CENTRO NACIONAL DE TECNOLOGIA ELETRÔNICA AVANÇADA S/A CNPJ 10.770.641/0001-89 NIRE 43300050611 BALANCE Financial Statements for the Year Ending on December 31, 2016 Management Report - Fiscal Year 2016 Message from the Administration CEITEC is the only company based in Brazil with proven ability to provide a complete solution for the development of chips (integrated circuit) to meet the technological demands of the State and the Brazilian Society. This statement is based, for example, in the sale of more than 45 million chips to the private market in recent years and in the international certifications of its chips, which recognize its interoperability, respect for international operational and safety requirements. The major highlight in this case is the recent Common Criteria international safety certification obtained for the "CTC 21001 chip and its embedded software" for inclusion in passports. On the basis of these facts, we can say that CEITEC has been successful in the field of skills required for the design, manufacturing management (in particular by third parties) and final processing required for the production of chips with different technologies. Thus, although only one of the products in CEITEC's portfolio (the animal identification chip CTC 11002) is capable of being integrally produced with the technology installed with 600 nanometer technology in its factory, all its other products designed by CEITEC had its manufacturing initial step overseas and its completion performed in our factory in Porto Alegre. Finalization includes activities such as: thinning, cutting, testing, initialization and encapsulation. This was the case, for example, of the passport chip based on 180-nanometer technologies. Most of the items in its current portfolio are products with market viability, as long as incorporated into consistent business models. Therefore, one of the goals of the current administration is to restructure and strengthen the company's business area, so that these products can exert its potential by expanding market penetration. The current administration also assumed the commitment to reposition CEITEC in the public sector and in society in general, aiming to fulfill its role as central actor in actions in the area of semiconductors and microelectronics. Such repositioning needs to have as immediate reflection a clear and consistent perspective increase in company revenue, and the consequent significant reduction of its dependence on the public budget. Even in the face of challenges that marked the 2016 year, especially in national economic and political scenario, CEITEC was able to grow, increasing its revenues for the fifth consecutive year. Only in 2016 were more than 17 million chips sold. The strengthening of the business area and the company repositioning will allow an exponential increase in the company's revenues, supported by increased sales in an accelerated and continuous manner, diversification of clients and qualification of CEITEC offers to the Society as a whole. These results, however modest, in addition to others that can be observed in this Annual Report, show that this is the moment of consolidation of CEITEC in the Brazilian market. Among the outstanding results of 2016 presented in this Report is the achievement of the safety international recommendation Common Criteria of the product CTC21001, known as Passport Chip. Certification is essential for the production and marketing of the product. Also in 2016, CEITEC began the commercialization of the product CTC13002, UHF RFID chip for logistic application with international certification EPC Global Gen2. We also highlight the disclosure of a survey conducted by INPI (National Institute of Industrial Property), which pointed to CEITEC as the 44th institution that most filed patents in Brazil in 2015 and the first among public companies, a result that proves the effectiveness of efforts to value and invest more and more in intellectual property, one of the main assets in high-tech segment, as is the case of CEITEC. Focusing on the short-term future, the conviction of the current management is that 2017 will be a good year for CEITEC. The company and its employees are prepared to face new challenges and look forward to new achievements. The company says goodbye to 2016 with the certainty that the efforts and hard work will make CEITEC go even further in the year that begins.

