

(III) Former CPAs' response to Article 10, Subparagraph 6, Items 1 and Item 2-3 of the Regulations: None.

VI. The Corporation's Chairman, CEO, or any managerial officer in charge of finance or accounting matters who has held a position at the accounting firm of its CPAs or at an affiliated company in the most recent year: None.

VII. Equity transfer or changes in equity pledged by directors, managerial officers, or shareholders holding more than 10% of the Corporation's shares in the most recent year up to the publication date of this annual report 1. Changes in equity held by directors, managerial officers, and major shareholders

Title	Name	2018	2018	Current year up to April 20, 2019	Current year up to April 20, 2019
		Increase (decrease) in the number of shares held	Increase (decrease) in the number of shares pledged	Increase (decrease) in the number of shares held	Increase (decrease) in the number of shares pledged
Chairman and CEO	Leo Huang	48,000	0	0	0
Independent director	QuincyLin	0	0	0	0
Independent director	Tsung-MingChung	0	0	0	0
Independent director	Tai-Jen George Chen	0	0	0	0
Director and General Manager, Integrated System Solution BU	I-Shih Tseng	(96,000)	0	100,000	0
Director	Tsun-I Wang	0	0	0	0
Director	Chung-Ju Chang	0	0	0	0
General Manager,Test & Measurement BU	David Yang	20,000	0	0	0
General Manager of the Business Department	C. C. Ho	50,000	0	0	0
General Manager, Intelligent Manufacturing System BU	Joe Lin	(45,400)	0	70,000	0
General Manager, Semiconductor Testing Equipment BU	George Chang	18,000	0	(4,000)	0
Vice President, Finance & Administration Center	Paul Ying	70,000	0	50,000	0
Vice President,ManufacturingCenter	Steven Liu	(9,000)	0	60,000	0
Vice President, Operation Management Center	Benjamin Huang	(79,000)	0	30,000	0
Vice President, R&D Department, Semiconductor TestingEquipment BU	Max Chang (Note 1)	(10,000)	0	-	-
Vice President, Sales Department 1, Integrated System Solution BU	Herbert Tsai	10,000	0	(10,000)	0
Vice President,CEO Office	C. C. Fan	(40,000)	0	30,000	0
Vice President, Planning Department, Test & Measurement BU	Bobby Tseng	(13,000)	0	0	0
Vice President, Greater China Area Sales Department, Test & Measurement BU	Vincent Chen	42,000	0	0	0
Vice President, Technical Service Department, Test & Measurement BU	Tony Yang	12,000	0	0	0
Vice President, R&D Department, Test & Measurement BU	Vincent Wu	28,000	0	0	0
Vice President, R&D Department 1, Integrated System Solution BU	Lance Ouyang	0	0	12,000	0
Vice President, Sales Department 2, Integrated System Solution BU	Jeff Lee	10,000	0	0	0
Vice President, Planning Department, Test & Measurement BU	Kenny Wang (Note 2)	-	-	0	0
Vice President, Planning Department, Test & Measurement BU	Cindy Tai (Note 2)	-	-	0	0
Vice President, Planning Department, Test & Measurement BU	Galen Chou (Note 2)	-	-	0	0

Note 1: Mr. Max Chang resigned on January 31, 2019. Therefore, changes in equity held by Mr. Max Chang are provided as of this date. Note 2: Mr. Kenny Wang、Miss Cindy Tai and Mr. Galen Chou were promoted to the position of Vice President on January 1, 2019. Therefore, changes in equity held by them are provided as of this date.

Where the counterparty for equity transfer is a related person:

Name (Note 1)	Reason for equity transfer	Date of transaction	Counterparty	Relationship between the counterparty and the Corporation, directors, supervisors and the 10 largest shareholders with a shareholding percentage of more than 10%	Number of shares	Transaction price
I-Shih Tseng	Gift	2018.10.30	Jui-Min Tsai, Chi-Lun Tseng, Wei-Han Tseng	Spouse and children	116,000	Not applicable

Note 1: The names of directors, supervisors and the 10 largest shareholders with a shareholding percentage of more than 10% at the Corporation are filled in the column.

Where the counterparty of equity pledged is a related party: None.

VIII. Information on the 10 largest shareholders who are related parties or each other's spouses and relatives within the second degree of kinship

Information on the relationships 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 relationship of the 10 largest shareholders who are related parties or each other's spouses and relatives within the second degree of kinship (Note 2)	Title or name and relationship of the 10 largest shareholders who are related parties or each other's spouses and relatives within the second degree of kinship (Note 2)
	Number of shares	Shareholding percentage	Number of shares	Shareholding percentage	Number of shares	Shareholding percentage	Title	Relation
Leo Huang	20,491,897	4.90%	11,794,362	2.82%	0	0	Shu- Chuan Chen	Spouse
Chun-Sheng Chen	15,113,308	3.61%	11,074,646	2.65%	0	0	Yu-Mei Hsueh	Spouse
First State Asia Pacific Leaders fund, a sub-fund of First State Investment	15,089,000	3.61%	0	0	0	0	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Schroder International Selection Fund - Asian Absolute Return	13,082,000	3.13%	0	0	0	0	None	None
Shu-Chuan Chen	11,794,362	2.82%	20,491,897	4.90%	0	0	Leo Huang	Spouse
Yu-Mei Hsueh	11,074,646	2.65%	15,113,308	3.61%	0	0	Chun- Sheng Chen	Spouse
Nan Shan Life Insurance Co., Ltd Representative: Ying-TsungTu	8,553,000	2.04%	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Universities Superannuation Scheme Limited	6,964,724	1.66%	0	0	0	0	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Stichting Depositary APG Emerging Markets EquityPool	6,804,000	1.63%	0	0	0	0	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	6,120,800	1.46%	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 legal persons and natural persons. Relationships between shareholders shall be disclosed according to the financial reporting standards used by the issuer.

IX. Number and percentage of shares held by the Corporation, its directors, managerial officers and directly or indirectly controlled reinvestment companies in the same reinvestment companies

Combined shareholding percentage

companies	Combined shareholding percentage	Combined shareholding percentage	Combined shareholding percentage	Combined shareholding percentage	Combined shareholding percentage	Combined shareholding percentage
	Unit: thousand shares / thousand units of foreign currency Investment by the Corporation Investments by directors, managerial officers, and companies directly or indirectly controlled by the Corporation Combined investment Number of shares Shareholding percentage (%) Number of shares Shareholding percentage (%) Number of shares Shareholding percentage (%) 64,013 100.0 0 0 64,013 100.0 24,502 11.3 13 0 24,515 11.3 25,000 100.0 0 0 25,000 100.0 14,000 100.0 0 0 14,000 100.0 9,841 27.3 5,111 14.2 14,952 41.5 1,200 100.0 0 0 1,200 100.0 1 100.0 0 0 1 100.0 1,000 100.0 0 0 1,000 100.0 120 25.0 240 50.0 360 75.0 3,085 100.0 0 0 3,085 100.0 3,830 100.0 0 0 3,830 100.0 2,050 100.0 0 0 2,050 100.0 20,160 67.2 914 3.1 21,074 70.3 10,000 100.0 0 0 10,000 100.0 215 100.0 0 0 215 100.0 9 100.0 0 0 9 100.0 1,750 35.0 0 0 1,750 35.0 12,240 51.0 0 0 12,240 51.0 9,412 85.6 89 0.8 9,501 86.4 1,914 60.0 0 0 1,914 60.0 14,214 71.1 700 3.5 14,914 74.6 5,700 78.1 0 0 5,700 78.1 0 0 1,000 100.0 1,000 100.0 0 0 375 75.0 375 75.0 0 0 4,475 100.0 4,475 100.0 0 0 65 100.0 65 100.0 0 0 US$200 100.0 US$200 100.0 0 0 600 100.0 600 100.0 0 0 99 100.0 99 100.0 0 0 30 100.0 30 100.0 0 0 RMB$8,374 100.0 RMB$8,374 100.0 0 0 HK$30,000 100.0 HK$30,000 100.0 0 0 US$3,000 100.0 US$3,000 100.0 0 0 US$2,700 100.0 US$2,700 100.0 0 0 US$3,800 100.0 US$3,800 100.0 0 0 RMB$1,737 100.0 RMB$1,737 100.0 0 0 RMB$11,871 100.0 RMB$11,871 100.0 0 0 RMB$11,417 100.0 RMB$11,417 100.0
Reinvestment company (Note 1)	Investment by the Corporation		Investments by directors, managerial officers, and companies directly or indirectly controlled by the Corporation		Combined investment
	Number of shares	Shareholding percentage (%)	Number of shares	Shareholding percentage (%)	Number of shares	Shareholding percentage (%)
Neworld Electronics Ltd.	64,013	100.0	0	0	64,013	100.0
Adlink TechnologyInc.	24,502	11.3	13	0	24,515	11.3
Chroma New Material Corp.	25,000	100.0	0	0	25,000	100.0
Chroma Investment Co.,Ltd.	14,000	100.0	0	0	14,000	100.0
DynaScan TechnologyCorp.	9,841	27.3	5,111	14.2	14,952	41.5
Sensational HoldingLtd.	1,200	100.0	0	0	1,200	100.0
Chroma ATE Europe B.V.	1	100.0	0	0	1	100.0
Chroma ATE Inc.	1,000	100.0	0	0	1,000	100.0
Chroma Systems Solutions,Inc.(Note 2)	120	25.0	240	50.0	360	75.0
Chen Hwa TechnologyInc.	3,085	100.0	0	0	3,085	100.0
Chi Incorporation Ltd.	3,830	100.0	0	0	3,830	100.0
San Eagle Development Corp.	2,050	100.0	0	0	2,050	100.0
Testar Electronic Corporation	20,160	67.2	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.	9,412	85.6	89	0.8	9,501	86.4
Quantel Private Ltd.	1,914	60.0	0	0	1,914	60.0
Innovative Nanotech Inc.	14,214	71.1	700	3.5	14,914	74.6
Touch Cloud Inc.	5,700	78.1	0	0	5,700	78.1
Adivic HoldingCorporation	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 KuangMech. 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	US$200	100.0	US$200	100.0
Quantel Global Sdn. Bhd.	0	0	600	100.0	600	100.0
Quantel Global Philippines Corporation	0	0	99	100.0	99	100.0
Chroma GermanyGmbH	0	0	30	100.0	30	100.0
Sajet System Technology (Suzhou) Co., Ltd.(Note 3)	0	0	RMB$8,374	100.0	RMB$8,374	100.0
Chroma Electronics (Shenzhen) Co., Ltd. (Note 3)	0	0	HK$30,000	100.0	HK$30,000	100.0
Chroma Electronics (Shanghai) Co., Ltd. (Note 3)	0	0	US$3,000	100.0	US$3,000	100.0
Chroma (Shanghai) Trading Co., Ltd. (Note 3)	0	0	US$2,700	100.0	US$2,700	100.0
Chroma ATE(Suzhou)Co.,Ltd.	0	0	US$3,800	100.0	US$3,800	100.0
Mou Kuan Technologies (Nanjing) Co., Ltd.	0	0	RMB$1,737	100.0	RMB$1,737	100.0
Wei Kuang Automatic Equipment (Nanjing)Co.,Ltd.(Note 3)	0	0	RMB$11,871	100.0	RMB$11,871	100.0
Wei Kuang Automatic Equipment (Xiamen)Co., Ltd.(Note 3)	0	0	RMB$11,417	100.0	RMB$11,417	100.0

Note 1: Reinvestment companies are invested by the Corporation using the equity method. Note 2: The combined shareholding percentage of the Corporation and its subsidiary in Chroma ATE Inc. is 75%.

Note 3: These invested companies have yet to issue any share. Therefore, only the amount and percentage of capital contribution are indicated.

Chapter 4 Financing Status

I. Capital and shares (I) Source of shares

Year and month	Issue price	Authorized capital stock	Authorized capital stock	Paid-in capital	Paid-in capital	Remark
		Number of shares (thousand shares)	Amount (NT$ thousands)	Number of shares (thousand shares)	Amount (NT$ thousands)	Source of share capital	Equity contributions made in the form of assets otherthancash	Others
1996.08	10	70,000	700,000	54,365	543,650	Recapitalizationof retained earnings	None	Note1
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

Year and month	Issue price	Authorized capital stock	Authorized capital stock	Paid-in capital	Paid-in capital	Remark
		Number of shares (thousand shares)	Amount (NT$ thousands)	Number of shares (thousand shares)	Amount (NT$ thousands)	Source of share capital	Equity contributions made in the form of assets otherthancash	Others
2006.06	10	360,000	3,600,000	284,344	2,843,442	Recapitalization of retained earnings: NT$81,370,000 Stocks converted from stock warrants: NT$12,760,000	None	Note 16
2006.10	10	360,000	3,600,000	285,154	2,851,542	Stocks converted from stock warrants: NT$8,100,000	None	Note 15
2007.01	10	360,000	3,600,000	286,378	2,863,779	Stocks converted from stock warrants: NT$12,240,000	None	Note 15
2007.03	10	360,000	3,600,000	287,410	2,874,099	Stocks converted from stock warrants: NT$10,320,000	None	Note 15
2007.08	10	400,000	4,000,000	302,311	3,023,114	Recapitalization of retained earnings: 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$13,260,000	None	Note 22
2015.01	10	450,000	4,500,000	378,782	3,787,821	Stocks converted from convertible corporate bonds: NT$6,960,000	None	Note 22
2015.05	10	450,000	4,500,000	378,786	3,787,862	Stocks converted from convertible corporate bonds: NT$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 convertedfromconvertible	None	Note22

Year and month	Issue price	Authorized capital stock	Authorized capital stock	Paid-in capital	Paid-in capital	Remark
		Number of shares (thousand shares)	Amount (NT$ thousands)	Number of shares (thousand shares)	Amount (NT$ thousands)	Source of share capital	Equity contributions made in the form of assets otherthancash	Others
						corporate bonds: NT$2,890,000 Stocks converted from stock warrants: NT$2,350,000		to Note 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 shares: NT$31,000,000	None	Note 22 to Note 24
2016.12	10	450,000	4,500,000	387,158	3,871,576	Stocks converted from convertible corporate bonds: NT$28,500,000 Stocks converted from stock warrants: NT$9,350,000	None	Note 22 to Note 23
2017.01	10	450,000	4,500,000	389,887	3,898,872	Stocks converted from convertible corporate bonds: NT$23,820,000 Stocks converted from stock warrants: NT$3,470,000	None	Note 22 to Note 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	Note 22 to Note 23
2017.06	10	450,000	4,500,000	405,275	4,052,754	New restricted employee shares: NT$1,850,000	None	Note 24
2017.07	10	450,000	4,500,000	405,263	4,052,631	New restricted employee shares extinguished: NT$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	Note 22 to Note 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	Note 22 to Note 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	Note 22 to Note 23
2018.05	10	450,000	4,500,000	412,953	4,129,532	Stocks converted from convertible corporate bonds: NT$220,000 Stocks converted from stock warrants: NT$10,910,000 New restricted employee shares extinguished: NT$540,000	None	Note 22 to Note 24
2018.09	10	450,000	4,500,000	414,359	4,143,594	Stocks converted from convertible corporate bonds: NT$80,000 Stocks converted from stock warrants: NT$14,070,000 New restricted employee shares extinguished: NT$90,000	None	Note 22 to Note 24
2018.11	10	450,000	4,500,000	416,443	4,164,431	Stocks converted from convertible corporate bonds: NT$14,940,000 Stocks converted from stock warrants: NT$6,100,000 New restricted employee shares extinguished: NT$210,000	None	Note 22 to Note 24
2019.01	10	450,000	4,500,000	416,779	4,167,794	Stocks converted from convertible corporate bonds: NT$900,000 Stocks converted from stock warrants: NT$2,460,000	None	Note 22 to Note 23
2019.03	10	450,000	4,500,000	416,717	4,167,174	New restricted employee shares extinguished: NT$620,000	None	Note 24

Year and month	Issue price	Authorized capital stock	Authorized capital stock	Paid-in capital	Paid-in capital	Remark
		Number of shares (thousand shares)	Amount (NT$ thousands)	Number of shares (thousand shares)	Amount (NT$ thousands)	Source of share capital	Equity contributions made in the form of assets otherthancash	Others
2019.04	10	450,000	4,500,000	418,539	4,185,389	Stocks converted from stock warrants: NT$18,220,000	None	Note 25
Note 1: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (85) Taiwan-Finance-Securities (I) 41514 dated July 8, 1996 . Note 2: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (86) Taiwan-Finance-Securities (I) 45915 dated June 25, 1997. Note 3: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (87) Taiwan-Finance-Securities (I) 46094 dated June 8, 1998 . Note 4: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (88) Taiwan-Finance-Securities (I) 48548 dated May 24, 1999. Note 5: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (89) Taiwan-Finance-Securities (I) 49542 dated June 8, 2000 . Note 6: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (89) Taiwan-Finance-Securities (I) 83405 dated December 18, 2000 . Note 7: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (89) Taiwan-Finance-Securities (III) 102418 dated December 22, 2000 . Note 8: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. (90) Taiwan-Finance-Securities (I) 137773 dated June 13, 2001. Note 9: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. Taiwan-Finance-Securities (I) 0910132477 dated June 14, 2002. Note 10: Approved by the Securities and Exchange Commission, Ministry of Finance as per letter with Ref. No. Taiwan-Finance-Securities (I) 0920125022 dated June 9, 2003. Note 11: Approved by the Securities and Exchange Commission, Ministry of Finance as per letters with Ref. No. Taiwan-Finance-Securities (III) 0920162383 dated January 2, 2004, and (90) Taiwan-Finance-Securities (I) 143348 dated July 16, 2001. Note 12: Approved by the Securities and Exchange Commission, Ministry of Finance as per letters with Ref. (90) No Taiwan-Finance-Securities (I) 143348 dated July 16, 2001 and Taiwan-Finance-Securities (I) 0930128437 dated June 28, 2004.

Note 13: Approved by the Securities and Exchange Commission, Ministry of Finance as per letters with Ref. (90) No Taiwan-Finance-Securities (I) 143348 dated July 16, 2001 and Taiwan-Finance-Securities (I) 0910132478 dated June 14, 2002.
Note 14: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-Securities (1) 0940122455 dated June 3, 2005.
Note 15: Approved by the Securities and Exchange Commission, Ministry of Finance as per letters with Ref. (90) No Taiwan-Finance-Securities (I) 143348 dated July 16, 2001, Taiwan-Finance-Securities (I) 0910132478 dated June 14, 2002, and Taiwan-Finance-Securities (I) 0920127281 dated June 19, 2003.
Note 16: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-Securities (1) 0950122451 dated June 2, 2006.
Note 17: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-Securities (1) 0960030405 dated June 14, 2007 .
Note 18: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-Securities (1) 0970031743 dated June 25, 2008.
Note 19: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-SecuritiesCorporate-0980027677 dated June 5, 2009.
Note 20: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-SecuritiesCorporate-0990029749 dated June 9, 2010.
Note 21: Approved by the Financial Supervisory Commission, Executive Yuan as per letter with Ref. No. Financial-Supervisory-SecuritiesCorporate-1000028222 dated June 20, 2011
Note 22: Approved by the Financial Supervisory Commission as per letter with Ref. No. Financial-Supervisory-Securities-Corporate-1030012130 dated April 17, 2014.
Note 23: Approved by the Financial Supervisory Commission as per letter with Ref. No. Financial-Supervisory-Securities-Corporate-1010042558 dated September 17, 2012
Note 24: Approved by the Financial Supervisory Commission as per letter with Ref. No. Financial-Supervisory-Securities-Corporate-1050024281 dated June 27, 2016.
Note 25: Approved by the Financial Supervisory Commission as per letter with Ref. No. Financial-Supervisory-Securities-Corporate-1010042558 dated September 17, 2012, and Financial-Supervisory-Securities-Corporate-1040036382 dated September 7, 2015. (changes to capital amount are yet to be implemented)

	Unit:shares,as of April 20,2019	Unit:shares,as of April 20,2019	Unit:shares,as of April 20,2019	Unit:shares,as of April 20,2019
Type of shares	Authorized capital stock			Remark
	Number of shares outstanding(listed)	Number of shares not issued	Total
Common shares	418,538,887	31,461,113	450,000,000	3,000,000 shares have been reserved for employee stock warrants.

Information on the shelf registration system: None.

(II) Shareholder structure

(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure
As of April 20,2019 Shareholder structure Quantity Government agencies Financial institutions Other legal persons Individuals Overseas institutions and individuals Total
	Government agencies	Financial institutions	Other legal persons	Individuals	Overseas institutions and individuals	Total
Number of individuals	5	46	45	9,824	447	10,367
Number of shares held	1,854,000	29,508,706	16,657,793	102,521,910	267,996,478	418,538,887
Shareholding percentage	0.44%	7.05%	3.98%	24.50%	64.03%	100.00%

(III) Distribution of equity ownership 1. Common shares

		As of April 20,2019	As of April 20,2019
Shareholdingrange	Number of shareholders	Number of shares held	Shareholding percentage
1 to 999	4,137	763,730	0.18%
1,000 to 5,000	4,736	8,968,655	2.14%
5,001 to 10,000	552	4,146,319	0.99%
10,001 to 15,000	181	2,239,866	0.54%
15,001 to 20,000	111	1,991,130	0.48%
20,001 to 30,000	92	2,300,817	0.55%
30,001 to 40,000	61	2,166,248	0.52%
40,001 to 50,000	34	1,567,867	0.37%
50,001 to 100,000	107	7,609,059	1.82%
100,001 to 200,000	101	13,875,912	3.32%
200,001 to 400,000	86	24,500,809	5.85%
400,001 to 600,000	41	19,583,249	4.68%
600,001 to 800,000	21	14,697,179	3.51%
800,001 to 1,000,000	16	14,691,883	3.51%
1,000,001 and above	91	299,436,164	71.54%
Total	10,367	418,538,887	100.00%
2. Preferred shares: None.

(IV) List of major shareholders

Name of shareholders who hold more than 5% of the shares or are the 10 largest shareholders, as well as number and percentage of shares held by them:

shareholders, as well as number and percentage of shares held by them:	shareholders, as well as number and percentage of shares held by them:	shareholders, as well as number and percentage of shares held by them:
As of April 20,2019
Shares Name of major shareholder	Number of shares held	Shareholding percentage
Leo Huang	20,491,897	4.90%
Chun-Sheng Chen	15,113,308	3.61%
First State Asia Pacific Leaders fund,a sub-fund of First State Investment	15,089,000	3.61%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Schroder International Selection Fund - Asian Absolute Return	13,082,000	3.13%
Shu-Chuan Chen	11,794,362	2.82%
Yu-Mei Hsueh	11,074,646	2.65%
NanShan Life InsuranceCo.,Ltd	8,553,000	2.04%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Universities SuperannuationScheme Limited	6,964,724	1.66%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Stichting DepositaryAPGEmergingMarkets EquityPool	6,804,000	1.63%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund,a series of Vanguard Star Funds	6,120,800	1.46%

(V) Market price per share, net asset value per share, earnings per share, dividends per share and related information in the two most recent years

Item	Year	Year	2017	2018	Current year up to March 31,2019
Market price per share (Note 1)	Maximum		188.00	197.00	157.00
	Minimum		75.40	99.10	112.00
	Average		121.12	150.53	133.26
Net asset value per share (NAVPS)	Before distribution		32.12	34.57	-
	After distribution		28.93	-	-
Earnings per share	Weighted average		399,051,822	409,438,272	-
	Earnings per share		6.41	6.22	-
Dividend per Share	Cash dividend		4.47539992	4.2(Note 5)	-
	Stock dividends	Dividends from surplus earnings	-	-	-
		Dividends from capital reserve	-	-	-
	Accumulated unpaid dividend		-	-	-
Return on investment	Price/earningratio(Note 2)		18.90	24.20	-
	Price/dividend ratio(Note 3)		27.06	35.84	-
	Cash dividendyield(Note 4)		3.69	2.79	-

Note 1: The highest and lowest market price of ordinary shares for each year are listed, while the average market price for each year is calculated based on trading value and volume in each year.

Note 2: Price/earnings Ratio = Average closing price per share for the current year/Earnings per share.

Note 3: Price/dividend ratio = Average closing price per share for the current year/Cash dividend per share. Note 4: Cash dividend yield = Cash dividend per share/Average closing price per share for the current year.

Note 5: The 2018 surplus allocation plan is currently pending approval from the 2019 Annual General Meeting.

(VI) Dividend policy of the Corporation and its implementation
Dividend policy stipulated in the Articles of Incorporation If the Corporation posts a net income after taxes as indicated in its final annual accounts for the current year, the Corporation shall first make up for the cumulative loss, then set aside 10% of the remaining profit as statutory reserve. If such statutory reserve amounts to the Corporation’s total paid-up capital, this provision shall not apply. In addition, based on the special reserves set aside as required by the law or the competent authority, the balance shall then be combined with the undistributed earnings at the beginning of the same period. The Board of Directors shall propose a surplus allocation plan to be submitted to the Shareholders' Meeting for approval. No share dividends and bonuses shall be allocated when the Corporation does not post a profit.
- Where the Corporation does not post a loss, its legal reserve may be used to distribute new shares or cash for up to 25% of the sum of the said reserve have in excess of the paid-in capital.
- Dividend payout shall be implemented according to the business condition of the Corporation and consider both future capital budgets and capital requirements of future development plans of the Corporation as well as shareholders’ interests. The Board of Directors shall formulate the category and amount of dividend payout, which shall, by principle, be no less than 60% of NIAT for the year. The Corporation's dividend payout ratio in 2018 and 2017 were 68% and 70%, respectively.
- Since the Corporation is still in the growth stage, cash dividend distributed each year shall be no less than 20% of the total cash and stock dividends distributed for the year in consideration of funding needs of the Corporation’s future development plans.
Dividend payout plans proposed during the most recent Shareholder's Meeting With regard to the Corporation's 2018 surplus allocation plan, it was proposed during the Board of Directors' meeting on February 21, 2019 that a cash dividend of NT$4.2 per share will be allocated. Cash dividends will be allocated upon approval by the 2019 Annual General Meeting.
- If provision of employee stock options or any other reasons affect the number of outstanding shares, thereby leading to changes in dividend payout ratio, it is proposed that the Shareholders’ Meeting fully authorizes the Board of Directors to handle the relevant issue.
(VII) Impact of stock dividends proposed by the Shareholders' Meeting on the Corporation's business performance and earnings per share (EPS): Not applicable.
(VIII) Rewards for employees and directors
Percentage or range of employee rewards and directors' rewards as stipulated in the Company's Articles of Incorporation.
- If the Corporation records a profit, 5% to 20% of the said profit shall be set aside for employee rewards. The Board of Directors shall determine whether to issue rewards in the form of stocks or cash. Recipients of the said rewards shall include employees at the Corporation who satisfy specific criteria. The Corporation permits the Board of Directors to set aside no more than 1.5% of the aforementioned profit as directors' rewards. Proposals for the distribution of employee rewards as well as directors' rewards shall be submitted to the Shareholder’s Meeting.
Accounting treatment for the basis of estimating the amount of employee rewards and directors’ rewards, the basis of calculating the number of shares to be distributed as employee rewards, and for any discrepancy between the actual amount distributed and the estimated figures.
- (1) According to the Corporation's Articles of Incorporation as well as past experience on the amount of rewards that may be distributed, the amount of employee rewards and directors' rewards in 2018 were NT$240,000,000 and NT$9,600,000, respectively, making up for 7.55% and 0.30% of the

Corporation's net income before taxes (the amount before deducting employee rewards and directors' rewards), respectively, thus fulfilling the limits prescribed by the Articles of Incorporation.

  - (2) Number of shares issued for employee rewards: 0.

  - (3) Accounting treatment for any discrepancy between the actual amount distributed and the estimated figures: Where the Board of Directors approved to make major changes to the amount of rewards issued before the approval and issuance of the financial statements, the said change shall be adjusted as annual expenses listed for the year. Where changes were still made to the said amount after approval and issuance of financial statements, the changes shall be treated as changes to accounting estimates, and be adjusted and entered into the accounts for the following year.

Distribution of rewards as approved by the Board of Directors
- (1) Where the value of the employee rewards as well as directors' rewards distributed in the form of cash or shares exhibit discrepancies with the recognized expenses and annual estimates, the sum, cause, and treatment of such discrepancies shall be disclosed: On February 21, 2019, the Board of Directors of the Corporation has approved cash distributions of NT$240,000,000 and NT$9,600,000 for employee rewards and directors' rewards, respectively. There was no discrepancy with recognized expenses and annual estimates.
- (2) Amount of employee rewards distributed in the form of shares and its proportion of NIAT provided in the parent company-only financial statements and total sum of employee rewards: 0.
The actual distribution of rewards for employees, directors, and supervisors (including the number, amount and price of shares distributed) in the previous year, as well as the amount, cause, and treatment of discrepancy between the actual amount of rewards distributed and the recognized amount of rewards shall be described:
- In 2017, the Corporation distributed employee rewards totaled NT$310,000,000, whereas rewards for directors and supervisors totaled NT$9,600,000. There was no discrepancy between the actual amount of rewards distributed and the recognized amount of rewards.
(IX) Repurchase of the Corporation's own shares: None.

II. Corporate bond (I) Issuance of corporate bonds

Type of corporate bond	Type of corporate bond	Second issuance of unsecured convertible corporate bonds in Taiwan
Issue(placement)date		May23,2014
Par value		NT$100,000
Place of issuance and trading (Note 1)		Taiwan
Issueprice		Issued atpar value
Total amount		NT$2,000,000,000
Interest rate		Coupon rate: 0%
Maturity		5 years Maturitydate:May23,2019
Guarantor		Not applicable
Trustee		Mega International Commercial Bank Co.,Ltd.
Underwriter		TaishinSecuritiesCo.,Ltd.
Certified attorney		Tai-Yuan Huang,Hwecker Law Firm
CPA		Wen-Chin Lin andChen-MingLee,Deloitte&Touche
Repayment method		Bondholders may convert these bonds to common shares of the Corporation in accordance with Article 10 of the Regulations for the Issuance and Conversion of the Second Unsecured Convertible Corporate Bonds, or exercise repurchase rights in accordance to Article 19 of these regulations, or redeem these bonds in advance in accordance with Article 18 of these regulations, or buy back canceled bonds at security firms. The Corporation shall provide a lump-sum cash payment at par value of the bond upon maturity of the Corporation’s convertible corporate bonds.
Outstanding principal balance		0
Date of tradingtermination		November 7,2018
Terms of redemption or early repayment		Refer to the Regulations for the Issuance and Conversion of the SecondUnsecuredConvertibleCorporate Bonds of theCorporation
Restrictive terms(Note 2)		None
Name of credit rating agency, rating date and 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 annual report	Since the remaining number of the Corporation's second unsecured convertible corporate bonds was lower than 10% of the original number of these bonds, redemption right was exercised in accordance with the "Regulations for the Issuance and Conversion of Corporate Bonds", and trading of these bonds on TPEx were terminated on November 7, 2018. The number of common shares of the Corporation to which bondholders applied for conversion of corporate bondswas 29,774,323shares.
	Regulations for the Issuance and Conversion of Corporate Bonds	Refer to the Regulations for the Issuance and Conversion of the Second Unsecured Convertible Corporate Bonds of the Corporation.
Possible dilution of equity or impact on shareholders’ equity due to regulations for the issuance and conversion, exchange, or stock subscription		A total of 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 the Corporation’s shares will occur if the bond holders do not request for conversion. Bondholders 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 the Corporation’s operation privileges and earnings pershare (EPS).
Name of custodian for underlying bonds		Not applicable

Note 1: This field is to be completed for bonds of overseas companies.

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

(II) Information on 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
Item	Year	2017	January 1, 2018 to the date of trading terminationonNovember7,2018
Market price of convertible corporate bond	Maximum	265.00	309.00
	Minimum	113.80	251.00
	Average	136.10	284.40
Conversionprice		67.2~64.9	64.9~63.1
Issue (placement) date and conversionprice on issue date		Issue date: May 23, 2014 Conversionprice on issue date: NT$74.2
Method for exercising conversion obligation		Issuance of new shares

III. Preferred shares: None.
IV. Overseas depositary receipt: None.
V. Employee stock warrant

(I) Status of employee stock warrants of the Corporation that are yet to mature

		As of April 20,2019
Type of employee stock warrant	Employee stock warrant in 2012	Employee stock warrant in 2015
Date of effective registration	September 17,2012	September 7,2015
Issue date	July8,2013	March 25,2016
Number of units issued	6,000,000 units	7,900,000 units
Proportion of the number of subscribable shares to the total number of shares issued(%)	1.4398	1.8958
Subscriptionperiod	6years	6years
Method for exercisingstock warrant	Issuance of new shares	Issuance of new shares
Period and percentage of which subscription is restricted (%)	Period Ratio of subscribable shares End of Year 2 40% End of Year 3 70% End of Year 4 100%	Period Ratio of subscribable shares End of Year 2 40% End of Year 3 70% End of Year 4 100%
Number of subscribed shares	5,190,200 shares	3,687,800 shares
Amount of unsubscribed shares	NT$246,410,610	NT$230,973,860
Cumulative number of expired shares	394,800 shares	443,000 shares
Number of unsubscribed shares	415,000 shares	3,769,200 shares
Subscription price per share of unsubscribed shares	NT$45.4	NT$61.6
Proportion of the number of unsubscribed shares to the total number of shares issued(%)	0.0996	0.9045
Impact on shareholders' equity	The Corporation may only refer to the period to issue new stock warrants two years after the issue date of these stock warrants. The warrant exercise period was also 6 years, meaning that they would have a limited impact on the dilution of shareholder equity.	The Corporation may only refer to the period to issue new stock warrants two years after the issue date of these stock warrants. The warrant exercise period was also 6 years, meaning that they would have a limited impact on the dilution of shareholder equity.

(II) Name and subscription status of managerial officers who have obtained employee stock warrants and employees ranked in the top 10 employees with the highest number of shares to which they have subscription rights through employee stock warrants acquired, up to the publication date of this annual report

As of April 20, 2019

									As of April 20,2019	As of April 20,2019	As of April 20,2019	As of April 20,2019
	Title (Note 1)	Name	Number of subscribed shares (thousand shares) (Note 2)	Proportion of the number of subscribed shares to the total number of shares issued (%) (Note 4)	Implemented				Not implemented
					Number of subscribed shares (thousand shares)	Price of subscribed share (NT$) (Note 5)	Amount of subscribed shares (NT$ thousand)	Proportion of the number of subscribed shares to the total number of shares issued (%) (Note 4)	Number of unsubscribed shares (thousand shares)	Price of unsubscribed share (NT$)	Amount of unsubscribed shares (NT$ thousands)	Proportion of the number of unsubscribed shares to the total number of shares (%) (Note 4)
Managerial officers	CEO	Leo Huang	1,270	0.3048	910	45.4~ 49.9	42,394	0.2184	360	45.4	16,344	0.0864
	President	I-Shih Tseng
	President	David Yang
	President	C. C. Ho
	President	Joe Lin
	President	George Chang
	Vice President	Paul Ying
	Vice President	Steven Liu
	Vice President	Benjamin Huang
	Vice President	Max Chang (Note 6)
	Vice President	Herbert Tsai
	Vice President	C. C. Fan
	Vice President	Bobby Tseng
	Vice President	Vincent Chen
	Vice President	Tony Yang
	Vice President	Vincent Wu
	Vice President	Lance Ouyang
	Vice President	Jeff Lee
Employees (Note 3)	Employee	C. F. Huang	893	0.2143	551	45.4~ 63.4	28,908	0.1322	342	61.6	21,067	0.0821
	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	Wen- Chung Chen

Note 1: It includes managerial officers and employees (special notes shall be provided for 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: It refers to the number of employee stock warrants obtained from 2012 to 2015. Note 3: It refers to a non-managerial employee ranked in the top 10 employees with the highest number of stock warrants acquired.

Note 4: Total number of shares issued refers to the number of shares listed in the change registration information held by MOEA. (On March 6, 2019, the number of shares listed in the change registration information held by MOEA was 416,717,387 shares)

Note 5: For the price of employee stock warrant already implemented, the subscription price at the time of implementation shall be disclosed. Note 6: Mr. Max Chang resigned on January 31, 2019.

VI. New restricted employee shares

(I) Implementation of new restricted employee shares

As of April 20, 2019

		As of April 20, 2019
Type of new restricted employee share	First issuance of new restricted employee sharesin 2016	Second issuance of new restricted employee sharesin 2016
Date of effective registration	June 27, 2016	June 27, 2016
Issue date	July 8, 2016	June 20, 2017
Number of new restricted employee shares issued	3,100,000 shares	185,000 shares
Issueprice	NT$10	NT$10
Proportion of the number of new restricted employee shares issued to the total numberofsharesissued (%)	0.7439	0.0444
Vesting conditions for new restricted employee shares	An employee must be employed for a period of one year after subscribing for new restricted employee shares and at maturity in each vesting period. Subscription of new restricted employee shares must also comply with the overall financial performance of the Corporation and personal performance assessment indicators. The proportion of shares that may be issued according to the fulfillment of respective vesting conditions shall be distributed according to regulations for the issuance of new restricted employee shares. Ratio of shares to be issued under various vesting conditions are listed as follows: End of Year 1: 10% End of Year 2: 20% End of Year 3: 30% End of Year 4:40%	An employee must be employed for a period of one year after subscribing for new restricted employee shares and at maturity in each vesting period. Subscription of new restricted employee shares must also comply with the overall financial performance of the Corporation and personal performance assessment indicators. The proportion of shares that may be issued according to the fulfillment of respective vesting conditions shall be distributed according to regulations for the issuance of new restricted employee shares. Ratio of shares to be issued under various vesting conditions are listed as follows: End of Year 1: 10% End of Year 2: 20% End of Year 3: 30% End of Year 4:40%
Restricted rights to new restricted employee shares	1. An employee may not sell, pledge, transfer, provide as a gift to other party, set up or using other means to dispose of new restricted employee shares. 2. New restricted employee shares may partake in dividend payouts and cash capital increase subscriptions. Dividend payout that may be acquired is not subject to vesting period restrictions. Dividend payout to be issued shall be remitted from a trust account to a personal bank account of the employee on the date of issuance without any surcharge. 3. For an employee who has yet to meet the vesting conditions, attendance, proposal,speech,	1. An employee may not sell, pledge, transfer, provide as a gift to other party, set up or using other means to dispose of new restricted employee shares. 2. New restricted employee shares may partake in dividend payouts and cash capital increase subscriptions. Dividend payout that may be acquired is not subject to vesting period restrictions. Dividend payout to be issued shall be remitted from a trust account to a personal bank account of the employee on the date of issuance without any surcharge. 3. For an employee who has yet to meet the vesting conditions, attendance, proposal,speech,

	voting rights, and other matters related to shareholder equity in the Shareholders’ Meeting shall be commissioned to a trust custodian shall be commissioned to exercise matters related to attendance, proposal, speech, voting rights, as well as other matters related to shareholder equity in the Shareholders’ Meeting on behalf of the employee.	voting rights, and other matters related to shareholder equity in the Shareholders’ Meeting shall be commissioned to a trust custodian shall be commissioned to exercise matters related to attendance, proposal, speech, voting rights, as well as other matters related to shareholder equity in the Shareholders’ Meeting on behalf of the employee.
Safekeeping of new restricted employee shares	Once issued, new restricted employee shares shall be handed over 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 of new shares by employees who have yet to meet the vesting conditions	Before meeting the vesting conditions, the Corporation may refer to law to buy back new restricted employee shares that have been issued at the price of the original issuance and extinguishthe shares accordingly.	Before meeting the vesting conditions, the Corporation may refer to law to buy back new restricted employee shares that have been issued at the price of the original issuance and extinguishthe shares accordingly.
Number of new restricted employee shares recovered or repurchased	131,300 shares	27,000 shares
Number of new restricted shares extinguished	896,700 shares	18,500 shares
Number of new restricted shares yet to be extinguished	2,072,000 shares	139,500 shares
Proportion of the number of new restricted employee shares to the total number of sharesissued (%)	0.4972	0.0335
Impact on shareholders' equity	Overall evaluation of the vesting conditions, periods, and proportions listed in the regulations for issuing shares reveal that the said issuance had a limited impact and dilution on the earnings per share (EPS) of the Corporation from 2016 to 2020, and will not significantly affect shareholders' equity.	Overall evaluation of the vesting conditions, periods, and proportions listed in the regulations for issuing shares reveal that the said issuance had a limited impact and dilution on the earnings per share (EPS) of the Corporation from 2017 to 2021, and will not significantly affect shareholders' equity.