INITIAL CONSIDERATIONS Centro Nacional de Tecnologia Eletrônica Avançada S.A. (CEITEC) is a federal public company linked to the Ministry of Science, Technology, Innovation and Communications (MCTIC), incorporated as a joint-stock company, with exclusive participation of the Federation in the share capital. The company operates in the segment of semiconductors, developing solutions for automatic identification (RFID and smart cards) and for specific applications (ASICs). It designs, manufactures and markets integrated circuits (chips) for applications such as identification of animals, medicines, people and vehicles, as well as authentication, inventory management, asset control, among others. Located in Porto Alegre (RS), CEITEC S.A. plays a strategic role in the development of Brazil's microelectronic industry. Since its creation by the federal government in 2008, CEITEC has been accumulating good results, consolidating its position as a reference in microelectronics and collaborating more and more for the development of a Brazilian semiconductor industry. During 2016, the company continued to follow its path of success, despite the difficulties of the national economic scenario. The company was able to increase its revenue for the fifth consecutive year, selling more than 17 million chips. This year the company started marketing its RFID UHF chip for logistics CTC13002, zeroing the inventories of its previous version, the CTC13001. It also obtained for its product CTC21001, known as Passport Chip, the recommendation for international safety certification common criteria, an essential step for the production and marketing of this product for personal identification. Following its policy of valorization of intellectual property, CEITEC was still prominent in the ranking of patent depositors of INPI (National Institute of Industrial Property). Despite referring to data of 2015, the ranking was announced in 2016. According to the document, CEITEC was the 44th institution that most filed patents in Brazil in 2015 with INPI and the first among public companies. Also in 2016, CEITEC made the first call of its second public tender, strengthening its staff; joined by administrative channels, the Collective Work Convention of its professional category, resulting in the correction of salary table of employees; continued by reducing the consumption of resources such as water and electricity, generating economy; invested in infrastructure and information technology, improved and optimized administrative and factory processes, searching by stay competitive and with more and more growth potential. 1. CEITEC S.A. Profile CEITEC was constituted by Law No. 11,759 of July 31, 2008, and by Decree No. 6,638, of November 7, 2008, which defined its status. Its head office is located at Estrada João de Oliveira Remiao, n° 777, in Porto Alegre, Rio Grande do Sul. CEITEC is a publicly owned company, whose resources are provided by the Federation through specific budget allocation. 1.1. Mission, vision and values CEITEC's mission is to develop innovative solutions in microelectronics, with high quality standards and financial sustainability, meeting the strategic needs of Brazil and the market, contributing to national development. Its vision is to be a leading national company in the production chain of the sector and a reference in the generation of innovative solutions in microelectronics in emerging economies, contributing to the social, technological and economic development of the country. Values People – To act as a center for training of people in the semiconductor industry in Brazil. Innovation - To reach and surpass the world technological level of integrated circuits that it develops. Commitment to the Country – To contribute to meet strategic needs in integrated circuits of Brazil. Commitment to the Customer – To offer quality integrated circuits, at competitive prices, taking into account the needs of the market. Management Quality – To be a reference in management quality in the Brazilian semiconductor industry. Safety – To ensure a secure working environment according to global standard of semiconductor industry. Environmental Responsibility – To minimize environmental impact throughout the life cycle of its products. 1.2. Organizational structure and performance

At the top of the organization chart of CEITEC S.A. is the Shareholders' Meeting. Today, the sole shareholder of the company is the Federation. Liaised with it are the Board of Directors, Fiscal and Advisory Councils, included within the statutory structure of the company. The Board of Directors outlines the company's institutional and commercial policy guidelines, monitors targets and requires the Executive Board to reach the proposed results. The Fiscal Council supervises the information and acts of budgetary, financial or accounting nature, prioritizing actions and measures of constructive and instructive nature. The Advisory Council assists the execution of the guidelines of the company's institutional and commercial policies. In its internal organizational structure, CEITEC S.A. has the Presidency, the main supervisor body of its activities. It is primarily responsible for the acts of management and representation of the interests of the corporation. The Presidency is linked to Legal Advisory, responsible for the legal guidance of the management acts of the Executive Board and the legal or extrajudicial representation of the company, and the Department of Communication & Corporate Marketing. CEITEC also has its Internal Audit, to assist in the exercise of the attributions of fiscal nature of the Boards of Directors and Fiscal Council and of the Executive Board. In addition, the company has three strategic business areas, fundamental for its advancement and consolidation. These areas are called Divisions. CEITEC also has an Administration & Finance Division to manage the areas that provide the necessary support for the company's activities. 1.2.1. Business Division It is responsible for identifying new business niches for CEITEC. It prospects clients, closes partnerships and maps opportunities for the company's products in Brazil and abroad. It manages sales and deliveries to customers. 1.2.2. Research & Development Division It is responsible for conducting research and development of new products, processes and technologies, according to the needs specified by the Business Division. Suggests improvements in processes already used by CEITEC; prospects and supports the implementation of new processes that meet business opportunities. It manages the product life cycle and is in charge of providing technical assistance to customers. Under its scope of action are the superintendencies of Integrated Circuits and Product Development Project. 1.2.3. Factory Division It is responsible for the manufacturing processes of integrated circuits. It has under its responsibility activities such as process engineering, maintenance of industrial facilities and equipment, factory logistics and work safety. CEITEC is today the only fully operational semiconductor company in Latin America that has an integrated circuit factory with front-end modules (wafers manufacturing) and back-end (testing, thinning, cutting and encapsulation of chips), in addition to a center of integrated circuit projects. 1.2.4. Administration & Finance Division It is responsible for guiding and executing the administrative and financial management acts of the company. 1.3. Physical structure CEITEC occupies an area of 14.7 thousand m2. Of this total, 9.6 thousand m2 are occupied by the Factory. In this space, 2,000 m2 are dedicated to the Clean Room (ISO 5 and ISO 7 classes), controlled environment characterized by a degree of cleanliness comparable to that of the most advanced ICU of a modern hospital. It is the place where the wafers are produced, tested, thinned and cut and the chips, encapsulated. In the rest of the factory space are located infrastructure facilities, such as ultrapure water plant and electricity, air-conditioning and special gases systems, among others. The other 5,1 thousand m2 are destined to the Administrative Building, which houses all the Divisions, in addition to the Development Laboratory. 1.4. Employees The staff of CEITEC S.A. is made up of professionals from different areas, highly qualified. In addition to bringing together some of the best microelectronics professionals in Brazil, it has a well-trained management team that is committed to offering high standards of service, seeking

excellence standards compatible with the international electronics industry, fully respecting the principles imposed by the Federal Public Administration. In 2016, the company made the first call for its second open call, strengthening its staff. CEITEC reaches the end of 2016 with a total of 195 employees. One of the characteristics of the CEITEC team is precisely the high level of education of its employees, which indicates the level of the company specialization. Of his staff of 195 people, 2 have Post-Doctorate; 10 have a PhD, 47 have master's degree, 40 have Post-Graduate level or MBA, 62 have Complete Higher Education, 1 has Incomplete Higher Education, 10 have Complete High School and 23 have Technical Education. This education is complemented by courses and trainings that contemplate the specificity of its area of operation, considering that many equipment and systems in use are unique in Brazil. This education adds up to the experience acquired by the teams in each development carried out, focusing on quality international standards. CEITEC is constantly seeking new benefits for its employees. Today, the company's staff has a health and dental plan that extends to direct dependents with the employees participating with 50% of the monthly fee value, work-place dining room, transportation voucher, nursery assistance, group life insurance and funeral grant. During the year 2016, CEITEC adhered, by administrative means, to the Collective Labor Convention of its professional category, which resulted in the adjustment of the salary scale of its employees, taking into account the readjustments of the conventions from 2012 to 2016. 2. Semiconductor industry scenario in 2016 Preliminary data from Gartner, one of the world's leading research institutes, estimate that by 2016 global semiconductor revenue increased 1.5 percent from the previous year. While 2015 closed with revenues of US$ 334.8 billion, in 2016 the amount was US$ 339.7 billion. According to the institute, revenue from the top 25 semiconductor suppliers in the world increased by 7.9% over 2015, representing 75.9% of the market. The first position was with Intel, followed by Samsung Electronics. For Gartner, semiconductor revenues in the second half of 2016 were stronger than in the first half. Gartner forecast for 2017 is for the year to close with revenue of $ 364.1 billion, an increase of 7.2% over 2016. 3. Products, services and businesses CEITEC's performance in the semiconductor market (chips) basically takes the following forms: with the design of integrated circuits (ICs), fabrication of ICs (front-end and back-end), with the commercialization of ICs and with the support to the development of microelectronic solutions based on these circuits. The final product of CEITEC are the ICs or chips, as they are most commonly known. Today the company is mainly focused on the Brazilian and Latin American markets. Its typical customer is the industry or integrative company that will use these chips in the assembly lines of their own products. The complete portfolio of CEITEC products and solutions can be accessed in www.ceitecsa.com/produtos. Since 2012, the year in which it achieved its first revenue, CEITEC has been accumulating growing revenues. In 2012, its revenue was R$ 189 thousand, with a significant increase in the following year, when the company earned its first R$ 1 million, closing the year 2013 with R$ 1.2 million in revenue. In 2014, revenues reached R$ 2.9 million and, in 2015, R$ 4.3 million. In 2016, CEITEC closed the year with revenues of R$ 4.486 million, an increase over the previous year. The value was reached from sales of the products CTC11002, CTC12100, CTC13001v3, CTC13002 and CTC12100, in addition to the encapsulation service in micro-modules. In number of units, CEITEC surpassed the mark of 17 million chip sold. It was in 2016 that the commercialization of the product CTC13002, RFID UHF chip for application in logistics began. From October to December were sold 730,000 units of the product. Released during an event last year, this product is certified according to the most important standard for electronic identification, the EPCglobal Class 1 Gen 2. The CTC13002 is the first integrated circuit of a Southern Hemisphere company to receive the certificate. Around the world, only 10 other chips have this certification. By having better performance, it allows smaller antennas. In addition, innovations in the production process of CEITEC have made the product more competitive. Throughout the year, all inventories from its previous version (CTC13001v3) were marketed.