(II ) Name of managerial officers and top 10 employees with the highest number of new restricted employee shares, and status of acquisition

of	acquisition
					As of April 20,2019
	Title (Note 1)	Name	Number of new restricted employee shares acquired (thousand shares)	Proportion of the number of new restricted employee shares to the total number of shares issued (%) (Note 3)	Restricted shares extinguished				Restricted shares yet to be extinguished
					Number of restricted shares extinguished (thousand shares)	Issue price (NT$)	Issue amount (NT$ thousands)	Proportion of the number of restricted shares to the total number of shares issued (%) (Note 3)	Number of restricted shares yet to be extinguished (thousand shares)	Issue price (NT$)	Issue amount (NT$ thousands)	Proportion of the number of restricted shares yet to be extinguished to the total number of shares issued (%) (Note 3)
Managerial officers	CEO	Leo Huang	1,410	0.3384	419	10	4,194	0.1006	952	10	9,520	0.2285
	President	I-Shih Tseng
	President	David Yang
	President	Joe Lin
	President	George Chang
	Vice President	Paul Ying
	Vice President	Steven Liu
	Vice President	Benjamin Huang
	Vice President	Max Chang (Note 4)
	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
	Vice President	Kenny Wang
	Vice President	Cindy Tai
	Vice President	Galen Chou
Employees (Note 2)	Employee	C. F. Huang	450	0.1080	131	10	1,308	0.0314	315	10	3,150	0.0756
	Employee	Amy Huang
	Employee	Addin Chuang
	Employee	Elia Huang
	Employee	Glen Yang
	Employee	Vincent Chen
	Employee	Lawrence Wu
	Employee	Ray Chi
	Employee	Jih-Hsiung Hsieh
	Employee	Yung-Lung Hsiao

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

Note 2: It refers to a non-managerial employee ranked in the top 10 employees with the highest number of new restricted employee shares acquired. Note 3: The total number of shares issued refers to the number of shares listed in the change registration information held by MOEA. (On March 6, 2019, the number of shares listed in the change registration information held by MOEA was 416,717,387 shares)

Note 4: Mr. Max Chang resigned on January 31, 2019.

VII. Issuance of new shares in connection with the merger or acquisition of other companies: None.

VIII. Implementation of capital utilization plan
(I) Content of the plan
- Where various issuance or private placement of securities have yet to be completed, or have been completed in the three most recent years but the benefits of the plan have yet to be realized:
- Second issuance of unsecured convertible corporate bonds in Taiwan
  - (1) Content of the plan
    - Total amount of capital required for this plan: NT$2,180,372,000 Source: Issuance of corporate bonds worth NT$2,000,000,000 with a maturity of 5 years and an interest of 0%. 

Method for acquiring the remaining NT$180,372,000: Own funds or others. 

(2) Capital utilization plan and expected progress

Unit: NT$ thousands

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

(3) Anticipated possible benefits

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

Unit: units, sets; NT$ thousands

Year	Item	Production volume	Sales volume	Sales value	Gross profit	Net operating profit
2017	Precision electronic measurement instruments	515	515	1,010,000	555,500	202,000
	Integrated automaticmeasurement systems	20	20	600,000	240,000	90,000
2018	Precision electronic measurement instruments	725	725	1,371,000	740,340	274,200
	Integrated automaticmeasurement systems	25	25	1,000,000	390,000	150,000
2019	Precision electronic measurement instruments	905	905	1,622,500	859,925	324,500
	Integrated automaticmeasurement systems	28	28	1,120,000	442,400	168,000
2020	Precision electronic measurement instruments	1,080	1,080	1,804,500	956,385	360,900
	Integrated automaticmeasurement systems	35	35	1,550,000	596,750	232,500
2021	Precision electronic measurement instruments	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

(II) Status of implementation

Unit: NT$ thousands

					Unit: NT$thousands
Project item	Status of implementation		Q1 2019	As of Q1 2019	Reason for project being ahead of schedule or behind schedule, and improvement plans
Construction of factory building	Expenses	Expected	`－`	2,180,372	Due to delays in land requisition by the Ministry of Interior, the land was handed over to the Corporation in stages after negotiations, and the construction of factory building was started in the third quarter of 2015. At present, the construction permit applied by the Corporation has been approved. In the first quarter of 2019, the Corporation has made payments for matters including glass curtain works, the 10th phase of construction management and inspection services, the 4th phase of interior design, the 3rd phase of mechanical electrical changes, steel structure works for the 5th and 6th phases of new construction works, the 5th phase of air-conditioner works, the 16th and 17th phases of construction works, the 9th and 10th phases of mechanical and electrical works, and audit fees for the 4th phase of structural changes. The construction of the Corporation's factory is expected to be completed in 2019. Although the project is behind schedule, the project remains currently in progress according to the factory construction project, with no abnormal events identified.
		Actual	232,775	1,343,488
	Progress	Expected	`－`	100.00%
		Actual	10.68%	61.62%
Total	Expenses	Expected	`－`	2,180,372
		Actual	232,775	1,343,488
	Progress	Expected	`－`	100.00%
		Actual	10.68%	61.62%

The Corporation engaged in the second issuance of unsecured convertible corporate bonds to fund the construction of factory building. Due to delays in land requisition by the Ministry of Interior, the land was handed over to the Corporation in stages after negotiations, and the construction of factory building was started in the third quarter of 2015. As of the first quarter of 2019, the Corporation has made payments for matters including glass curtain works, the 10th phase of construction management and inspection services, the 4th phase of interior design, the 3rd phase of mechanical electrical changes, steel structure works for the 5th and 6th phases of new construction works, the 5th phase of air-conditioner works, the 16th and 17th phases of construction works, the 9th and 10th phases of mechanical and electrical works, and audit fees for the 4th phase of structural changes. The cumulative amount of payments made was NT$1,343,488,000, with capital utilization progress reaching 61.62%.

(III) Analysis of discrepancies between expected and actual benefits Due to delays in land requisition by the Ministry of Interior, the land was handed over in stages after negotiations. Based on the progress of factory building construction, the Corporation has obtained the construction permit approved by the competent authority, and the construction of factory building has begun. Therefore, the reason for the delay in actual capital utilization and benefits compared with the scheduled benefits is still reasonable.

Chapter 5 Operation Summary

I. Business content
(I) Scope of business
1. Major content of business

The Corporation and its subsidiaries mainly engage in the design, assembly, manufacturing, trading, repair, maintenance, calibration and distribution of computer and peripheral equipment hardware and software, computer automated test systems, electronic test equipment, signal generators, power supplies and communication power supply equipment; trading of special materials; and the design, manufacture and installation of automatic equipment. The Corporation's current production lines include: 1. test instruments; 2. special materials; 3. automatic equipment.

Proportion of various businesses Consolidated revenue:

Unit: NT$ thousands

Year Product category	2017	2017	2018	2018
	Amount	Percentage of revenue(%)	Amount	Percentage of revenue(%)
Test instrument equipment	9,932,614	66.66	9,724,331	57.43
Special materials	2,054,568	13.79	2,005,001	11.84
Automatic equipment	2,538,348	17.03	4,862,323	28.72
Others	375,816	2.52	339,473	2.01
Total net operatingrevenue	14,901,346	100.00	16,931,128	100.00

Current products of the Corporation
Power electronic test solution
1. DC electronic load
2. AC electronic load
3. Regenerative AC load
4. AC power source
5. DC power supply
6. Digital power meter
7. Switching power supply automatic test system
8. Battery simulator
9. Chroma soft panel (graphic user interface)
Electric vehicle test solution
1. OBC & DC-DC converter automatic test system
2. Battery simulator
3. Battery test system
4. DC power supply
5. AC power source
6. Electronic load
7. Motor stator test system
Automatic transformer test system/automatic components analyzer
Battery test and automation solution 1. Battery pack/battery module automatic test system
1. Battery cell formation system
2. Battery pack automatic test system
3. Battery cell balance maintenance automatic test system
4. Electrical safety test solution
Automatic optical inspection system
Passive components test solution
1. LCR meter/auto transformer test system
2. Electrolytic capacitor tester
3. High frequency AC tester
4. Components test scanner

Battery cell insulation tester
Milliohm tester
Passive components automatic test system
Inductor test and packing machine
Electrical safety test solution
Partial discharge tester
Lead-acid battery cell tester
Electrical safety analyzer
High potential tester/safety tester
Ground bond tester
Electrical safety test scanner
Impulse winding tester
Calibrator
Automatic test system 10. Motor stator test system
Video and color testing solution 1. Video pattern generator
Color analyzer
Automatic test system Flat panel display test solution
Flat panel display tester
OLED test system
SHK 8K test solution LED/lightning & driver test solution
LED total power test system
ESD test system
LED power driver test solution Photonics test solution
Wafer level test
Package level test Automatic optical inspection system
Thermoelectric cooling chip controller
Thermal data logger
Photovoltaic/inverter test & automation solution 1. Photovoltaic sorter
Automatic loading/unloading system
C-Si solar cell tester
Automatic optical inspection system
Thermoelectric cooling chip controller
Thermal data logger
Hybrid PV inverter test solution Semiconductor/IC test solution
SoC test system
VLSI test system
IC test handler
Metrology system
RF & wireless test solution
Wireless test solution
RF recorder / player
GPS simulator
PXI test & measurement solution
PXI SMU/power supply instrument
PXI semiconductor/IC test system Intelligent manufacturing system solution 1. Intelligent manufacturing system Turnkey test & automation solution
Assembly & test automation solution Other solutions and services
Electric vehicle powertrain solution
General purpose instrument

New products under development
- Next generation high power and high speed solar array simulator
- Next generation high power density and constant power DC source
- Next generation bi-direction power module platform
- Next generation regenerative charger and discharger
- Next generation high precision linear and modular DC load
- High bandwidth hybrid type recycling linear load
- Next generation portable/automotive flat panel display tester
- 8K HDMI 2.1 pattern generator
- High performance high speed and high current insulation tester with partial discharge measurement function
- Ultra-high precision, wide current range battery cell analyzer
- Next generation super capacitor automatic burn-in system
- Semiconductor advanced packaging optical metrology system
(II) State of the industry
Current state and development of the industry
- A. Instruments industry At the beginning of 2018, the information electronics industry flourished in various types of applications. With the emergence of the US-China trade war thereafter, the industry began to produce and ship goods in advance so as to respond to tariff increase, resulting in the illusion of economic prosperity. At the end of 2018, economic fundamentals trended downward due to excessive inventory. In 2019, manufacturers will reconsider their plans due to the US-China trade wars by not only changing their investment plans, but also diverting equipment investments toward intelligent manufacturing system.
Power electronic test solution
Power supplies represent a basic and core component of electronic equipment, and are widely utilized in various electronic products such as PC, servers, rechargers, displays, and industrial power supplies. The mobile communications, mobile power, mobile charging and battery industries are all booming. Power supplies are of critical importance to the LED industry and the solar photovoltaic and automotive electronics industries, leading to emerging demand for power supply test equipment. Power supply test equipment provided by the Corporation and its subsidiaries is not only used in PC, servo or telecom power supplies, chargers, and backlight inverter, but can also be applied to LED lighting, solar photovoltaics, and electric vehicle chargers. In response to the increasingly ubiquitous automation of manufacturing, the Corporation has also independently developed automatic test systems for power supply, as well as provided a software platform with powerful functions. Test solutions with built-in applications can offer a variety of industry application tests to maintain the Corporation's competitive advantage of its product lines. Due to wide range of applications, its product lines were able to sustain stable development.
Video and color test solutions
As Japan's NHK began testing its Super 8K (Super-Hi Vision) ultrahigh-definition resolution video in August 2016, the display industry will officially enter the 8K era during the 2020 Tokyo Olympics. To meet this requirement, the video and color test solutions must focus on the 8K Super-Hi Vision (7680x4320/8192 x 4320) tests for the upcoming panel and display industry. In the meantime, a modular architecture design must be adopted so that the solution can be combined flexibly with different signals or power modules and required test conditions. High flexibility, strong scalability, and the ability to support a variety of mainstream industry communication interfaces, enable this solution to be in line with the development of the industry.
Passive components and safety test solutions

After many years of consolidation and conservative expansion, the passive components industry has experienced severe supply shortages as demand increases, prompting manufacturers to accelerate capacity expansion, reduce labor costs, human errors, and improve data management, quality, and efficiency. All these have become trends in equipment development. Therefore, a new automation testing technology is provided to test the passive components and safety test by simplifying multiple test functions into one, such as the 11022 LCR Meter dual-frequency tester. For electrolytic and plastic film capacitors, a single unit can complete different frequency measurements, which reduces the number of test stations used. The automatic test system for components provides multi-step and multichannel test programs to meet diverse test applications. Semiconductor/IC test solutions

Semiconductor products serve as the pilot of the information and communications industry. Hence, China has been vigorously developing the semiconductor industry in recent years, thus resulting in a sharp increase in semiconductor-related test equipment in the Chinese market. Along with the continuous expansion of semiconductor applications in recent years, demand for semiconductor equipment has increased significantly. As a result, the Corporation offers a wide variety of test programs, and is able to perform large numbers of parallel tests to increase throughput per unit time, which is the development trend for test equipment manufacturers. Customized test equipment capable of satisfying specific requirements may be directly utilized to replace the general-purpose testers achieving significant reduction in costs. - Battery test and automation solutions
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, market demand for power batteries has increased significantly, but related accidents are also common; therefore, 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 strive for testing automation and efficiency in the battery industry to provide customers with battery cells, modules, battery packs and battery system performance, environmental reliability, as well as safety testing and certification services. The key factors in the evolution of electric vehicles depend on the advancement of battery functions. With batteries becoming increasingly important, the quality and stability of batteries not only affect the range of electric vehicles, but also their safety. Hence, battery automation testing is an important part of the current development of electric vehicles.
Photovoltaic test solutions In mid-2018, China terminated subsidies for the solar energy industry that significantly affected the development of the solar energy industry. In other words, this industry is facing a severe elimination race. Demand for solar equipment has also been severely affected. It can only be hoped that the industry will recover in 2019.
B. Special materials In recent years, technical issues associated with copper wire packaging have gradually been overcome and improved, and downstream package manufacturers have accelerated the introduction and certification of copper wire packaging. Most of the packaging wire materials which use gold wires have been replaced by copper wires. Chroma New Material Corp., a subsidiary of the Corporation, will combine technical services provided by Japanese company, Nippon Micrometal Corporation to

increase the added value of its products in order to consolidate the market share of high-tech threshold packaging products in the Taiwanese market.
Correlation with upstream, midstream and downstream sectors of the industry A. Measuring instruments and equipment These instruments and equipment belong to the test instrument sector in the information electronics industry. The Corporation primarily purchases parts and components from upstream suppliers, and assembles them to produce the test instrument and equipment, which are marketed and sold to customers under the Corporation’s brand name. The Corporation and its subsidiaries offer an extensive selection of solutions for product testing and validation purposes to customers in many fields such as video surveillance, passive components, LCD modules, LED, semiconductor, solar photovoltaics, and electric vehicle industries. The following diagram describes the relationship between the upstream, midstream, and downstream sectors in this industry:

Upstream Boxes and cases Printed circuit boards (PCB) IC Other components	Midstream Assembly Test Sales	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, solar photovoltaic and solar power cells, and electric vehicles industries

B. Special materials
- The main products in the special materials business are gold wires, copper wires, and lead-free solder balls. Gold and copper wires are bonding wires used in the process of bonding semiconductor packaging wires. The primary business engaged by the Corporation’s subsidiary, Chroma New Materials Corp., is trading of special materials, and the downstream industry is the IC packaging industry.
C. Automatic equipment
Automatic equipment, which consists of metrology equipment, automation systems, and MES software capabilities, provide customers with automation solutions (turnkey solution). The main products offered by MAS Automation Corp., a subsidiary of the Corporation, are automated production and system integration for photovoltaic and TFTLCD, as well as clean room equipment planning and system integration.
1. Development trends and competition for various products
A. Development trends of various products
- (A) Instruments industry
  - Power electronics testing industry
    - The following describes the current 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.
    - Simulation of input and electrical grid distortion in response to regulatory requirements for testing of power supplies.
    - Discontinuous, low power measurements in response to energy saving requirements for power supplies in standby mode.
    - DC power supplies covering high voltage and current levels are able to reduce the required number of DC power supplies with DC/DC converter input, thus reducing testing costs.
    - High voltage, high frequency testing technology and low parasitic capacitance test fixtures for LCD Inverter testing

  - can greatly improve the testing speed and stability.

Network data capture functions enable manufacturers to establish real-time production capacity control and perform quality statistical analysis.
Video testing industry
The display industry continues to progress toward high resolution. With the commencement of video broadcasting test via 8K super hi-vision by NHK beginning August 2016, the display area will officially enter the 8K during the 2020 Tokyo Olympics. Therefore, the resolution and interactive functions of displays are important, which rely on test equipment to provide the quality assurance. Adopting the product development trend of modular design, this test solution can be combined flexibly with different signals or power modules together with free combinations of test conditions. High flexibility, strong scalability, and the ability to support a variety of mainstream industry communication interfaces, enable this solution to the panels and displays with 8K super hi-vision resolution (7680x4320/8192x4320) for the current and future applications in the video industry.
Passive component testing industry At present, electronic products are becoming lighter, thinner, and smaller. As a result, the manufacturing, R&D, and quality of passive components used in these products are also moving towards high efficiency and precision levels. The following describes the trends for developing test equipment for passive components:
High speed precision measurement, integration equipment automation to improve production efficiency while reducing human negligence to enhance reliability.
Integrated testing of multiple parameters to reduce the production equipment and labor hours required, thereby lowering the production costs.
Provide complete test solutions for specific applications that help users establish systems rapidly to fulfill their test requirements, and receive comprehensive technical support.
• Provide network data log functions so that manufacturers can build up real-time production capacity control and perform quality statistical analysis.
Electric vehicle/battery test equipment The most important component in mobile devices and electric vehicles is battery module. Safety is the key factor of battery modules reliability that makes the testing of battery reliability is vital. As the battery production is extremely energy-consuming, automated instruments which are energy saving, high efficiency, high stability and safety have become an important trend in the development of the instruments industry.
Semiconductor/IC test solutions Since the manufacturing industry began to move towards intelligent manufacturing for Industry 4.0, the combination of integrated test equipment and automation has become a challenge for the instruments industry. The Corporation and its subsidiaries have actively combined integrated technologies in various areas, including electronics, motors, machinery, software, information and communications in order to respond to the development of such a trend in the past year, providing turnkey test solutions for different semiconductor products in production and process. New models feature a wide range of functions, while greatly reducing labor costs by automating test machines and significantly enhancing product quality, thereby fully highlighting the

economic benefits of testing.
Photonics test solutions

Since Apple Inc. amazed the technology community by incorporating the facial recognition function into iPhone X, its key laser diode has become an important element for 3D sensing. This technology has recently been widely used, especially in face recognition, autonomous vehicles and existing fiber-optic communications. With the increase in demand for laser diodes, the quality and reliability of laser diodes become relatively important. Thus, the needs for various related test instruments are in the ascendant. The photonics test solutions include wafer-level test for laser diodes and package-level test for active optical communication components.

(B) Special materials

The following lists the major development trends of IC packaging wire materials and technologies in response to the changes in semiconductor packaging technologies and product applications:

     - Gradual replacement of gold wire with copper wire due to cost considerations.

     - Need for copper wires with even smaller diameters and higher strength in response to miniaturization, high frequency, and high speed for final products.

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

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

B. Product competition
- The Corporation and its subsidiaries started working extensively with the electronics industry from its earliest stages of development. Strong foundation in the instruments industry and high barriers of entry in terms of product and techniques also allowed the Corporation and its subsidiaries to achieve leading positions in various product technologies. However, with the continuous launch of new products, the Corporation must also improve its R&D technologies for its instrument products to maintain product advantage. In addition, with rampant counterfeiting in third region due to relocation of industries in recent years, products of the Corporation and its subsidiaries also suffer from price competition involving counterfeit products. Hence, in order to maintain the competitive advantage of its products, the Corporation and its subsidiaries invested a considerable amount of manpower to apply for patents and safeguard the brand value. As production processes become increasingly automated, integrated test instruments and automatic equipment will provide the instruments industry with high levels of competitive advantages.
(III) Technologies and recent R&D efforts 1. R&D expenses invested in the two most recent years

considerable amount of manpower to apply for patents and safeguard the brand value. As production processes become increasingly automated, integrated test instruments and automatic equipment will provide the instruments industry with high levels of competitive advantages. ologies and recent R&D efforts R&D expenses invested in the two most recent years	considerable amount of manpower to apply for patents and safeguard the brand value. As production processes become increasingly automated, integrated test instruments and automatic equipment will provide the instruments industry with high levels of competitive advantages. ologies and recent R&D efforts R&D expenses invested in the two most recent years	considerable amount of manpower to apply for patents and safeguard the brand value. As production processes become increasingly automated, integrated test instruments and automatic equipment will provide the instruments industry with high levels of competitive advantages. ologies and recent R&D efforts R&D expenses invested in the two most recent years
Unit: NT$ thousands Item\Year 2017 2018 R&D expenses 1,212,383 1,254,553 Net operating revenue 14,901,346 16,931,128 Proportion of R&D expenses to net operating revenue 8% 7%
Item\Year	2017	2018
R&D expenses	1,212,383	1,254,553
Net operating revenue	14,901,346	16,931,128
Proportion of R&D expenses to net operating revenue
	8%	7%

Major R&D outcomes
2238 Video Pattern Generator
2918 Flat Panel Display Tester
7505-05 Multi-Functional Optical Measuring System
61509 Programmable AC Power Source
63000 Programmable DC Electronic Load
◎ 63000L Programmable DC Power Supply ◎ 66205 Digital Power Meter

1870D Inductor Test and Packing Machine
◎ 1871 Inductor Layer Short Automatic Test System ◎ 11210 Battery Cell Insulation Tester ◎ 11050 High Frequency LCR Meter ◎ 19501-K Partial Discharge Tester ◎ 19311 Battery Cell Surge Tester ◎ 33010 PXIe Digital IO Card ◎ 3680 Advanced SoC Test System ◎ 3160C Tri Temp Quad Site Handler ◎ 3660C Tri-Temp SLT Handler ◎ 7940 Wafer Chip Inspection System ◎ 58620 Laser Diode Characterization System ◎ 58604 Laser Diode Burn-in and Reliability Test System ◎ 7505-K006 Cylindrical Battery Cell Automated Optical Inspection System ◎ 7505-K007 Thin Film Thickness Automated Optical Metrology System ◎ 3730-E Solar Cell Inspection Test/Sorting System ◎ 3760 Solar Cell Inspection Test/Sorting System
17011 Battery Cell Charge/Discharge Test System
17040 Regenerative Battery Pack Test System
7925 TO-CAN Inspection System
8000 Electric Vehicle AC Charging Compatibility Automatic Test System
1. Future R&D plans

The Corporation has been running the precision measuring instrument and semiconductor testing business for many years, but has been unable to penetrate into wafer manufacturing. With TSMC taking the lead and becoming an extremely important component manufacturer in the electronic industry, how to penetrate into the testing sector in the field of semiconductor fabrication plant will be a major R&D subject of the Corporation in the coming years. The recent development trends in the IT industry include 3D applications, smart communications, and the development of the Internet of Things (IoT), which involve the use of various equipment in wireless communications to enter into the era of electric vehicles, autonomous vehicles and smart cities, lead the emergence of Industry 4.0 in the manufacturing industry and Finance 3.0 in the financial industry.

Therefore, the Corporation's R&D plan has also evolved with various industries, promoting the related automation equipment of Industry 4.0 and the development and integration of Turnkey Solutions, as well as the establishment of Industry 4.0 smart manufacturing related solutions. In response to the trend of IoT, the equipment for testing the electric vehicle, battery, wireless communication, VR and AR are developed. The Corporation and its subsidiaries are also committed to the R&D of products related to clean technology with the aim of developing relevant automatic test equipment.

(IV) Long-term and short-term business development plans
Short-term development plans
- (1) Build a strong global first-tier customer base to increase market share for each product.
  - The Corporation knows that marketing products to customers globally and obtains the certification of the first-tier customers is a strong guarantee for the Corporation's product quality, which helps increase the product's popularity, facilitate the promotion of products to the market, and enhance the market share for each product.
- (2) Accelerate innovation, develop instruments and systems equipped with AI, and meet intelligent manufacturing needs.
  - With major industrialized nations facing issues such as aging population and high salaries, the development of AI to drive intelligent manufacturing can greatly reduce the use of manpower, while providing great possibilities for the manufacturing industry to engage in manufacturing in the US. Therefore, the Corporation has invested in big data analysis, and will deepen its foundation in machine learning and deep learning. The Corporation will apply AI technology to its intelligence measurement

equipment, which can provide alerts regarding the health status of equipment, and integrate AI technology into intelligent manufacturing system to help customers execute big data analysis and perform forecasts during manufacturing to improve the process, thereby accelerating 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, the Corporation has established a product 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 serves as a basis for business decision-making to effectively improve quality and efficiency.
(4) Implement the 5300 program to enhance operation 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 enhance the operation scale.
Long-term development plans The Corporation’s long term goal and vision is to aggressively develop worldclass products and strive to become a world-class enterprise. World-class products are "precise, reliable and unique", offering test solutions with more value to customers in various electronic technology industries. Meanwhile, world-class enterprises are advancing toward three major directions, namely "innovative technologies, own brands, and internationalization." Thus, the Corporation invests a lot in R&D each year to ensure that the Corporation maintains its lead with its core technologies and highly integrated capabilities in optics, machinery, electronics, temperature control and software, in order to maintain its competitive advantage and growth, thereby achieving the goal of sustainable development.
(1) Marketing plans With the rise of work specialization at international level, manufacturing bases for the IT industry have started expanding outward. In order to provide customers with services of the highest quality, the Corporation and its subsidiaries have also established a sales network composed of overseas subsidiaries, as well as sales agents and dealers. With Taiwanese companies heading to Southeast Asia for investment in recent years, the Corporation has also formulated plans to set up sales and marketing locations in Southeast Asia through its subsidiary in Singapore. Besides, the headquarters provides support to various activities, in hopes of increasing revenue in this region. The Corporation fully promotes products with its own brand, and sets up strategic alliances with well-known international brands to serve as an agent to sell professional instruments through online market, in order to increase overall efficiency.
(2) Human resource plans Developing niche products has long been a goal of the Corporation and its subsidiaries. Having been engaging in technology-intensive industries, the Corporation and its subsidiaries must continuously nurture professional talents and strengthen employee training by establishing a knowledge management platform and learning database helping employees quickly gain competence in the field of professional technology through resource sharing, so as to effectively enhance human resources and reduce learning time.
(3) Product development plans The Corporation and its subsidiaries have penetrated the electronic product testing industry for many years, and thus their product development strategies have been keeping pace with the development of the industry. In addition to the products developed for testing semiconductors and flat panel displays, the Corporation has also invested in modular instruments, system integration, and a variety of customized automation products. With

the rising labor costs and aged population, intelligent networks, industrial automation, and health care industries are becoming increasingly important. The Corporation's long-term product development plans will therefore focus upon the development of test equipment related to products in intelligent network systems in order to develop equipment related to industrial automation and health care. The Corporation will also be aggressively integrating the upstream and downstream industries, and utilize the merger and acquisition strategy to create opportunities for expanding relevant product lines.

II. Market, production and sales summary

(I) Market analysis
Major products by sales area

Area Domestic sales Export sales Total			2017 Percentage of net operating revenue (%) 28 72 100			Unit: NT$ thousands 2018	Unit: NT$ thousands 2018
		Amount $4,157,800 10,743,546 $14,901,346					Percentage of net operating revenue (%)
							23 77 100

State of the market

President Trump introduced policies which were different from the past since he took office, triggering trade barriers between various nations. However, the tax reduction measure he introduced stimulated economic growth, causing a moderate increase in inflation. The Fed began to adopt a moderate monetary tightening policy, but Europe and China continued to implement monetary easing. Yet, the emergence of the US-China trade war and US sanctions against major Chinese telecommunications firms Huawei and ZTE have affected the plans of various major industries. With the information electronics industry treading on thin ice, it was difficult for customers in both the Chinese and US camps to come up with different types of applications in order to drive industrial demand. Despite the development of autonomous vehicles, smart driving, IoT and smart manufacturing in Industry 4.0, investments in such technologies remained relatively conservative.

State and growth of market supply and demand In 2018, the information electronics industry hit a new peak, in which a sharp increase in demand resulted in a serious shortage of components. However, inventory adjustment marked a prosperous ending at the end of 2018. In 2019, the manufacturing industry remains conservative and hesitant about expansion due to uncertainties resulted from the US-China trade war. Yet, China and South Korea have consecutively launched 5G and foldable mobile phones, thereby driving the communications industry. The market anticipates that the introduction of 5G technology will drive the development of autonomous vehicles and smart driving, thereby advancing 3D sensing needs. With the introduction of IoT and Internet of Vehicles (IoV), the development of wireless chargers, battery lifespan, virtual reality (VR) and augmented reality (AR) will drive limitless imagination in expanding applications related to these technologies.
Favorable and unfavorable factors affecting competitive niches and long-term development, as well as response measures
A. Test instrument equipment
- (A) Competitive niche and favorable factors:

Having established operations all over the world, the quality of a variety of equipment produced by the Corporation are highly recognized by the world’s first-tier manufacturers. The Corporation also maintains good relationships with leading manufacturers of various products so it obtains real-time industry developments, invests in R&D immediately, and launches new measurement products in a timely manner, with a view to providing customer with R&D and solutions of the best quality during production. The

Corporation has invested heavily in R&D over the years, accumulating a variety of key technologies, and developing a number of technologically advanced products, thus enabling the Corporation and its subsidiaries to stay ahead of the testing market. The competitive niches of the Corporation and its subsidiaries include effective control over sales channels, acquisition of the latest information about the industry, and ownership of key technologies. Besides, with an abundance of resources, the Group owns testing, automation, and factory management systems to provide customers with turnkey solutions. All these are favorable factors that help the Corporation and its subsidiaries maintain their market competitiveness.

(B) Unfavorable factors:
- Instrument products are typically produced in small amounts and wide varieties, making mass production difficult. Production processes are often complicated and difficult to manage. Other unfavorable factors include complexity of test instruments, and a diverse range of material types required which results in high warehousing costs.
(C) Response measures: Since products are manufactured in small amount and wide varieties, the Corporation and its subsidiaries have adopted modular designs during the stage of product development, in which products with different specifications in a product line are centralized in the same module, while designs with common features in a product line are common modules to increase the production volume of common modules and reduce the amount of materials required for sections with different features. Besides, in order to strengthen production and inventory management, the IMS BU and the Information Center at the Corporation and its subsidiaries have also built a complete information management system according to the nature of industries to which they belong, with a view to enhancing management efficiency.
B. Special materials
(A) Competitive niche and favorable factors:
- The Corporation's subsidiaries are the largest suppliers in Taiwan, and are able to provide customers with overall competitive value, including quality, price, delivery, technical support and other services, thereby serving as important competitive niches for the Corporation, which are responsible for helping the Corporation and its subsidiaries secure a growing market share.
(B) Unfavorable factors:
- Key materials had to be imported, which offer a certain degree of uncertainty.
(C) Response measures:

Chroma New Material Corp., a subsidiary of the Corporation, has built a long-term partnership with Nippon Micrometal Corporation from Japan to supply materials to Chroma New Material Corp., so as not to affect its development.

(II) Major uses and production process of primary products
Major uses of primary products
- Power electronic test solutions
  - In addition to applications in IT, communications, aerospace, defense, and other industries, the power supply test solutions provided by Chroma ATE Inc. are also applied to hybrid vehicles, LED lighting, solar power, fuel cells, and other energy saving products that were actively developed as natural resources become increasingly scarce. The Corporation also provides various industries with customized test solutions. The Corporation offers a wide variety of test equipment, including programmable AC power source, programmable DC power supply, DC

electronic load, AC electronic load, digital power meter, and frequency response analyzer, which are required for specification tests and dynamic simulation for both input and output terminals of power supplies. Exclusive graphic operating software (Softpanel) and NI Labview drivers are also provided to help users conveniently utilize these solutions. The Corporation and its subsidiaries have independently developed an automatic testing system which includes a software platform that comes with powerful built-in functions, and integrates the necessary hardware instruments into the system so that users can independently edit the test items and analyze vast amounts of test data, which can then be used as a basis for R&D or quality assurance (QA) to make changes to products or improve factory processes. In addition to recent applications in PC, servo or telecom power sources, adapters, and chargers, other areas such as backlight inverters, LED drivers, energy-saving lamp ballasts, and even UPS, PV inverters, and electric vehicle supply equipment (EVSE) are also part of its scope of application. Also, the Corporation and its subsidiaries have a global technical applications support team, which us capable of providing customized plans for automation systems and production of testing fixtures.

Video & color test solutions

LCD modules are equipped with different signal transforming panels. Once assembled, the final products can be used with different signal outputs in various products. These complex outputs and input interfaces require a video pattern generator which provides various international standard signal testing screens for testing purposes to analyze the performance of the display in processing video signals. Precision is a key requirement since output signals of the video pattern generator is the standard source.

Color analyzers use advanced digital signal processors and photoelectric conversion technology and combined them with precision optical components and circuit design to 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, optical color analysis probes can be used to achieve simultaneous measurements of multiple points. This can then be integrated with the video pattern generator as well as a software operation interface for video signal analysis. All programmed tests could be carried out quickly using single button operations, making it the most competitive video and color testing solution available.

Passive component and safety test solutions

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 can be used to analyze the properties of the tested objects and provide design optimization for integrated applications such as automated production inspection, feed/discharge inspection, QA verification, and R&D analysis in order to satisfy the customer’s requirements for cost reduction and achieving better efficiency.

Electrical regulatory test equipment is widely employed in various types of electronic components, electrical products, or health care products. Major tests include AC/DC withstanding voltage and insulation resistance testing for electronic components as well as earth connection and grounding leakage current tests for electrical products or medical electronics. In addition to verifying product compliance with various safety specifications such as the UL (United States), CE (Europe), and TUV (Germany), the primary purpose of testing is to ensure personal

safety of the users as well as long-term reliability of the products. To create an international sales channel, safety regulations must be regarded as a major concern.

General test instruments include multi-functional calibrators, resistors, and capacitor meters. In addition to single unit operations, these solutions can also be connected and used with other testers for R&D, design verification, and QA testing purposes. These test solutions were capable of fulfilling basic testing requirements of different units.

Flat panel display test solutions

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

Semiconductor/IC test solutions

The Corporation has established a strong foundation in the field of semiconductor wafer testing for many years, and thus has a large number of product lines. 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 can be used to rapidly screen 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/lighting test solutions

LED test equipment of the 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 electrostatic discharge, thermal resistance, and temperature control (tri-temperature) can be carried out with simulated changes of environmental temperature and humidity and measuring the electrical and optical properties of the LED module. Test requirements for LED modules were primarily lifespan tests for LED Flash Lights, LED Light Bars, and OLEDs. Customized test solutions for electrical properties of LEDs and optical testing are also provided to satisfy various kinds of test requirements.

Photovoltaic 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 photovoltaic manufacturing. I-V testers could be used to measure cell conversion efficiency of solar cells and sort these cells according to conversion efficiency. Automatic optical testing is then

performed to detect any color, top side, and back side printing defects of the solar cell. Finally, the category of the solar cell is used to implement relevant sorting. When assembling a PV system, the system inverter 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 & automation solutions

The Corporation's battery testing and automation solutions cover a wide range of products that possess features of 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, which helps save on electricity and air conditioning costs and reduce production costs. Scope of application for these solutions includes electric vehicle manufacturers, energy storage system vendors, and battery module plants. These solutions are suitable for battery management system testing, battery pack endurance testing, product shipment inspection, design verification research, and battery pack production line capacity learning and DC internal group testing and other purposes.

Photonics test solution

Photonics test solutions include a wafer-level test for laser diodes and package-level test for active optical communication components. With the Corporation's superior power electronics and optical measurement technology, alongside the integration of institutions and temperature control, the optical components can be burned in at different ambient temperatures for testing. 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 high-capacity vehicle designs. A large number of chips are used to perform various tests. In addition, AOI can increase the speed and reliability of automated inspections. The design of a highly stable temperature control platform enables the R&D engineers to accurately understand the relationship between laser 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 assorted 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 enhance production efficiency.
Production process

==> picture [412 x 171] intentionally omitted <==

(III) Supply of primary raw materials The Corporation and its subsidiaries manufacture a large variety of products in small quantities. A large quantity of raw materials would be required, with primary materials including programmable logic gate array IC, converter IC, memory, relays, structural materials, and PCB. The following describes the state of material supply:

Primary raw material category	Main supplier	State of supply
Programmable logic gate array IC	Galaxy Far East Corp., Weikeng Industrial Co., Ltd., and Answer Technology Co., Ltd.	The three suppliers above, which serve as agents for distributing and selling products made by world- renowned manufacturers, are vendors which the Corporation collaborates in the long run, and offers products with stable quality and supply of goods.
Inverter IC	Answer Technology Co., Ltd., Morrihan International Corp., and World Peace Industrial Group	The three suppliers above, which serve as agents for distributing and selling products made by world- renowned manufacturers, are vendors which the Corporation collaborates in the long run, and offers products with stable quality and supply of goods.
Memory	Weikeng Industrial Co., Ltd., Transcend Information, Inc., and Arrow Electronics, Inc.	The three suppliers above, which serve as agents for distributing and selling products made by world- renowned manufacturers, are vendors which the Corporation collaborates in the long run, and offers products with stable quality and supply of goods.
Electric relay	Sumchip Technology Co., Ltd., IC-Hi Technology Co., Ltd., and Bright Toward Industrial Co., Ltd.	The three suppliers above, which serve as agents for distributing and selling products made by world- renowned manufacturers, are vendors which the Corporation collaborates in the long run, and offers products with stable quality and supply of goods.
Structural materials	Chyuan Jyh Industry Co.,Ltd., Gao Jing Jhun Metal Co, Ltd., and Chang Yang Electronics Co., Ltd.	The three suppliers above, whose manufacturing quality and supply of goods are relatively stable, are responsible for supplying goods, and have established good long-term relationship with the Corporation.
PCB	Lin Genius Enterprise Co. Ltd., Speed Circuits Co., Ltd., and Golden Sum Co., Ltd.	The three suppliers above, whose manufacturing quality and supply of goods are relatively stable, are responsible for supplying goods, and have established good long-term relationship with the 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 the Corporation’s subsidiary, Chroma New Material Corp.

Given the large variety of raw materials and components needed by the Corporation and its subsidiaries to manufacture precision instruments, all local and overseas purchases are handled by a single purchasing unit. Where possible, 2 or more suppliers were selected to ensure supplier replaceability, acquire competitive pricing, distribute purchasing risks, achieve reasonable cost reductions, and provide better services. The purchasing unit shall regularly review quotations offered by the supplier. QC and purchasing personnel shall conduct audits at the supplier end to ensure the stability of product quality while assessing the process capability of suppliers.

(IV) List of suppliers and customers accounting for 10 percent or more of the Corporation’s total purchases (sales) of goods in either of the two most recent years, amount and percentage of total purchases (sales) of goods, and reason for changes in these figures.
List of suppliers accounting for 10 percent or more of the Corporation's total purchases of goods in either of the two most recent years

Information on major suppliers in the two most recent years

Unit: NT$ thousands

Item	2017	2017	2017	2017	2018	2018	2018	2018
	Name	Amount	Proportion to net purchases of goods for the entire year (%)	Relationship with the issuer	Name	Amount	Proportion to net purchase of goods for the entire year (%)	Relationship with the issuer
1	NMC	1,164,136	13.99	None	NMC	1,085,331	11.73	None
2	NMC(Philippines)	780,296	9.38	None	NMC(Philippines)	794,434	8.58	None
	Others	6,378,055	76.63	-	Others	7,374,992	79.69	-
	Net purchase	8,322,487	100.00		Net purchase	9,254,757	100.00

Explanation for any changes:

As NMC is the main supplier of the Corporation's subsidiary, Chroma New Material Corporation, the change in purchase of goods was mainly resulted from the decrease in the proportion of sales of special materials by NMC to its consolidated revenue in 2018. Therefore, the ratio of purchases of goods significantly reduced. Yet, NMC remains one of the two most important suppliers of the Corporation.

List of customers accounting for 10 percent or more of the Corporation's total sales of goods in either of the two most recent years

Information of major customers for the two most recent years

Unit: NT$ thousands

	2017	2017	2017	2017	2018	2018	2018	2018
Item	Name	Amount	Proportion to net sales of goods for the entireyear(%)	Relationship with the issuer	Name	Amount	Proportion to net sales of goods for the entireyear(%)	Relationship with the issuer
1	Others	14,901,346	100.00	-	Customer A	2,646,345	15.63	None
					Others	14,284,783	84.37	-
	Net sales	14,901,346	100.00		Net sales	16,931,128	100.00

Explanation for any changes:

These changes occurred due mainly to the fact that the revenue of MAS Automation Corp. under the Group in 2018 grew by 92%, and the total sales of goods to Customer A, an important sales customer of MAS Automation Corp., accounted for 15.63% of the total revenue of the Group.

(V) Production volume in the two most recent years

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

Year Production volume and value Majorproduct	2017	2017	2017	2018	2018	2018
	Production capacity (Note 1)	Production volume	Production value	Production capacity (Note 1)	Production volume	Production value
Test instrument equipment	-	82,080	3,098,167	-	80,981	2,741,528
Special materials	-	-	-	-	-	-0
Automatic equipment	-	203	2,504,014	-	178	4,001,230
Others	-	21	971	-	153	6,103
Total	-	82,304	5,603,152	-	81,312	6,748,861

Note 1: The Corporation and its subsidiaries adopt a production model of producing small amounts in wide varieties 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 this production model. For production processes, flexible manufacturing work stations are assembled based upon the number of man hours contributed by operators and test personnel, along with machinery and equipment. Production volume and capacity for various products shall be arranged according to the product market or purchase order requirements. Expected production volume is used to flexibly adjust production capacity in order to achieve maximum benefits using limited economic resources. Hence, stable capacity utilization rate can be maintained for all primary products listed above. The most flexible production plan can also be applied to products with market advantage in order to achieve optimal capacity utilization rate.

(VI) Sales volume in the two most recent years

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

Year Sales volume and value Majorproduct	2017	2017	2017	2017	2018	2018	2018	2018
	Domestic sales		Export sales		Domestic sales		Export sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Test instrument	13,887	1,776,403	104,278	8,156,211	20,354	1,628,748	95,358	8,095,583
Special materials	2,920,789,389	2,028,001	71	26,567	3,034,452,325	1,969,686	71	35,315
Automatic equipment	133	30,209	70	2,508,139	107	147,298	71	4,715,025
Others	-	323,187	-	52,629	-	176,142	-	163,331
Total	2,920,803,409	4,157,800	104,419	10,743,546	3,034,472,786	3,921,874	95,500	13,009,254

III. Employee information in the two most recent years up to the publication date of this annual report

	Year	2017	2018	Current year up to February 28,2019
Number of employees	Management and sales personnel	1,258	1,341	1,333
	Manufacturing personnel	856	854	835
	R&Dpersonnel	757	791	788
	Total	2,871	2,986	2,956
Average age		35.26	33.7	33.83
Averagework tenure		5.88	6.71	6.83
Proportion for the distribution of academic backgrounds Ratio	PhD	0.91%	0.97%	0.97%
	Masters	20.37%	21.40%	21.48%
	University/college degree	63.97%	68.46%	68.49%
	High school diploma	13.14%	7.55%	7.42%
	Below high school	1.61%	1.63%	1.64%

IV. Environmental protection expenditure
(I) Total losses and fines from environmental pollution from the most recent year up to the publication date of this annual report: None.
- In 2018, 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.
(II) Future response strategies
- Located in the Huaya Technology Park in Linkou, the Corporation engages in a high tech and low polluting industry in the IT sector, which does not cause public hazards or pollution issues during the production process. Hence, there is no need for the Corporation to apply for a permit to establish pollution control facilities. For waste water and sewage issues, the Corporation only generates domestic sewage which undergoes 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 a waste removal and treatment company approved by the competent environmental protection agency. The waste removal and treatment company approved by the competent environmental protection authority is also entrusted to carry out proper disposal or recycling of business waste. The Corporation and its subsidiaries place great importance on environmental issues and comply with the relevant laws. Landscaping and aesthetics were considered when constructing factory buildings to provide green, spacious, clean, healthy, and comfortable areas for employees.

The Corporation and its subsidiaries also actively participate in activities related to green and environmental protection industries, and actively incorporate or develop greener operations and products for processes, products, services, and principles in

order to fulfill laws and requirements related to RoHS and toxic chemical substances of the customers and countries where the products are being sold to. These laws and requirements are also used as guidelines to achieve continuous improvements and sustainable management to achieve the final objective of green industries. When pursuing and maintaining the overall ecology and sustainable development, the Corporation and its subsidiaries are committed to technical improvements and breakthrough while fulfilling corporate responsibilities such as compliance with the law, social duties, and environmental protection. Stringent approaches are adopted to actively promote environmental management systems (EMS), safety and healthrelated activities, and pollution prevention measures in order to create an excellent, safe, and healthy work environment to safeguard employees’ physical and mental health.

V. Labor relations
(I) Various employee welfare measures, continuing education and training, retirement systems, and their implementation, as well as various labor-management agreements and measures for safeguarding employee rights and interests.
1. Employee welfare measures The Corporation has established the Employee Welfare Committee in charge of coordinating and managing employee welfare funds, organizing employee social clubs and trips, ball games, social activities, and festive gifts for fellow employees. The plan also includes subsidies for employee marriage, passing of immediate family, 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.
2. Continuing education and training To promote the employees’ competence, knowledge, and management skills required for their duties, the Corporation stipulated the Education and Training Management Regulations. The Corporation's business objectives, as well as results of departmental surveys, were compiled to formulate the annual training plan. Newly hired staff was 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 the results for the implementation of training the most recent year:

year:
Numberofemployees trained	Training expenses (NT$ thousands)
9,605	1,891

Training courses include: training for newly hired staff, professional training, language training, management function training, and lifestyle seminars.
1. Retirement system

The Corporation has established the Regulations for Employee Retirement in accordance with the Labor Standards Act, stipulating that 4% of the total monthly salary provided shall be contributed to the retirement reserve fund and deposited to at the Trust Department of Bank of Taiwan. On the other hand, the Employment Retirement Reserve Fund Supervision Committee has been established for monitoring the retirement reserve fund. As of July 1, 2005, regulations for employee retirement funds entered into force, contributions shall be deposited to the Employee's Pension Account established by the Bureau of Labor Insurance.

Labor-management agreement
The 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 are also established. Additionally, it promotes the efficiency of internal communication and encourages fellow employees to propose various recommendations. In addition to regular internal

communication meetings between various units, communication channels for employee relations were also established. Any employee inquiry or suggestions can be communicated using the “Employee Communication Helpline”, “Employee Communication Email”, and “Employee Communication Feedback Mailbox” in order to learn about the issues faced by employees, thereby preventing any possible labor disputes.

Measures for safeguarding employee rights and interests To safeguard the employees’ rights and improve the living standards of fellow employees, additional labor-management communication channels have been established. The Corporation has also established the Employee Welfare Committee to plan the allocation, payment, preservation, and utilization of the employee welfare fund and to provide laws specified by relevant laws. Protection of employees’ rights and implementation of welfare systems shall comply with the relevant laws and regulations.
(II) Any loss suffered due to labor disputes, estimated loss for current or future incidents that may occur, and response measures from the most recent year up to the publication date of this annual report, and reasons why a reasonable estimate cannot be made: None.

VI. Important contracts

Nature of contract	Contracting party	Start and end date of contract	Major content	Restrictive terms
Land purchase and sale contract	Ministry of the Interior	After signing the contract on April 18, 2012 until the advance registration of land for this project is fully terminated in accordance with the contract	The Corporation entered into a contract with Heran Co., Ltd. and Dynapack Corp. to participate in the "Tender for the Industrial Development Zone in the Taoyuan International Airport Access MRT Station A7 Transit-Oriented Development Zone". The total sum of this contract was NT$ 10,088,889,990, and the project covered a total land area of 222,300 square meters. Shares held by each member of the tender are as follow: Chroma ATE Inc. 35%, Heran Co., Ltd. 35%, and Dynapack International Technology Corporation 30%.	When transferring land property rights, the seller requested the buyer to agree to the condition of providing notice land registration to this land as undeveloped and unused land.
Construction contract	Lee Ming Construction Co., Ltd.	(1) February 24, 2017 to the project acceptance date (2) August 15th, 2017 to the project acceptance date	(1) New construction of the Corporation's Station A7 building. (2) Electrical and mechanical works for the Corporation's Station A7 building.	None
Construction contract	Evergreen Steel Corp.	March 2017 to the project acceptance date	Steel structure works for the construction of the Corporation's Station A7 building	None
Construction contract	Lead Fu Industrials Corp.	August 15, 2017 to the project acceptance date	Glass curtain works for the construction of the Corporation's Station A7 building	None
Medium- term loan contract	Taishin International Bank	2017.9.4~2020.9.4	Medium-term loan	The financial ratios must meet the agreed criteria during the duration ofcreditline.
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	Medium-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.
(1) Share transfer agreement (2)Share purchase agreement	(1)Camtek (2) Priortech	2019.2.11 to	Chroma will acquire a total of 6,117,440 shares from Priortech(the controlling shareholder of Camtek) and a further 1,700,000 new shares issued by Camtek with cash payment of US$ 9.50 per share. The total cash transaction will be US$ 74 million.	The delivery will
		delivery condition		be carried out after
		achievement		the completion of the delivery conditions in accordance with the agreement of

				the equity sale and
				purchase
				agreement and the
				equity transfer agreement.

Chapter 6 Financial Summary

I. Condensed balance sheet and statement of comprehensive income in the five most recent years 1. Condensed consolidated balance sheet and statement of comprehensive income

Unit: NT$ thousands

		Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item		Financial information in the five most recent years
		2014(Note 1)	2015(Note 1)	2016	2017	2018
Current assets		9,184,704	9,632,600	11,212,692	14,105,784	13,231,273
Property, plant and equipment		2,712,962	2,767,608	2,714,127	2,664,584	3,389,889
Intangible assets		200,472	200,576	227,503	278,036	274,095
Other assets		2,871,838	3,459,655	4,478,456	4,969,208	6,307,207
Total assets		14,969,976	16,060,439	18,632,778	22,017,612	23,202,464
Current liabilities	Before distribution	2,870,775	3,112,654	4,723,411	6,922,901	5,972,513
	Afterdistribution	3,853,214	4,020,607	6,037,618	8,774,705	(Note2)
Non-current liabilities		2,726,113	3,416,489	3,121,516	1,631,882	2,539,602
Total liabilities	Before distribution	5,596,888	6,529,143	7,844,927	8,554,783	8,512,115
	After distribution	6,579,327	7,437,096	9,159,134	10,406,587	(Note 2)
Equity attributable to the owner ofthe parent company		9,252,948	9,410,104	10,616,627	13,230,679	14,410,020
Capital stock		3,787,821	3,791,699	3,898,872	4,118,942	4,167,794
Capital surplus		1,256,654	1,302,269	1,960,159	3,187,289	3,469,637
Retained earnings	Before distribution	3,737,083	3,952,185	4,735,275	5,972,296	6,795,059
	After distribution	2,754,644	3,044,232	3,421,068	4,120,492	(Note 2)
Other equity		507,104	399,665	58,035	(12,134)	13,244
Treasury stock		(35,714)	(35,714)	(35,714)	(35,714)	(35,714)
Non-controllinginterests		120,140	121,192	171,224	232,150	280,329
Total equity	Before distribution	9,373,088	9,531,296	10,787,851	13,462,829	14,690,349
	After distribution	8,390,649	8,623,343	9,473,644	11,611,025	(Note 2)

Year Item	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears
	2014 (Note 1)	2015 (Note 1)	2016	2017	2018
Operatingrevenue	10,307,085	9,692,365	11,624,369	14,901,346	16,931,128
Gross profit (Note 3)	4,046,270	4,221,340	5,428,322	7,068,872	7,458,293
Profitfromoperations	1,221,400	1,219,999	2,013,181	3,043,081	3,039,633
Non-operatingincome and expenses	302,113	262,673	28,876	78,986	268,457
Profit beforeincome tax	1,523,513	1,482,672	2,042,057	3,122,067	3,308,090
Netincomefromcontinuing operations	1,295,985	1,194,542	1,695,566	2,548,823	2,547,179
Lossfromdiscontinued operations	─	─	─	─	─
Net profit	1,295,985	1,194,542	1,695,566	2,548,823	2,547,179
Other comprehensive income (net value aftertax)	4,567	(131,740)	(223,152)	(138,228)	3,487
Totalcomprehensiveincome	1,300,552	1,062,802	1,472,414	2,410,595	2,550,666
Net profit attributable to the owner of the parent company	1,318,373	1,236,557	1,719,935	2,558,401	2,546,275
Net profit attributable to non-controlling interests	(22,388)	(42,015)	(24,369)	(9,578)	904
Total comprehensive income attributable to the ownerofthe parent company	1,320,288	1,102,621	1,501,612	2,425,174	2,546,584
Total comprehensive income attributable tonon-controllinginterests	(19,736)	(39,819)	(29,198)	(14,579)	4,082
Earningsper share(NT$)	3.51	3.28	4.53	6.41	6.22

Note 1:[In 2015, the Corporation began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as ] well as the 2013 version of IFRS and International Accounting Standards (IAS) as well as interpretations and announcements thereof approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial statements to adjust those items that may be affected by these adoptions.

Note 2:[The 2018 surplus allocation plan has not been approved by the Annual General Meeting. As a result, these fields were left blank ] as a result.

Note 3:[The values listed are net realized gross profit from which unrealized gross profit are deducted.]

2. Condensed parent company-only balance sheet and statement of comprehensive income

Unit: NT$ thousands

		Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Year Item		Financial information in the five most recentyears
		2014(Note 1)		2015(Note 1)		2016		2017		2018
Current assets		6,015,641		5,999,691		7,709,289		8,212,509		6,640,159
Property, plant and equipment		1,907,429		1,844,215		1,805,031		1,789,099		2,493,620
Intangible assets		94,424		94,424		94,424		94,424		94,424
Other assets		5,274,245		6,026,586		6,977,507		8,463,667		10,098,682
Total assets		13,291,739		13,964,916		16,586,251		18,559,699		19,326,885
Current liabilities	Before distribution	1,455,362		1,310,706		3,037,002		3,877,087		2,551,737
	After distribution	2,442,795		2,220,906		4,351,427		5,731,511		(Note 2)
Non-current liabilities		2,583,429		3,244,106		2,932,622		1,451,933		2,365,128
Total liabilities	Before distribution	4,038,791		4,554,812		5,969,624		5,329,020		4,916,865
	After distribution	5,026,224		5,465,012		7,284,049		7,183,444		(Note 2)
Equity attributable to the ownerofthe parent company		9,252,948		9,410,104		10,616,627		13,230,679		14,410,020
Capital stock		3,787,821		3,791,699		3,898,872		4,118,942		4,167,794
Capital surplus		1,256,654		1,302,269		1,960,159		3,187,289		3,469,637
Retained earnings	Before distribution	3,737,083		3,952,185		4,735,275		5,972,296		6,795,059
	After distribution	2,749,650		3,041,985		3,420,850		4,117,872		(Note 2)
Other equity		507,104		399,665		58,035		(12,134)		13,244
Treasury stock		(35,714)		(35,714)		(35,714)		(35,714)		(35,714)
Non-controllinginterests		─		─		─		─		─
Total equity	Before distribution	9,252,948		9,410,104		10,616,627		13,230,679		14,410,020
	After distribution	8,265,515		8,499,904		9,302,202		11,376,255		(Note 2)

Item		Year	Financial information inthefivemostrecent years
			2014(Note1)		2015 (Note1)		2016		2017		2018
Operating revenue			5,135,199		4,539,441		7,233,315		8,018,006		7,546,840
Gross profit (Note 3)			2,752,917		2,519,834		3,763,579		4,116,862		3,916,720
Profit from operations			1,052,145		825,721		1,726,398		1,759,378		1,514,112
Non-operating income and expenses			431,832		548,464		281,123		1,106,336		1,414,496
Profit before income tax			1,483,977		1,374,185		2,007,521		2,865,714		2,928,608
Net income from continuing operations			1,318,373		1,236,557		1,719,935		2,558,401		2,546,275
Lossfromdiscontinued operations			─		─		─		─		─
Net profit			1,318,373		1,236,557		1,719,935		2,558,401		2,546,275
Other comprehensive income (net value aftertax)			1,915		(133,936)		(218,323)		(133,227)		309
Total comprehensive income			1,320,288		1,102,621		1,501,612		2,425,174		2,546,584
Net profit attributable to the owner of the parent company			1,318,373		1,236,557		1,719,935		2,558,401		2,546,275
Net profit attributable to non-controlling interests			─		─		─		─		─
Total comprehensive income attributable to the ownerofthe parent company			1,320,288		1,102,621		1,501,612		2,425,174		2,546,584
Total comprehensive income attributable tonon-controllinginterests			─		─		─		─		─
Earnings per share (NT$)			3.51		3.28		4.53		6.41		6.22

Note 1: In 2015, the Corporation began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of IFRS and International Accounting Standards (IAS) as well as interpretations and announcements thereof approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial statements to adjust those items that may be affected by these adoptions.

Note 2: The 2018 surplus allocation plan has not been approved by the Annual General Meeting. As a result, 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.

Names of CPA and audit opinion for the five most recent years (1) Name of CPA and audit opinion for the five most recent years

Year	Accountingfirm	Name of CPA	Audit opinion
2014	Deloitte & Touche	Cheng-Ming Lee, Li-Wen Kuo	Unqualified opinion
2015	Deloitte & Touche	Yi-Wen Wang, Wen-Chi Kuo	Unqualified opinion
2016	Deloitte & Touche	Yi-Wen Wang, Wen-Chi Kuo	Unqualified opinion
2017	Deloitte & Touche	Cheng-Ming Lee, Wen-Chi Kuo	Unqualified opinion
2018	Deloitte & Touche	Cheng-Ming Lee, Wen-Chi Kuo	Unqualified opinion

(2) Accounting firm, former and successor CPAs, and reasons for the replacement of CPAs in the five most recent years
1) Reasons for replacing CPAs in 2014
- a. Name of former and successor CPAs: Former CPAs: Wen-Chin Lin, Cheng-Ming Lee Successor CPAs: Cheng-Ming Lee, Li-Wen Kuo
- b. Reason for replacement: Internal rotation of duties in the accounting firm.
- c. Date of incident: April 30, 2014
- d. Any disagreement related to accounting principles or audit items between former and successor CPAs: None.
2) Reasons for replacing CPAs in 2015
- a. Name of former and successor CPAs: Former CPAs: Cheng-Ming Lee, Li-Wen Kuo Successor CPAs: Yi-Wen Wang, Wen-Chi Kuo
- b. Reason for change: To ensure the independence of CPAs and comply with the internal rotation system of Deloitte & Touche.
- c. Date of incident: December 23, 2015.
- d. Any disagreement related to accounting principles or audit items between former and successor CPAs: None.
3) Reasons for changing CPAs in 2017
- a. Name of former and successor CPAs: Former CPAs: Yi-Wen Wang, Wen-Chi Kuo Successor CPAs: Cheng-Ming Lee, Wen-Chi Kuo
- b. Reason for change: To comply with the internal rotation system of Deloitte & Touche.
- c. Date of incident: December 27, 2017
- d. Any disagreement related to accounting principles or audit items between former and successor CPAs: None.

II. Financial analysis in the five most recent years 1. Consolidated financial analysis

Year Analysis item(Note 3)	Year Analysis item(Note 3)	Financial analysis for the five most recentyears	Financial analysis for the five most recentyears	Financial analysis for the five most recentyears	Financial analysis for the five most recentyears	Financial analysis for the five most recentyears
		2014 (Note 1)	2015 (Note 1)	2016	2017	2018
Financial structure (%)	Debt ratio	37.39	40.65	42.10	38.85	36.69
	Proportion of long-term capital to property, plant, and equipment	445.98	467.83	512.48	566.49	508.27
Debt- paying ability (%)	Current ratio	319.94	309.47	237.39	203.76	221.54
	Quick ratio	258.74	248.58	190.86	161.87	163.98
	Interest coverage ratio	49.67	39.02	49.56	138.04	105.13
Operating ability	Receivables turnover (times)	3.25	3.23	3.92	4.04	3.72
	Average collection days	112	113	93	90	98
	Inventory turnover (times)	3.46	2.73	2.77	2.97	2.95
	Payable turnover (times)	4.77	4.02	3.62	3.15	3.45
	Average inventory turnover days	105	134	132	123	124
	Property, plant and equipment turnover(times)	3.81	3.54	4.24	5.54	5.59
	Total asset turnover (times)	0.74	0.62	0.67	0.73	0.75
Profitability	Return on assets (%)	9.69	8.18	10.12	12.68	11.37
	Return on equity (%)	14.80	13.25	17.18	21.46	18.42
	Ratio of income before tax to paid-in capital(%)	40.22	39.10	52.38	75.80	79.37
	Net profit margin (%)	12.79	12.76	14.80	17.17	15.04
	Earnings per share (NT$)	3.51	3.28	4.53	6.41	6.22
Cash flow	Cash flow ratio (%)	42.76	72.88	42.36	39.71	21.19
	Cash flow adequacy ratio (%)	103.43	89.78	84.19	89.99	77.28
	Cash re-investment ratio (%)	2.31	9.82	8.31	10.36	(Note 2)
Degree of leverage	Degree of operating leverage (DOL)	1.25	1.27	1.17	1.10	1.10
	Degree of financial leverage (DFL)	1.03	1.03	1.02	1.01	1.01
Explain the reasons for changes in various financial ratios in the two most recent years (analysis is not required if the change is within 20%). The following describes the reason for changes to financial ratios that exceed 20% in the two most recent years: 1. Decrease in interest coverage ratio: It was mainly due to the increase in interest expense in 2018 compared to the previous period. 2. Decrease in cash flow: It was mainly due to the decrease in net cash inflows from operating activities and the increase in capital expenditures in 2018 compared with the previous period, resulting in a decrease in cash flow ratio.

Note 2: Net cash flow from operating activities - cash dividends is negative. Therefore, the relevant ratio is not applicable. Note 3: The following lists the formulas used for performing the financial analysis: 1. Financial structure (1) Debt ratio = Total liabilities/Total assets. (2) Proportion of long-term capital to property, factory and equipment ratio = (Total equity + Non-current liabilities)/Net property, plant and equipment.
Debt-paying ability (1) Current ratio = Current assets/Current liabilities. (2) Quick ratio = (Current assets – Inventory – Prepaid expense)/Current liabilities. (3) Interest coverage ratio = Net income before income tax and interest expense/Current interest expense for the 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 goods sold/Average inventory value.

  - (4) Payable turnover rate (including bills payable resulting from accounts payable and business operations) = Cost of goods sold/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 asset turnover rate = Net sales/Average total assets.
1. Profitability (1) Return on assets ＝ [Net income after taxes + Interest expense (1– Tax rate)]/Average total assets. (2) Return on equity = Net income after taxes/Average total equity.
2. (3) Net profit margin = Net income after taxes/Net sales.
(4) Earnings per share = (Net profit (loss) attributable to the owners of the parent company – Preferred dividends) / Weighted average number of shares outstanding.
1. Cash flow (1) Cash flow ratio = Net cash flow from operating activities/Current liabilities.
2. (2) Net cash flow adequacy ratio = Net cash flow from operating activities for the five most recent years/(Capital expenditure + Inventory increase + Cash dividend) for the most recent five years.
3. (3) Cash reinvestment ratio = (Net cash flow from operating activities – Cash dividend)/Gross value of PP&E + Long-term investments + Other non-current assets + Working capital).
Degree of leverage (1) Degree of operating leverage = (Net operating revenue - Change in operating costs and operating expenses)/Operating income.
- (2) Degree of financial leverage = Operating income/(Operating income - Interest expenses).
Note 4: The following shall be taken note of when using the abovementioned formula for calculating earnings per share: 1. Calculation is made based upon the weighted average of common shares and not the number of issued shares at the end of the year.
Where cash capital increase or transaction of treasury stock is involved, weighted average number of shares shall be calculated by taking into consideration circulation period.
Where recapitalization of retained earnings or recapitalization of Capital surplus is involved, retrospective adjustment shall be made according to the proportion of recapitalization when calculating annual and semiannual earnings per share. There is no need to consider the period of issuance for the said recapitalization.
If preferred shares cannot be converted into cumulative preferred shares, then dividends for the year (issued or not) shall be deducted from NIAT or increase net loss after tax. If preferred shares are non-cumulative, dividends for preferred shares shall be deducted from any NIAT resulting from this period. No readjustment is required for losses.
Note 5: The following items shall be taken note of during cash flow analysis:
Net cash flow from operating activities refers to the net cash inflows from operating activities in the statement of cash flows.
Capital expenditure refers to the amount of cash outflows from capital investments every year.
Inventory increase is only included in the calculation when the ending balance is greater than the beginning balance. Inventory decrease at the end of the year shall be calculated as zero.
Cash dividends include cash dividends for common shares and preferred shares.
Gross value of property, plant and equipment (PP&E) refers to the total value of PP&E before deducting accumulated depreciation.
Note 6: The issuer shall categorize operating costs and operating expenses as fixed and variable based on the nature of these items. Where estimates or subjective judgments must be made, care must be taken to ensure their validity and consistency.
Note 7: Where the share of the Corporation has no par value or its par value is not NT$10 per share, the abovementioned ratio of income before tax to paid-in capital shall be replaced with ratio of income before tax to equity attributable to the owner of the parent company listed in the balance sheet.

2. Parent company-only financial analysis

Year Analysis item(Note 3)	Year Analysis item(Note 3)	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears
		2014 (Note 1)	2015 (Note 1)	2016	2017	2018
Financial structure (%)	Debt ratio	30.39	32.62	35.99	28.71	25.44
	Proportion of long-term capital to property, plant, and equipment	620.54	686.16	750.64	820.67	672.72
Debt-paying ability (%)	Current ratio	413.34	457.74	253.85	211.82	260.22
	Quick ratio	325.04	354.57	204.82	161.19	184.01
	Interest coverage ratio	69.62	48.66	74.97	230.44	135.59
Operating ability	Receivables turnover (times)	2.54	2.25	3.58	2.91	2.58
	Average collection days	144	162	102	125	141
	Inventory turnover (times)	1.73	1.34	2.13	2.07	1.75
	Payable turnover (times)	5.07	3.55	3.94	3.01	3.01
	Average inventory turnover days	211	272	171	176	209
	Property, plant and equipment turnover(times)	2.68	2.42	3.96	4.46	3.52
	Total asset turnover (times)	0.42	0.33	0.47	0.46	0.40
Profitability	Return on assets (%)	11.01	9.25	11.41	14.62	13.53
	Return on equity (%)	14.80	13.25	17.18	21.46	18.42
	Ratio of income before tax to paid-in capital(%)	39.18	36.24	51.49	69.57	70.27
	Net profit margin (%)	25.67	27.24	23.78	31.91	33.74
	Earnings per share (NT$)	3.51	3.28	4.53	6.41	6.22
Cash flow	Cash flow ratio (%)	56.54	116.19	65.03	17.05	71.13
	Cash flow adequacy ratio (%)	82.31	74.59	72.41	61.09	63.58
	Cash re-investment ratio (%)	(Note 2)	4.46	8.88	(Note 2)	(Note 2)
Degree of leverage	Degree of operating leverage (DOL)	1.16	1.24	1.14	1.12	1.12
	Degree of financial leverage (DFL)	1.02	1.04	1.02	1.01	1.01
Explain the reasons for changes in various financial ratios in the two most recent years (analysis is not required if the change is within 20%). The following describes the reason for changes to financial ratios that exceed 20% in the two most recent years: 1. Increase in current ratio: It was mainly due to the decrease in long-term liabilities due within one year in 2018. 2. Decrease in interest coverage ratio: It was mainly due to the increase in interest expense in 2018 compared to the same period in the previous year. 3. Decrease in property, plant and equipment turnover: It was mainly due to the decrease in revenue and the increase in average net fixed assets in 2018. 4. Increase in cash flow ratio: It was mainly due to the increase in net cash flow from operating activities and the decrease in current liabilities 2018.

Note 1: In 2015, the Corporation began to adopt the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the 2013 version of IFRS and International Accounting Standards (IAS) as well as interpretations and announcements thereof approved by the Financial Supervisory Commission (FSC), and traced applicable items in previous financial statements to adjust those items that may be affected by these adoptions.
Note 2: Net cash flow from operating activities - cash dividends is negative. Therefore, the relevant ratio is not applicable. Note 3: The following lists the formulas used for performing the financial analysis: 1. Financial structure (1) Debt ratio = Total liabilities/Total assets. (2) Proportion of long-term capital to property, factory and equipment ratio = (Total equity + Non-current liabilities)/Net property, plant and equipment.
1. Debt-paying ability (1) Current ratio = Current assets/Current liabilities. (2) Quick ratio = (Current assets – Inventory – Prepaid expense)/Current liabilities. (3) Interest coverage ratio = Net income before income tax and interest expense/Current interest expense for the period.
1. 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 goods sold/Average inventory value. (4) Payable turnover rate (including bills payable resulting from accounts payable and business operations) = Cost of goods sold/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 asset turnover rate = Net sales/Average total assets.
1. Profitability (1) Return on assets ＝ [Net income after taxes + Interest expense (1– Tax rate)]/Average total assets. (2) Return on equity = Net income after taxes/Average total equity. (3) Net profit margin = Net income after taxes/Net sales. (4) Earnings per share = (Net profit (loss) attributable to the owners of the parent company – Preferred dividends) / Weighted average number of shares outstanding.
1. Cash flow (1) Cash flow ratio = Net cash flow from operating activities/Current liabilities.
(2) Net cash flow adequacy ratio = Net cash flow from operating activities for the five most recent years/(Capital expenditure + Inventory increase + Cash dividend) for the most recent five years.
(3) Cash reinvestment ratio = (Net cash flow from operating activities – Cash dividend)/Gross value of PP&E + Long-term investments + Other non-current assets + Working capital).
1. Degree of leverage (1) Degree of operating leverage = (Net operating revenue - Change in operating costs and operating expenses)/Operating income.
(2) Degree of financial leverage = Operating income/(Operating income - Interest expenses).
Note 4: The following shall be taken note of when using the abovementioned formula for calculating earnings per share: 1. Calculation is made based upon the weighted average of common shares and not the number of issued shares at the end of the year.
Where cash capital increase or transaction of treasury stock is involved, weighted average number of shares shall be calculated by taking into consideration circulation period.
Where recapitalization of retained earnings or recapitalization of Capital surplus is involved, retrospective adjustment shall be made according to the proportion of recapitalization when calculating annual and semiannual earnings per share. There is no need to consider the period of issuance for the said recapitalization.
If preferred shares cannot be converted into cumulative preferred shares, then dividends for the year (issued or not) shall be deducted from NIAT or increase net loss after tax. If preferred shares are non-cumulative, dividends for preferred shares shall be deducted from any NIAT resulting from this period. No readjustment is required for losses.

Note 5: The following items shall be taken note of during cash flow analysis:

Net cash flow from operating activities refers to the net cash inflows from operating activities in the statement of cash flows.
Capital expenditure refers to the amount of cash outflows from capital investments every year.
Inventory increase is only included in the calculation when the ending balance is greater than the beginning balance. Inventory decrease at the end of the year shall be calculated as zero.
Cash dividends include cash dividends for common shares and preferred shares.
Gross value of property, plant and equipment (PP&E) refers to the total value of PP&E before deducting accumulated depreciation.
Note 6: The issuer shall categorize operating costs and operating expenses as fixed and variable based on the nature of these items. Where estimates or subjective judgments must be made, care must be taken to ensure their validity and consistency.
Note 7: Where the share of the Corporation has no par value or its par value is not NT$10 per share, the abovementioned ratio of income before tax to paid-in capital shall be replaced with ratio of income before tax to equity attributable to the owner of the parent company listed in the balance sheet.

III. Audit Committee's audit report on financial statements in the most recent year

Chroma ATE Inc.

Audit Committee’s Audit Report

This audit report was generated after a complete audit of the Corporation's 2018 business report, parent company-only and consolidated financial statements, and surplus allocation plan submitted by the Board of Directors, where the parent company-only and consolidated financial statements have been audited by CPAs Cheng-Ming Lee and Wen-Chi, Kuo of Deloitte & Touche. No discrepancies were found upon review of the abovementioned documents by the Audit Committee. This audit report is hereby submitted for review in accordance with Article 14-4 of the Securities and Exchange Act and Article 2019 of the Company Act.

Sincerely yours,

Chroma ATE Inc. 2019 Annual General Meeting

Chairman of Audit Committee: Tsung-Ming Chung

==> picture [56 x 53] intentionally omitted <==

March 7, 2019

IV. Financial statements in the most recent year: Refer to Page 111 to 202 of this annual report.
V. The Corporation's parent company-only financial statements audited and attested by CPAs in the most recent year: Refer to Page 203 to 281 of this annual report.
VI. Any financial difficulties experienced by the Corporation and its affiliated companies during the most recent year up to the publication date of this annual report as well as the impact of the said difficulties on the financial condition of the Corporation: None.

Chapter 7 Review and Analysis of Financial Condition and Performance, and Relevant Risk Events

I. Financial condition

Comparative analysis of financial conditions

Units: NT$ thousands; %

Year			Difference	Difference
	December 31, 2018	December 31, 2017
Item			Amount	%


Current assets	13,231,273	14,105,784	(874,511)	(6%)
Property, plant and
	3,389,889	2,664,584	725,305	27%
equipment

Investment property	3,137,187	0	3,137,187	-
Intangible assets	274,095	278,036	(3,941)	(1%)
Other assets	3,170,020	4,969,208	(1,799,188)	(36%)
Total assets	23,202,464	22,017,612	1,184,852	5%
Current liabilities	5,972,513	6,922,901	(950,388)	(14%)
Non-current liabilities	2,539,602	1,631,882	907,720	56%
Total liabilities	8,512,115	8,554,783	(42,668)	-
Capital stock	4,167,794	4,118,942	48,852	1%
Capital surplus	3,469,637	3,187,289	282,348	9%
Retained earnings	6,795,059	5,972,296	822,763	14%
Other equity	13,244	(12,134)	25,378	209%
Treasury stock	(35,714)	(35,714)	0	-
Non-controlling interests	280,329	232,150	48,179	21%
Total shareholders' equity	14,690,349	13,462,829	1,227,520	9%
1. Major reasons and impact of any material change to the Corporation's assets, liabilities, or equity in the two most recent years: (analysis of changes whose percentage exceeds 20%, and whose amount reaches NT$10 million shall be provided) (1) Increase in property, plant and equipment: It was mainly due to the acquisition of land rights related to the development of Station A7 of the Taoyuan International Airport Access MRT. (2) Increase in investment property: It was mainly due to the acquisition of land rights related to the development of Station A7 of the Taoyuan International Airport Access MRT, and the transfer of land for the development of Station A7 to investment property. (3) Decrease in other assets: It was mainly due to the transfer of prepaid land and equipment payments to property, plant and equipment, as well as investment property. (4) Increase in non-current liabilities: It was mainly due to the increase in long-term borrowings. (5) Increase in other equity: It was mainly due to the increase employees' unearned rewards. (6) Increase in non-controlling interests: It was mainly due to cash capital increase at subsidiaries. 2. Future response plan: These changes were considered part of normal business operations, and would not lead to severe negative impacts upon overall financial operations of the Corporation and its subsidiaries. 3. Futures responseplans: Not applicable.