For the CEITEC Plant, 2016 was also a year marked by achievements. This year, the CTC13002 logistics chip began to be processed, which involves testing, thinning and cutting. The testing process was optimized: Its parallelization increased by eight times the production capacity (from 3 thousand to 24 thousand chips per hour per tester). In addition, operations were started with the new laser cutting machine, which more than doubled the production capacity, allowing for improved quality, reduced process cost and increased number of chips per blade. In 2016, external services in the areas of testing, thinning and cutting, die sorting and editing of integrated circuits were expanded. The highlight is the reached number of 6 million micro-modules delivered to customers. During this period the first sensor developed in the company was also delivered: a pressure transducer using a subset of XC06 technology developed and produced in partnership with an external customer. Still this year, the photolithography process was optimized with the production of prototypes in very low time and at a low cost, and there was the qualification of new stages of deposition of thick films and corrosion, streamlining and allowing greater flexibility in the development of processes Adding to the range of services offered by CEITEC, there is the Brazilian Multiuser Project (PMUB), an initiative of the company to promote the use of the set of technologies licensed by CEITEC for its Factory with the national industry and the academic community, creating an environment for rapid development of prototypes, as well as for its production. Launched in the year 2015, from PMUB, Design Houses of the CIBrasil program, microelectronics industries and microelectronics teaching and research institutions in Brazil have access to CEITEC integrated circuit production technology and its German partner X-FAB, by providing dedicated periodic rounds of integrated circuits manufacture. During the year 2016 two PMUB rounds were held, serving 10 institutions in the first round and 6 in the second round. New rounds are planned for the year 2017. In terms of relationships, CEITEC is increasingly working on the development of channels that bring the company closer to society and to potential clients. On its website (www.ceitecsa.com), in addition to the company's typical contact information (address, telephone and email), a specific channel is made available to be sent to the company by e-mail, questions, suggestions and other messages In addition, on the website there is a space dedicated especially to the disclosure of its portfolio, with the possibility of referring doubts about each specific product and downloading the brochure of each of the products offered by the company. It is also possible to request information from CEITEC by eSIC (www.acessoainformacao.gov.br), a federal government electronic web system that allows individuals or legal entities to file requests for access to information for bodies and entities of the Federal Executive Branch. 3.1. Financial Result and Indebtedness CEITEC S.A. did not contract in 2016 loans and financing debts with third parties. Its liabilities are basically comprised of amounts transferred by the Federation, for Costing were transferred in 2016 R$ 7.344 million (3.4%) and for future increase of capital R$ 200.5 million (90.8%), with an increase in the liabilities of 2016 compared with 2015 of 12% due to the update of the Selic rate of values received from the Federation. 3.2. Cash and Financial Applications CEITEC S.A. is a state-owned company totally dependent, with its cash values being passed on by the Federation. At December 31, the amounts in cash totaled R$ 7.344 million, an increase of R $ 4.606 million compared to 2015. 4. Transparency of management Information on bids, accountability, financial statements, annual and management reports and access to information are available for control of the company through the CEITEC website: www.ceitec-sa.com 5. Strategic Planning CEITEC's Strategic Planning in 2016 had 33 performance indicators, eight more than 2015. The growth in the number of indicators, which has been registered each year (25 in 2015, 24 in 2014, 15 in 2013 and 8 in 2012), demonstrates the company's constant search for improvement and maturation of their quality indicators over time. The company is currently in the process of hiring a company that will work on the elaboration of the new Strategic Planning of CEITEC for the period 2017-2021.

6. Social and environmental responsibility Concerned with the socio-environmental issue, CEITEC promotes and develops actions aimed at well-being of society and protection of environment. Below are related some initiatives that were highlighted in 2016 Solid Waste Management Plan (PGRS): promotes the proper segregation of waste generated during the execution of daily activities. Initiatives such as selective collection, recycling and "papa pilhas” (battery disposal program) seek to minimize or reduce occurrences that may impact the environment and society. Water and energy saving: In 2016, CEITEC worked intensively to reduce the consumption of important resources, such as water and electricity. The company ended the year with water consumption 24.9% lower than in 2015, thanks to optimizations made in the processes of the ultrapure water plant and to a work of greater reutilization of industrial water. In addition, CEITEC consumed 24.7% less electricity compared to 2015 due to the implementation of several saving measures. Among them, the installation of the factory air-conditioning system with automatic rotation control. Jovem Aprendiz (Young Apprentice): formation of classes of young apprentices from an agreement signed with the National Service of Industrial Learning of Rio Grande do Sul (SENAI-RS). Collection campaigns: During the year, campaigns to collect toys, clothing and non-perishable food among CEITEC employees. The material collected was delivered to community members and poor institutions. During the year 2016, CEITEC employees mobilized in four of these campaigns. In addition to the Campanha do Agasalho (Coat Campaign) and the collection of toys at Christmas, in August, Volunteer Month, toys and school supplies were collected for a school near CEITEC's headquarters, and in October, the month of prevention and combat of breast cancer, were donated tissues for patients in treatment against the disease. Educational lectures: performance of educational lectures on health and quality of life. In spite of its focus on the internal public, the execution of lectures benefit society as a whole, since employees themselves become multipliers of information received among relatives, friends and others in their social circle. Among the issues addressed in 2016 were subjects such as disease prevention, oral health, motivation, healthy habits, and work accidents, among others. 7. Prospects for the future In 2017, CEITEC will seek to continue increasing its operations, consolidating itself as a company, helping to meet the strategic needs of the Brazilian State and the semiconductor market, achieving the goals stipulated in its Strategic Planning. Today CEITEC still dependent on the Federal budget, CEITEC expects that by 2021 the company will become independent and profitable, maintaining a growth multiplier of 2x per year. Besides continuing to operate in the commercialization of devices for the identification of items in the logistics area, CEITEC intends to work vigorously in the vehicular, personal and animal identification segments and in the context of intelligent cities, strengthening existing products and working in development of new solutions for market. Between 2017 and 2021, a period covered by the new Strategic Planning, investments are also planned to upgrade the CEITEC plant in order to make the company's products more competitive in the market. By 2021, the intention is for the public authority to represent a significant portion of CEITEC's revenues, with the sale to the government of the solutions developed by the company. Today, CEITEC sells only to clients of the private sector. We will start in 2017 studies on the accounting of intangible assets addressing the issue on two fronts, one dealing with patents already registered by the company and the other with investments in research and development. As for the patents an internal study has already been carried out and some mechanisms of control and valuation of the time invested in the registered innovations have already been implemented. As for the resources invested in research and development in the previous years, as soon as the relevant revenue perspective becomes a reality, together with the results of the analyzes we will make, we will recognize the investments as assets of CEITEC S.A. BALANCE SHEETS

FISCAL YEARS ENDED ON DECEMBER 31, 2016 & 2015 (Values expressed in thousands of Reais) Current Assets Note 12/31/2016 12/31/2015 Liabilities and Current Equity Note 12/31/2016 12/31/2015 Cash and cash equivalents 3 7.344 2.739 Advances from the National

Treasury 3 7.344 2.739

Accounts receivable - Clients 218 157 Suppliers 9 608 9.272 Inventories 4 14.704 18.069 Obligations and tax provisions 10 79 1.412 Taxes to recover 5 6.796 8.017 Labor Obligations and Provisions 11 2.835 4.210 Advances to employees and suppliers

322 980 Other liabilities - 66

Prepaid expenses 6 3.082 2.742 10.866 17.699 32.466 32.704 Non current Non current Labor Contingencies 23 9.242 9 Realizable in the Long Term 4.834 2.228 - Judicial deposits 281 7 Deferred Taxes 12 - 8.540 Taxes to recover 5 4.553 2.221 Resources allocated to capital

increase 13 200.210 170.283

209.452 178.832 Fixed 7 120.299 138.592 Intangible 8 10.002 10.643 Equity 14 135.135 151.463 Share capital 42.000 42.000 Asset Evaluation Adjustment 23.028 16.578 Accumulated losses 12 (117.745) (70.942) (52.717) (12.364) Total Assets 167.601 184.167 Total liabilities and equity 167.601 184.167 The accompanying notes are an integral part of these financial statements STATEMENTS OF RESULTS FISCAL YEARS ENDED ON DECEMBER 31, 2016 & 2015 (Values expressed in thousands of Reais)