II. Financial performance

Analysis of financial performance


Year				Percentage of
	2018	2017	Amount of change
Item				change(%)

Operating revenue	16,931,128	14,901,346	2,029,782	14%
Gross profit (Note)	7,458,293	7,068,872	389,421	6%
Profit from operations	3,039,633	3,043,081	-3,448	0%
Non-operating income and
	268,457	78,986	189,471	240%
expenses

Profit before income tax	3,308,090	3,122,067	186,023	6%
Net income	2,547,179	2,548,823	-1,644	0%
Other comprehensive
	3,487	(138,228)	141,715	103%
income(net value after tax)

Total comprehensive income	2,550,666	2,410,595	140,071	6%
Net profit attributable to the
owner of the parent	2,546,275	2,558,401	-12,126	0%
company
Total comprehensive income
attributable to the owner of	2,546,584	2,425,174	121,410	5%
theparent company
1. Major reasons and impact of any material change to the Corporation’s operating revenue, operating
profit, and earnings before tax (EBT) in the two most recent years: (analysis of changes whose
percentage exceeds 20%, and whose amount reaches NT$10 million shall be provided)
(1) Increase in non-operating income and expenses: It was mainly due to the increase in foreign
currency exchange gain.
(2) Increase in other comprehensive income for the period: It was mainly due to the increase in
unrealized gain or loss from equipment instrument investments measured at fair value and
exchange difference from the translation of financial statements of foreign operations.
2. Expected sales volume and relevant data, possible impact on the company’s financial operations, and
response plans:
The Corporation has invested in integrated testing 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 highly
recognized and employed by international first-tier manufacturers. Looking forward to 2019, with the
adjustment of inventory, it is generally expected that the economy will be flat, while most investors are
adopting a wait-and-see approach. For the non-Apple camp in the information and communications
industry, Huawei and Samsung will be launching a new generation of mobile phones and 5G
communications, in which increased transmission speed will help to expand 3D sensing applications. It
is expected that promoting the development of electric vehicles will help increase demand for
semiconductor and photonics test equipment. Rising labor cost and the US-China trade war will lead to
an increase in demand for intelligent and automation equipment.

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

III. Cash flow

Analysis of cash liquidity

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

Unit: NT$ thousands

				Unit: NT$thousands	Unit: NT$thousands
		Total net cash		Remedial measures for
Initial cash balance	Net cash inflow from operating activities throughout the year	inflow (outflow) from investing and financing activities throughout the year	Amount of cash surplus (deficit)	cash inadequacy Investment plan Financing plan
		(Note)
5,076,411	1,265,787	(3,418,241)	2,923,957	─	─

Note: Net cash outflow from investing and financing activities was NT$3,465,877 thousand, and the effect of exchange rate was NT$47,636 thousand.

Analysis of change in cash flow in the most recent year:
(1) Operating activities: Net cash inflow from operating activities in 2018 was NT$1,265,787 thousand, which came mainly from business profits.
(2) Investing activities: Net cash outflow from investing activities in 2018 amounted to NT$1,834,540 thousand, which was mainly used for making payment for the construction of the Station A7 Building.
(3) Financing activities: Net cash outflow from financing activities in 2018 amounted to NT$1,631,337 thousand, which came mainly from the issuance of cash dividends.
1. Remedial measures and liquidity analysis for cash inadequacy: Not applicable.

(II) Analysis of cash liquidity for the following year

Unit: NT$ thousands

				Unit: NT$thousands	Unit: NT$thousands
	Expected net cash	Expected total net		Remedial measures for
	inflow from	cash inflow	Expected	expected cash inadequacy
Beginning cash	operating	(outflow) from	amount of
balance	activities	investing and	cash surplus	Investment	Financing
	throughout the	financing activities	(deficit)	plan	plan
	year	throughout theyear
2,923,957	2,505,790	(3,512,804)	1,916,943	─	─

Analysis of changes in cash flow in the most recent year
(1) Operating activities: It mainly refers to cash inflow generated by business profits.
(2) Investing activities: It mainly refers to cash outflow due to expected payment for the construction of the Station A7 factory building and equity investment in Camtek.
(3) Financing activities: It mainly refers to cash outflow due to expected distribution of cash dividends and cash inflow generated by long-term borrowings.
1. Remedial measures and liquidity analysis for expected cash inadequacy: Not applicable.
IV. Impact of material expenditures on the Corporation's finances and operations in the most recent year

The Corporation made plans to invest NT$ 3.5 billion for expanding and constructing new Station A7 factory building. The construction will increase usable space. Expected adjustments to spatial layouts and production line configurations can 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 the Corporation.

The Corporation invested in the construction of the Station A7 factory building to expand production capacity and increase experiment area for R&D, and incorporated more R&D resources to develop more key technologies and products, in order to offer all-round turnkey test and automation solutions, in hopes of maintaining the long-term competitiveness of the Corporation, thereby providing the industry with products which are faster, more accurate and more reliable.

V. Investment policies in other companies, main reasons for profit / losses resulting therefrom, improvement plan, and investment plans for the upcoming year
(I) The most recent annual transfer of investment was mainly to increase the capital of the original investment company, and to invest in Singapore Quantel to establish sales locations 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 world in order to increase scale of operations.
(II) Profitability or loss analysis of invested companies

(I) The most recent annual transfer of investment was mainly to increase the capital of the original investment company, and to invest in Singapore Quantel to establish sales locations 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 world in order to increase scale of operations. (II) Profitability or loss analysis of invested companies	(I) The most recent annual transfer of investment was mainly to increase the capital of the original investment company, and to invest in Singapore Quantel to establish sales locations 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 world in order to increase scale of operations. (II) Profitability or loss analysis of invested companies	(I) The most recent annual transfer of investment was mainly to increase the capital of the original investment company, and to invest in Singapore Quantel to establish sales locations 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 world in order to increase scale of operations. (II) Profitability or loss analysis of invested companies	(I) The most recent annual transfer of investment was mainly to increase the capital of the original investment company, and to invest in Singapore Quantel to establish sales locations 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 world in order to increase scale of operations. (II) Profitability or loss analysis of invested companies
As of December 31,2018 Unit: NT$thousands Name of company Shareholding percentage Investment gain(loss) Description NeworldElectronicsLtd. 100.0% 112,846 Gain resultingfromexcellent sales Chroma New Material Corporation 100.0% 44,611 Gain resulting from excellent sales Chroma Investment Co., Ltd. 100.0% (2,094) Net profit in 2018 was NT$6,749 thousand, which was due to the deduction of dividend income from the parent company, thereby resultingin investmentlossforthe period. Adlink Technology Inc. 11.3% 26,963 Good R&D capabilities and business performance. San Eagle Development Corp. 100.0% 121,538 Mainly derived from investment profits recognized using the equitymethod MAS Automation Corp. 100.0% 885,886 Significant sales growth, leading to profit increase Chi Incorporation Ltd. 100.0% 7,444 Mainly derived from investment gain recognized using the equitymethod Testar Electronic Corporation 67.2% (1,876) Loss resulting from failure to meet revenue expectations andrising cost ChromaATE Inc. (USA) 100.0% (5,875)Lossresultingfrompoorsales Sensational HoldingLtd. 100.0% 1,851 Mainly derivedfrom rental income Chroma Systems Solutions, Inc. 25.0% 21,928 Establishment of a comprehensive sales networkwithgood business performance. Chroma ATE Europe B.V. 100.0% 21,939 Establishment of a comprehensive sales networkwithgood business performance. Chen HwaTechnologyInc. 100.0% 990Mainly derivedfromdividendincome. Dynascan Technology Corp. 27.3% 21,014Gain resultingfromexcellent sales Deep Red Holding Co., Ltd. 100.0% 45,430 Mainly derived from investment gain recognized using the equitymethod Chroma JapanCorp. 100.0% (33,979)Lossresultingfrompoorsales Chih Ho Shun Development Co.,Ltd. 35.0% 38 Mainly derived from recognized interest income. Adivic Technology Co., Ltd. 51.0% (20,641) Operational loss resulting from incomplete R&D for new products andhigh R&Dcosts EVT Technology Co., Ltd. 85.6% (8,517) Losses resulting from product conversion and incompleteR&D for new products Quantel Private Ltd. 60.0% 16,888 Establishment of a comprehensive sales networkwithgood business performance. Innovative Nanotech, Inc. 71.1% (22,503) A startup company which is still in the stage of product development Touch Cloud Inc. 78.1% (11,563)Still in the stage ofproduct development
Name of company	Shareholding percentage	Investment gain(loss)	Description
NeworldElectronicsLtd.	100.0%	112,846	Gain resultingfromexcellent sales
Chroma New Material Corporation	100.0%	44,611	Gain resulting from excellent sales
Chroma Investment Co., Ltd.	100.0%	(2,094)	Net profit in 2018 was NT$6,749 thousand, which was due to the deduction of dividend income from the parent company, thereby resultingin investmentlossforthe period.
Adlink Technology Inc.	11.3%	26,963	Good R&D capabilities and business performance.
San Eagle Development Corp.	100.0%	121,538	Mainly derived from investment profits recognized using the equitymethod
MAS Automation Corp.	100.0%	885,886	Significant sales growth, leading to profit increase
Chi Incorporation Ltd.	100.0%	7,444	Mainly derived from investment gain recognized using the equitymethod
Testar Electronic Corporation	67.2%	(1,876)	Loss resulting from failure to meet revenue expectations andrising cost
ChromaATE Inc. (USA)	100.0%	(5,875)	Lossresultingfrompoorsales
Sensational HoldingLtd.	100.0%	1,851	Mainly derivedfrom rental income
Chroma Systems Solutions, Inc.	25.0%	21,928	Establishment of a comprehensive sales networkwithgood business performance.
Chroma ATE Europe B.V.	100.0%	21,939	Establishment of a comprehensive sales networkwithgood business performance.
Chen HwaTechnologyInc.	100.0%	990	Mainly derivedfromdividendincome.
Dynascan Technology Corp.	27.3%	21,014	Gain resultingfromexcellent sales
Deep Red Holding Co., Ltd.	100.0%	45,430	Mainly derived from investment gain recognized using the equitymethod
Chroma JapanCorp.	100.0%	(33,979)	Lossresultingfrompoorsales
Chih Ho Shun Development Co.,Ltd.	35.0%	38	Mainly derived from recognized interest income.
Adivic Technology Co., Ltd.	51.0%	(20,641)	Operational loss resulting from incomplete R&D for new products andhigh R&Dcosts
EVT Technology Co., Ltd.	85.6%	(8,517)	Losses resulting from product conversion and incompleteR&D for new products
Quantel Private Ltd.	60.0%	16,888	Establishment of a comprehensive sales networkwithgood business performance.
Innovative Nanotech, Inc.	71.1%	(22,503)	A startup company which is still in the stage of product development
Touch Cloud Inc.	78.1%	(11,563)	Still in the stage ofproduct development

(III) Improvement plan
Adivic Technology Co., Ltd.: The WiFi test instruments developed by Avidic Technology has been provided to customers for verification. In mid-2018, some products have been completely verified by customers, while better performance has been recorded in the fourth quarter of 2018. It is expected that turnover can increase in 2019, thereby improving business performance.
EVT Technology Co., Ltd.: EVT Technology is now working with the Corporation to develop production lines for electric vehicle parts, expected improvement in business performance upon completion and release of R&D product in the market.
Innovative Nanotech, Inc.: Innovative Nanotech continues to invest in R&D. Its

products have met customer requirements, and are currently being verified by customers and suppliers.

Touch Cloud Inc.: Touch Cloud integrated its software with the Corporation's hardware, and built an AI platform to achieve expected turnover and profit.

(IV) Investment plans for the coming year: Taking into consideration future development strategies, as well as to improve business performance, the Board of Directors passed the resolution, on February 11, 2019, to acquire a total of 7,817,400 shares of the Israeli company, Camtek Ltd. at a price of US$9.5 per share, equivalent to a shareholding percentage of 20.5%. The total amount of investment involved was US$74,265,680.

  - It is hoped that this investment can enhance the Corporation's AOI and 3D metrology test technology capabilities, and penetrate into the foundry and advanced packing market, thereby enhancing the Group's international operational capabilities and increasing financial efficiency.

VI. Risk analysis and assessment of the most recent year up to the publication date of this annual report
(I) Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact the Corporation penetrate loss as well as future response measures
1. Changes to interest rates and resulting impact to the Corporation's gain or loss as well as future response measures
  - (1) Changes to interest rates and impact on the gain or loss of the Corporation and its subsidiaries

Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact the Corporation penetrate loss as well as future response measures 1. Changes to interest rates and resulting impact to the Corporation's gain or loss as well as future response measures (1) Changes to interest rates and impact on the gain or loss of the Corporation and its subsidiaries	Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact the Corporation penetrate loss as well as future response measures 1. Changes to interest rates and resulting impact to the Corporation's gain or loss as well as future response measures (1) Changes to interest rates and impact on the gain or loss of the Corporation and its subsidiaries	Changes to interest rates, currency exchange fluctuations, and inflation and how these may impact the Corporation penetrate loss as well as future response measures 1. Changes to interest rates and resulting impact to the Corporation's gain or loss as well as future response measures (1) Changes to interest rates and impact on the gain or loss of the Corporation and its subsidiaries
Unit: NT$thousands Item/Year 2017 2018 Interest expense 22,782 31,768 Net operatingrevenue 14,901,346 16,931,128 Operating profit 3,043,081 3,039,633 Interest expense/Operatingrevenue (%) 0.15 0.19 Interest expense/Operating profit (%) 0.75 1.05
Item/Year	2017	2018
Interest expense	22,782	31,768
Net operatingrevenue	14,901,346	16,931,128
Operating profit	3,043,081	3,039,633
Interest expense/Operatingrevenue (%)	0.15	0.19
Interest expense/Operating profit (%)	0.75	1.05

Interest expenses of the Corporation and its subsidiaries in 2017 and 2018 were NT$22,782 thousand and NT$31,768 thousand, respectively, while the interest expenses and operating profit margin of the Corporation and its subsidiaries were 0.75% and 1.05%, respectively. These changes in interest expenses were of no significant influence to the Corporation and its subsidiaries.

(2) Future response measures

The Corporation and its subsidiaries have been carrying out capital planning based on the principle of stability and conservativeness, and focus primarily on safety and liquidity. Measures undertaken by the 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 personnel at the 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 the Corporation’s profitability as a result of changing interest rates.

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

Corporation and its subsidiaries	Corporation and its subsidiaries	Corporation and its subsidiaries
Unit: NT$thousands
Item/Year	2017	2018
Net exchangegain (loss)	(133,637)	97,928
Net operatingrevenue	14,901,346	16,931,128
Operatingprofit	3,043,081	3,039,633
Profit before income tax	3,122,067	3,308,090
Proportion of net profit (loss) on exchange net to operating revenue (%)	(0.90)	0.58
Proportion of net profit (loss) on exchange to operatingprofit (%)	(4.39)	3.22
Proportion of net profit (loss) on exchange to earnings before tax (EBT) (%)	(4.28)	2.96

The Corporation and its subsidiaries have provided accounts payable and receivable calculating value in US dollar. Hence, fluctuations in the US dollar exchange rate correlate with changes in exchange gain (loss) of the Corporation and its subsidiaries. Exchange gain (loss) in 2017 and 2018 were (NT$133,637) thousand and NT$97,928 thousand, respectively, whereas the proportion of exchange gain (loss) to profit before tax in 2017 and 2018were (4.28)% and 2.96%, 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 achieve a natural hedging effect. In addition, the financial department also collects information on the exchange rate on a daily basis to fully understand the changes in exchange rates, and adjust foreign currency positions in a timely manner. The Corporation and its subsidiaries initiate the operation of foreign currency hedging instruments in a timely manner in accordance with the “Procedures for Handling Derivative Trading”, with a view to reducing the impact of exchange rate fluctuations on the Corporation and its subsidiaries.

Inflation and its impact on the Corporation’s gain or loss as well as future response measures
- (1) Inflation and its impact to the gain or loss of the Corporation and its subsidiaries
  - The Corporation and its subsidiaries has not been affected by inflation severely enough to result in major impact to the gains or losses to the Corporation and its subsidiaries during the period of the most recent year up to the publication date of this annual report.
- (2) Future response measures The Corporation and its subsidiaries are minimally affected by inflation, but will continue to monitor changes in the prices of upstream and downstream products to reduce its impact on their gains or losses as a result of cost changes.
(II) Policies on high risk, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives trading, main reasons for the profits or losses generated thereby, and future response measures to be undertaken.
Main reasons for engaging in high risk, highly leveraged investments and future response measures
- (1) Main reasons for engaging in high risk, highly leveraged investments

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

(2) Future response measures

The Corporation and its subsidiaries focus upon specialized businesses and adopt a conservative and stable financial operation in principle. No capital is used in 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, in principle, provided to affiliated companies or companies that the Corporation and its subsidiaries have business dealings with. Interest rates of loans provided by the Corporation and its subsidiaries shall be, by principle, higher than shortterm loan interest rates provided by financial institutions to the Corporation and its subsidiaries.
(2) Future response measures The 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 the Corporation and its subsidiaries include hedging of foreign exchange risks generated by the assets or liabilities. No derivatives trading have been implemented in the most recent fiscal year up to the publication date of this annual report.
(2) Future response measures The 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, the 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.

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

R&D plan	Current progress	Expected completion time	Additional investments required (NT$)
Next generation high power and high speed solar array simulator	Design verification phase	Q2 2019	5 million
Next generation high power density and constant power DC source	Design verification phase	Q3 2019	7 million
Next generation bi-direction power module platform	Design verification phase	Q4 2019	20 million
Next generation regenerative charge/discharge tester for public electrical equipment	Design planning phase	Q3 2019	5 million
Next generation bi-direction charger for battery cell testing	Design planning phase	Q4 2019	8 million
High frequency mixed regenerative linear load development project	Design planning phase	Q3 2019	6 million
Next generation portable/automotive flat panel display tester	Design review phase	Q3 2019	5 million
8K HDMI 2.1 pattern generator	Design review phase	Q3 2019	10 million
High performance high speed and high current Insulation tester with partial discharge measurement function	Design verification phase	Q4 2019	4 million
Ultra-high precision, wide current range battery cell analyzer	Design planning phase	Q1 2020	12 million
New generation super capacitor automatic aging system	Design verification phase	Q2 2019	3.5 million
Advanced semiconductor packaging optical metrologysystem	Design verification phase	Q4 2019	4.5 million

(IV) 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 the Corporation and its subsidiaries.
(V) Changes in technology and industry that will impact the Corporation's financial operation with countermeasures
The Corporation produces instruments for the technology sector which enjoy longer life cycles. The Corporation also has a wide selection of product lines and would not be easily affected by changes to the technology or industry.
(VI) Changes in corporate image that will impact the Corporation's risk management with countermeasures
The Corporation and its subsidiaries enjoy good business images and would not be subject to changes that negatively affect their corporate images.
(VII) Expected benefits, possible risks and response measures for merger and acquisition The Corporation invested in Touch Cloud Inc., in hopes of enhancing and integrating the software R&D capabilities of its product lines to increase marketing opportunities and scale of operations. In addition, the Corporation invested in the establishment of Innovative Nanotech, Inc., in hopes of advancing semiconductor test solutions to frontend processes to provide customers with more comprehensive semiconductor/IC test solutions.
(VIII) Expected benefits, possible risks and response measures of expanding factory buildings
Expansion of factory buildings allows the Corporation and its subsidiaries to increase its productivity, gain the ability to receive more purchase orders, improve revenue and profitability, and increase market share. Expansion of factory buildings by the Corporation and its subsidiaries has been carefully reviewed to ensure that customers’ requirements are met while achieving optimal use of corporate capital.

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(IX) Risks resulting from consolidation of purchase or sales operations and response measures
Purchasing risks Purchases from NMC by the Corporation and its subsidiaries amounted to 20.31% and 23.37% of the total purchases made in 2018 and 2017, respectively, thus indicating centralized purchasing from the same group. The scenario was mainly due to the fact that gold wires, copper wires, and other special materials provided by NMC are of higher quality compared to those provided by Japanese or Korean companies such as Tanaka, NKE, and Heesung, and thus better meet the product quality requirements of downstream semiconductor packaging clients. The amount of purchases made from various suppliers by the 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 the Corporation and its subsidiaries to produce their products, all local and overseas purchases are handled by a single purchasing unit. Where possible, two or more suppliers are selected to ensure supplier replaceability, acquire competitive pricing, spread purchasing risks, achieve reasonable cost reductions, and provide better services. Also, the 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 the 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 the Corporation and its subsidiaries and their main suppliers, no major non-conformities have been identified so far. Since establishment, the Corporation and its subsidiaries have achieved positive interaction with their main suppliers. Hence, no material shortage or supply interruption has yet to occur.
Sales risks The 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 the Corporation and its subsidiaries. Hence, the Corporation and its subsidiaries are actively developing new customers to achieve business stability and growth. Currently, most customers were listed companies or renowned companies in Taiwan and other countries. Revenue from automatic equipment in 2018 and 2017 were NT$4,862,323 thousand and NT$2,538,348 thousand, respectively, where revenue from the largest customers of the combined company in 2018 and 2017 were NT$2,646,345 thousand and NT$714,907 thousand, respectively. Due to shipment of automatic equipment in 2018, revenue from one single customer accounted for more than 10% of the total revenue of the Group.
(X) Impacts, risks, and response measures resulting from major equity transfer or replacement of directors, supervisors, or shareholders holding more than 10% of the company's shares
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 from 2018 up to the publication date of this annual report.
(XI) Impact, risk, and response measures related to any change in governance rights in the company
The 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, the Corporation and its subsidiaries did not experience any changes their governance rights.
(XII) Any litigious or non-litigious matters or administrative disputes up to the publication date of this annual report where the company and company directors, supervisors, general managers, person with actual responsibility in the company, and major shareholders holding more than 10% of the company's shares who have been concluded through final judgment or still under litigation, to be a party thereof, and

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where the results thereof could materially affect the shareholders’ equity or prices of the company’s securities, as well as the facts of the dispute, amount of money at stake, date of litigation commencement, and main parties to the litigation: None. (XIII) Other material risks and response measures: None.

Organizational context and risk management
(1) Risk management organization: The highest-ranking officer at various business units and centers are responsible for promoting organizational context and stakeholder needs and expectation analyses, risk identification and assessment, as well as handling and communicating organizational context and stakeholder needs and expectation analyses.
(2) Information security risk management and response measures To protect R&D assets and maintain information security, a highavailability remote backup mechanism has been planned for the Corporation's information system architecture according to its risk level, so as to ensure that important information systems are not interrupted. In addition, important data is stored in different places by the remote backup mechanism. With regard to confidential information, the Corporation also introduces an appropriate encryption mechanism to reduce the risk of information leakage. Some of the colleagues' work environment involves the use of virtual desktop environment, which centralizes operating systems and data in the machine room to enhance security. In addition to undergoing basic information security training when new employees join the Corporation, the Corporation also regularly promotes information security to increase awareness toward information security among colleagues at the Corporation. As regards the treat of Internet and e-mail viruses, the Corporation adopts the relevant information security solutions to prevent cyber-attacks from any third party.

The information department constantly follows the latest security threats. Every year, the department conducts analysis of organizational context and risk management, and performs operational risk impact analysis using information risk analysis map. In addition, the department carries out design planning and increases appropriate software and hardware equipment resources based on risk level, in order to improve response measures such as operating procedures.

In 2018, the Corporation improved the air-conditioning system and uninterruptible power supply equipment in machine rooms. With regard to abnormal disasters that may happen to equipment and host machines in machine rooms, the Corporation monitors the environment of machine rooms on a regular basis, and conducts various simulation tests and emergency drills in machine rooms in order to ensure the normal operation of various facilities and information systems in machine rooms, with a view to preventing the risks of various disasters or human errors without warning.

VII. Other important matters: None

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As of March 31, 2019

Chapter 8 Special Notes

I. Information on affiliated companies

(I) Consolidated business report

Diagram of affiliated companies

Neworld Electronics Ltd. Shareholding percentage: 100%	Shareholding percentage: 50% Chroma Electronics (Shenzhen) Co., Ltd. Shareholding percentage: 100% Chroma Electronics (Shanghai) Co., Ltd. Shareholding percentage: 100% Chroma Germany GmbH Shareholding percentage: 100% Shareholding percentage: 15%%	Shareholding percentage: 50% Chroma Electronics (Shenzhen) Co., Ltd. Shareholding percentage: 100% Chroma Electronics (Shanghai) Co., Ltd. Shareholding percentage: 100% Chroma Germany GmbH Shareholding percentage: 100% Shareholding percentage: 15%%
CHI Incorporation Ltd. Shareholding percentage: 100%		Chroma ATE (Suzhou) Co., Ltd. Shareholding percentage: 100%

Chen Hwa Technology Inc Shareholding percentage: 100%		Chroma (Shanghai) Trading Co., Ltd. Shareholding percentage: 100%		Mou Kuan Technologies (Nanjin) Co., Ltd. Shareholding percentage: 100%
	Sajet System Technology (Suzhou) Co., Ltd. Shareholding percentage:100% Wei Kuang Mech. Eng. Inc. Shareholding percentage: 100% Adivic Holding Corporation Shareholding percentage: 100%		Wei Kuang Automation (Nanjing) Co., Ltd. Shareholding percentage: 100%
			Wei Kuang Automation (Xiamen) Co., Ltd. Shareholding percentage: 100%
Adivic Technology Co., Ltd. Shareholding percentage: 51%		Adivic Holding Corporation Shareholding percentage: 100%
EVT Technology Co., Ltd. Shareholding percentage: 85.6%		Wei Da Electric Vehicle Co., Ltd. Shareholding percentage: 75%
Quantel Private Ltd. Shares held: 60%		Quantel Global Vietnam Co., Ltd. Shareholding percentage: 100%

Innovative Nanotech, Inc. Shareholding percentage: 71.7%		Quantel Technologies India Pvt Ltd Shareholding percentage: 100%

Touch Cloud Inc. Shareholding ratio: 78.1%		Quantel Global Sdn. Bhd. Shareholding percentage: 100%
	Quantel Global Philippines Corporation Shareholding percentage: 100%
		Quantel Global Philippines Corporation Shareholding percentage: 100%

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2. Basic information of various affiliated companies

2.	Basic information of various affiliated companies	Basic information of various affiliated companies	Basic information of various affiliated companies	Basic information of various affiliated companies
As of March 31,2019	Unit: thousands in US$or foreign currency Date established Address Paid-in capitalPrimary business or product 1994.02.17 Unit 606, Shui Hing Centre, No. 13, Sheung Yuet Rd., Kowloon Bay, Kowloon, H.K. HK$64,013 Sale and maintenance of electronic test instruments 1998.03.10 8F, No. 4, Nanyou Tian An Industrial Estate, Shenzhen, China HK$30,000 Sale and maintenance of electronic test instruments, etc. 2000.11.10 3F Building 40, No.333, Qin Jiang Rd., Shanghai, China US$3,000 Sale and maintenance of electronic test instruments, etc. 1993.02.18 7 Chrysler Irvine CA92618 US$1,000 Sale and maintenance of electronic test instruments 1999.09.17 Morsestraat 32,6716 AH Ede,The Netherlands EUR$45 Sale and maintenance of electronic test instruments 2017.09.04 Südtiroler Str. 9 86165 Augsburg Germany EUR$30 Sale and maintenance of electronic test instruments 1997.01.14 9F,No.66,Huaya 1st Road, Guishan District, Taoyuan City NT$140,000 Investment 2006.08.11 4F, No.68, Huaya 1st Road, Guishan District, Taoyuan City NT$250,000 Processing and sale of gold wire 2007.03.09 4F, No. 68, Huaya 1st Road, Guishan District, Taoyuan City NT$300,000 Testing of LED products 1997.07.11 Citco Buildings PO Box 662, Road Town, Tortola, British Virgin Island US$1,200 Investment 2001.04.01 19772 Pauling, Foothill Ranch, CA 92610 US$5 Sale and maintenance of electronic test instruments 1998.04.03 P.O.Box 957PO Box 957 Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$3,830 Test of inductance, capacitance and resistance equipment and sale of parts 2006.03.15 Building 7, No. 855, Zhujiang Rd., Suzhou New District, Jiang Su, China US$3,800 Sale and maintenance of electronic test instruments, etc. 1998.04.03 P.O.Box 957 Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$3,085 Test of inductance, capacitance and resistance equipment and sale of parts. 2004.01.05 Rm 1102B, Building 1, No.18, Tai Gu Rd., Waigaoqiao Free Trade Zone, Shanghai US$2,700 International and transit trading, simple commercial processing, commercial consulting services, etc. 2006.07.04 Drake Chambers, Road Town, Tortola, British Virgin Islands US$2,050 Investment 2002.01.10 608 St. James Court, St.Denis Street Port Louis,Mauritius US$4,475 Investment 1997.09.27 No. 811, Hushan Road, Jiangning District, RMB$1,737 Assembly, sale and
Name of enterprise	Date established	Address	Paid-in capital	Primary business or product
Neworld Electronics Ltd.	1994.02.17	Unit 606, Shui Hing Centre, No. 13, Sheung Yuet Rd., Kowloon Bay, Kowloon, H.K.	HK$64,013	Sale and maintenance of electronic test instruments
Chroma Electronics (Shenzhen) Co., Ltd.	1998.03.10	8F, No. 4, Nanyou Tian An Industrial Estate, Shenzhen, China	HK$30,000	Sale and maintenance of electronic test instruments, etc.
Chroma Electronics (Shanghai) Co., Ltd.	2000.11.10	3F Building 40, No.333, Qin Jiang Rd., Shanghai, China	US$3,000	Sale and maintenance of electronic test instruments, etc.
Chroma ATE Inc. (USA)	1993.02.18	7 Chrysler Irvine CA92618	US$1,000	Sale and maintenance of electronic test instruments
Chroma ATE Europe B.V.	1999.09.17	Morsestraat 32,6716 AH Ede,The Netherlands	EUR$45	Sale and maintenance of electronic test instruments
Chroma Germany GmbH	2017.09.04	Südtiroler Str. 9 86165 Augsburg Germany	EUR$30	Sale and maintenance of electronic test instruments
Chroma Investment Co., Ltd.	1997.01.14	9F,No.66,Huaya 1st Road, Guishan District, Taoyuan City	NT$140,000	Investment
Chroma New Material Corporation	2006.08.11	4F, No.68, Huaya 1st Road, Guishan District, Taoyuan City	NT$250,000	Processing and sale of gold wire
Testar Electronic Corporation	2007.03.09	4F, No. 68, Huaya 1st Road, Guishan District, Taoyuan City	NT$300,000	Testing of LED products
Sensational Holding Ltd.	1997.07.11	Citco Buildings PO Box 662, Road Town, Tortola, British Virgin Island	US$1,200	Investment
Chroma Systems Solutions, Inc.	2001.04.01	19772 Pauling, Foothill Ranch, CA 92610	US$5	Sale and maintenance of electronic test instruments
CHI Incorporation Ltd.	1998.04.03	P.O.Box 957PO Box 957 Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands	US$3,830	Test of inductance, capacitance and resistance equipment and sale of parts
Chroma ATE (Suzhou) Co., Ltd.	2006.03.15	Building 7, No. 855, Zhujiang Rd., Suzhou New District, Jiang Su, China	US$3,800	Sale and maintenance of electronic test instruments, etc.
Chen Hwa Technology Inc.	1998.04.03	P.O.Box 957 Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands	US$3,085	Test of inductance, capacitance and resistance equipment and sale of parts.
Chroma (Shanghai) Trading Co., Ltd.	2004.01.05	Rm 1102B, Building 1, No.18, Tai Gu Rd., Waigaoqiao Free Trade Zone, Shanghai	US$2,700	International and transit trading, simple commercial processing, commercial consulting services, etc.
San Eagle Development Corp.	2006.07.04	Drake Chambers, Road Town, Tortola, British Virgin Islands	US$2,050	Investment
Wei Kuang Mech. Eng .Inc.	2002.01.10	608 St. James Court, St.Denis Street Port Louis,Mauritius	US$4,475	Investment
Mou Kuan	1997.09.27	No. 811, Hushan Road, Jiangning District,	RMB$1,737	Assembly, sale and

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Name of enterprise	Date established	Address	Paid-in capital	Primary business or product
Technologies (Nanjing) Co., Ltd.		Nanjin City, China		maintenance of factory conveyors and related systems and rendering after- sales services
Wei Kuang Automation (Nanjing) Co., Ltd.	2005.06.30	No. 811, Hushan Road, Jiangning District, Nanjing City, China	RMB$11,871	Sale and maintenance of electronic equipment and factory conveyor systems
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	2007.02.01	Floor 1, Building A4, No. 20, Jinhui Road, Houxi, Jimei District, Xiamen	RMB$11,417	Sale and maintenance of electronic equipment and factory conveyor systems
MAS Automation Corp.	1975.11.26	No.6,Lane 17,Niupu S Rd.,Hsinchu City , Taiwan	NT$100,000	Design, manufacturing, installment and testing of automated factory conveyor systems
Chroma Japan Corp.	1998.05.30	888 Nippa-cho, Kouhoku-ku, Yokohama- shi, Kanagawa, 223-0057Japan	JPY$99,500	Sale and maintenance of electronic test instruments
Deep Red Holding Co., Ltd.	2004.04.29	2F, Felix House, 24 Dr. Joseph Riviere Street, Port Louis, Republic of Mauritius	US$215	Investment
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	Sale and research of RF device
Adivic Holding Corp	2015.01.15	Offshore Chambers, P.O.Box 217, Apia, Samoa.	US$1,000	Sale and research of RF device
EVT Technology Co., Ltd.	1999.08.19	No. 68, Huaya 1st Road, Guishan District, Taoyuan City	NT$110,000	Manufacturing of motorcycles and its parts
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 Geylang #05-02 Enterprise Industrial Building Singapore 388568.	SG$3,190	Sale of test and measuring instruments
Quantel Global Vietnam Co., Ltd	2017.01.03	Floor 6th, HL Tower No. 6 Lane 82, Duy Tan Road, Dich Vong Hau Ward, Cau Giay District, Hanoi, Vietnam	VND4,526,506	Sale of test and measuring instruments
Quantel Technologies India Pvt Ltd	2016.10.05	K-13 Ground Floor, Lajpat Nagar-II, New Delhi 110024	INR6,500	Sale of test and measuring instruments
Quantel Global Sdn. Bhd.	2016.07.20	Unit 802, 8th Flr, Blk A Damansara Intan, No. 1 Jalan SS20/27, 47400, Petaling Jaya, Selangor, Malaysia	MYR600	Sale of test and measuring instruments
Quantel Global Philippines Corporation	2017.07.24	Units 2401 and 2402 The Orient Square, F. Ortigas Jr. Road, Ortigas Centre, Pasig City 1605, Manila Phililppines	PHP9,910	Sale of test and measuring instruments
Innovative Nanotech Incorporated	2017.08.09	5F, No. 6-2, Du Sing Rd, East District, Hsinchu City, Taiwan	NT$200,000	Nanoparticles monitoring equipment
Touch Cloud Inc.	2016.02.03	10F-4, No. 148, Section 4, Zhongxiao East Road, Taipei City, Taiwan	NT$72,995	Cloud platform development and IoT system integration

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Information of shareholders with corporate governance power while working in the Corporation: None.
Overall business scope of every affiliated company The overall business scope of every affiliated company of the Corporation primarily focuses upon specialized manufacturing services for measurement instruments. There are also a small number of affiliated companies that focus on investments in its scope of business. In general, specialization of work among affiliated companies focus on mutual support in technology, production capacity, sales, and services to maximize synergy so that the Corporation could keep providing the best manufacturing services for professional measurement instruments for customers throughout the world and ensure the Corporation’s leadership in the global market.
Directors, supervisors, CEO and general managers of Chroma ATE Inc. and affiliated companies

			As of March 31, 2019 Shares held Number of shares held Shareholding percentage 64,012,815 shares 100% (Note 1) - - - 100% - - - (Note 1) - - - 100% - - - Chroma holds 1,000,000 shares 100% 1,000 shares 100% (Chroma BV holds 30,000 shares) 100% 14,000,000 shares 100% 25,000,000 shares - 100% - 20,159,600 shares 1,000 shares 350,000 shares 67.2% - 1.2% 1,200,000 shares 100% 120,000 shares Chroma holds 120,000 shares CHROMA USA holds 240,000 share 25% 25% 50% (Chroma holds 3,830,000 shares) 100% (Note 1) - - 100% - -	As of March 31, 2019 Shares held Number of shares held Shareholding percentage 64,012,815 shares 100% (Note 1) - - - 100% - - - (Note 1) - - - 100% - - - Chroma holds 1,000,000 shares 100% 1,000 shares 100% (Chroma BV holds 30,000 shares) 100% 14,000,000 shares 100% 25,000,000 shares - 100% - 20,159,600 shares 1,000 shares 350,000 shares 67.2% - 1.2% 1,200,000 shares 100% 120,000 shares Chroma holds 120,000 shares CHROMA USA holds 240,000 share 25% 25% 50% (Chroma holds 3,830,000 shares) 100% (Note 1) - - 100% - -
Name of enterprise	Title	Name or representative	Shares held
			Number of shares held	Shareholding percentage
Neworld Electronics Ltd.	Director	Chroma ATE Inc. (Representatives: Leo Huang and Ming Chang)	64,012,815 shares	100%
Chroma Electronics (Shenzhen) Co., Ltd.	Director Director Director CEO	Neworld Electronics (Representative: Leo Huang) Vincent Chen Jackie Liao Vincent Chen	(Note 1) - - -	100% - - -
Chroma Electronics (Shanghai) Co., Ltd.	Director Director Director CEO	Neworld Electronics (Representative: Leo Huang) Paul Ying Vincent Chen Paul Ying	(Note 1) - - -	100% - - -
Chroma ATE Inc.(USA)	Director Director Director	I-Shih Tseng Cheng Ying Yi-Shen Wang	Chroma holds 1,000,000 shares	100%
Chroma ATE Europe B.V.	Director	Chroma ATE Inc. (Representative: David Yang, Paul Ying, I-Shih Tseng)	1,000 shares	100%
Chroma Germany GmbH	Director	Chroma ATE Europe BV (Representative: Cheng Ying)	(Chroma BV holds 30,000 shares)	100%
Chroma Investment Co., Ltd.	Director Supervisor	Chroma ATE Inc. (Representative: Leo Huang, Paul Ying, Ming Chang) Chroma ATE Inc. (Representative: Amy Huang)	14,000,000 shares	100%
Chroma New Material Corporation	Director Supervisor CEO	Chroma ATE Inc. (Representative: Leo Huang, C. C. Ho, Amy Huang) Chroma ATE Inc. (Representative: Paul Ying) C. C. Ho	25,000,000 shares -	100% -
Testar Electronic Corporation	Director Supervisor CEO	Chroma ATE Inc. (Representatives: Leo Huang, I-Shih Tseng, Tsun-I Wang) Amy Huang C. C. Ho	20,159,600 shares 1,000 shares 350,000 shares	67.2% - 1.2%
Sensational Holding Ltd.	Director	Chroma ATE Inc. (Representative: Leo Huang)	1,200,000 shares	100%
Chroma Systems Solutions, Inc.	Director Director Director	Fred Joseph Sabatine Cheng Ying Tai-Wei Yang	120,000 shares Chroma holds 120,000 shares CHROMA USA holds 240,000 share	25% 25% 50%
CHI Incorporation Ltd.	Director	Leo Huang	(Chroma holds 3,830,000 shares)	100%
Chroma ATE (Suzhou) Co., Ltd.	Director Director Director	CHI (Representative: Leo Huang) Paul Ying Emma Chen	(Note 1) - -	100% - -