Note Jan 01, 2016 to Dec 31, 2016 Jan 01, 2015 to Dec 31, 2015

Net sales 15 3.987 3.755 Cost of Goods Sold (3.074) (2.572) Gross Profit 913 1.183 Operational Expenses

With staff 16 (34.795) (33.515) General and administrative 17 (47.786) (51.500) Management fees 18 (1.559) (1.591) Other operating income (expenses) 19 70.879 72.034 Provision for labor contingency 23 (9.233) 1.119 Impairment Depreciation (3.900) (26.394) (13.453) Loss before financial result (25.481) (12.270) Financial result 20 Financial expenses (24.743) (20.405) Financial income 621 1.474 Loss for the Year (49.603) (31.201) Average number of shares (in thousands) 42.000 42.000 Basic and diluted earnings per share - R$ (1.18) (0,74) The accompanying notes are an integral part of these financial statements. STATEMENTS OF CHANGES IN EQUITY FISCAL YEARS ENDED ON DECEMBER 31, 2016 & 2015 (Values expressed in thousands of Reais) Subscribed Share

Capital Accumulated losses

Asset Evaluation Adjustment

Total equity Comprehensive results

On January 1, 2014 (Re-Displayed) 42.000 (41.120) 17.957 18.837 (21.899) Performance Asset Evaluation Adjustment 1.379 (1.379) - 1.379 Loss for the Year - (31.201) - (31.201) (31.201) On December 31, 2015 42.000 (70.942) 16.578 (12.364) (29.822) Performance Asset Evaluation Adjustment 2.089 (2.089) - 2.089 Reversal of Deferred Taxes - Current Liabilities - 7 11 - 7 11 7 11 Reversal of Deferred Taxes - Non-Current Liabilities - - 8.539 8.539 8.539 Loss for the Year - (49.603) - (49.603) (49.603) On December 31, 2016 42.000 (117.745) 23.028 (52.717) (38.264) The accompanying notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS - INDIRECT METHOD FISCAL YEARS ENDED ON DECEMBER 31, 2016 & 2015 (Values expressed in thousands of Reais)

Note Jan 01, 2016 to Dec 31, 2016 Jan 01, 2015 to Dec 31, 2015 Loss for the Year (49.603) (31.201) Adjustments Reversal Provision Deferred Taxes Asset Evaluation 711 - Provision for Labor Contingency 9.233 (1.110) Impairment Depreciation 3.900 - Depreciation 7 16.372 14.018 Amortization 8 1.618 1.235 Monetary actualization resources allocated to increase capital 24.310 19.485 Changes in assets and liabilities Increase / (Decrease) in customers (61) 256 Increase / (Decrease) in inventories 3.365 (4.136) Increase / (Reduction) of recoverable taxes 1.221 (2.210) Increase) / Reduction of anticipated expenses (341) (485) (Increase) / Reduction of judicial deposits (274) - (Reduction) / Increase of advances to employees and suppliers 658 91 (Reduction) / Increase in Recoverable Taxes Noncurrent Assets (2.332) - (Reduction) / Increase of suppliers (8.664) 5.915 (Reduction) / Increase of obligations and tax provisions (1.333) 916 (Reduction) / Increase of National Treasury advance 4.605 (666) (Reduction) / Increase of labor obligations and provisions (1.375) 140 (Reduction) / Increase in other liabilities (66) (710) Net cash (used in) / resulting from operating activities 1.944 1.538 Cash flows from investing activities Acquisitions of fixed assets 7 (1.783) (10.043) Acquisitions of intangible assets 8 (1.172) (1.898) Net cash used in investment activities (2.955) (11.941) Cash flows from financing activities Resources allocated to capital increase 13 5.616 9.738 Net cash resulting from financing activities 5.616 9.738 Net decrease in cash and cash equivalents 4.605 (665) Cash and cash equivalents at beginning of period 2.739 3.404 Cash and cash equivalents at the end of the year 7.344 2.739 The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS