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Name of enterprise	Title	Name or representative	Shares held
			Number of shares held	Shareholding percentage
	CEO	Vincent Chen	-	-
Chen Hwa Technology Inc.	Director	Leo Huang	(Chroma holds 3,085,000 shares)	100%
Chroma (Shanghai) Trading Co., Ltd.	Director	Chen Hwa (Representative: Leo Huang)	(Note 1)	100%
San Eagle Development Corp.	Director	Chroma ATE Inc. (Representative: Leo Huang)	2,050,000 shares	100%
Wei Kuang Mech Eng Inc.	Director	San Eagle (Representative: Leo Huang)	4,475,000 shares	100%
Mou Kuan Technologies (Nanjing) Co., Ltd.	Chairman Director Director	Wei Kuang (Representative: Leo Huang) C. F. Huang Amy Huang	(Note 1) - -	100% - -
Wei Kuang Automation (Nanjing) Co., Ltd.	Director Director Director	Wei Kuang (Representative: Leo Huang) C. F. Huang Amy Huang	(Note 1) - -	100% - -
Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Director Director Director	Wei Kuang (Representative: Leo Huang) C. F. Huang Amy Huang	(Note 1) - -	100% - -
MAS Automation Corp.	Director Supervisor CEO	Chroma ATE Inc. (Representative: Leo Huang, C. F. Huang, I-Shih Tseng) Chroma ATE Inc. (Representative: Amy Huang) C.-F. 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 Director Director Supervisor CEO	Deep Red Holding Co., Ltd. (Representative: Joe Lin) Arno Wu Paul Ying Amy Huang Joe Lin	(Note 1) - - - -	100% - - - -
Adivic Technology Co., Ltd.	Director Director Supervisor CEO	Chroma ATE Inc. (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 Co., Ltd. (Representative: I-Shih Tseng)	1,000,000 shares	100%
EVT Technology Co., Ltd.	Director Director Director Supervisor CEO	Leo Huang Joey Chang Tsun-I Wang Chroma ATE Inc. (Representative: Paul Ying) Leo Huang	54,023 shares 1,339 shares 34,838 shares 9,412,412 shares 54,023 shares	0.5% - 0.3% 85.6% 0.5%
Wei Da Electric Vehicle Co., Ltd.	Director Supervisor CEO	EVT Technology Co., Ltd. (Representative: Leo Huang, Hatch Huang, Joey Chang) Bill Shiau Leo Huang	375,000 shares - -	75% - -
Quantel Private Ltd.	Director Director	Chroma ATE Inc. (Representative: Leo Huang, Paul Ying) Yip Hin 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%
Quantel Global Sdn. Bhd.	Director	NA	Quantel Private holds 600,000 shares	100%
Quantel Global Philippines	Director	Yip Hin Lay	Quantel Private holds 99,095 shares	100%

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Name of enterprise	Title	Name or representative	Shares held
			Number of shares held	Shareholding percentage
Corporation
Innovative Nanotech, Inc.	Director Supervisor CEO	Chroma ATE Inc. (Representative: Leo Huang, I-Shih Tseng, Tsun-I Wang) Amy Huang Po-Jen Wu	14,214,000 shares 100,000 shares 100,000 shares	71.1% 0.5% 0.5%
Touch Cloud Inc.	Director Director Director Supervisor	Chroma ATE Inc. (Representative: Leo Huang) Kun-Shan Lu Cheng-Hsun Li Amy Huang	5,700,000 shares - 360,000 shares -	78.1% - 4.9% -

Note 1: Limited liability company

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6. Business operating conditions of Chroma ATE Inc. and its affiliated companies As of December 31, 2018 Unit: NT$ thousands

As of December 31,2018	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Name of enterprise	Paid-in capital	Total assets	Total liabilities	Net worth	Net revenue	Operating profit	Profit and loss (after tax)	Earnings per share (NT$)
Neworld Electronics Ltd.(Note 1)	250,994	2,340,063	1,201,078	1,138,985	4,880,729	158,088	112,846	1.76
Chroma Electronics (Shenzhen) Co.,Ltd.	117,630	1,266,872	614,124	652,748	1,711,856	116,102	85,372	Not applicable
Chroma Electronics (Shanghai) Co., Ltd.	92,145	213,786	94,582	119,204	347,348	21,598	15,954	Not applicable
Chroma ATE Inc.(USA)	30,715	822,059	665,644	156,415	1,033,784	(54,204)	(5,873)	(5.87)
Chroma Systems Solutions, Inc.	147	745,119	413,427	331,692	936,002	116,243	86,297	Not applicable
Chroma Investment Co., Ltd.	140,000	351,950	1,237	350,713	3,818	2,268	6,479	0.46
Chroma New Material Corporation	250,000	1,005,062	561,990	443,072	2,005,001	50,741	44,611	1.78
Chroma ATE Europe BV (Note 1)	1,597	640,073	457,021	183,052	669,072	28,494	21,964	Not applicable
Chroma (Shanghai) Trading Co., Ltd.	82,931	87,105	3,074	84,031	16,403	(3,423)	117	Not applicable
Chroma ATE (Suzhou) Co., Ltd.	116,717	511,429	305,278	206,151	632,600	3,542	7,444	Not applicable
MAS Automation Corp.	100,000	3,034,183	1,827,631	1,206,552	4,001,230	1,036,956	885,878	88.59
Mou Kuan Technologies (Nanjing) Co.,Ltd.	7,768	19,118	1,335	17,783	26,564	4,284	3,902	Not applicable
Wei Kuang Automation (Nanjing) Co.,Ltd.	53,087	361,813	189,655	172,158	773,667	126,334	94,346	Not applicable
Wei Kuang Automatic Equipment (Xiamen)Co.,Ltd.	51,057	776,631	335,973	440,657	819,450	173,841	129,595	Not applicable
Sajet System Technology (Suzhou) Co.,Ltd.	37,449	117,637	13,417	104,220	113,306	40,206	45,431	Not applicable
Testar Electronic Corporation	300,000	270,962	204,789	66,173	335,347	(5,024)	(2,792)	(0.09)
Chroma Japan Corp.	27,661	249,704	311,841	(62,137)	298,126	(38,624)	(33,977)	Not applicable
Sensational HoldingLtd.	36,858	54,220	296	53,924	-	(822)	1,851	1.54
Chen Hwa TechnologyInc.	94,756	105,965	20	105,945	-	(172)	990	0.32
CHI Incorporation Ltd.	117,638	206,319	-	206,319	-	-	7,444	1.94
San Eagle Development Corp.	62,966	869,331	20	869,311	-	(77)	198,996	97.07
Wei KuangMech. Eng.Inc.	137,450	861,933	20	861,912	-	(62)	199,047	44.48
DeepRed HoldingCo., Ltd.	6,604	104,303	-	104,303	-	-	45,430	211.30
Adivic Technology Co., Ltd. (Note 1)	240,000	90,917	19,054	71,863	24,019	(44,483)	(39,420)	(1.64)
EVT TechnologyCo., Ltd.(Note 1)	110,000	72,912	4,255	68,657	3,813	(10,820)	(10,767)	(0.98)
Quantel Private Ltd.(Note 1)	71,711	235,312	52,631	182,681	346,902	34,212	30,011	9.41
Innovative Nanotech,Inc.	200,000	196,967	28,905	168,062	184	(29,821)	(29,451)	(1.47)
Touch Cloud Inc.	72,995	41,568	535	41,033	427	(15,013)	(14,809)	(2.03)

Note 1: Expressed per the consolidated financial statement. Note 2: The following lists the exchange rates for the statement of assets and liabilities:

1 USD = NT$30.715, 1 HKD = NT$3.921, 1 EUR = NT$35.20, 1 RMB = NT$4.472, 1 JPY = NT$0.278, 1 SGD = NT$22.48

The following lists the exchange rates for the profit and loss statement:

1 USD = NT$30.149, 1 HKD = NT$3.846, 1 EUR = NT$35.61, 1 RMB = NT$4.56, 1 JPY = NT$0.273, 1 SGD = NT$22.35

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(II) Consolidated financial statements of affiliated companies For 2018 (January 1 to December 31, 2018), affiliated companies of the Corporation that shall be included according to the rules prescribed by the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” were the same as those companies that shall be included into the parent and subsidiary consolidated financial statement as prescribed by IFRS 10. All information to be disclosed in the consolidated financial statements of affiliated companies has been disclosed in the consolidated financial statements of the parent company and subsidiaries. Hence, consolidated financial statements of affiliated companies were therefore not prepared separately.
(III) Affiliation report According to Article 369-12 of the Company Act, separate affiliation reports are not required for subsidiaries of the Corporation that have not been publicly listed.
II. Private placement of securities in the most recent year up to the publication date of this annual report: None.
III. Holding or disposition of the Corporation's shares by subsidiaries in the most recent year up to the publication date of this annual report

Unit: NT$ thousand; shares; %

Name of subsidiary	Paid-in capital	Source of capital	Shareholding of the Corporation	Date of acquisition or disposal	Number and amount of shares acquired	Number and amount of shares disposed	Investment gain (loss)	Number and amount of shares up to the publication date of this annual report (Note 1)	Status of pledge	Amount of endorsements and guarantees provided to subsidiaries by the Corporation	Loans provided to subsidiaries by the Corporation
Chroma Investment Co., Ltd.	140,000	Own capital	100%	2018	0	0	0	1,915,579 shares NT$288,295 thousand	None	0	0
				Current year up to the publication date of this annual report	0	0	0		None	0	0

Note 1: The amount of shares held is calculated based on the closing price of NT$150.5 on April 19, 2019.

IV. Other supplementary matters: None.
V. Any event that results in substantial impact upon 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 annual report: None.

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Chroma ATE Inc. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

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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, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

CHROMA ATE INC.

LEO HUANG Chairman

February 21, 2019

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma ATE Inc.

Opinion

We have audited the accompanying consolidated financial statements of Chroma ATE Inc. and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, 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, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended, 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, 2018. 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.

Key audit matters of the consolidated financial statements for the year ended December 31, 2018 are stated as follows:

Impairment of Trade Receivables

As indicated in Notes 5 and 13, trade receivables are significant accounts in the consolidated balance sheet of the Group. The process of evaluating impairment loss involves subjective judgement of uncollectible accounts. The management recognizes lifetime Expected Credit Loss (ECL) on trade receivables under the regulations of IFRS 9. The above evaluation involves the impact on receivables of the management’s subjective judgements and assumptions on credit risks; thus, we consider the impairment of trade receivables as a key audit matter.

We assessed the rationale of the Group’s policy on providing allowance for trade receivables, tested the impairment rate of ECL, inspected individual overdue receivables and made inquiries for related reasons, to draw a conclusion on ECL of trade receivables.

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 adjusts the product portfolio in response to the rapid change in the market and business fluctuation.

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The market competition or technique replacement may result in the risk of inventories becoming unmarketable or prices slumping 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 15 to the consolidated financial statements for the details of the information about inventories.

Other Matter

We have also audited the parent company only financial statements of Chroma ATE Inc. as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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.

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 the 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

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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.

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, 2018 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 21, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated 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 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.

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (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 10) Financial assets at amortized cost - current (Notes 9 and 36) Contract assets - current (Note 27) Debt investments with no active market - current (Notes 12 and 36) Notes receivable (Note 13) Trade receivables - unrelated parties (Note 13) Trade receivables - related parties (Notes 13 and 35) Construction contracts receivable (Note 14) Inventories (Note 15) Prepayments Other current assets (Note 35) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 7) Financial assets at fair value through other comprehensive income - non-current (Note 8) Available-for-sale financial assets - non-current (Note 10) Financial assets measured at cost - non-current (Note 11) Investments accounted for using equity method (Note 17) Property, plant and equipment (Notes 18 and 36) Investment properties (Note 19) Goodwill (Note 20) Other intangible assets (Note 21) Deferred tax assets (Note 29) Prepayments for land and equipment (Note 38) Refundable deposits Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 22 and 36) Contract liabilities - current (Note 27) Notes payable - unrelated parties Notes payable - related parties (Note 35) Trade payables - unrelated parties Trade payables - related parties (Note 35) Construction contracts payable (Note 14) Other payables (Note 24) Current tax liabilities Receipts in advance (Note 14) Current portion of long-term borrowings (Notes 22 and 36) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Note 23) Long-term borrowings (Notes 22 and 36) Deferred tax liabilities (Note 29) Net defined benefit liabilities (Note 25) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 26) 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		2018 Amount % $ 2,923,957 13 1,345,944 6 - - 418,886 2 845,164 4 - - 96,163 - 4,686,789 20 51,818 - - - 2,416,814 10 175,801 1 269,937 1 13,231,273 57 6,807 - 618,271 3 - - - - 649,709 3 3,389,889 15 3,137,187 13 227,961 1 46,134 - 250,150 1 1,082,451 5 466,748 2 95,884 - 9,971,191 43 $ 23,202,464 100 $ 807,348 4 888,333 4 132,773 1 14,556 - 2,404,279 10 8,953 - - - 1,258,976 5 410,208 2 93 - 13,240 - 33,754 - 5,972,513 26 - - 1,954,021 8 424,561 2 160,054 1 966 - 2,539,602 11 8,512,115 37 4,167,794 18 3,469,637 15 2,152,411 9 86,888 - 4,555,760 20 6,795,059 29 13,244 - (35,714) - 14,410,020 62 280,329 1 14,690,349 63 $ 23,202,464 100		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 - 101,972 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

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, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NET OPERATING REVENUE (Notes 14, 27 and 35) OPERATING COSTS (Notes 15, 28 and 35) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 28 and 35) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Finance costs (Note 28) Share of profits of associates and joint ventures (Note 17) Interest income Dividend income Other income (Note 35) (Loss) gain on disposal of property, plant and equipment, net Gain on disposal of investments Net foreign exchange gain (loss) (Note 39) Gain on financial assets (liabilities) at fair value through profit or loss, net Other expenses Impairment loss on financial assets Total non-operating income and expenses		2018 Amount % $ 16,931,128 100 9,472,788 56 7,458,340 44 (47) - - - 7,458,293 44 2,010,963 12 1,153,144 7 1,254,553 7 4,418,660 26 3,039,633 18 (31,768) - 48,015 - 41,793 - 24,146 - 102,784 1 (5,510) - - - 97,928 1 6,571 - (15,502) - - - 268,457 2		2017
				Amount % $ 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 (22,782) - 49,204 1 35,090 - 27,610 - 104,755 1 3,141 - 15,050 - (133,637) (1) 1,858 - (1,194) - (109) - 78,986 1 (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 29) 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 Unrealized gain on investments in equity investments designated as at fair value through other comprehensive income 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 the financial statements of foreign operations Unrealized loss on available-for-sale financial assets Share of the other comprehensive loss of associates and joint ventures accounted for using equity method Total other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests		2018 Amount % $ 3,308,090 20 760,911 5 2,547,179 15 (4,794) - 12,847 - (521) - (3,035) - - - (1,010) - 3,487 - $ 2,550,666 15 $ 2,546,275 15 904 - $ 2,547,179 15 $ 2,546,584 15 4,082 - $ 2,550,666 15		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 (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (NT$; Note 30) Basic Diluted	2018 Amount % $ 6.22 $ 6.08	2017
		Amount % $ 6.41 $ 6.18

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

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

		Equity Attrib	utable to Owners of the Corporation	utable to Owners of the Corporation
Ordinary Share Capital Capital Surplus $ 3,898,872 $ 1,960,159 - - - - - (8,326 ) - - - - - - 201,515 1,101,453 - - (123 ) - - 6,170 18,678 127,833 - - 4,118,942 3,187,289 - - 4,118,942 3,187,289 - - - - - (267 ) - - - - - - 16,141 84,486 - - (840 ) - - 8,572 - - 33,551 189,557 - - - - - - $ 4,167,794 $ 3,469,637	Retained Earnings	Total $ 4,735,275 - (1,314,425 ) - 2,558,401 (6,955) 2,551,446 - - - - - - 5,972,296 135,130 6,107,426 - (1,854,424 ) - 2,546,275 (5,322) 2,540,953 - - - - (2,107 ) - - 4,241 (1,030) $ 6,795,059		Other Equity		Total Treasury Shares $ 58,035 $ (35,714 ) - - - - - - - - (126,272) - (126,272) - - - - (123 ) - 123 - - 56,103 - - - (12,134 ) (35,714 ) (27,484) - (39,618) (35,714) - - - - - - - - 5,631 - 5,631 - - - - (840 ) - 840 - - - - 51,472 - - - (4,241 ) - - - $ 13,244 $ (35,714)
			Exchange Differences on Translating the Financial Statements of Foreign Operations A $ (24,914 ) - - - - (72,719) (72,719) - - - - - - (97,633 ) - (97,633) - - - - (7,239) (7,239) - - - - - - - - - $ (104,872)	Unrealized Gain (Loss) on Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other vailable-for- sale Financial Assets Comprehensive Income Un $ 232,901 $ - - - - - - - - - (53,553) - (53,553) - - - - - - - - - - - - - 179,348 - (179,348) 151,864 - 151,864 - - - - - - - - - 12,870 - 12,870 - - - - - - - - - - - - - - - (4,241 ) - - $ - $ 160,493	earned Employee Benefit $ (149,952 ) - - - - - - - - - - 56,103 - (93,849 ) - (93,849) - - - - - - - - - - - 51,472 - - - $ (42,377)
	Legal Reserve Special Reserve Unappropriated Earnings $ 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 - - 135,130 1,896,570 86,888 4,123,968 255,841 - (255,841 ) - - (1,854,424 ) - - - - - 2,546,275 - - (5,322) - - 2,540,953 - - - - - - - - - - - - - - (2,107 ) - - - - - - - - 4,241 - - (1,030) $ 2,152,411 $ 86,888 $ 4,555,760

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, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on trade receivables (provision for bad debt expense) Net gain on financial assets (liabilities) 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 Loss (gain) on disposal of property, plant and equipment, net Gain on disposal of investments Impairment loss on financial assets Impairment loss (reversal of impairment) on non-financial assets Unrealized gain on transactions with associates and joint ventures Realized gain on transactions with associates and joint ventures Net (gain) loss on foreign currency exchange Net changes in operating assets and liabilities Contract assets Notes receivable Trade receivables Construction contracts receivable Inventories Prepayments Other current assets Contract liabilities Notes payable Trade payables Construction contracts payable 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	2018 $ 3,308,090 308,923 6,491 8,899 (6,571) 31,768 (41,793) (24,146) 78,596 (48,015) 5,510 - - 22,933 47 - (90,474) (642,629) 153,622 (937,810) - (107,544) 90,143 (91,806) 335,806 (168,462) (209,964) - 95,036 (247,029) 3,478 (10,566) 1,822,533 (556,746) 1,265,787	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 (Continued)

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CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Payments to acquire financial assets at fair value through other comprehensive income Cash returned of capital reduction of financial assets at fair value through other comprehensive income Decrease in financial assets at amortized cost 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 Payments to acquire 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 Increase in prepayments for investments Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Payments to acquire intangible assets Net cash inflows from business combination Decrease (increase) in other non-current assets Increase in prepayments for equipment Interest received Dividends received Net cash (used in) generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase 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 EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES	2018 $ (67,800) 5,262 479,482 (1,989,000) 1,701,003 - - - - - - (135,775) 13,877 (439,309) (2,850) 8,477 1,703 (1,517,801) 47,292 60,899 (1,834,540) 332,835 900,000 (1,216,046) 128 (1,851,804) 195,755 (840) (41,034) 49,669 - (1,631,337) 47,636	2017 $ - - - - 1,000 (556,000) 1,809,889 (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) (Continued)

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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

2018 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $(2,152,454) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 5,076,411 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,923,957 The accompanying notes are an integral part of the consolidated financial statements.	2017 $ 1,926,441 3,149,970 $ 5,076,411 (Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (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 of the Corporation and its subsidiaries (collectively referred to as the “Group”) 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 21, 2019.

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 would not have any material impact on the Group’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as of January 1, 2018.

Financial Assets Cash and cash equivalents Derivatives Domestic listed equity securities Domestic listed equity securities Domestic unlisted equity securities Foreign unlisted equity securities Domestic open-end beneficiary certificates Foreign open-end beneficiary certificates Time deposits with original maturities of more than 3 months Notes receivable, trade receivables and other receivables Refundable deposits Financial Assets FVTPL Add: Reclassification from available-for-sale (IAS 39) required reclassification FVTOCI Equity instruments Add: Reclassification from available-for-sale (IAS 39)			Measurement Category IFRS 9 s Amortized cost Mandatorily at fair value through profit or loss (i.e. FVTPL) Mandatorily at FVTPL Fair value through other comprehensive income (i.e. FVTOCI) - equity instrument FVTOCI - equity instrument FVTOCI - equity instrument Mandatorily at FVTPL Mandatorily at FVTPL s Amortized cost s Amortized cost s Amortized cost Reclassifi- cations Remeasure- ments IFRS 9 Carrying Amount as of January 1, 2018 $ 1,053,539 $ (4,139) 1,053,539 (4,139) $ 1,058,194 452,001 112,030 452,001 112,030 564,031 $ 1,505,540 $ 107,891 $ 1,622,225		Carrying Amount IAS 39 IFRS 9 Remark 5,076,411 $ 5,076,411 - 31 31 - 8,763 8,763 - 268,582 268,582 a) 157,762 265,884 a) 25,657 29,565 a) 1,043,387 1,043,387 b) 10,152 6,013 b) 899,368 899,368 c) 4,146,995 4,146,995 d) 27,439 27,439 - Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark b) $ 10,662 $ (14,801) a) 123,376 (11,346) $ 134,038 $ (26,147)
	Lo He He Av Av Av Av Av Lo Lo Lo	IAS 39 ans and receivable ld`‑`for`‑`trading ld`‑`for`‑`trading ailable`‑`for`‑`sale ailable`‑`for`‑`sale ailable`‑`for`‑`sale ailable`‑`for`‑`sale ailable`‑`for`‑`sale ans and receivable ans and receivable ans and receivable IAS 39 Carrying Amount as of January 1, 2018 $ 8,794 - 8,794 - - $ 8,794		$

a) The Group elected to designated all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized gain (loss) on availablefor-sale financial assets of $158,625 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $112,030 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018, respectively.

The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $123,376 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of the same amount in retained earnings on January 1, 2018, respectively.

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b) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in a decrease of $14,801 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and an increase of the same amount in retained earnings on January 1, 2018. Mutual funds previously measured at cost under IAS 39 were classified as at FVTPL under IFRS 9 and were measured at fair value. Consequently, a decrease of $4,139 thousand was recognized in both financial assets at FVTPL and retained earnings.
c) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.
d) Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9. The Group had assessed that the effect of retrospective application would not have any material impact.
e) As a result of the retrospective application of IFRS 9 by associates and joint ventures accounted for using equity method, there was a decrease in investments accounted for using equity method of $245 thousand, a decrease in other equity - unrealized gain (loss) on available-for-sale financial assets of $5,922 thousand, an increase on other equity - unrealized gain (loss) on financial assets at FVTOCI of $4,585 thousand and an increase in retained earnings of $1,092 thousand on January 1, 2018.
2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, the net effect of the progress billings, cost incurred and recognized profit (loss) of a construction contract was recognized as amount due from (to) customer for construction contract under IAS 11.

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations
(the “New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

IFRS 16 “Leases”

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 (Note 2)
January 1, 2019
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: The FSC permits the election for early adoption of the amendments starting from 2018.

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Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether An Arrangement Contains A Lease”, and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Rightof-use assets will be measured at an amount equal to the lease liabilities. The Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
2) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
3) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
4)The Group will use hindsight, such as in determining lease terms, to measure lease liabilities

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The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

					Adjusted
	Carrying			Adjustments	Carrying
	Amount as of			Arising from	Amount as of
	December		31,	Initial	January 1,
		2018		Application	2019
Right-of-use assets	$		-	$ 168,654	$ 168,654
Total effect on assets	$		-	$ 168,654	$ 168,654
Lease liabilities - current	$		-	$ 82,145	$ 82,145
Lease liabilities - non-current			-	86,509	86,509
Total effect on liabilities	$		-	$ 168,654	$ 168,654

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group had assessed that the application of other standards and interpretations would not have significant impacts on the Group’s financial position and financial performance.

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

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

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 Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments 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, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

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

Current assets include:

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

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period; and
3) 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.

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d. 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 intragroup 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 noncontrolling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling 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 16, Tables 9 and 10 for detailed information on subsidiaries (including percentage of ownership and main business).

e. Business combinations

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

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

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. Other types of non-controlling interests are measured at fair value.

f. Foreign currencies

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

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

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

Non-monetary items that are measured at historical cost in a foreign currency are not translated using the exchange rate at the date of the transaction.

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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 the 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 non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising from the acquisition of a foreign operation 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.

g. Inventories

Inventories consist of raw materials, semi-finished goods, work-in-process, finished goods and inventory in transit, which are stated at the lower of cost or net realizable value. Inventory writedowns are made by item, except where it may be appropriate to group similar or related items. The 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.

h. 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. A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

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

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

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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 had the investee 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 not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

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

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

i. Property, plant and equipment

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

Property, plant and equipment in the course of construction are measured 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.

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

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

j. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

Investment properties under construction are measured at cost less accumulated impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

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

k. Goodwill

Goodwill arising from the acquisition of a business is measured 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 pro rata to the other assets of the unit 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 which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

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l. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods 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.

2) Intangible assets acquired in a business combination

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

3) Derecognition of intangible assets

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

m. 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 individual 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.

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

When an impairment loss is subsequently reversed, the carrying amount of the 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 for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

n. Financial instruments

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

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Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) 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 FVTPL are recognized immediately in profit or loss.

1) Financial assets

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

a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI.

i. Financial assets at FVTPL

The Group recognizes a financial asset at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL, including investments in equity instruments which are not designated as at FVTOCI.

Financial assets at FVTPL are subsequently measured 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 does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 34.

ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, financial assets at amortized cost, trade receivables at amortized cost and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

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ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

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

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

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

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL 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 does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 34.

ii. 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 FVTPL.

Available-for-sale financial assets are measured at fair value. Dividends on available-forsale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established. 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 such investments are disposed of or are determined to be impaired.

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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 presented as 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 the carrying amount and the fair value of such financial assets is recognized in other comprehensive income. Any impairment losses are recognized in profit and loss.

iii. Loans and receivables

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

b) Impairment of financial assets and contract assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables) that are measured at FVTOCI, as well as contract assets.

The Group always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables and contract assets. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, 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 such financial assets, that the estimated future cash flows of the investment have been affected.

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Financial assets at amortized cost, such as trade receivables, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with 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 defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of its estimated future cash flows, discounted at the financial asset’s original effective interest rate. 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 impairment is recognized in other comprehensive income.

For a financial asset measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its 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 a 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 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.

c) Derecognition of financial assets

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

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Before 2018, 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 which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Equity instruments

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

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

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

3) Financial liabilities
a) Subsequent measurement

Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized cost using the effective interest method.

Financial liabilities at FVTPL 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 does not incorporate any interest or dividend paid on such financial liability. Fair value is determined in the manner described in Note 34.

b) Derecognition of financial liabilities

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

4) Convertible bonds

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

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

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

Transaction costs that relate to the issuance 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.

o. 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 to assure that products comply with agreed-upon specifications are recognized on the date of sale of the relevant products at the best estimate by the management of the Group of the expenditures required to settle the obligations.

p. Revenue recognition

2018

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

1) Revenue from the sale of goods

Revenue from sale of goods comes from sales of test instruments and other products. Revenue is recognized when the goods are delivered to the customer’s specific location or the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and bears the risks of obsolescence. Trade receivables are recognized concurrently. The transaction price received is recognized as a contract liability until the goods are delivered to the customer.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

2) Revenue from the rendering of services

Revenue from the rendering of services comes from wafer level test and development of cloud platform. The Group acquires enforceable right to payment for services rendered in accordance with customer contracts only upon completion of the services; thus, the Group recognizes revenue from rendering of services upon completion of the contract.

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3) Construction contract revenue

For construction contracts to build customized production line, the Group recognizes revenue over time. The Group measures the progress on the basis of costs incurred relative to the total expected costs as there is a direct relationship between the costs incurred and the progress of satisfying the performance obligations. Contract assets are recognized during the construction and are reclassified to trade receivables at the point at which the customer is invoiced. If the milestone payments exceed the revenue recognized to date, then the Group recognizes contract liabilities for the difference. Certain payment retained by the customer as specified in the contract is intended to ensure that the Group adequately completes all of its contractual obligations. Such retention receivables are recognized as contract assets until the Group satisfies its performance obligations.

2017

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

1) Sale of goods

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

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

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

2) Revenue from the rendering of services

Service income is recognized when services are provided.

3) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and that 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 with reference to the principal outstanding and at the applicable effective interest rate.

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4) Construction contracts

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized with reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred to date relative to the estimated total contract costs. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

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

When contract costs incurred to date plus recognized profits less recognized losses exceed progress billings, the surplus is presented as construction contracts receivable. For contracts where progress billings exceed contract costs incurred to date plus recognized profits less recognized losses, the surplus is presented as construction contracts payable. Amounts received before the related work is performed are recognized as 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.

q. Borrowing costs

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

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

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

r. 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 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.

s. Employee benefits

1) Short-term employee benefits

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

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2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under 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.

3) Other long-term employee benefits

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

t. 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 shares or options that are expected to 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 is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration and should be returned once the employee resigns, they are recognized as payables. Dividends paid to employees on 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 expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options and capital surplus - restricted shares for employees.

u. Taxation

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

1) Current tax

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

143

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

2) Deferred tax

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

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, 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 assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax 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 liabilities are settled or the assets are 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.

3) Current and deferred taxes for the year

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

144

a. Estimated impairment of trade receivables

The provision for impairment of trade receivables is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 13. Where the actual future cash flows are less than expected, a material impairment loss may arise.

b.Write-down 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 is 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.

6. CASH AND CASH EQUIVALENTS

December 31 2018 2017 Cash on hand $ 4,515 $ 5,439 Checking accounts and demand deposits 2,728,749 4,251,592 Cash equivalents Time deposits with maturities less than 3 months 190,693 819,380 $ 2,923,957 $ 5,076,411 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2018 2017 Mandatorily at FVTPL Non-derivative financial assets Domestic listed shares $ 3,653 $ - Open-end beneficiary certificates 1,342,291 - 1,345,944 - Held for trading Derivative instruments (Note 23) Call and put option of convertible bonds payable - 31 Non-derivative financial assets Domestic listed shares - 8,763 - 8,794 Financial assets - current $ 1,345,944 $ 8,794 Mandatorily at FVTPL-non-current Non-derivative financial assets Open-end beneficiary certificates $ 6,807 $ -		December 31	December 31
		2018 $ 3,653 1,342,291 1,345,944 - - - $ 1,345,944 $ 6,807	2017 $ - - - 31 8,763 8,794 $ 8,794 $ -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

145

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

	December 31,
	2018
Investments in equity instruments-non-current
Domestic listed ordinary shares	$ 431,797
Domestic unlisted ordinary shares	182,039
Foreign unlisted ordinary shares	4,435
	$ 618,271

These investments in equity instruments are not held for trading. Instead, they are held for medium to longterm strategic purposes. Refer to Table 3 for the detailed information. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing shortterm fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale and measured at cost under IAS 39. Refer to Note 3, Note 10 and Note 11 for information relating to their reclassification and comparative information for 2017.

9. FINANCIAL ASSETS MEASURED AT AMORTIZED COST - CURRENT - 2018

	December 31,
	2018
Time deposits with original maturities of more than 3 months	$ 188,951
Pledge deposits (Note 36)	229,935
	$ 418,886
AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017
	December 31,
	2017
Current
Domestic open-end beneficiary certificates	$ 1,043,387
Non-current
Domestic listed shares	$ 268,582

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

146

11. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT - 2017

	December 31,
	2017
Domestic unlisted ordinary shares	$ 157,762
Foreign unlisted ordinary shares	25,657
Foreign open-end beneficiary certificates	10,152
	$ 193,571
Classified according to financial asset measurement categories
Available-for-sale financial assets	$ 193,571

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.

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - CURRENT - 2017

	December 31,
	2017
Time deposits with original maturities of more than 3 months	$ 407,921
Pledge deposits (Note 36)	491,447
	$ 899,368

13. NOTES RECEIVABLE AND TRADE RECEIVABLES

Gross carrying amount at amortized cost Less: Allowance for impairment loss Gross carrying amount at amortized cost - related parties		December 31	December 31
		2018 $ 4,909,282 (126,330) 4,782,952 51,818 $ 4,834,770	2017 $ 4,094,746 (127,707) 3,967,039 47,702 $ 4,014,741

In 2018

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. 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.

147

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate. As the Group’s historical credit loss experience does not show other factors that matter significantly, the expected credit loss rate is based on past due status of trade receivables.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The aging schedule of notes receivable and trade receivables based on the past due days was as follows:

	December 31,
	2018
Less than 60 days	$ 4,365,269
61-180 days	230,296
Over 180 days	313,717
	$ 4,909,282

The movements of the loss allowance of notes receivable and trade receivables were as follows:

	For the Year
	Ended
	December 31,
	2018
Balance at January 1, 2018 per IAS 39	$ 127,707
Adjustment on initial application of IFRS 9	-
Balance at January 1, 2018 per IFRS 9	127,707
Add: Impairment loss recognized on receivables	8,899
Less: Amounts written off	(10,545)
Foreign exchange gains and losses	269
Balance at December 31, 2018	$ 126,330

In 2017

The Group applied the same credit policy in 2018 and 2017. 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.

148

The aging of notes receivable and trade receivables was as follows:

	December 31,
	2017
Less than 60 days	$ 3,333,066
61-180 days	429,499
Over 180 days	332,181
	$ 4,094,746

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

The aging of notes receivable and trade receivables that were past due but not impaired was as follows:

				December 31,
				2017
Less than 60 days				$ 447,305
61-180 days				415,515
Over 180 days				231,913
				$ 1,094,733
The above aging schedule was based on the past due days from end of			credit term.
The movements of the allowance for doubtful notes receivable and trade receivables were				as follows:
	Individually		Collectively
	Assessed for		Assessed for
	Impairment		Impairment	Total
Balance at January 1, 2017	$ 135,696		$ 34,665	$ 170,361
Add: Impairment losses recognized on
receivables		2,407	41,260	43,667
Less: Amounts written off during the year as
uncollectible		(83,378)	(401)	(83,779)
Reclassification of impairment loss from
collective assessment to individual
assessment		31,071	(31,071)	-
Foreign exchange translation gains		(1,017)	(1,525)	(2,542)
Balance at December 31, 2017	$ 84,779		$ 42,928	$ 127,707

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

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14. CONSTRUCTION CONTRACTS RECEIVABLE (PAYABLE)

	December 31,	December 31,
		2017
Construction contracts receivable
Construction costs incurred plus recognized profits (less recognized losses) to
date	$	316,677
Less: Progress billings		(114,142)
Due from customers for construction contracts	$	202,535
Construction contracts payable
Progress billings	$	1,149,807
Less: Construction costs incurred plus recognized profits less recognized losses
to date		(597,280)
Due to customers for construction contracts	$	552,527
Receipts in advance	$	10,434

The Group recognized construction contract revenue of $2,538,348 thousand in accordance with IAS 11 for the year ended December 31, 2017.

15. INVENTORIES

Finished goods Semi-finished products Work in process Raw materials Inventory in transit		December 31	December 31
		2018 $ 482,436 381,704 613,007 939,667 - $ 2,416,814	2017 $ 482,724 390,533 686,539 842,094 29,184 $ 2,431,074

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 was $6,032,195 thousand and $5,941,061 thousand, respectively. The cost of goods sold included inventory write-downs of $22,933 thousand and the reversal of inventory write-downs of $38,384 thousand, respectively.

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16. 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.
Quantel Global Sdn. Bhd.
Sale and maintenance of test instruments, etc.
Quantel Global Philippines
Corporation
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
2018
2017
Remark
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
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
85.6
73.8
Note 3
60.0
60.0
71.1
89.3
Note 4
78.1
78.1
Note 5
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
100.0
Note 6
100.0
100.0
Note 6
100.0
-
Note 6
100.0
-
Note 6
100.0
100.0
Note 7

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. 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 resolved to participate in the capital injection at the same percentage as originally owned. The Corporation’s equity interest in Adivic remained the same.

151

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. In August 2018, EVT decreased its capital by $30,000 thousand to make up for losses and increased its capital by $50,000 thousand subsequently. The Corporation’s board of directors participated in the capital injection. The Corporation’s equity interest in EVT rose to 85.6% after the cash injection.
Note 4: In response to the demand of 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 and May 2018, Innovative Nanotech Incorporated increased its capital. The Corporation participated in the cash injection and held 71.1% equity consequently.
Note 5: 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% in 2017.
Note 6: To lay out sales network in Southeast Asia, Quantel Private Ltd. resolved to set up Quantel Technologies India Private Ltd., Quantel Global Vietnam Co., Ltd. in the fourth quarter of 2017, Quantel Global Sdn. Bhd. and Quantel Global Philippines Corporation in the first and second quarter of 2018, respectively, to be engaged in the sale of test instruments.
Note 7: 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.

17. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates Investments in joint ventures		December 31	December 31
		2018 $ 632,045 17,664 $ 649,709	2017 $ 623,941 17,626 $ 641,567

a.Investments in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2018 Amount Percentage of Equity Interest (%) $ 517,852 11.3 114,193 27.3 $ 632,045		2017
				Amount Percentage of Equity Interest (%) $ 529,538 11.3 94,403 27.3 $ 623,941

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Aggregate information of associates that are not individually material:

The Group’s share of: Profit from continuing operations Other comprehensive loss Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 47,977 (1,531) $ 46,446	2017 $ 49,171 (7,808) $ 41,363

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.

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. Investments in joint ventures

Joint ventures that are not individually material Chih Ho Shun Development Co., Ltd.		December 31	December 31	December 31
		2018 Amount Percentage of Equity Interest (%) $ 17,664 35.0		2017
				Amount Percentage of Equity Interest (%) $ 17,626 35.0

Aggregate information of joint ventures that are not individually material:

The Group’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 38 - $ 38	2017 $ 33 - $ 33

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 for a 35% entity interest in Chih Ho Shun but did not have control over this investee.

The investments in joint ventures accounted for using equity method and the share of profit or loss and other comprehensive income of the investment for the years ended December 31, 2018 and 2017 was based on the joint ventures’ financial statements which have been audited.

153

18. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2017 Additions Disposals Acquisition through business combinations (Note 32) Intercompany transfer Exchange differences Balance, December 31, 2017 Accumulated depreciation Balance, January 1, 2017 Depreciation Disposals Acquisition through business combinations (Note 32) Intercompany transfer Exchange differences Balance, December 31, 2017 Carrying value at December 31, 2017 Cost Balance, January 1, 2018 Additions Disposals Transferred from prepayments for land and equipment Transferred from inventories Reclassification Exchange differences Balance, December 31, 2018 Accumulated depreciation Balance, January 1, 2018 Depreciation Disposals Reclassification Exchange differences Balance, December 31, 2018 Carrying value at December 31, 2018	Land $ 525,615 - - - - (5,268) $ 520,347 $ - - - - - - $ - $ 520,347 $ 520,347 - - 688,331 - - 2,550 $ 1,211,228 $ - - - - - $ - $ 1,211,228	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 $ 2,526,395 41,136 - - - - 5,526 $ 2,573,057 $ 1,073,428 85,011 - - 363 $ 1,158,802 $ 1,414,255	Machinery Miscellaneous Equipment $ 930,663 $ 1,485,404 23,430 141,826 (186,480) (80,708) 371 751 22,842 103,325 (5,928) (5,256) $ 784,898 $ 1,645,342 $ 743,583 $ 1,034,493 84,455 133,372 (185,362) (64,378) 56 182 (1,217) - (3,834) (2,380) $ 637,681 $ 1,101,289 $ 147,217 $ 544,053 $ 784,898 $ 1,645,342 71,384 147,796 (36,088) (58,788) - - 12,936 86,542 (323) 323 1,722 (7,698) $ 834,529 $ 1,813,517 $ 637,681 $ 1,101,289 61,951 161,961 (34,428) (41,061) (210) 210 1,115 (4,868) $ 666,109 $ 1,217,531 $ 168,420 $ 595,986	Total $ 5,475,946 178,878 (267,220) 1,122 126,167 (37,911) $ 5,476,982 $ 2,761,819 310,239 (249,769) 238 (1,217) (8,912) $ 2,812,398 $ 2,664,584 $ 5,476,982 260,316 (94,876) 688,331 99,478 - 2,100 $ 6,432,331 $ 2,812,398 308,923 (75,489) - (3,390) $ 3,042,442 $ 3,389,889

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

Buildings Primary buildings 55 years Mechanical and electrical equipment 10 years Clean room equipment 10 years Others 2-50 year Machinery 2-6 years scellaneous equipment 13-16 year

154

Refer to Note 36 for property, plant and equipment have been pledged to secure borrowings of the Group.

19. INVESTMENT PROPERTIES

Cost January 1, 2018 Transferred from prepayments for land and equipment December 31, 2018	Land $ - 3,137,187 $ 3,137,187

The Group acquired the land ownership certificates of the investment and development plan, “The Action Plan of Developing Land Surrounding the MRT Airport Station to Improve Civilian’s Life” in the third quarter of 2018 and transferred the parts of land held for undetermined future use to investment properties. Please refer to Note 38. The determination of fair value was performed by independent qualified professional valuers, and the fair value was measured by using Level 3 inputs. The valuation was arrived at by reference to market evidence of transaction prices for similar properties. The significant unobservable inputs used include discount rates and the fair value as appraised.

	December 31,
	2018
Fair value	$ 13,588,172

All of the Group’s investment properties were held under freehold interests.

20. GOODWILL

Cost Balance, beginning of the year Acquisition through business combination (Note 32) Net effect of exchange differences Balance, end of the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 225,408 - 2,553 $ 227,961	2017 $ 220,236 11,737 (6,565) $ 225,408

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, 2018 and 2017.

155

21. OTHER INTANGIBLE ASSETS

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 Cost Balance, January 1, 2018 Disposals Exchange differences Balance, December 31, 2018 Accumulated amortization Balance, January 1, 2018 Amortization expenses Disposals Balance, December 31, 2018 Carrying value at December 31, 2018	Patents Licenses and Franchises Core Technology Customer Relationships $ - $ - $ 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 $ 16,088 $ 32,662 $ 317,931 $ 5,592 - - (317,931) - - - - - $ 16,088 $ 32,662 $ - $ 5,592 $ 268 $ 136 $ 317,428 $ 1,957 3,218 1,633 503 1,118 - - (317,931) - $ 3,486 $ 1,769 $ - $ 3,075 $ 12,602 $ 30,893 $ - $ 2,517	Computer Software $ - 162 - 2 $ 164 $ - 19 1 $ 20 $ 144 $ 164 - (3) $ 161 $ 20 19 - $ 39 $ 122	Total $ 323,523 48,912 2 $ 372,437 $ 316,256 3,552 1 $ 319,809 $ 52,628 $ 372,437 (317,931) (3) $ 54,503 $ 319,809 6,491 (317,931) $ 8,369 $ 46,134

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	20 years
Core technology	5 years
Customer relationships	5 years
Computer software	10 years

156

22. BORROWINGS

a.Short-term borrowings

Unsecured borrowings Bank loans		December 31	December 31
		2018 $ 807,348	2017 $ 471,638

As of December 31, 2018 and 2017, the interest rate on the bank loans was 0.86%-5.50% and 0.85%4.50% per annum, respectively.

b.Long-term borrowings

Secured borrowings Bank loans (1) (Note 36) Unsecured borrowings Syndicated bank loans (2) Bank loans (3) Less: Current portions Long-term borrowings		December 31	December 31
		2018 $ 467,261 - 1,500,000 1,967,261 13,240 $ 1,954,021	2017 $ 177,735 1,200,000 900,000 2,277,735 1,216,042 $ 1,061,693

1) Secured by the Group’s financial assets amortized at cost, debt investments with no active market and property, plant and equipment. The final repayment period of those bank loans will be due in March 2023 to November 2025. As of December 31, 2018 and 2017, the effective interest rate on the bank loans were 1.17%-5.75% and 0.90%-8.88% per annum, respectively.
2) On August 30, 2012, the Group 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 38). The syndicated bank loan had been repaid from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per installment), the remaining $800,000 thousand had been repaid in September 2018. As of December 31, 2017, the interest rate per annum was 1.58% on a floating basis and the interest is paid monthly.
3) The bank loans are for the purpose of general operation with due date on June 8, 2023. As of December 31, 2018 and 2017, the interest rates on the bank loans were 1.08%-1.20% and 1.17%1.20% per annum, respectively.

157

23. BONDS PAYABLE

	December 31,
	2017
Unsecured domestic convertible bonds	$ 99,703

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 from June 24, 2014 to May 13, 2019. The conversion price would be adjusted when earning distribution of cash dividends was resolved by shareholders’ meeting. The unsecured domestic convertible bonds had been completely converted into the Corporation’s common stock in the fourth quarter of 2018.

24. OTHER PAYABLES

Salaries and bonus (including employee’s compensation and remuneration of directors) Others		December 31	December 31
		2018 $ 915,728 343,248 $ 1,258,976	2017 $ 872,526 293,927 $ 1,166,453

25. RETIREMENT BENEFIT PLANS

a.Defined contribution plans

The Corporation and its subsidiaries in the 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 People’s Republic of China, USA, Europe, Singapore, Japan and branches in Korea 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.

b.Defined benefit plans

The defined benefit plans adopted by the Corporation and its subsidiaries, Chroma New Material Corp. and Adivic Technology Co. in accordance with the Labor Standard Law is operated by the government of the ROC. 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.

158

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
		2018 $ 470,802 (310,748) $ 160,054	2017 $ 459,640 (293,814) $ 165,826

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	Liabilities
Balance at January 1, 2017	$ 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
Current service cost	4,030	-	4,030
Net interest expense (income)	6,325	(4,149)	2,176
Recognized in profit or loss	10,355	(4,149)	6,206
Remeasurement
Return on plan assets (excluding
amounts included in net interest)	-	(7,472)	(7,472)
Actuarial loss - changes in demographic
assumptions	442	-	442
Actuarial loss - changes in financial
assumptions	7,047	-	7,047
Actuarial loss - experience adjustments	4,777	-	4,777
Recognized in other comprehensive
income	12,266	(7,472)	4,794
Contributions from employer	-	(16,772)	(16,772)
Benefits paid	(11,459)	11,459	-
Balance at December 31, 2018	$ 470,802	$(310,748)	$ 160,054

159

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

1) 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.
2) 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.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate(s) Expected rate(s) of salary increase	December 31
	2018 2017 0.88%-1.38% 0.88%-1.63% 1.50%-2.50% 1.50%-2.50%

If possible reasonable changes 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
		2018 $(13,988) $ 14,593 $ 14,173 $(13,659)	2017 $(14,066) $ 14,697 $ 14,293 $(13,752)

The sensitivity analysis presented above may not be representative of the actual changes in the present value of the defined benefit obligation as it is unlikely that the changes 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
	2018 2017 $ 16,615 $ 16,338 12.7 years 13.5 years

160

26. 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
		2018 450,000 $ 4,500,000 416,779 $ 4,167,794	2017 450,000 $ 4,500,000 411,894 $ 4,118,942

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

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (Note) Additional paid-in capital Treasury share transactions Consolidation excess 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
		2018 $ 2,860,255 179,801 146,976 12,421 44,110 - 87,000 139,074 $ 3,469,637	2017 $ 2,514,454 171,229 146,976 5,874 44,377 7,209 116,389 180,781 $ 3,187,289

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

c. Retained earnings and dividend policy

Under the dividend policy as set forth in the Corporation’s Articles of Incorporation (the “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, please refer to d. employees’ compensation and remuneration of directors in Note 28.

161

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 a 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 deficits 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.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and in 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.

The appropriations of earnings for 2017 and 2016 have been approved in the annual shareholders’ meeting on June 8, 2018 and 2017, respectively, were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2017 For Fiscal Year 2016 $ 255,841 $ 171,994 1,854,424 1,314,425	Dividend Per Share (NT$)
		For Fiscal Year 2017 For Fiscal Year 2016 $ 4.5 $ 3.3

The appropriations of earnings for 2018 had been proposed by the Corporation’s board of directors on February 21, 2019. The appropriations and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Legal reserve	$ 254,628
Cash dividends	1,750,896	$4.2

The appropriations of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on June 18, 2019.

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.

162

e. Other equity items

Exchange
Differences on
Translating
Foreign
Operations
Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI
Unrealized Gain
(Loss) on
Available-for-
sale Financial
Assets
For the year ended December 31, 2018
Balance at January 1, 2018 (IAS 39)
$ (97,633)
$ -
$ 179,348

Effect of retrospective application of IFRS 9

-

151,864
(179,348)

Balance at January 1, 2018 (IFRS 9)
(97,633)
151,864
-
Exchange differences on translating
foreign operations
(6,229)
-
-
Unrealized gain (loss) arising from equity
investment
-
12,847
-
Share of other comprehensive gain (loss)
of associates and joint ventures
accounted for using equity method
(1,010)
23
-
Disposal of investments in equity
instruments designated as at FVTOCI
-
(4,241)
-
Share-based payment transaction

-

-

-

Balance at December 31, 2018
$ (104,872)
$ 160,493
$ -

For the year ended December 31, 2017
Balance at January 1, 2017
$ (24,914)
$ -
$ 232,901

Exchange differences on translating
foreign operations
(64,660)
-
-
Unrealized gain (loss) on available-for-sale
financial assets
-
-
(53,553)
Share of other comprehensive gain (loss)
of associates and joint ventures
accounted for using equity method
(8,059)
-
-
Issuance of shares
-
-
-
Share-based payment transaction

-

-

-

Balance at December 31, 2017
$ (97,633)
$ -
$ 179,348

f. Non-controlling interests

Unearned
Employee
Benefit
$ (93,849)

-
(93,849)
-
-
-
-

51,472
$ (42,377)
$ (149,952)
-
-
-
(13,772)

69,875
$ (93,849)

Balance, beginning of the year Share of non-controlling interests Net profit (loss) Exchange difference on translating the financial statements of foreign entities Remeasurement on defined benefit plans Unrealized gain on available-for-sale financial assets Capital increase of subsidiaries Non-controlling interests arising from acquisition of subsidiaries (Note 32) Changes in percentage of ownership interest in subsidiaries Subsidiaries cash dividend Balance, end of the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 232,150 904 3,194 (16) - 49,669 - 2,107 (7,679) $ 280,329	2017 $ 171,224 (9,578) (4,958) (83) 40 68,756 12,701 - (5,952) $ 232,150

163

g. Treasury shares

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, 2018 Chroma Investment Co., Ltd. 1,916 December 31, 2017 Chroma Investment Co., Ltd. 1,916	Carrying Amount Market Price $ 35,714 $ 226,038 $ 35,714 $ 310,324

Forfeited employee restricted shares of 84 thousand were returned to the Corporation and canceled during 2018. Forfeited employee restricted shares of 12 thousand were returned to the Corporation and canceled during 2017.

Under the Securities and Exchange Act, the Corporation shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the 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.

27. REVENUE

Revenue from contracts with customers Revenue from sale of goods Construction contract revenue Other revenue a. Contract balances Contract assets - construction contract Contract liabilities -construction contract Contract liabilities - sale of goods	For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ 11,733,130 $ 11,989,444 4,862,323 2,538,348 335,675 373,554 $ 16,931,128 $ 14,901,346 December 31, 2018 $ 845,164 $ 645,135 243,198 $ 888,333

The changes in the balance of contract liabilities primarily result from the timing difference between the Group’s performance and the respective customer’s payment. Revenue of the reporting period recognized from the beginning contract liabilities is $564,062 thousand.

164

b.Disaggregation of revenue

Refer to Note 41 for the information on disaggregation of revenue.

28. ADDITIONAL INFORMATION ON EXPENSES

a.Finance costs

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2018 2017 $ 40,442 $ 40,313 935 6,764 41,377 47,077 (9,609) (24,295) $ 31,768 $ 22,782 $ 9,609 $ 24,295 1.58% 1.58% For the Year Ended December 31
2018 2017 $ 75,359 $ 95,716 233,564 214,523 $ 308,923 $ 310,239 $ 6,491 $ 3,552 For the Year Ended December 31
	2018 $ 3,386,786 78,596 93,653 6,206 70,500 $ 3,635,741 $ 630,029 3,005,712 $ 3,635,741	2017 $ 3,079,813 121,593 77,504 6,402 64,457 $ 3,349,769 $ 594,855 2,754,914 $ 3,349,769

165

d. Employees’ compensation and remuneration of directors

According to the Article of Incorporation of the Corporation, the Corporation accrued employees’ compensation and remuneration of directors 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. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017, which have been approved by the Corporation’s board of directors on February 21, 2019 and February 22, 2018, respectively, were as follows:

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2018 Amount Rate % $ 240,000 7.55 9,600 0.30	2017
		Amount Rate % $ 310,000 9.73 9,600 0.30

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

There is no difference between the actual amounts of the employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2018 and 2017.

Information on the employees’ compensation and remuneration of directors resolved by the Corporation’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

29. 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 Adjustments to deferred tax attributable to changes in tax rates and law Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 605,469 45,612 8,685 659,766 73,527 27,618 101,145 $ 760,911	2017 $ 485,085 20,687 (34,220) 471,552 101,692 - 101,692 $ 573,244

166

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 Others Income tax on unappropriated earnings Unrecognized investment credits Others credits Temporary differences Additional income tax under the Alternative Minimum Tax Act Effect of tax rate changes Adjustments for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,308,090 $ 953,833 (191,423) 16,333 45,612 (101,193) 1,345 (452) 553 27,618 8,685 $ 760,911		2017 $ 3,122,067 $ 776,015 (118,652) (28,509) 20,687 (67,191) - 25,114 - - (34,220) $ 573,244

In 2017, the applicable corporate income tax rate used by the group entities in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of 2019 appropriations of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

b.Deferred tax assets and liabilities

For the year ended December 31, 2018

Deferred Tax Assets Unrealized intercompany gain Tax losses Inventory reserve Tax credit Allowance for impaired receivables Net defined benefit liability Unrealized exchange loss Others Impairment loss	Opening Balance Recognized in Profit or Loss Exchange Differences and Other $ 92,296 $ 18,458 $ - 39,636 4,638 991 33,561 10,124 - 18,757 5,434 702 9,562 1,569 18 8,991 (545) - 5,302 (5,277) - 2,838 4,083 (988) 19,465 (19,465) - $ 230,408 $ 19,019 $ 723	Closing Balance $ 110,754 45,265 43,685 24,893 11,149 8,446 25 5,933 - $ 250,150

167

Deferred Tax Liabilities
Opening
Balance
Recognized
in Profit or
Loss
Exchange
Differences
and Other
Unappropriated earnings of
foreign subsidiaries
$ 272,636
$ 109,122
$ -

Goodwill
21,593
7,455
19
Unrealized exchange gain
219
8,122
-
Others

9,374

(4,535)

556

$ 303,822
$ 120,164
$ 575

For the year ended December 31, 2017
Deferred Tax Assets
Opening
Balance
Recognized
in Profit or
Loss
Exchange
Differences
and Other
Unrealized intercompany
gain
$ 70,420
$ 21,876
$ -

Tax losses
61,207
(18,065)
(3,506)
Inventory reserve
33,321
240
-
Impairment loss
16,030
3,435
-
Tax credit
16,263
3,834
(1,340)
Allowance for impaired
receivables
3,402
6,190
(30)
Net defined benefit liability
9,000
(9)
-
Unrealized exchange loss
4,367
935
-
Others

6,054

(2,828)

(388)

$ 220,064
$ 15,608
$ (5,264)

Deferred Tax Liabilities
Opening
Balance
Recognized
in Profit or
Loss
Exchange
Differences
and Other
Unappropriated earnings of
foreign subsidiaries
$ 161,194
$ 111,442
$ -

Goodwill
15,959
5,634
-
Unrealized exchange gain
945
(726)
-
Others

9,072

950

(648)

$ 187,170
$ 117,300
$ (648)

Closing
Balance
$ 381,758
29,067
8,341
5,395
$ 424,561
Closing
Balance
$ 92,296

39,636
33,561
19,465

18,757

9,562
8,991
5,302
2,838
$ 230,408
Closing
Balance
$ 272,636
21,593
219
9,374
$ 303,822

168

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

Loss carryforwards Expiry in 2018 Expiry in 2019 Expiry in 2020 Expiry in 2021 Expiry in 2022 Expiry after 2023 Deductible temporary differences		December 31	December 31
		2018 $ - 49,907 44,523 71,191 109,666 411,678 $ 686,965 $ 3,502	2017 $ 33,277 57,397 49,826 68,584 109,443 377,850 $ 696,377 $ 287

d. Information about unused investment credits, unused loss carryforwards and tax-exemptions

Loss carryforwards as of December 31, 2018 were as follows:

Unused
Amount	Expiry Year
$ 54,458	2019
49,826	2020
75,788	2021
110,060	2022
71,740	2023
64,217	2024
97,853	2025
90,790	2026
70,727	2027
57,934	2028
58,755	2033
26,173	2034
17,180	2036
59,703	2038
$ 905,204

e. Income tax assessments

As of December 31, 2018, the Corporation’s tax returns through 2016 had been assessed by the tax authorities.

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

169

30. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share are 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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,546,275 966 $ 2,547,241	2017 $ 2,558,401 7,459 $ 2,565,860

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	(In Thousands of Shares) For the Year Ended December 31	(In Thousands of Shares) For the Year Ended December 31	(In Thousands of Shares) For the Year Ended December 31
		2018 409,438 961 4,395 2,313 1,882 418,989	2017 399,052 6,864 5,037 2,392 2,057 415,402

If 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.

31. 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.

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Information on employee share options was as follows:

Balance at January 1 Options exercised Options forfeited Balance at December 31 Options exercisable, end of the year	For the Year Ended December 31	For the Year Ended December 31
	2018 Number of Options (In Thousands) Weighted - average Exercise Price (NT$) 9,463 $ 60.1 (3,354) 58.4 (103) - 6,006 59.0 1,532	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

Information on outstanding options as of December 31, 2018 and 2017 is as follows:

December 31	December 31
2018 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $45.4 0.52 61.6 3.24	2017
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $46.7 1.52 63.4 4.24

Compensation costs recognized were $29,810 thousand and $51,802 thousand for the years ended December 31, 2018 and 2017, respectively.

b. Employee share option plan of subsidiaries

Adivic Technology Co. granted its employees share options of 1,360 thousand units in 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.

Information on employee share options was as follows:

Balance at January 1 Options forfeited Balance at December 31 Options exercisable, end of the period		For the Year Ended December 31	For the Year Ended December 31
		2018 Number of Options (In Thousands) Weighted - average Exercise Price (NT$) 785 $ 10.0 - - 785 10.0 -	2017
			Number of Options (In Thousands) Weighted - average Exercise Price (NT$) 785 $ 10.0 - - 785 10.0 -

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Information on outstanding options as of December 31, 2018 and 2017 is as follows:

December 31	December 31
2018 Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $10 3.20	2017
	Range of Exercise Price (NT$) Weighted-average Remained Contractual Life (Years) $10 4.20

No compensation costs were recognized for the years ended December 31, 2018 and 2017.

c. 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.
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.

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Information relating to outstanding employee restricted shares as of December 31, 2018 and 2017 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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 2,975 - (618) (84) 2,273	2017 3,100 185 (298) (12) 2,975

Compensations costs of share-based payment arising from the RSU Plan were $48,786 thousand and $69,791 thousand (including deduction of 2,686 and 84 thousand for canceled shares) for the years ended December 31, 2018 and 2017, respectively.

32. BUSINESS COMBINATIONS

a. Subsidiaries acquired

The Group bought 78.1% of equity interest in and acquired control of Touch Cloud Incorporation (“Touch Cloud”) in 2017. The subsidiary is included in the consolidated financial statements since the date the Group acquired control.

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

	Touch Cloud
	Incorporation
Current assets
Cash and cash equivalents	$ 60,514
Trade receivables	790
Prepayments	339
Other current assets	30
Non-current assets
Property, plant and equipment, net	884
Refundable deposits	175
Other non-current assets	1
Current liabilities
Trade payables	(290)
Notes payable	(443)
Other payables	(20)
Other current liabilities	(4,016)
	$ 57,964

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c. Goodwill recognized on acquisitions

	Touch Cloud
	Incorporation
Consideration transferred	$ 57,000
Plus: Non-controlling interests	12,701
Less: Fair value of identifiable net assets acquired	(57,964)
Goodwill recognized on acquisitions	$ 11,737

d. Net cash inflow on the acquisition of subsidiaries

	Touch Cloud
	Incorporation
Consideration paid in cash	$(57,000)
Less: Cash and cash equivalent balances acquired	60,514
	$ 3,514

e. Impact of acquisitions on the results of the Group

The results of the acquirees since the acquisition date included in the consolidated statements of comprehensive income are as follows:

	Touch Cloud
	Incorporation
Revenue	$ 1,121
Net loss	$ (2,123)

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s revenue would have been $14,906,187 thousand, and the profit would have been $2,542,377 thousand for the year ended December 31, 2018. This pro-forma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on January 1, 2018, nor is it intended to be a projection of future results.

33. 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 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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34. FINANCIAL INSTRUMENTS

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

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

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

December 31, 2018 Financial assets at FVTPL Domestic listed equity securities Open-end beneficiary certificates Financial assets at FVTOCI Domestic listed equity securities Domestic unlisted equity securities Foreign unlisted equity securities December 31, 2017 Financial assets at FVTPL Derivative instruments Domestic listed equity securities Available-for-sale financial assets Domestic listed equity securities Open-end beneficiary certificates	Level 1 $ 3,653 1,342,291 $ 1,345,944 $ 431,797 - - $ 431,797 $ - 8,763 $ 8,763 $ 268,582 1,043,387 $ 1,311,969	Level 2 $ - - $ - $ - - - $ - $ 31 - $ 31 $ - - $ -	Level 3 $ - 6,807 $ 6,807 $ - 182,039 4,435 $ 186,474 $ - - $ - $ - - $ -	Total $ 3,653 1,349,098 $ 1,352,751 $ 431,797 182,039 4,435 $ 618,271 $ 31 8,763 $ 8,794 $ 268,582 1,043,387 $ 1,311,969

There were no transfers between Levels 1 and 2 for the years ended December 31, 2018 and 2017.

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2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets Balance at January 1, 2018 Recognized in profit or loss (included in valuation gains and losses) Recognized in other comprehensive income (included in unrealized gain (loss) on financial assets at FVTOCI) Purchases Cash returned of capital reduction Transfers out of Level 3 Balance at December 31, 2018	Financial Assets at FVTPL Equity Instruments $ 6,013 794 - - - - $ 6,807	Financial Assets at FVTOCI Equity Instruments $ 295,449 - (15,269) 67,800 (5,262) (156,244) $ 186,474	Total $ 301,462 794 (15,269) 67,800 (5,262) (156,244) $ 193,281

3) Valuation techniques and inputs applied for Level 2 fair value measurement

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

4) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of domestic unlisted equity securities and open-end beneficiary certificates are determined by using the asset approach and the market approach. Asset approach evaluates the total market value of individual asset and liability of the evaluated target, taking into account the risk factors (lack of marketability, etc.) to estimate the fair value. Market approach refers to the transaction prices in active market of the listed companies engaging in similar business, related price multiplier, transaction and information implied by the transaction price, to arrive at the fair value.

c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Mandatorily at FVTPL Loans and receivables (1) Available-for-sale financial assets (2)	December 31
	2018 2017 $ - $ 8,794 1,352,751 - - 10,150,213 - 1,505,540 (Continued)

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Financial assets at amortized cost (3) Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at amortized cost (4)	December 31
	2018 2017 $ 8,882,741 $ - 618,271 - 6,595,112 6,946,853 (Concluded)

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 receivables (classified as 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 include financial assets measured at amortized cost, which comprise cash and cash equivalents, financial assets measured at amortized cost, notes receivable, trade receivables, other receivables (classified as other current assets) and refundable deposits.
4) 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 investments, 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 39.

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Sensitivity analysis

The Group 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 $256,386 thousand and $289,984 thousand for the years ended December 31, 2018 and 2017, 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
	2018 2017 $ 609,579 $ 1,718,748 278,637 673,710 2,728,644 4,250,952 2,495,972 2,175,366

Sensitivity analysis

The sensitivity analysis below has been determined on the basis of the exposure to interest rates for both derivative and non-derivative 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, 2018 and 2017 would increased/decreased by $1,163 thousand and $10,378 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 followings:

i. Investment in financial assets at FVTOCI (mainly investment in domestic and foreign stocks), which are held for strategic rather than trading purposes. The Group does not actively trade these investments.
ii. Financial assets at FVTPL (mainly investment in domestic and foreign open-ended beneficiary certificates and listed stocks in Taiwan)

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

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower, the pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $67,638 thousand as a result of the changes in fair values of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $30,914 thousand as a result of the changes in fair values of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, the pre-tax profit for the year ended December 31, 2017 would have increased/decreased by $438 thousand as a result of the changes in fair values of financial assets held by the Group for trading purposes, and the pre-tax other comprehensive income for the year ended December 31, 2017 would have increased/decreased by $65,598 thousand as a result of the changes in fair values of available-for-sale financial assets held by the Group.

2) Credit risk

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

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The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Group’s available unutilized bank loan facilities were $2,972,285 thousand and $3,036,639 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.

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 nonderivative financial liabilities were based on the agreed repayment dates.

Non-derivative financial liabilities Non-interest bearing 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, 2018	December 31, 2018
	Within 1 Year 1-5 Years More Than 5 Years $ 3,819,537 $ - $ - 187,606 35,983 107,351 665,291 1,897,191 - $ 4,672,434 $ 1,933,174 $ 107,351 December 31, 2017
	Within 1 Year $ 4,096,939 - 482,332 1,233,271 $ 5,812,542	1-5 Years More Than 5 Years $ - $ - 101,900 - 98,794 3,057 981,261 7,462 $ 1,181,955 $ 10,519

After considering the financial position of the Group, management does not expect 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 its cash flow demand, as a result, the Group does not use its overdraft limit.

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35. 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

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 Purchases Related Party Categories Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 63,587 $ 46,766 60,355 51,380 $ 123,942 $ 98,146 For the Year Ended December 31
		2018 $ 17,433 70,517 $ 87,950	2017 $ 24,917 58,716 $ 83,633

c. Purchases
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
		2018 $ 6,990 44,828 $ 51,818	2017 $ 4,075 43,627 $ 47,702

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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 Others Line Item Related Party Categories Rental income Associates Rental expense Other related parties Administration expense Associates Other related parties Line Item Related Party Categories Other current assets Associates Compensation of key management personnel Short-term employee benefits Post-employment benefits	December 31 2018 2017 $ 14,556 $ 17,502 $ 7,438 $ 7,201 1,515 32,233 $ 8,953 $ 39,434 For the Year Ended December 31 2018 2017 $ 1,260 $ 1,260 $ 12,600 $ 12,600 $ 4,764 $ 4,770 21,256 26,726 $ 26,020 $ 31,496 December 31 2018 2017 $ 3,797 $ 912 For the Year Ended December 31 2018 2017 $ 118,804 $ 121,303 2,180 2,247 $ 120,984 $ 123,550			December	31
			2018 $ 118,804 2,180 $ 120,984

f. Others

g. Compensation of key management personnel

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

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36. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

Property, plant and equipment, net Pledge deposits - (classified as financial assets measure at amortized cost) Pledge deposits - (classified as debt investments with no active market)		December 31	December 31
		2018 $ 971,991 229,935 - $ 1,201,926	2017 $ 1,030,465 - 491,447 $ 1,521,912

37. SIGNIFICANT EVENTS AFTER REPORTING PERIOD

In view of future development strategy and improvement of operating performance, the Corporation’s board of directors resolved on February 11, 2019, to subscribe equity interest of Camtek Ltd. in US$9.5 per share with a consideration of US$74,265,680. The Corporation expects to acquire 20.5% of equity interest upon completion of the transaction. The investment is awaiting for the authorities’ approval for settlement.

38. 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).

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.

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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% 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 Corporation has paid the fourth installment $716,362 thousand in June 2018 and obtained the property registration over the land from the MOI. 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. The Corporation has recognized the land for self-use and the land for undetermined future use to property, plant and equipment and investment properties, respectively. Please refer to Notes 18 and 19.

39. 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, 2018

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 149,940 30.715 (USD:NTD) USD 9,634 7.833 (USD:HKD) USD 4,526 1.366 (USD:SGD) RMB 109,170 4.472 (RMB:NTD) RMB 126,780 1.141 (RMB:HKD) RMB 37,354 0.146 (RMB:USD) Financial liabilities Monetary items USD 24,643 30.715 (USD:NTD) USD 12,304 7.833 (USD:HKD)	Carrying Amount $ 4,605,398 295,902 139,018 488,209 566,962 167,048 $ 6,262,537 $ 756,911 377,909 $ 1,134,820

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December 31, 2017

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 143,081 29.760 (USD:NTD) USD 18,885 7.817 (USD:HKD) USD 4,348 1.337 (USD:SGD) RMB 479,401 4.565 (RMB:NTD) RMB 176,964 1.199 (RMB:HKD) Financial liabilities Monetary items USD 33,786 29.760 (USD:NTD) USD 19,711 7.817 (USD:HKD) RMB 30,206 4.565 (RMB:NTD) RMB 91,165 1.199 (RMB:HKD)	Carrying Amount $ 4,258,102 562,031 129,370 2,188,466 807,841 $ 7,945,810 $ 1,005,481 586,585 137,891 416,167 $ 2,146,124

For the years ended December 31, 2018 and 2017, (realized and unrealized) net foreign exchange gain (losses) were $97,928 thousand and $(133,637) 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 of the group entities.

40. 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 ventures): 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: Table 5 (attached).
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 6 (attached)

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8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 7 (attached)
9) Trading in derivative instruments: Note 7 and Note 23
10) Others: Intercompany relationships and significant intercompany transactions: Table 8 (attached)
11) Information on investees: Table 9 (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 10 (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 6 (attached)
b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 6 (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: Table 2 (attached).
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: Table 1 (attached).
f) Other transactions that have a material effect on the profit or loss for the year or on the financial position, such as the rendering or receiving of services: None.

41. 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.

186

d. Other

1) Segment revenues and results

For the year ended December 31, 2018 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, 2017 Revenue from external customers Inter-segment revenue Segment revenue Consolidated revenue Segment income Non-operating income and expenses Profit before tax	Special Materials Department $ 2,005,001 - $ 2,005,001 $ 50,741 $ 2,054,568 - $ 2,054,568 $ 38,334	Test Instrument Department $ 9,724,331 6,767,600 $ 16,491,931 $ 1,723,167 $ 9,932,614 6,704,652 $ 16,637,266 $ 2,147,485	Automatic Equipment Department $ 4,862,323 755,759 $ 5,618,082 $ 1,332,796 $ 2,538,348 416,355 $ 2,954,703 $ 815,601	Other $ 339,473 114 $ 339,587 $ (31,253) $ 375,816 12 $ 375,828 $ (10,961)	Elimination $ - (7,523,473) $ (7,523,473) $ (35,818) $ - (7,121,019) $ (7,121,019) $ 52,622	Total $ 16,931,128 -
						16,931,128
						$ 16,931,128
						$ 3,039,633 268,457
						$ 3,308,090
						$ 14,901,346 -
						14,901,346
						$ 14,901,346
						$ 3,043,081 78,986
						$ 3,122,067

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, 2018 and 2017 had been adjusted and eliminated from the consolidated financial statements.

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 investments, foreign exchange gain (loss), valuation gain (loss) on financial instruments, 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		December 31
		2018 2017 $ 863,031 $ 935,074 18,578,300 19,209,748 3,856,680 2,703,688 353,624 599,309 (3,738,938) (4,722,373) 19,912,697 18,725,446 3,289,767 3,292,166 $ 23,202,464 $ 22,017,612 (Continued)

187

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
		2018 2017 $ 561,478 $ 614,525 6,184,236 6,330,287 1,369,831 2,001,270 115,500 277,289 (2,918,100) (3,821,486) 5,312,945 5,401,885 3,199,170 3,152,898 $ 8,512,115 $ 8,554,783 (Concluded)

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

a) All assets were allocated to reportable segments other than interests in associates accounted for using 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.
3) Revenue from major products

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

Special material equipment Test instrument equipment Automatic equipment	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,005,001 9,724,331 4,862,323 $ 16,591,655	2017 $ 2,054,568 9,932,614 2,538,348 $ 14,525,530

4) Geographical information

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

The Group’s revenue 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 Year Ended December 31
		December 31
2018 $ 8,622,514 5,823,264 2,485,350 $ 16,931,128	2017 $ 7,843,613 4,650,547 2,407,186 $ 14,901,346	2018 $ 7,465,536 531,449 449,269 $ 8,446,254	2017 $ 5,605,770 507,384 458,057 $ 6,571,211

188

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

Included in revenue from direct sales of automated factory conveyor systems of $4,862,323 thousand and $2,538,348 thousand in 2018 and 2017, respectively, were revenues of approximately $2,646,345 thousand and $714,907 thousand, respectively, which were generated from sales to the Group’s largest customer. No other single customers contributed 10% or more to the Group’s revenue for both 2018 and 2017.

189

CHROMA ATE INC. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing (Note 5)	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit
													Item	Value
0	The Corporation	Chroma Systems Solutions, Inc. Chroma Japan Corp.	Other receivables Other receivables	Y Y	$ 119,375 46,321	$ 119,375 41,194	$ 119,375 35,553	3.25% -	a a	$ 493,283 223,056	- -	$ - -	- -	$ - -	$ 1,441,002 (Note 1) 1,441,002 (Note 1)	$ 2,882,004 (Note 2) 2,882,004 (Note 2)
1	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	44,720	44,720	-	2.50%	b	-	Operation	-	-	-	456,924 (Note 3)	456,924 (Note 3)
2	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	44,720	44,720	13,416	2.50%	b	-	Operation	-	-	-	308,460 (Note 3)	308,460 (Note 3)

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 70% of the net value from the latest financial statements of borrowing company that have been audited.

Note 4: The amounts listed in the table were translated into New Taiwan dollars at the exchange rate of US$1=NT$30.715, RMB1=NT$4.472 and JPY1 = NT$0.278 as of December 28, 2018.

Note 5: Financing provided:

a. For transactions.

b. For short-term financing.

190

TABLE 2

CHROMA ATE INC. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars or Foreign Currency, 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/Gu aranteed During the Period	Outstanding Endorsement /Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/Gu aranteed 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 Japan Corp. Chroma ATE Europe B.V. Chroma ATE Inc. Sajet System Technology (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Quantel Private Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503	$ 34,100 52,800 61,430 22,360 44,720 44,720 89,440 44,960	$ 34,100 52,800 61,430 22,360 44,720 44,720 89,440 44,960	$ 5,560 - 61,430 - - - 5,417 -	$ - - - - - - - -	0.24% 0.37% 0.43% 0.16% 0.31% 0.31% 0.62% 0.31%	$ 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006	Y Y Y Y Y Y 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$30.715, JPY1=NT$0.278, RMB1=NT$4.472, EUR1=NT$35.200, SGD1=NT$22.480 as of December 28, 2018.

191

TABLE 3

CHROMA ATE INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) DECEMBER 31, 2018

(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, 2018	December 31, 2018		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value
The Corporation Chroma New Material Corp. Chroma Investment Co., Ltd. Chen Hwa Technology Inc.	Fund Mega Diamond Money Market Fund Jih Sun Money Market Fund Hua Nan Kirin Money Market Fund Yuanta De-Li 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. Taiwan Advanced Nanotech Inc. Fund Fuh Hwa You Li Money Market Fund Taishin 1699 Money Market Fund Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Chroma ATE Inc. Cosmactive Broadband Networks Co., Ltd. Prance System Technology Co., Ltd. Stocks Hangzhou New Material Chroma Co., Ltd.	- - - - - - - - - - - - - - - - - - - The Corporation - - -	Financial assets at fair value through profit or loss - current `〃` `〃` `〃` Financial assets at fair value through profit or loss - non- current Financial assets at fair value through other comprehensive income - non-current `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` Financial assets at fair value through profit or loss - current `〃` `〃` `〃` Financial assets at fair value through other comprehensive income - non-current `〃` `〃` `〃`	44,427 6,765 7,947 12,287 - 6,050 412 26 4,614 3,561 2,553 806 723 3,280 2,700 6,829 3,712 7,444 85 1,916 26 111 -	$ 556,317 100,076 95,019 200,044 6,807 228,702 46,599 252 37,017 42,585 156,244 3,594 2,289 47,954 48,600 91,891 50,140 88,996 3,653 226,038 - - 4,435	- - - - - 6.1 - - 4.6 4.4 8.1 1.9 1.4 14.7 15.0 - - - - 0.5 1.5 5.1 19.0	$ 556,317 100,076 95,019 200,044 6,807 228,702 46,599 252 37,017 42,585 156,244 3,594 2,289 47,954 48,600 91,891 50,140 88,996 3,653 226,038 - - 4,435	- - - - - - - - - - - - - - - - - - - - - - -
							(Continued)

192

(Concluded)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value
Innovative Nanotech Incorporated Touch Cloud Incorporation	Fund Mega Diamond Money Market Fund Fund Mega Diamond Money Market Fund	- -	Financial assets at fair value through profit or loss - current `〃`	10,010 2,753	$ 125,339 34,469	- -	$ 125,339 34,469	- -

Note 1: Marketable securities refer to stocks, bonds, beneficiary certificates and marketable securities derived from above items under IFRS 9 “Financial Instruments”.

Note 2: The fair value of open-end beneficiary certificates and listed market securities was calculated based on the net asset value and closing price as of balance sheet date.

193

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, 2018

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	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)
The Corporation	Fund Mega Diamond Money Market Fund Jih Sun Money Market Fund	Financial assets at fair value through profit or loss - current `〃`	- -	- -	20,372 -	$ 253,960 -	24,055 33,911	$ 300,000 500,000	- 27,146	$ - 400,970	$ - 400,000	$ - 970	44,427 6,765	$ 556,317 100,076

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

TABLE 5

CHROMA ATE INC. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

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

Company Name	Type of Property	Transaction Date	Transaction Amount	Payment Term	Counter-party	Nature of Relationship	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Price Reference	Purpose of Acquisition	Other Terms
							Owner	Relationship	Transfer Date	Amount
The Corporation	Land	2018.06.05	$ 717,244	Based on the contract; fourth installment had been paid.	Ministry of the Interior, Republic of China	-	-	-	-	$ -	Public bidding	Manufacturing, R&D, operating and building employee dormitories	Note

Note: Please refer to Note 38 to the financial statements for related information.