PERIODS ENDED ON DECEMBER 31, 2016 & 2015 (In thousands of Reais) 1. Operational context Centro Nacional de Tecnologia Eletrônica Avançada S.A. is a federal public company domiciled in Brazil, constituted as a joint-stock company, with exclusive participation of the Union in the share capital, linked to the Ministry of Science, Technology, Innovations and Communications (MCTIC). The Company was constituted by Law No. 11,759, dated July 31, 2008, and Decree No. 6,638, dated November 7, 2008. The General Meeting of Constitution of CEITEC was held on April 15, 2009, when it began its activities of studies and tests. With headquarters in Porto Alegre (RS), CEITEC occupies a total area of 14.7 thousand m2: 9.6 thousand m2 are destined for the Factory and 5.1 m2 for the Administrative Building. CEITEC's corporate purpose is to develop scientific and technological solutions that contribute to the progress and well-being of Brazilian society and the purpose of directly exploiting economic activity in the field of semiconductor, microelectronics and related technologies. In addition, through CEITEC, the federal government aims to develop the semiconductor segment, considered strategic for the country's development. On May 14, 2009, the Company signed a technical cooperation agreement with the civil association Center for Excellence in Advanced Electronic Technology, aimed at assisting in the implementation and start-up of CEITEC S.A. activities by providing personnel, equipment, technology knowledge and costing of initial COSTS, so as to enable the structuring and beginning of CEITEC S.A. operations. CEITEC operates in the semiconductor segment developing solutions for automatic identification (RFID and smartcards) and for specific applications (ASICs). The company designs, manufactures and markets integrated circuits for applications such as identification of animals, perishable products, people and vehicles, as well as authentication, inventory management, asset control, among others. As described above, the Company is a publicly owned company, whose resources are provided by the Union through specific budget allocation. In September 2011, was signed a CMOS technology transfer agreement of 600 nanometers with the German company X-FAB, an important milestone for Brazil to join the select group of countries capable of producing integrated circuits on a commercial scale. In October of the same year, CEITEC began the commercial production of its first product, CTC11002 (known as Chip do Boi – Cattle Chip). In 2012, CTC11002 began to be used in electronic earrings for animal identification produced by the Fockink Group, a Rio Grande do Sul company specialized in products for agribusiness. In September, CEITEC signed a strategic partnership with the Brazilian Mint to develop the new chip for the Brazilian passport. Also in 2012, CEITEC sold a batch of 100,000 units of the CTC13001 chip, directed to the logistics area, to the Flextronics Institute of Technology (FIT) for use in HP Brazil printer cartridges. On November 28, 2012, a Term was signed between CEITEC Association and CEITEC SA, which made effective the reversal of assets acquired and/or produced by the Association with federal public resources, for all purposes, subrogates to its rights and obligations, under the authorization of the art. 5, paragraph 3, of Law No. 11,759/2008, as well as the determination of the Federal Court of Auditors at the trial of Case TC-028.282/2010-8 (Provision of Accounts - Fiscal Year 2009). The following year, in 2013, CEITEC reached its first R$ 1 million in revenue, mainly obtained from the sale of 6 million units of the chip CTC13001. That year the CTC13001T was launched, a device that has an input signal that can be used in tamper detection (Tamper Detection). Also in 2013, the CTC13100 chip, for vehicle tracking to meet the Siniav program, entered production stage in commercial volume. In the same period, CEITEC achieved the recognition of information technology and automation asset with technology developed in the country for the CTC13001 chip. It is the first integrated circuit to reach such status in Brazil. In 2013 there was also the implantation in the Factory of "Module 4", an area that performs wafers processing (testing, thinning and cutting), making the company use these services in the production of chips that it makes available to the market and offer the same services to the regional semiconductor ecosystem.