194

TABLE 6

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, 2018

(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 Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Chroma ATE Inc. The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Europe B.V. The Corporation Quantel Private Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd.	Neworld Electronics Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Chroma ATE Inc. The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Europe B.V. The Corporation Quantel Private 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	$ (1,979,060) 1,979,060 (169,418) 169,418 (308,313) 308,313 (129,839) 129,839 (223,056) 223,056 (665,640) 665,640 (493,283) 493,283 (403,983) 403,983 (166,600) 166,600 (817,631) 817,631	(26) 100 (2) 100 (4) 100 (2) 100 (3) 100 (9) 100 (7) 100 (5) 100 (2) 100 (29) 72	Net 90 days after delivery Net 90 days after delivery Net 120 days after delivery Net 120 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 120 days after delivery Net 120 days after delivery Net 90 days after delivery Net 90 days after delivery Net 180 days after delivery Net 180 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days Net 90 days	- - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - -	$ 447,646 (447,646) 27,286 (27,286) 71,854 (71,854) 59,922 (59,922) 221,817 (221,817) 467,443 (467,443) 135,507 (135,507) 253,438 (253,438) 27,851 (27,851) 364,859 (364,859)	17 (100) 1 (100) 3 (100) 2 (100) 9 (100) 18 (100) 5 (100) 10 (100) 1 (100) 52 (80)	- - - - - - - - - - - - - - - - - - - -
										(Continued)

195

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. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Neworld Electronics Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment 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	$ (143,737) 143,737 (261,831) 261,831 (343,601) 343,601 (512,937) 512,937 (139,851) 139,851	(5) 44 (9) 87 (12) 68 (13) 21 (3) 28	Net 90 days Net 90 days Net 90 days Net 90 days Net 90 days Net 90 days Net 180 days after delivery Net 180 days after delivery Net 120 days after monthly closing Net 120 days after monthly closing	- - - - - - - - - -	- - - - - - - - - -	$ 90,145 (90,145) - - - - - - 113,499 (133,499)	13 (41) - - - - - - 7 (65)	- - - - - - - - - -

(Concluded)

196

TABLE 7

CHROMA ATE INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(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. Wei Kuang Automatic Equipment Co., Ltd.	Neworld Electronics Ltd. Chroma ATE Inc. Chroma ATE Europe B.V. Chroma Systems Solutions, Inc. Chroma Japan Corp. Chroma Electronics (Shenzhen) Co, Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Same parent company	Trade receivables $ 447,646 Trade receivables 467,443 Trade receivables 253,438 Trade receivables 135,507 Other receivables - financing provided 119,375 Trade receivables 221,817 Trade receivables 364,859 Trade receivables 113,499	3.00 1.60 1.85 4.02 - 1.16 1.97 2.40	$ - - - - - - - -	- - - - - - - -	$ 261,053 125,057 - 72,310 - 60,581 196,163 23,451	$ - - - - - - - -

Note: As of February 21, 2019.

197

TABLE 8

CHROMA ATE INC. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018 (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 Revenues or Total Assets
				Account	Amount	Transaction Terms
0	The Corporation	Neworld Electronics Ltd. Chroma USA Chroma Systems Solutions, Inc. Chroma Europe Chroma Electronics (Shenzhen) Co., Ltd. Chroma Japan Chroma Electronics (Shanghai) Co., Ltd. Quantel Private Ltd. Chroma ATE (Suzhou) Co., Ltd. Testar Electronics Co. Wei Kuang Automatic Equipment Co., Ltd. Chroma USA Chroma ATE (Suzhou) Co., Ltd. Adivic Technology Co. Testar Electronics Co. Quantel Private Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Chroma USA Neworld Electronics Ltd. Chroma Europe Chroma Japan Chroma Systems Solutions, Inc. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Testar Electronics Co. Quantel Private Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Systems Solutions, Inc. Chroma Japan Testar Electronics Co.	a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a	Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Purchase Purchase Purchase Purchase Rental revenue Commissions expense 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	$ 1,979,060 665,640 493,283 403,983 308,313 223,056 169,418 166,600 129,839 38,573 26,638 42,148 13,647 13,209 13,656 17,790 12,301 12,211 14,400 467,443 447,646 253,438 221,817 135,507 71,854 59,922 40,501 27,851 27,286 119,375 35,553 23,353	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Note 3 Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	12 4 3 2 2 1 1 1 1 - - - - - - - - - - 2 2 1 1 1 - - - - - 1 - -
1	Wei Kuang Automatic Equipment Co., Ltd.	Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	b b b b	Operating revenue Operating revenue Operating revenue Trade receivables	512,937 139,851 22,887 113,499	Based on regular terms Based on regular terms Based on regular terms Based on regular terms	3 1 - -
							(Continued)

198

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	Chroma USA	Chroma Japan Chroma Systems Solutions, Inc.	b a	Purchase Dividends receivable	$ 71,247 15,358	Based on regular terms Based on regular terms	- -
3	Neworld Electronics Ltd.	Chroma Electronics (Shenzhen) Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd.	a b b b a a a b a b a a	Operating revenue Operating revenue Operating revenue Operating revenue Operating revenue Commissions expense Commissions expense Commissions expense Trade receivables Trade receivables Trade receivables Other receivables	$ 817,631 343,601 261,831 143,737 44,253 45,767 37,365 27,232 364,859 90,145 13,831 80,160	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	5 2 2 1 - - - - 2 - - -
4	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Sajet System Technology (Suzhou) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd.	b b b b b	Operating revenue Operating revenue Purchase Trade receivables Trade receivables	47,191 31,747 16,886 53,608 34,900	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	- - - - -
5	Chroma Electronics (Shanghai) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd.	b b b	Purchase Trade receivables Trade payables	19,000 10,262 17,430	Based on regular terms Based on regular terms Based on regular terms	- - -
6	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Mou Kuan Technologies (Nanjin) Co., Ltd.	b b b	Operating revenue Operating revenue Purchase	15,083 12,590 22,076	Based on regular terms Based on regular terms Based on regular terms	- - -
7	Chroma Europe	Chroma Germany GmbH Chroma Germany GmbH Chroma Germany GmbH	a a a	Operating revenue Trade receivables Other receivables	91,066 83,457 50,712	Based on regular terms Based on regular terms Based on regular terms	1 - -

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)

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TABLE 9

CHROMA ATE INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor	Investee	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2018	as of December 31, 2018	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2018	December 31, 2017	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. Quantel Global Sdn. Bhd. Quantel Global Philippines Corporation 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 USA British Virgin Islands Taipei, Taiwan Japan USA Mauritius Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan USA Mauritius Pingtung, Taiwan Samoa India Vietnam Malaysia Philippines 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 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 17,500 247,096 117,311 142,140 57,000 64 185,686 3,750 42,245 3,056 6,219 4,199 610 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 38,301 193,800 147,125 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	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 9,412 14,214 5,700 240 4,475 375 1,000 65 - 600 99 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 85.6 71.1 78.1 50.0 100.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0	$ 949,027 791,854 517,852 443,073 1,206,381 164,834 130,270 101,626 124,674 60,658 114,193 134,810 53,924 35,617 (70,297) (45,711) 104,303 17,664 24,596 59,793 119,441 43,779 165,846 861,912 (3,906) 10,234 2,306 3,010 4,120 1,359 (3,063)	$ 112,846 198,996 238,525 44,611 885,878 7,444 30,011 990 6,479 21,964 76,973 (5,873) 1,851 (39,420) (33,977) 86,297 45,430 108 (2,792) (10,767) (29,451) (14,809) 86,297 199,047 - (1,259) (547) (896) (143) (4,238) 1,169	$ 112,846 121,538 26,963 44,611 885,886 7,444 16,888 990 (2,094) 21,939 21,014 (5,875) 1,851 (20,641) (33,979) 21,928 45,430 38 (1,876) (8,517) (22,503) (11,563) NA NA 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 Subsidiary Subsidiary

200

TABLE 10

CHROMA ATE INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (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)	Method of Investment (Note 1)	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018 (Note 3)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018 (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, 2018 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2018
							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		$ 117,630 (HK$ 30,000) 92,145 (US$ 3,000) 82,931 (US$ 2,700) 46,073 (US$ 1,500) 116,717 (US$ 3,800) 53,087 (RMB 11,871) 51,057 (RMB 11,417) 7,768 (RMB 1,737) 37,449 (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)	$ 85,372 15,954 117 18,853 7,444 94,346 129,595 3,902 45,431	100 100 100 19 100 100 100 100 100	$ 85,372 15,954 117 - 7,444 94,346 129,595 3,902 45,431	$ 653,019 119,254 86,639 4,436 206,304 171,227 440,657 50,145 104,298	$ - - - - - - - - -

Accumulated Outward Remittance for Investments in Mainland China as of December 31, 2018		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)			$8,646,012 (Note 7)

(Continued)

201

Note 1: Methods of investment have following type:

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$3.921, US$1=NT$30.715, RMB1=NT$4.472 prevailing on December 28, 2018. Note 3: The amounts of accumulated outflow of investment from Taiwan as of January 1, 2018 and December 31, 2018 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$3.846, US$1=NT$30.149, RMB1=NT$4.560 for the year ended December 31, 2018.

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.

202

Chroma ATE Inc.

Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

203 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Chroma ATE Inc.

Opinion

We have audited the financial statements of Chroma ATE Inc. (the “Corporation”), which comprise the balance sheets as of December 31, 2018 and 2017, 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, 2018 and 2017, 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, 2018. 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, 2018 are described as follows:

Impairment of Trade Receivables

As indicated in Notes 5 and 11, trade receivables are significant accounts in the balance sheet of Chroma ATE Inc. The process of evaluating impairment loss involves subjective judgement of uncollectible accounts. The management recognizes lifetime Expected Credit Loss (ECL) on trade receivables under the regulations of IFRS 9. The above evaluation involves the impact on receivables of the management’s subjective judgements and assumptions on credit risks;, thus, we consider the impairment of trade receivables as a key audit matter.

204 -

We assessed the rationale of the Corporation’s policy on providing allowance for trade receivables, tested the impairment rate of ECL, inspected individual overdue receivables and made inquiries for related reasons, to draw a conclusion on ECL of trade receivables.

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 slumping 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 12 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.

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.

205 -

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.

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, 2018 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.

206 -

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 21, 2019

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.

207 -

CHROMA ATE INC.

BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (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 9) Notes receivable - unrelated parties (Note 11) Notes receivable - related parties (Notes 11 and 29) Trade receivables - unrelated parties (Note 11) Trade receivables - related parties (Notes 11 and 29) Other receivables - related parties (Note 29) Inventories (Note 12) Prepayments Other current assets (Note 29) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 7) Financial assets at fair value through other comprehensive income - non-current (Note 8) Available-for-sale financial assets - non-current (Note 9) Financial assets measured at cost - non-current (Note 10) Investments accounted for using equity method (Note 13) Property, plant and equipment (Notes 14, 30 and 32) Investment properties (Notes 15 and 32) Goodwill (Note 16) Deferred tax assets (Note 24) Prepayments for land and equipment (Note 32) Refundable deposits Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 17) Contract liabilities - current (Note 22) Notes payable (Note 29) Trade payables - unrelated parties Trade payables - related parties (Note 29) Other payables (Note 19) Current tax liabilities (Note 24) Receipts in advance Current portion of long-term borrowings (Note 17) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Note 18) Long-term borrowings (Note 17) Deferred tax liabilities (Note 24) Net defined benefit liabilities (Note 20) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 21) Ordinary share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity TOTAL		2018 Amount % $ 915,899 5 951,456 5 - - 9,613 - 194 - 821,676 4 1,760,760 9 162,607 1 1,897,485 10 47,177 - 73,292 - 6,640,159 34 6,807 - 613,836 3 - - - - 5,082,361 26 2,493,620 13 3,137,187 16 94,424 1 170,635 1 1,082,451 6 5,405 - - - 12,686,726 66 $ 19,326,885 100 $ 630,000 3 31,014 - 105 - 979,904 5 12,787 - 667,068 4 214,898 1 - - - - 15,961 - 2,551,737 13 - - 1,800,000 9 412,043 2 152,393 1 692 - 2,365,128 12 4,916,865 25 4,167,794 22 3,469,637 18 2,152,411 11 86,888 - 4,555,760 24 6,795,059 35 13,244 - (35,714) - 14,410,020 75 $ 19,326,885 100		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

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

208 -

CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 22 and 29) Sales Less: Sales returns Sales allowances Net operating revenue OPERATING COSTS (Notes 12, 23 and 29) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 23 and 29) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Finance costs (Note 23) Share of profit of subsidiaries, associates and joint ventures, net (Note 13) Interest income (Note 29) Rental income (Note 29) Dividend income Other income (Note 29) Gain (loss) on disposal of property, plant and equipment, net Gain on disposal of investments Net foreign exchange gain (loss) (Note 33) Gain on financial assets (liabilities) at fair value through profit or loss, net (Note 18) Other expenses Total non-operating income and expenses		2018 Amount % $ 7,551,259 100 (2,714) - (1,705) - 7,546,840 100 (3,619,263) (48) 3,927,577 52 (10,857) - 3,916,720 52 788,086 11 471,125 6 1,143,397 15 2,402,608 32 1,514,112 20 (21,760) - 1,222,318 16 8,903 - 18,327 - 22,880 1 72,902 1 1 - - - 84,517 1 6,493 - (85) - 1,414,496 19		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 - (117,951) (1) 539 - (33) - 1,106,336 14 (Continued)

209 -

CHROMA ATE INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 24) 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 Unrealized gain on investments in equity investments designated as at fair value through other comprehensive income Share of the other comprehensive income (loss) of subsidiaries, associates and joint ventures accounted for using equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Unrealized loss on available-for-sale financial assets Share of the other comprehensive loss of subsidiaries, associates and joint ventures accounted for using equity method Total other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME EARNINGS PER SHARE (NT$; Note 25) Basic Diluted		2018 Amount % $ 2,928,608 39 382,333 5 2,546,275 34 (4,618) - 16,832 - (4,666) - (6,229) - - - (1,010) - 309 - $ 2,546,584 34 $ 6.22 $ 6.08		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

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, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Ordinary Share Capital Capital Surplus BALANCE AT JANUARY 1, 2017 $ 3,898,872 $ 1,960,159 Appropriation of the 2016 earnings Legal reserve - - Cash dividends - NT$3.3 per share - - 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 (loss) for the year ended December 31, 2017 - - Total comprehensive income (loss) for the year ended December 31, 2017 - - Conversion of convertible bonds 201,515 1,101,453 Buy-back of treasury shares - - Cancelation of treasury shares (123 ) - Adjustment of capital surplus for corporation's cash dividends received by subsidiaries - 6,170 Share-based payment transaction 18,678 127,833 BALANCE AT DECEMBER 31, 2017 4,118,942 3,187,289 Effect of retrospective application and retrospective restatement - - BALANCE AT JANUARY 1, 2018 AS RESTATED 4,118,942 3,187,289 Appropriation of the 2017 earnings Legal reserve - - Cash dividends - NT$4.5 per share - - Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using equity method - (267 ) Net profit for the year ended December 31, 2018 - - Other comprehensive income (loss) for the year ended December 31, 2018 - - Total comprehensive income (loss) for the year ended December 31, 2018 - - Conversion of convertible bonds 16,141 84,486 Buy-back of treasury shares - - Cancelation of treasury shares (840 ) - Adjustment of capital surplus for corporation's cash dividends received by subsidiaries - 8,572 Changes in percentage of ownership interests in subsidiaries - - Share-based payment transaction 33,551 189,557 Disposals of investments in equity instruments designated as at fair value through other comprehensive income - - Adjustments to share of changes in equities of subsidiaries, associates and joint ventures accounted for using equity method - - BALANCE AT DECEMBER 31, 2018 $ 4,167,794 $ 3,469,637 The accompanying notes are an integral part of the financial statements.		Retained Earnings	Total $ 4,735,275 - (1,314,425 ) - 2,558,401 (6,955) 2,551,446 - - - - - 5,972,296 135,130 6,107,426 - (1,854,424 ) - 2,546,275 (5,322) 2,540,953 - - - - (2,107 ) - 4,241 (1,030) $ 6,795,059		Other Equity	Total Treasury Shares $ 58,035 $ (35,714 ) - - - - - - - - (126,272) - (126,272) - - - - (123 ) - 123 - - 56,103 - (12,134 ) (35,714 ) (27,484) - (39,618 ) (35,714 ) - - - - - - - - 5,631 - 5,631 - - - - (840 ) - 840 - - - - 51,472 - (4,241 ) - - - $ 13,244 $ (35,714)	Total Equity $ 10,616,627 - (1,314,425 ) (8,326 ) 2,558,401 (133,227) 2,425,174 1,302,968 (123 ) - 6,170 202,614 13,230,679 107,646 13,338,325 - (1,854,424 ) (267 ) 2,546,275 309 2,546,584 100,627 (840 ) - 8,572 (2,107 ) 274,580 - (1,030) $ 14,410,020
				Exchange Differences on Translating the U Financial Statements of A Foreign Operations F $ (24,914 ) - - - - (72,719) (72,719) - - - - - (97,633 ) - (97,633 ) - - - - (7,239) (7,239) - - - - - - - - $ (104,872)	Unrealized Gain (Loss) on Financial Assets at nrealized Gain Fair Value (Loss) on Through Other vailable-for-sale Comprehensive Unearned inancial Assets Income Employee Benefit $ 232,901 $ - $ (149,952 ) - - - - - - - - - - - - (53,553) - - (53,553) - - - - - - - - - - - - - - - - 56,103 179,348 - (93,849 ) (179,348) 151,864 - - 151,864 (93,849 ) - - - - - - - - - - - - - 12,870 - - 12,870 - - - - - - - - - - - - - - - - - - 51,472 - (4,241 ) - - - - $ - $ 160,493 $ (42,377)
		Unappropriated Legal Reserve Special Reserve Earnings $ 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 - - 135,130 1,896,570 86,888 4,123,968 255,841 - (255,841 ) - - (1,854,424 ) - - - - - 2,546,275 - - (5,322) - - 2,540,953 - - - - - - - - - - - - - - (2,107 ) - - - - - 4,241 - - (1,030) $ 2,152,411 $ 86,888 $ 4,555,760

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CHROMA ATE INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on trade receivables (provision for bad debt expense) Net gain on financial assets (liabilities) at fair value through profit or loss Finance costs Interest income Dividend income Compensation costs of share-based payments Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (Gain) loss on disposal of property, plant and equipment Gain on disposal of investments Impairment loss (reversal of impairment) on non-financial assets Unrealized gain on transactions with subsidiaries and associates Net (gain) loss on foreign currency exchange Net changes in operating assets and liabilities Notes receivable Trade receivables Inventories Prepayments Other current assets Contract liabilities 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 Payments to acquire financial assets at fair value through other comprehensive income Cash returned of capital reduction of financial assets at fair value through other comprehensive income Payments to acquire financial assets at fair value through profit or loss	2018 $ 2,928,608 176,530 960 3,000 (6,493) 21,760 (8,903) (22,880) 78,596 (1,222,318) (1) - 21,000 10,857 (62,225) (4,237) 553,062 (761) 53,689 37,689 (30,579) (3,685) (422,570) (51,971) - (168) (9,657) 2,039,303 (224,349) 1,814,954 (67,800) 5,262 (1,745,000)	2017 $ 2,865,714 168,141 960 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) 964,901 (302,752) 662,149 - - - (Continued)

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CHROMA ATE INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

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 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 Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease (increase) in other receivables - related parties Increase in other non-current assets Increase in prepayments for equipment Interest received Dividends received Net cash (used in) generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase 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 (DECREASE) 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	2018 $ 1,631,577 - - - - (121,970) (133,241) 6,949 (3,070) 5,409 - (1,519,652) 9,173 627,585 (1,304,778) 330,000 900,000 (1,200,000) 123 (1,854,424) 195,755 (840) (30,989) - (1,660,375) 20,027 (1,130,172) 2,046,071 $ 915,899	2017 $ - (476,000) 1,678,988 2,552 23,111 (217,858) (71,611) 3,875 (259) (10,108) (960) (465,376) 17,189 181,175 664,718 300,000 900,000 (800,000) - (1,314,425) 79,128 (123) (30,440) 1,850 (864,010) (41,624) 421,233 1,624,838 $ 2,046,071

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

(Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHROMA ATE INC.

1. GENERAL INFORMATION

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

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Corporation’s board of directors on February 21, 2019.

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)

IFRS 9 “Financial Instruments” and related amendment

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Corporation has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Corporation’s financial assets and financial liabilities as of January 1, 2018.

Financial Assets Cash and cash equivalents Derivatives Domestic listed equity securities Domestic unlisted equity securities Domestic open-end beneficiary certificates Foreign open-end beneficiary certificates Notes receivable, trade receivables and other receivables Refundable deposits Financial Assets FVTPL Add: Reclassification from available-for-sale (IAS 39) required reclassification FVTOCI Equity instruments Add: Reclassification from available-for-sale (IAS 39)			Measurement Category IFRS 9 s Amortized cost Mandatorily at fair value through profit or loss (i.e. FVTPL) Fair value through other comprehensive income (i.e. FVTOCI) - equity instrument FVTOCI - equity instrument Mandatorily at FVTPL Mandatorily at FVTPL s Amortized cost s Amortized cost Reclassifi- cations Remeasure- ments IFRS 9 Carrying Amount as of January 1, 2018 $ 842,466 $ (4,139 ) 842,466 (4,139) $ 838,358 426,344 108,122 426,344 108,122 534,466 $ 1,268,810 $ 103,983 $ 1,372,824		Carrying Amount IAS 39 IFRS 9 Remark 2,046,071 $ 2,046,071 - 31 31 - 268,582 268,582 1) 157,762 265,884 1) 832,314 832,314 2) 10,152 6,013 2) 3,363,393 3,363,393 3) 2,335 2,335 - Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark 2) $ 8,176 $ (12,315) 1) 109,876 (1,754) $ 118,052 $ (14,069)
	Lo He Av Av Av Av Lo Lo	IAS 39 ans and receivable ld`‑`for`‑`trading ailable`‑`for`‑`sale ailable`‑`for`‑`sale ailable`‑`for`‑`sale ailable`‑`for`‑`sale ans and receivable ans and receivable IAS 39 Carrying Amount as of January 1, 2018 $ 31 - 31 - - $ 31		$

1) The Corporation elected to designated all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets of $158,625 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $108,122 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018, respectively.

The Corporation recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $109,876 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of the same amount in retained earnings on January 1, 2018, respectively.

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2) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in a decrease of $12,315 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and an increase of the same amount in retained earnings on January 1, 2018. Mutual funds previously measured at cost under IAS 39 were classified as at FVTPL under IFRS 9 and were measured at fair value. Consequently, a decrease of $4,139 thousand was recognized in both financial assets at FVTPL and retained earnings.
3) Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9. The Corporation had assessed that the effect of retrospective application would not have any material impact.
4) As a result of the retrospective application of IFRS 9 by subsidiaries, associates and joint ventures accounted for using equity method, there was an increase in investments accounted for using equity method of $3,663 thousand, a decrease in other equity - unrealized gain (loss) on available-for-sale financial assets of $8,408 thousand, a decrease on other equity - unrealized gain (loss) on financial assets at FVTOCI of $5,007 thousand and an increase in retained earnings of $17,078 thousand on January 1, 2018.
b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the “IFRSs” endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

IFRS 16 “Leases”

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 (Note 2)
January 1, 2019
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: The FSC permits the election for early adoption of the amendments starting from 2018.
Note 3: The Corporation shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
IFRS 16 “Leases”

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Definition of a lease

Upon initial application of IFRS 16, the Corporation will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Corporation as lessee

Upon initial application of IFRS 16, the Corporation will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the balance sheets except for those whose payments under lowvalue and short-term leases will be recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Corporation will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Corporation anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, the Corporation will apply IAS 36 to all right-of-use assets.

The Corporation expects to apply the following practical expedients:

1) The Corporation will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
2) The Corporation will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
3) The Corporation will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
4) The Corporation will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Corporation as lessor

The Corporation will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

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Anticipated impact on assets, liabilities and equity

					Adjusted
	Carrying			Adjustments	Carrying
	Amount as of			Arising from	Amount as of
	December		31,	Initial	January 1,
		2018		Application	2019
Right-of-use assets	$		-	$ 42,905	$ 42,905
Total effect on assets	$		-	$ 42,905	$ 42,905
Lease liabilities - current	$		-	$ 15,963	$ 15,963
Lease liabilities - non-current			-	26,942	26,942
Total effect on liabilities	$		-	$ 42,905	$ 42,905

Except for the above impacts, the Corporation had assessed that the application of other standards and interpretations would not have significant impacts on the Corporation’s financial position and financial performance.

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

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

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 Corporation shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Corporation shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

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b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments 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.

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

When preparing these financial statements, the Corporation used the 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 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 basis and the consolidated basis were made to investments accounted for using the 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 financial statements.

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

Current assets include:

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

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period; and
3) 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.

d. 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.

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Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

e. Inventories

Inventories consist of raw materials, semi-finished 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. The 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.

f. Investments accounted for using equity method

Investments in subsidiaries, associates and joint ventures are accounted for by the equity method.

1) Investment in subsidiaries

A subsidiary is an entity that is controlled by the Corporation.

Under the equity method, an investment in a subsidiary 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 changes in the Corporation’s share of equity of subsidiaries attributable to the Corporation.

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 investee’s financial statements as a whole. 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.

2) Investments in associates and joint ventures

An associate is an entity over which the Corporation has significant influence and which is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Corporation and other parties that have joint control of the arrangement have rights 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 the 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 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 had the investee 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 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 had that associate directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Corporation continues to apply the equity method and does not remeasure the retained interest.

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

g. Property, plant and equipment

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

Property, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing cost 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 is recognized using the straight-line method. Each significant part is depreciated separately. If a lease term is shorter than the assets’ useful lives, such assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimates 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.

h. Investment properties

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

i. Goodwill

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

j. Impairment of tangible assets

At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible asset, 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 individual cash-generating units on a reasonable and consistent basis of allocation.

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k. Financial instruments

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

1) Financial assets

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

a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and equity instruments at FVTOCI.

i. Financial asset at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI.

ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables at amortized cost and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial asset; and
ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Corporation may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Corporation’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

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

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL 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 does not incorporate any dividends or interest earned such a financial asset. Fair value is determined in the manner described in Note 28.

ii. Available-for-sale financial assets

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Available-for-sale financial assets are measured at fair value. Dividends on available-forsale equity instruments are recognized in profit or loss when the Corporation’s right to receive the dividends is established. Other changes in the carrying amount of availablefor-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.

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.

iii. Loans and receivables

Loans and receivables (including cash and cash equivalents, notes receivable, trade receivables, and refundable deposits) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

b) Impairment of financial assets

2018

The Corporation recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

The Corporation always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables. For all other financial instruments, the Corporation recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Corporation measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Corporation recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

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2017

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

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

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 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.

c) 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.

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2) 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.

3) Financial liabilities
a) Subsequent measurement

Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

4) 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.

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l. 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 to assure that products comply with agreed-upon specifications are recognized on the date of sale of the relevant products at the best estimate by the management of the Corporation of the expenditures required to settle the obligations.

m. Revenue recognition

2018

The Corporation identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

Revenue from sale of goods comes from sales of test instruments. Revenue is recognized when the goods are delivered to the customer’s specific location or the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and bears the risks of obsolescence. Trade receivables are recognized concurrently. The transaction price received is recognized as a contract liability until the goods are delivered to the customer.

The Corporation does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

2017

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

1) Sale of goods

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

a) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
229 -
d) It is probable that the economic benefits associated with the transaction will flow to the Corporation; and
e) 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.

2) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Corporation and that 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 with reference to the principal outstanding and at the applicable effective interest rate.

n. 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.

o. 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 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.

p. Employee benefits

1) Short-term employee benefits

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

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2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under 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 liabilities (assets) are recognized as employee benefits expense in the period in which 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 liabilities (assets) represent the actual deficit (surplus) in the Corporation’s defined benefit plans. 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.

3) Other long-term employee benefits

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

q. Share-based Payment Arrangements

Employee share options and restricted shares for 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 employees is expensed on a straight-line basis over the vesting period, based on the Corporation's best estimate of the number of shares or options that are expected to 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 expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options and capital surplus - restricted shares for employees.

r. Taxation

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

1) Current tax

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

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

2) Deferred tax

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

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, 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 liabilities are settled or the assets are 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.

3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from 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, estimations 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. Estimated impairment of trade receivables

The provision for impairment of trade receivables is based on assumptions about risk of default and expected loss rates. The Corporation uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Corporation’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 11. Where the actual future cash flows are less than expected, a material impairment loss may arise.

b. Write-down of inventories

6. CASH AND CASH EQUIVALENTS

December 31 2018 2017 Cash on hand $ 2,434 $ 2,602 Checking accounts and demand deposits 913,465 1,448,269 Cash equivalents Time deposits with original maturities less than 3 months - 595,200 $ 915,899 $ 2,046,071 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2018 2017 Mandatorily at FVTPL Non-derivative financial assets Open-end beneficiary certificates $ 951,456 $ - Derivative instruments held for trading Call and put option of convertible bonds payable (Note 18) - 31 Financial assets - current $ 951,456 $ 31 Mandatorily at FVTPL-non-current Non-derivative financial assets Open-end beneficiary certificates $ 6,807 $ -		December 31	December 31	December 31
			2018 $ 951,456 - $ 951,456 $ 6,807	2017 $ - 31 $ 31 $ -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

233 -

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

December 31,
2018
Investments in equity instruments-non-current
Domestic Listed ordinary shares $ 431,797
Domestic unlisted ordinary shares 182,039
$ 613,836
These investments in equity instruments are not held for trading. Instead, they are held for medium to
long-term strategic purposes. Refer to Table 3 for the detailed information. Accordingly, the management
elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing
short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the
Corporation’s strategy of holding these investments for long-term purposes. These investments in equity
instruments were classified as available-for-sale and measured at cost under IAS 39. Refer to Note 3, Note
9 and Note 10 for information relating to their reclassification and comparative information for 2017.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,
	2017
Current
Domestic open-end beneficiary certificates	$ 832,314
Non-current
Domestic listed shares	$ 268,582

10. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT - 2017

	December 31,
	2017
Domestic unlisted ordinary shares	$ 157,762
Foreign open-end beneficiary certificates	10,152
	$ 167,914
Classified according to financial asset measurement categories
Available-for-sale financial assets	$ 167,914

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11. NOTES RECEIVABLE AND TRADE RECEIVABLES

Gross carrying amount at amortized cost Less: Allowance for impairment loss Gross carrying amount at amortized cost - related parties		December 31	December 31
		2018 $ 909,711 (78,422) 831,289 1,760,954 $ 2,592,243	2017 $ 926,522 (78,288) 848,234 2,250,825 $ 3,099,059

In 2018

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. Before accepting any new customer, the Corporation 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 Corporation.

The Corporation applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate. As the Corporation’s historical credit loss experience does not show other factors that matter significantly, the expected credit loss rate is based on past due status of trade receivables.

The Corporation writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Corporation continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The aging schedule of notes receivable and trade receivables based on the past due days was as follows:

	December 31,
	2018
Less than 60 days	$ 694,058
61-365 days	134,231
Over 365 days	81,422
	$ 909,711

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The movements of the loss allowance of notes receivable and trade receivables were as follows:

	For the Year
	Ended
	December 31,
	2018
Balance at January 1, 2018 per IAS 39	$ 78,288
Adjustment on initial application of IFRS 9	-
Balance at January 1, 2018 per IFRS 9	78,288
Add: Impairment loss recognized on receivables	3,000
Less: Amounts written off	(2,866)
Balance at December 31, 2018	$ 78,422

In 2017

The Corporation applied the same credit policy in 2018 and 2017. In determining the recoverability of a trade receivable, the Corporation considers 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 notes receivable and trade receivables was as follows:

	December 31,
	2017
Less than 60 days	$ 556,938
61-365 days	276,090
Over 365 days	93,494
	$ 926,522

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

The aging of notes receivable and trade receivables that were past due but not impaired was as follows:

	December 31,
	2017
Less than 60 days	$ 142,353
61-365 days	264,437
Over 365 days	31,373
	$ 438,163

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

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

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2017
$ 33,720
$ 10,363

Add: Impairment losses recognized on
receivables
-
36,000

Reclassification of impairment loss from
collective assessment to individual
assessment
31,071
(31,071)
Less: Amounts written off during the year as
uncollectible
(1,795)
-

Balance at December 31, 2017
$ 62,996
$ 15,292

Total
$ 44,083
36,000
-
(1,795)
$ 78,288

The allowance for impairment loss individually assessed due to customers were in liquidation or in severe financial difficulties were $62,996 thousand as of December 31, 2017. The Corporation did not hold any collateral over these balances.

12. INVENTORIES

Finished goods Semi-finished products Work in process Raw materials		December 31	December 31
		2018 $ 183,483 356,602 608,744 748,656 $ 1,897,485	2017 $ 190,397 361,613 638,940 671,368 $ 1,862,318

The cost of goods sold for the years ended December 31, 2018 and 2017 included the inventory writedowns of $21,000 thousand and the reversal of inventory write-downs of $37,331 thousand, respectively.

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in subsidiaries Investments in associates Investments in joint venture		December 31	December 31
		2018 $ 4,432,652 632,045 17,664 $ 5,082,361	2017 $ 3,716,869 623,941 17,626 $ 4,358,436

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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. Testar Electronics Corporation EVT Technology Co., Ltd. Innovative Nanotech Incorporated Touch Cloud Incorporation	December 31	December 31
	2018 Amount Percentage of Equity Interest (%) $ 949,027 100.0 791,854 100.0 443,073 100.0 1,206,381 100.0 164,834 100.0 130,270 60.0 101,626 100.0 124,674 100.0 60,658 100.0 134,810 100.0 53,924 100.0 35,617 51.0 (70,297 ) 100.0 (45,711 ) 25.0 104,303 100.0 24,596 67.2 59,793 85.6 119,441 71.1 43,779 78.1 $ 4,432,652	2017
		Amount Percentage 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 17,379 67.2 22,652 73.8 67,777 89.3 55,342 78.1 $ 3,716,869

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. (“EVT”) increased its capital by cash injection of $40,000 thousand to strengthen its financial structure. In August 2018, EVT decreased its capital by $30,000 thousand to make up for losses and increased its capital by $50,000 thousand subsequently. The Corporation’s board of directors resolved to participate in the capital injection. The Corporation’s equity interest in EVT rose to 85.6% 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 and May 2018, Innovative Nanotech Incorporated increased its capital. The Corporation participated in the cash injection and held 71.1% equity consequently.

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% in 2017.

Refer to Note 34 for the detail of the subsidiaries indirectly held by the Corporation.

Refer to Table 8 “Information on Investees” for the Corporations’ share of profit of subsidiaries under equity method.

238 -

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.

b. Investments in associates

Associates that are not individually material Adlink Technology Inc. Dynascan Technology Corp.		December 31	December 31	December 31
		2018 Amount Percentage of Equity Interest (%) $ 517,852 11.3 114,193 27.3 $ 632,045		2017
				Amount Percentage of Equity Interest (%) $ 529,538 11.3 94,403 27.3 $ 623,941

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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 47,977 (1,531) $ 46,446	2017 $ 49,171 (7,808) $ 41,363

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

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.

c. Investments in joint ventures

Joint ventures that are not individually material Chih Ho Shun Development Co., Ltd.		December 31	December 31	December 31
		2018 Amount Percentage of Equity Interest (%) $ 17,664 35.0		2017
				Amount Percentage of Equity Interest (%) $ 17,626 35.0

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Aggregate information of joint ventures that are not individually material:

The Corporation’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 38 - $ 38	2017 $ 33 - $ 33

14. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2017 Additions Disposals Transferred from inventories Balance, December 31, 2017 Accumulated depreciation Balance, January 1, 2017 Depreciation Disposals Balance, December 31, 2017 Carrying amount at December 31, 2017 Cost Balance, January 1, 2018 Additions Disposals Transferred from prepayments for land and equipment Transferred from inventories Reclassification Balance, December 31, 2018	Land $ 450,575 - - - $ 450,575 $ - - - $ - $ 450,575 $ 450,575 - - 688,331 - - $ 1,138,906	Buildings $ 2,004,437 10,554 - - $ 2,014,991 $ 906,259 77,560 - $ 983,819 $ 1,031,172 $ 2,014,991 15,838 - - - - $ 2,030,829	Machinery Miscellaneous Equipment Total $ 110,270 $ 968,615 $ 3,533,897 8,772 55,329 74,655 (34) (29,869) (29,903) 5,850 75,685 81,535 $ 124,858 $ 1,069,760 $ 3,660,184 $ 91,888 $ 730,719 $ 1,728,866 10,057 80,524 168,141 (15) (25,907) (25,922) $ 101,930 $ 785,336 $ 1,871,085 $ 22,928 $ 284,424 $ 1,789,099 $ 124,858 $ 1,069,760 $ 3,660,184 41,104 75,114 132,056 (5,040) (25,625) (30,665) - - 688,331 5,608 62,004 67,612 (323) 323 - $ 166,207 $ 1,181,576 $ 4,517,518 (Continued)

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Accumulated depreciation Balance, January 1, 2018 Depreciation Disposals Reclassification Balance, December 31, 2018 Carrying amount at December 31, 2018	Land $ - - - - $ - $ 1,138,906	Buildings $ 983,819 68,716 - - $ 1,052,535 $ 978,294	Machinery Miscellaneous Equipment Total $ 101,930 $ 785,336 $ 1,871,085 13,701 94,113 176,530 (5,040) (18,677) (23,717) (210) 210 - $ 110,381 $ 860,982 $ 2,023,898 $ 55,826 $ 320,594 $ 2,493,620 (Concluded)

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

Buildings
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	3-16 years

Refer to Note 30 for property, plant and equipment have been pledged to secure borrowings of the Corporation.

15. INVESTMENT PROPERTIES

Cost January 1, 2018 Transferred from prepayments for land and equipment December 31, 2018	Land $ - 3,137,187 $ 3,137,187

The Corporation acquired the land ownership certificates of the investment and development plan, “The Action Plan of Developing Land Surrounding the MRT Airport Station to Improve Civilian’s Life” in the third quarter of 2018 and transferred the parts of land held for undetermined future use to investment properties. Please refer to Note 32. The determination of fair value was performed by independent qualified professional valuers, and the fair value was measured by using Level 3 inputs. The valuation was arrived at by reference to market evidence of transaction prices for similar properties. The significant unobservable inputs used include discount rates and the fair value as appraised.

	December 31,
	2018
Fair value	$ 13,588,172

All of the Corporation’s investment properties were held under freehold interests.

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16. GOODWILL

Cost		December	31
		2018 $ 94,424	2017 $ 94,424

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, 2018 and 2017.

17. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Bank loans Interest rate (%) b. Long-term borrowings Secured borrowings Bank loans (1) (Note 30) Unsecured borrowings Syndicated bank loans (2) Bank loans (3) Less: Current portions			December 31	December 31
	2018 2017 $ 630,000 $ 300,000 0.86%-0.88% 0.85% December 31
		2018 $ 300,000 - 1,500,000 1,800,000 - $ 1,800,000		2017 $ - 1,200,000 900,000 2,100,000 1,200,000 $ 900,000

1) The Corporation applied to Mega International Commercial Bank for a credit line of $800,000 thousand and borrowed $300,000 thousand in March 2018, which will be used for increasing operating budget and repaying syndicated bank loans. The interest rate on the bank loan was 1.17% per annum on a floating basis. The bank loan will be due in March 2023, and was secured by the Corporation’s land and buildings. Please refer to Note 30.
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2) 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 32). The syndicated bank loan had been repaid from March 2017 to March 2018 in three equal semiannual installments ($400,000 thousand per installment), the remaining $800,000 thousand had been repaid in September 2018. As of December 31, 2017, the interest rate per annum was 1.58% on a floating basis and the interest is paid monthly.
3) The Corporation applied for bank loan for repaying syndicated bank loans and increasing operating budget. The interest rate was 1.08%-1.20% per annum on a floating basis. The bank loan will be due in June 2023.

18. BONDS PAYABLE

	December 31,
	2017
Unsecured domestic convertible bonds	$ 99,703

19. OTHER PAYABLES

Salaries and bonus Employee’s compensation Remuneration of directors Others		December 31	December 31
		2018 $ 306,560 275,489 9,600 75,419 $ 667,068	2017 $ 283,762 325,622 9,600 102,024 $ 721,008

20. RETIREMENT BENEFIT PLANS

a. 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.

243 -

b. 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:

December 31 2018 2017 Present value of defined benefit obligation $ 460,083 $ 449,301 Fair value of plan assets (307,690) (291,869) Net defined benefit liabilities $ 152,393 $ 157,432 Movements in net defined benefit liability were as follows: Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Net Defined Benefit Liabilities Balance at January 1, 2017 $ 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 Current service cost 4,009 - 4,009 Net interest expense (income) 6,178 (4,118) 2,060 Recognized in profit or loss 10,187 (4,118) 6,069 Remeasurement Return on plan assets (excluding amounts included in net interest) - (7,436) (7,436) Actuarial loss - changes in demographic assumptions 442 - 442 (Continued)		December 31

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	Present Value	Present Value	Present Value
	of the Defined			Fair Value of		Net Defined
		Benefit		the Plan		Benefit
		Obligation			Assets	Liabilities
Actuarial loss - changes in financial
assumptions		$	6,791	$	-	$	6,791
Actuarial loss - experience adjustments			4,821		-		4,821
Recognized in other comprehensive
income			12,054		(7,436)		4,618
Contributions from employer			-		(15,726)		(15,726)
Benefits paid			(11,459)		11,459		-
Balance at December 31, 2018		$	460,083	$(307,690)		$	152,393
						(Concluded)

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

1) 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.
2) 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.
3) 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.

Discount rate(s) Expected rate(s) of salary increase	December 31
	2018 2017 0.88%-1.25% 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
		2018 $(13,652) $ 14,243 $ 13,833 $(13,331)	2017 $(13,723) $ 14,340 $ 13,945 $(13,417)

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Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
		2018 $ 15,568 12 years	2017 $ 15,293 13 years

21. 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
		2018 450,000 $ 4,500,000 416,779 $ 4,167,794	2017 450,000 $ 4,500,000 411,894 $ 4,118,942

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

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends or transferred to share capital (Note) Additional paid-in capital Treasury share transactions Consolidation excess 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
		2018 $ 2,860,255 179,801 146,976 12,421 44,110 - 87,000 139,074 $ 3,469,637	2017 $ 2,514,454 171,229 146,976 5,874 44,377 7,209 116,389 180,781 $ 3,187,289

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c. Retained earnings and dividends policy

An appropriation of earnings to a 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.

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.

The appropriations of earnings for 2017 and 2016 have been approved in the annual shareholders’ meeting on June 8, 2018 and 2017, respectively, were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2017 For Fiscal Year 2016 $ 255,841 $ 171,994 1,854,424 1,314,425	Dividends Per Share (NT$)
		For Fiscal Year 2017 For Fiscal Year 2016 $ 4.5 $ 3.3

The appropriations of earnings for 2018 had been proposed by the Corporation’s board of directors on February 21, 2019. The appropriations and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Legal reserve	$ 254,628
Cash dividends	1,750,896	$4.2

The appropriations of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on June 18, 2019.

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d. Special reserves

e. Other equity items

Exchange
Differences on
Translating
Foreign
Operations
Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI
Unrealized
Gain (Loss) on
Available-for-
sale Financial
Assets
For the year ended December 31, 2018
Balance at January 1, 2018 (IAS 39)
$ (97,633)
$ -
$ 179,348

Effect of retrospective application of
IFRS 9

-
151,864
(179,348)

Balance at January 1, 2018 (IFRS 9)

(97,633)
151,864

-

Exchange differences on translating
foreign operations
(6,229)
-
-
Unrealized gain (loss) arising from
equity investments
-
16,832
-
Share of other comprehensive gain (loss)
of associates and join ventures
accounted for using equity method
(1,010)
(3,962)
-
Disposal of investments in equity
instruments designated as at FVTOCI
-
(4,241)
-
Share-based payment transaction

-

-

-

Balance at December 31, 2018
$ (104,872)
$ 160,493
$ -

For the year ended December 31, 2017
Balance at January 1, 2017
$ (24,914)
$ -
$ 232,901

Exchange differences on translating
foreign operations
(64,660)
-
-
Unrealized gain (loss) on available-for-
sale Financial assets
-
-
(53,099)
Shares of other comprehensive gain
(loss) of associates and join ventures
accounted for using equity method
(8,059)
-
(454)
Issuance of shares
-
-
-
Share-based payment transaction

-

-

-

Balance at December 31, 2017
$ (97,633)
$ -
$ 179,348

Unearned
Employee
Benefit
$ (93,849)

-

(93,849)
-
-
-
-

51,472
$ (42,377)
$ (149,952)
-
-
-
(13,772)

69,875
$ (93,849)

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f. Treasury shares

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, 2018 Chroma Investment Co., Ltd. 1,916 December 31, 2017 Chroma Investment Co., Ltd. 1,916	Carrying Amount Market Price $ 35,714 $ 226,038 $ 35,714 $ 310,324

22. REVENUE

Contract revenue of the Corporation comes from sale of goods.

a. Contract balances

	December 31,
	2018
Contract liabilities from sale of goods	$ 31,014

The changes in the balance of contract liabilities primarily result from the timing difference between the Corporation’s performance and the respective customer’s payment. Revenue of the reporting period recognized from the beginning contract liabilities is $47,766 thousand.

b. Disaggregation of revenue

Automatic test systems Precised electronic test instruments Others	Amount $ 3,957,776 3,120,094 468,970 $ 7,546,840

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23. 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 An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 30,434 $ 30,021 935 6,764 31,369 36,785 (9,609) (24,295) $ 21,760 $ 12,490 $ 9,609 $ 24,295 1.58% 1.58% For the Year Ended December 31
		2018 $ 32,754 143,776 $ 176,530 $ 960	2017 $ 29,224 138,917 $ 168,141 $ 960

c. Employee benefits expense

Short-term benefits Salary expenses Insurance expenses Remuneration of directors Share-based payments Retirement benefits efined contribution plans Defined benefit plans Other employee benefits Total employee benefits expense			For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
			2018	Total $ 1,590,464 127,581 10,185 1,728,230 78,596 61,443 6,069 67,512 38,423 $ 1,912,761			2017
		Operating Costs $ 277,786 28,949 - 306,735 - 9,179 961 10,140 15,896 $ 332,771	Operating Expenses $ 1,312,678 98,632 10,185 1,421,495 78,596 52,264 5,108 57,372 22,527 $ 1,579,990			Operating Costs $ 285,086 25,842 - 310,928 - 8,650 964 9,614 15,043 $ 335,585	Operating Expenses $ 1,284,096 90,158 9,125 1,383,379 121,593 46,991 5,249 52,240 23,620 $ 1,580,832	Total $ 1,569,182 116,000 9,125 1,694,307 121,593 55,641 6,213 61,854 38,663 $ 1,916,417

As of December 31, 2018 and 2017, the Corporation had 1,734 and 1,728 employees, respectively, among which there are 5 directors not concurrently holding positions in the Corporation. The basis of above calculations was the same with the basis which was used in the calculation on employee benefits expense.

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d. Employees’ compensation and remuneration of directors

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2018 Amount Rate (%) $ 240,000 7.55 9,600 0.30	2017
		Amount Rate (%) $ 310,000 9.73 9,600 0.30

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

There is no difference between the actual amounts of the employees’ compensation and remuneration of directors paid and the actual amounts recognized in the financial statements for the years ended December 31, 2017 and 2016.

24. 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 Adjustments to deferred tax attributable to changes in tax rates and law Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 227,322 44,118 - 271,440 83,298 27,595 110,893 $ 382,333	2017 $ 233,681 20,687 (32,223) 222,145 85,168 - 85,168 $ 307,313

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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 Unrecognized investment credits Adjustments for prior years’ tax Effect of tax rate changes Others (temporary differences adjustments) Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,928,608 $ 585,722 (189,101) 1,204 44,118 (101,193) - 27,595 13,988 $ 382,333	2017 $ 2,865,714 $ 487,171 (117,538) 972 20,687 (67,191) (32,223) - 15,435 $ 307,313

In 2017, the applicable corporate income tax rate used by the Corporation is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

As the status of 2019 appropriations of earnings is uncertain, the potential income tax consequences of the 2018 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, 2018

Deferred tax assets Temporary differences Unrealized intercompany gain Inventory reserve Allowance for impaired receivables Net defined benefit liability Provisions Impairment loss Unrealized exchange loss Deferred tax liabilities Temporary differences Unappropriated earnings of subsidiaries Goodwill Unrealized exchange gain	Opening Balance Recognized in Profit or Loss $ 92,296 $ 18,458 30,976 9,667 7,897 2,446 8,460 (438) - 873 19,465 (19,465) 4,620 (4,620) $ 163,714 $ 6,921 $ 272,636 $ 109,122 21,593 6,416 - 2,276 $ 294,229 $ 117,814	Closing Balance $ 110,754 40,643 10,343 8,022 873 - - $ 170,635 $ 381,758 28,009 2,276 $ 412,043

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For the year ended December 31, 2017

Deferred tax assets Temporary differences Unrealized intercompany gain Inventory reserve Impairment loss Net defined benefit liability Allowance for impaired receivables Unrealized exchange loss Others Deferred tax liabilities Temporary differences Unappropriated earnings of subsidiaries Goodwill	Opening Balance Recognized in Profit or Loss $ 70,420 $ 21,876 30,736 240 16,030 3,435 8,251 209 2,962 4,935 3,336 1,284 71 (71) $ 131,806 $ 31,908 $ 161,194 $ 111,442 15,959 5,634 $ 177,153 $ 117,076	Closing Balance $ 92,296 30,976 19,465 8,460 7,897 4,620 - $ 163,714 $ 272,636 21,593 $ 294,229

c. Income tax assessments

As of December 31, 2018, the Corporation’s tax returns through 2016 had been assessed by the tax authorities.

25. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share are 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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,546,275 966 $ 2,547,241	2017 $ 2,558,401 7,459 $ 2,565,860

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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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 409,438 961 4,395 2,313 1,882 418,989	2017 399,052 6,864 5,037 2,392 2,057 415,402

If 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.

26. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan

Information on employee share options was as follows:

Balance at January 1 Options exercised Options forfeited Balance at December 31 Options exercisable, end of the year	For the Year Ended December 31	For the Year Ended December 31
	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 9,463 $ 60.1 (3,354) 58.4 (103) - 6,006 59.0 1,532	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

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Information on outstanding options as of December 31, 2018 and 2017 is as follows:

December 31

2018 Range of Exercise Price (NT$) Weighted-average Remaining Contractual Life (Years) $45.4 0.52 61.6 3.24	2017
	Range of Exercise Price (NT$) Weighted-average Remaining Contractual Life (Years) $46.7 1.52 63.4 4.24

Compensation costs recognized were $29,810 thousand and $51,802 thousand for the years ended December 31, 2018 and 2017, 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.
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.
255 -

Information relating to outstanding employee restricted shares as of December 31, 2018 and 2017 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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 2,975 - (618) (84) 2,273	2017 3,100 185 (298) (12) 2,975

Compensation costs of share-based payment arising from the RSU Plan were $48,786 thousand and $69,791 thousand for the years ended December 31, 2018 and 2017, respectively

27. 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.

28. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments 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 instruments measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Open-end beneficiary certificates Financial assets at FVTOCI Domestic listed equity securities Foreign unlisted equity securities	Level 1 $ 951,456 $ 431,797 - $ 431,797	Level 2 $ - $ - - $ -	Level 3 Total $ 6,807 $ 958,263 $ - $ 431,797 182,039 182,039 $ 182,039 $ 613,836 (Continued)

256 -

Level 1 Level 2 Level 3 Total

December 31, 2017 Financial assets at FVTPL Derivative instruments Available-for-sale financial assets Domestic securities listed equity securities Open-end beneficiary certificates	$ - $ 268,582 832,314 $ 1,100,896	$ 31 $ - - $ -	$ - $ 31 $ - $ 268,582 - 832,314 $ - $ 1,100,896 (Concluded)	$ 31
				$ 268,582 832,314
				$ 1,100,896

There were no transfers between Levels 1 and 2 for the years ended December 31, 2018 and 2017.

2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets Balance at January 1, 2018 Recognized in profit or loss (included in valuation gains and losses) Recognized in other comprehensive income (included in unrealized gain (loss) on financial assets at FVTOCI) Purchases Cash returned of capital reduction Transfers out of Level 3 Balance at December 31, 2018	Financial Assets at FVTPL Equity Instruments $ 6,013 794 - - - - $ 6,807	Financial Assets at FVTOCI Equity Instruments $ 265,884 - 9,861 67,800 (5,262) (156,244) $ 182,039	Total $ 271,897 794 9,861 67,800 (5,262) (156,244) $ 188,846

3) 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.

257 -
4) Valuation techniques and inputs applied for Level 3 fair value measurement

c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Mandatorily at FVTPL Loans and receivables (1) Available-for-sale financial assets (2) Financial assets at amortized cost (3) Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at amortized cost (4)	December 31
	2018 2017 $ - $ 31 958,263 - - 5,411,799 - 1,268,810 3,744,311 - 613,836 - 4,090,556 4,631,830

Financial liabilities at amortized cost (4)

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables (classified as 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 include financial assets at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables (classified as other receivable - related parties and other current assets) and refundable deposits.
4) 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 investments, 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.

258 -

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 33.

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 $98,527 thousand and $154,405 thousand for the years ended December 31, 2018 and 2017, 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 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
	2018 2017 $ - $ 595,200 - 399,703 913,360 1,447,629 2,430,000 2,100,000

259 -

Sensitivity analysis

The sensitivity analysis below was determined on the basis of the exposure to interest rates for both derivative and non-derivative 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, 2018 and 2017 would have decreased/increased by $7,583 thousand and $3,262 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 portfolios of investment and having every equity investment get prior approval from the Corporation’s management.

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower, the pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $47,913 thousand as a result of the changes in fair values of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $30,692 thousand as a result of the changes in fair values of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, the pre-tax other comprehensive income for the year ended December 31, 2017 would have increased/decreased by $55,045 thousand as a result of the changes in fair values of available-for-sale financial assets held by the Corporation.

2) Credit risk

Credit risk refers to the risk that the 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 would cause a financial loss to the Corporation due to the failure of the counterparty to discharge its 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.

260 -

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, 2018 and 2017, the Corporation’s available unutilized bank loan facilities were $1,850,000 thousand and $2,067,840 thousand, respectively.

Liquidity and interest risk tables for non-derivative financial liabilities

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

Non-interest bearing Floating interest rate instruments Non-interest bearing Convertible bonds Floating interest rate instruments	December 31, 2018	December 31, 2018
	Within 1 Year 1-5 Years $ 1,659,864 $ - 654,453 1,834,028 $ 2,314,317 $ 1,834,028 December 31, 2017		More Than 5 Years $ - - $ -
	Within 1 Year $ 2,131,558 - 1,521,820 $ 3,653,378	1-5 Years $ - 101,900 919,379 $ 1,021,279	More Than 5 Years $ - - - $ -

After considering the financial position of the Corporation, management does not expect 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.

261 -

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

29. 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 Systems Solutions, Inc. (“CSS”)

Quantel Private Ltd. (“Quantel”)

San Eagle Development Corp. (“San Eagle”)

Wei Kuang Automatic Equipment Co., Ltd. (“Wei Kuang
Automatic”)

Testar Electronics Corp. (“Testar Electronics”)

Deep Red Holding Co., Ltd. (“Deep Red”)

Adivic Technology Co. (“Adivic Tech.”)

Sajet System Technology (Suzhou) Co., Ltd. (“Sajet
Suzhou”)

Wei Kuang Mech. Eng. Inc. (“Wei Kuang”)

Adivic Holding Corp. (“Adivic Holding”)

Chroma Electronics (Shenzhen) Co., Ltd. (“Chroma
Shenzhen”)

Chroma Electronics (Shanghai) Co., Ltd. (“Chroma
Shanghai”)

Chroma (Shanghai) Trading Co., Ltd. (“Chroma Shanghai
Trading”)

Chroma ATE (Suzhou) Co., Ltd. (“Chroma Suzhou”)

Mou Kuan Technologies (Nanjin) Co., Ltd. (“Mou Kuan
Nanjin”)

Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. (“Wei
Kuang Nanjin”)

Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.
(“Wei Kuang Xiamen”)

EVT Technology Co., Ltd. (“EVT”)

Wei Da Electric Vehicle Co., Ltd. (“Wei Da Electric”)

Innovative Nanotech Incorporated (“Innovative”)

Touch Cloud Incorporation (“Touch Cloud”)

Quantel Technologies India Private Ltd. (“Quantel
Technologies India”)

Quantel Global Vietnam Co., Ltd. (“Quantel Global
Vietnam”)

Quantel Global Sdn. Bhd. (“Quantel Global Malaysia”)

Relationship with the Corporation

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary (EVT’s subsidiary)
Subsidiary (the Corporation
acquired control over the
subsidiary since August 9, 2017)
Subsidiary (the Corporation
acquired control over the
subsidiary since 2017 Q4)
Subsidiary (Quantel’s subsidiary)
Subsidiary (Quantel’s subsidiary)
Subsidiary (Quantel’s subsidiary)
(Continued)

262 -

Relationship with the Corporation

Related Party

Quantel Global Philippines Corporation (“Quantel Global Subsidiary (Quantel’s subsidiary) Philippines”) Chroma Germany GmbH (“Chroma Germany”) Subsidiary (Chroma Europe’s subsidiary) Adlink Technology Inc. (“Adlink”) Associate DynaScan Technology Corp. (“DynaScan Technology”) Associate Chih Ho Shun Development Co., Ltd. (“Chih Ho Shun”) Joint venture Mon Kuan Technologies Co., Ltd. (“Mon Kuan Tec.”) Other related party 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”) 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.

The related-party transactions were as follows:

b. Sales

Related Party Categories Subsidiaries Neworld Electronics Chroma USA Others Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,979,060 665,640 1,937,829 22,534 1,175 $ 4,606,238	2017 $ 1,880,032 898,453 2,087,363 14,068 1,240 $ 4,881,156

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 Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 103,013 12,687 - $ 115,700	2017 $ 181,239 20,761 6 $ 202,006

263 -

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

Line Item Related Party Categories Notes receivable Subsidiaries Trade receivables Subsidiaries Chroma USA Neworld Electronics Chroma EUR Others Associates Other related parties Dividends receivable Subsidiaries		December 31	December 31
		2018 $ 194 $ 467,443 447,646 253,438 584,989 6,940 304 $ 1,760,760 $ 7,679	2017 $ 794 $ 363,520 870,209 184,154 827,829 4,015 304 $ 2,250,031 $ 5,952

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

	December 31	December 31
2018 2017 $ 105 $ 140 $ 9,660 $ 30,805 3,127 3,714 $ 12,787 $ 34,519 For the Year Ended December 31
	2018 2017 $ 6,533 $ 515 133 84 $ 6,666 $ 599 December 31
	2018 $ 119,375 35,553 $ 154,928	2017 $ 115,664 38,993 $ 154,657

f. Acquisitions of property, plant and equipment
g. Loans to related parties
1) Other receivables
264 -

2) Interest receivables

Related Party Categories Subsidiaries Interest revenue Related Party Categories Subsidiaries CSS		December 31	December 31
	2018 2017 $ 323 $ 313 For the Year Ended December 31
		2018 $ 3,808	2017 $ 3,827

3) Interest revenue

Note: Refer to Table 1 (attached) for other information related to financing provided.

h. Endorsement guarantees provided

Note:Refer to Table 2 (attached) for other information related to endorsement guarantees provided.

i. Others

1) Commission expense

Related Party Categories Subsidiaries Quantel Chroma Shanghai Chroma Suzhou Chroma Japan Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 17,790 12,301 12,211 - 2,863 $ 45,165	2017 $ 8,322 11,836 11,146 5,893 2,094 $ 39,291

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

2) Rental income

Related Party Categories Subsidiaries Testar Electronics Others Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 13,656 1,110 1,260 $ 16,026	2017 $ 13,815 1,074 1,260 $ 16,149

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

265 -
3) Management service income

Related Party Categories Subsidiaries Chroma New Material Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 6,000 600 $ 6,600	2017 $ 6,000 600 $ 6,600

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

4) Other income

Related Party Categories Subsidiaries Neworld Electronics Chroma Europe Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 14,400 666 26 $ 15,092	2017 $ 19,732 - 3 $ 19,735

Other income is income from repairs and maintenance.

5) Other current assets - other receivables

Related Party Categories Subsidiaries Testar Electronics Neworld Electronics Others Associates		December 31	December 31
		2018 $ 23,353 5,178 1,929 521 $ 30,981	2017 $ 53,543 10,317 2,076 666 $ 66,602

Receivables were recognized from managerial services and building rentals.

j. Compensation of key management personnel

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 108,652 2,180 $ 110,832	2017 $ 115,350 2,247 $ 117,597

266 -

30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The assets pledged as collaterals for bank loans were as follows:

Land and buildings, net		December 31	December 31
		2018 $ 700,115	2017 $ 707,751

31. SIGNIFICANT EVENTS AFTER REPORTING PERIOD

In view of future development strategy and improvement of operating performance, the Corporation’s board of directors resolved on February 11, 2019, to subscribe equity interest of Camtek Ltd. in US$9.5 per share with a consideration of US$74,265,680. The Corporation expected to acquire 20.5% of equity interest upon completion of the transaction. The investment is awarding for the authorities’ approval for settlement.

32. 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 over 50% of all industrial land and register with the authorities to go into operation.
267 -

33. 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, 2018

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 62,425 30.715 (USD:NTD) RMB 57,246 4.472 (RMB:NTD) Non-monetary items Investments accounted for using equity method USD 51,219 30.715 (USD:NTD) HKD 289,530 3.921 (HKD:NTD) Financial liabilities Monetary items USD 6,604 30.715 (USD:NTD)	Carrying Amount $ 1,917,377 256,006 $ 2,173,383 $ 1,509,875 1,135,246 $ 2,645,121 $ 202,848

268 -

December 31, 2017

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 87,600 29.760 (USD:NTD) RMB 168,862 4.565 (RMB:NTD) Non-monetary items Investments accounted for using equity method USD 44,127 29.760 (USD:NTD) HKD 271,236 3.807 (HKD:NTD) Financial liabilities Monetary items USD 9,736 29.760 (USD:NTD)	Carrying Amount $ 2,606,983 770,855 $ 3,377,838 $ 1,326,994 1,032,596 $ 2,359,590 $ 289,746

For the years ended December 31, 2018 and 2017, (realized and unrealized) net foreign exchange gains (losses) were $84,517 thousand and $(117,951) 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.

34. 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 ventures): 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: Table 5 (attached)
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 6 (attached)
269 -
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 7 (attached)
9) Trading in derivative instruments: Note 7 and Note 18
10) 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 6 (attached)
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: Table 6 (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: Table 2 (attached)
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: Table 1 (attached)
- f) Other transactions that have a material effect on the profit or loss for the year or on the financial position, such as the rendering or receiving of services: None
270 -

CHROMA ATE INC.

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (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 5)	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit
													Item	Value
0	The Corporation	Chroma Systems Solutions, Inc. Chroma Japan Corp.	Other receivables Other receivables	Y Y	$ 119,375 46,321	$ 119,375 41,194	$ 119,375 35,553	3.25% -	a a	$ 493,283 223,056	- -	$ - -	- -	$ - -	$ 1,441,002 (Note 1) 1,441,002 (Note 1)	$ 2,882,004 (Note 2) 2,882,004 (Note 2)
1	Chroma Electronics (Shenzhen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	44,720	44,720	-	2.50%	b	-	Operation	-	-	-	456,924 (Note 3)	456,924 (Note 3)
2	Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd.	Other receivables	Y	44,720	44,720	13,416	2.50%	b	-	Operation	-	-	-	308,460 (Note 3)	308,460 (Note 3)

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 70% of the net value from the latest financial statements of borrowing company that have been audited.

Note 4: The amounts listed in the table were translated into New Taiwan dollars at the exchange rate of US$1=NT$30.715, RMB1=NT$4.472 and JPY1 = NT$0.278 as of December 28, 2018.

Note 5: Financing provided:

a. For transactions.

b. For short-term financing.

271 -

TABLE 2

CHROMA ATE INC.

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (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 Japan Corp. Chroma ATE Europe B.V. Chroma ATE Inc. Sajet System Technology (Suzhou) Co., Ltd. Chroma Electronics (Shanghai) Co., Ltd. Chroma Electronics (Shenzhen) Co., Ltd. Chroma ATE (Suzhou) Co., Ltd. Quantel Private Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503 2,161,503	$ 34,100 52,800 61,430 22,360 44,720 44,720 89,440 44,960	$ 34,100 52,800 61,430 22,360 44,720 44,720 89,440 44,960	$ 5,560 - 61,430 - - - 5,417 -	$ - - - - - - - -	0.24% 0.37% 0.43% 0.16% 0.31% 0.31% 0.62% 0.31%	$ 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006 4,323,006	Y Y Y Y Y Y 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$30.715, JPY1=NT$0.278, RMB1=NT$4.472, EUR1=NT$35.200, SGD1=NT$22.480 as of December 28, 2018.
272 -

TABLE 3

CHROMA ATE INC.

MARKETABLE SECURITIES HELD

(EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT CONTROLLED ENTITIES) DECEMBER 31, 2018

(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, 2018	December 31, 2018		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value
The Corporation Chroma New Material Corp. Chroma Investment Co., Ltd. Chen Hwa Technology Inc.	Fund Mega Diamond Money Market Fund Jih Sun Money Market Fund Hua Nan Kirin Money Market Fund Yuanta De-Li 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. Taiwan Advanced Nanotech Inc. Fund Fuh Hwa You Li Money Market Fund Taishin 1699 Money Market Fund Fund Hua Nan Kirin Money Market Fund Stocks Greatek Electronics Inc. Chroma ATE Inc. Cosmactive Broadband Networks Co., Ltd. Prance System Technology Co., Ltd. Stocks Hangzhou New Material Chroma Co., Ltd.	- - - - - - - - - - - - - - - - - - - The Corporation - - -	Financial assets at fair value through profit or loss - current `〃` `〃` `〃` Financial assets at fair value through profit or loss - non- current Financial assets at fair value through other comprehensive income - non-current `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` Financial assets at fair value through profit or loss - current `〃` `〃` `〃` Financial assets at fair value through other comprehensive income - non-current `〃` `〃` `〃`	44,427 6,765 7,947 12,287 - 6,050 412 26 4,614 3,561 2,553 806 723 3,280 2,700 6,829 3,712 7,444 85 1,916 26 111 -	$ 556,317 100,076 95,019 200,044 6,807 228,702 46,599 252 37,017 42,585 156,244 3,594 2,289 47,954 48,600 91,891 50,140 88,996 3,653 226,038 - - 4,435	- - - - - 6.1 - - 4.6 4.4 8.1 1.9 1.4 14.7 15.0 - - - - 0.5 1.5 5.1 19.0	$ 556,317 100,076 95,019 200,044 6,807 228,702 46,599 252 37,017 42,585 156,244 3,594 2,289 47,954 48,600 91,891 50,140 88,996 3,653 226,038 - - 4,435	- - - - - - - - - - - - - - - - - - - - - - -
							(Continued)

273 -

(Concluded)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Shares/Units (Thousands)	Carrying Amount	Percentage of Ownership	Fair Value
Innovative Nanotech Incorporated Touch Cloud Incorporation	Fund Mega Diamond Money Market Fund Fund Mega Diamond Money Market Fund	- -	Financial assets at fair value through profit or loss - current `〃`	10,010 2,753	$ 125,339 34,469	- -	$ 125,339 34,469	- -

Note 1: Marketable securities refer to stocks, bonds, beneficiary certificates and marketable securities derived from above items under IFRS 9 “Financial Instruments”.

Note 2: The fair value of open-end beneficiary certificates and listed market securities was calculated based on the net asset value and closing price as of balance sheet date.

274 -

TABLE 4

TABLE 5

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, 2018

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	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)
The Corporation	Fund Mega Diamond Money Market Fund Jih Sun Money Market Fund	Financial assets at fair value through profit or loss - current `〃`	- -	- -	20,372 -	$ 253,960 -	24,055 33,911	$ 300,000 500,000	- 27,146	$ - 400,970	$ - 400,000	$ - 970	44,427 6,765	$ 556,317 100,076

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

CHROMA ATE INC.

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

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

Company Name	Type of Property	Transaction Date	Transaction Amount	Payment Term	Counter-party	Nature of Relationship	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Prior Transaction of Related Counter-party	Price Reference	Purpose of Acquisition	Other Terms
							Owner	Relationship	Transfer Date	Amount
The Corporation	Land	2018.06.05	$ 717,244	Based on the contract; fourth installment had been paid.	Ministry of the Interior, Republic of China	-	-	-	-	$ -	Public bidding	Manufacturing, R&D, operating and building employee dormitories	Note

Note: Please refer to Note 32 to the financial statements for related information.

275 -

TABLE 6

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, 2018

(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 Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Chroma ATE Inc. The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Europe B.V. The Corporation Quantel Private Ltd. Neworld Electronics Ltd. Chroma Electronics (Shenzhen) Co., Ltd.	Neworld Electronics Ltd. The Corporation Chroma Electronics (Shanghai) Co., Ltd. The Corporation Chroma Electronics (Shenzhen) Co., Ltd. The Corporation Chroma ATE (Suzhou) Co., Ltd. The Corporation Chroma Japan Corp. The Corporation Chroma ATE Inc. The Corporation Chroma Systems Solutions, Inc. The Corporation Chroma ATE Europe B.V. The Corporation Quantel Private 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	$ (1,979,060) 1,979,060 (169,418) 169,418 (308,313) 308,313 (129,839) 129,839 (223,056) 223,056 (665,640) 665,640 (493,283) 493,283 (403,983) 403,983 (166,600) 166,600 (817,631) 817,631	(26) 100 (2) 100 (4) 100 (2) 100 (3) 100 (9) 100 (7) 100 (5) 100 (2) 100 (29) 72	Net 90 days after delivery Net 90 days after delivery Net 120 days after delivery Net 120 days after delivery Net 90 days after monthly closing Net 90 days after monthly closing Net 120 days after delivery Net 120 days after delivery Net 90 days after delivery Net 90 days after delivery Net 180 days after delivery Net 180 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days after delivery Net 90 days Net 90 days	- - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - -	$ 447,646 (447,646) 27,286 (27,286) 71,854 (71,854) 59,922 (59,922) 221,817 (221,817) 467,443 (467,443) 135,507 (135,507) 253,438 (253,438) 27,851 (27,851) 364,859 (364,859)	17 (100) 1 (100) 3 (100) 2 (100) 9 (100) 18 (100) 5 (100) 10 (100) 1 (100) 52 (80)	- - - - - - - - - - - - - - - - - - - -
										(Continued)

276 -

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. Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Chroma ATE (Suzhou) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Nanjin) Co., Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Neworld Electronics Ltd. Neworld Electronics Ltd. Wei Kuang Automatic Equipment Co., Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd. Wei Kuang Automatic Equipment 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	$ (143,737) 143,737 (261,831) 261,831 (343,601) 343,601 (512,937) 512,937 (139,851) 139,851	(5) 44 (9) 87 (12) 68 (13) 21 (3) 28	Net 90 days Net 90 days Net 90 days Net 90 days Net 90 days Net 90 days Net 180 days after delivery Net 180 days after delivery Net 120 days after monthly closing Net 120 days after monthly closing	- - - - - - - - - -	- - - - - - - - - -	$ 90,145 (90,145) - - - - - - 113,499 (133,499)	13 (41) - - - - - - 7 (65)	- - - - - - - - - -

(Concluded)

277 -

TABLE 7

CHROMA ATE INC.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(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. Wei Kuang Automatic Equipment Co., Ltd.	Neworld Electronics Ltd. Chroma ATE Inc. Chroma ATE Europe B.V. Chroma Systems Solutions, Inc. Chroma Japan Corp. Chroma Electronics (Shenzhen) Co, Ltd. Wei Kuang Automatic Equipment (Xiamen) Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Same parent company	Trade receivables $ 447,646 Trade receivables 467,443 Trade receivables 253,438 Trade receivables 135,507 Other receivables - financing provided 119,375 Trade receivables 221,817 Trade receivables 364,859 Trade receivables 113,499	3.00 1.60 1.85 4.02 - 1.16 1.97 2.40	$ - - - - - - - -	- - - - - - - -	$ 261,053 125,057 - 72,310 - 60,581 196,163 23,451	$ - - - - - - - -

Note: As of February 21, 2019.

278 -

TABLE 8

CHROMA ATE INC.

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (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, 2018	as of December 31, 2018	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				December 31, 2018	December 31, 2017	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. Quantel Global Sdn. Bhd. Quantel Global Philippines Corporation 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 USA British Virgin Islands Taipei, Taiwan Japan USA Mauritius Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan USA Mauritius Pingtung, Taiwan Samoa India Vietnam Malaysia Philippines 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 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 17,500 247,096 117,311 142,140 57,000 64 185,686 3,750 42,245 3,056 6,219 4,199 610 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 38,301 193,800 147,125 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	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 9,412 14,214 5,700 240 4,475 375 1,000 65 - 600 99 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 85.6 71.1 78.1 50.0 100.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0	$ 949,027 791,854 517,852 443,073 1,206,381 164,834 130,270 101,626 124,674 60,658 114,193 134,810 53,924 35,617 (70,297) (45,711) 104,303 17,664 24,596 59,793 119,441 43,779 165,846 861,912 (3,906) 10,234 2,306 3,010 4,120 1,359 (3,063)	$ 112,846 198,996 238,525 44,611 885,878 7,444 30,011 990 6,479 21,964 76,973 (5,873) 1,851 (39,420) (33,977) 86,297 45,430 108 (2,792) (10,767) (29,451) (14,809) 86,297 199,047 - (1,259) (547) (896) (143) (4,238) 1,169	$ 112,846 121,538 26,963 44,611 885,886 7,444 16,888 990 (2,094) 21,939 21,014 (5,875) 1,851 (20,641) (33,979) 21,928 45,430 38 (1,876) (8,517) (22,503) (11,563) NA NA 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 Subsidiary Subsidiary

279 -

TABLE 8

CHROMA ATE INC.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018

(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, 2018 (Note 3)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018 (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, 2018 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2018
						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		$ 117,630 (HK$ 30,000) 92,145 (US$ 3,000) 82,931 (US$ 2,700) 46,073 (US$ 1,500) 116,717 (US$ 3,800) 53,087 (RMB 11,871) 51,057 (RMB 11,417) 7,768 (RMB 1,737) 37,449 (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)	$ 85,372 15,954 117 18,853 7,444 94,346 129,595 3,902 45,431	100 100 100 19 100 100 100 100 100	$ 85,372 15,954 117 - 7,444 94,346 129,595 3,902 45,431	$ 653,019 119,254 86,639 4,436 206,304 171,227 440,657 50,145 104,298	$ - - - - - - - - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018		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)		$8,646,012 (Note 7)

(Continued)

280 -

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 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$3.846, US$1=NT$30.149, RMB1=NT$4.560 for the year ended December 31, 2018.

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

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Chroma ATE Inc.

==> picture [115 x 106] intentionally omitted <==

Chariman Leo Huang

==> picture [63 x 54] intentionally omitted <==

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==> picture [483 x 682] intentionally omitted <==

283 -

AI assistant

CHROMA — Annual Report 2018

52029_rns_2019-06-28_a58693ce-03c4-4732-9c3f-c4f8dee4bd05.pdf

Critical financial indicators (consolidated)

Table of Contents

Chapter 1 Report to Shareholders

Business results

Business plan, development strategies, external competition and environment, legal environment, and macro-business environment

Chapter 2 Company Introduction

II. Company overview

Chapter 3 Corporate Governance Report I. Organization

II. Directors, CEO, general managers, vice presidents, assistant managers, and supervisors at various departments and branches (I) Director Information

Director Information

(III) Remuneration paid to directors, CEO, general managers and vice presidents in the most recent year 1. Remuneration for directors (including independent directors)

Remuneration range

2. Remuneration for CEO, general managers and vice presidents

Remuneration range

compensation paid to managerial officers.

III. Operation of corporate governance (I) Operation of Board of Directors

(II) Operation of Audit Committee

(V) Fulfillment of corporate social responsibility

(2)

Chroma ATE Inc. Statement on Internal Control System

Information on CPA fees

V. Replacement of CPAs

(I) Information on previous CPAs

Combined shareholding percentage

Chapter 4 Financing Status

I. Capital and shares (I) Source of shares

(II) Shareholder structure

(III) Distribution of equity ownership 1. Common shares

(IV) List of major shareholders

VI. New restricted employee shares

(3) Anticipated possible benefits

Chapter 5 Operation Summary

II. Market, production and sales summary

(V) Production volume in the two most recent years

(VI) Sales volume in the two most recent years

VI. Important contracts

Chapter 6 Financial Summary

2. Condensed parent company-only balance sheet and statement of comprehensive income

2. Parent company-only financial analysis

Chroma ATE Inc.

Audit Committee’s Audit Report

Chapter 7 Review and Analysis of Financial Condition and Performance, and Relevant Risk Events

I. Financial condition

II. Financial performance

III. Cash flow

(II) Analysis of cash liquidity for the following year

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

Chapter 8 Special Notes

2. Basic information of various affiliated companies

6. Business operating conditions of Chroma ATE Inc. and its affiliated companies As of December 31, 2018 Unit: NT$ thousands

Chroma ATE Inc. and Subsidiaries

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Impairment of Trade Receivables

Evaluation of Write-down of Inventories

Other Matter

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHROMA ATE INC. AND SUBSIDIARIES

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHROMA ATE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHROMA Annual Report 2018