In 2014, CEITEC reached the mark of 15 million units of chip CTC13001 produced and delivered to its customers, which made the company's revenues more than double compared to the year 2013. CEITEC also celebrated the fact that it has made further progress in the process of technology transferring for integrated circuit production. The factory ended the year with more than 70% of the stages of the entire transfer process qualified and with 99% of the equipment related to the transfer of technology commissioned, in order to allow the process tests. In the year 2015, CEITEC continued to attain new achievements. The company started to make CTC13100 available to the market, for use by companies that are developing solutions for the National Registry of Freight Road Carriers (RNTRC), and the CTC12100 chip, developed from a partnership between NOVUS and CEITEC initiated in 2011. The device measures and records the temperature of sensitive products. In 2015 CEITEC also launched the product CTC13002, RFID UHF chip for applications in logistics certified in the most important standard for electronic identification of the planet, the EPCglobal Class 1 Gen 2. CTC13002 was the first integrated circuit of a Southern Hemisphere company to receive the certificate. Around the world, only 10 other chips have this certification. Among other relevant results recorded in 2015 it is the launch of the Brazilian Multiuser Program (PMUB), an initiative to promote the use of the set of technologies licensed by CEITEC for its Factory with the national industry and the academic community, creating an environment for the rapid development and production of prototypes, In the same year, the company started operating its line of micromodules. The sale of the encapsulation service in micromodules gained strength during 2015. Regarding the recognition of the work carried out by the company to improve quality management, the year 2015 was important because it was marked by several awards and certifications. Among them are the ISO 9001:2008 certification, an international standard that guarantees the quality management of a company, granted to the factory's back-end area, the Bronze Medal in the RS Quality Award of the Gaúcho Quality and Productivity Program (PGQP), the Trade and Services Quality Trophy, awarded during the 8th Forum Trade and Services RS, among others. In 2016, despite the challenging economic scenario, CEITEC closed the year with revenues of R$ 4.486 million, an increase over the previous year. The value was reached from sales of the products CTC11002, CTC12100, CTC13001v3, CTC13002 and CTC12100, in addition to the encapsulation service in micro-modules. In number of units, CEITEC surpassed 17 million chip sold. It was in 2016 that the commercialization of the product CTC13002, RFID UHF chip for application in logistics launched during event in 2015 and that is the new version of the CTC13001 chip began. Because it performs better, it allows smaller antennas. In addition, innovations in the production process of CEITEC have made the product more competitive. Throughout the year, all inventory from its previous version (CTC13001v3) was marketed. At the CEITEC Plant, in 2016 the processing of CTC13002 began, whose process involves testing, thinning and cutting. The testing process was optimized: its parallelization increased by eight times the production capacity. In addition, operations were started with the new laser cutting machine, which more than doubled the production capacity, allowing for quality improvement, reduction of process cost and increase of number of chips per blade. In 2016, external services in the areas of testing, thinning and cutting, die sorting and editing of integrated circuits were expanded. The highlight is the number reached of 6 million micro-modules delivered to customers. During the year 2016 also 2 PMUB rounds were held, serving 10 institutions in the first round and 6 in the second. New rounds are planned for the year 2017. Basis of preparation a. Declaration of conformity in relation to CPC standards The annual financial statements have been prepared in accordance with accounting practices adopted in Brazil, based on the provisions contained in the Brazilian Corporation Law, the Pronouncements, Guidance and Interpretations issued by the Accounting Pronouncements Committee (CPC), and in accordance with the resolutions of the Federal Accounting Council - CFC. The issuance of the annual financial statements was authorized by Management. b. Basis of measurement The annual financial statements have been prepared based on historical cost.

c. Functional currency and presentation currency These annual financial statements are presented in Brazilian Reais, which is the Company's functional currency. All financial information presented in Real has been rounded to the nearest thousand, unless otherwise noted. d. Use of estimates and judgments The preparation of the annual financial statements was carried out in accordance with Brazilian GAAP, which requires Management to make judgments, estimates and assumptions that affect the accounting policies applied and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and assumptions are reviewed in a continuous manner. Reviews with respect to accounting estimates are recognized in the year in which the estimates are reviewed and in any future fiscal years affected. 2. Main accounting policies The accounting policies described in detail below have been applied consistently to all years presented in these annual financial statements. a. Foreign currency Transactions in foreign currency are converted into the Company's functional currency (Brazilian Real) by the exchange rates at the date of the transactions. Monetary assets and liabilities denominated and determined in foreign currencies at the reporting date are converted into the functional currency at the exchange rate calculated on that date. Currency gain or loss on monetary items is the difference between the amortized cost of the functional currency at the beginning of the year, adjusted for interest and actual payments during the period, and the amortized cost in foreign currency at the exchange rate at the end of the reporting period Foreign currency differences resulting from the conversion are recognized in the income statement. Non-monetary items that are measured in terms of historical costs in foreign currency are converted at the exchange rate calculated on the date of the transaction. b. Financial instruments i. Non-derivative financial assets The Company recognizes loans and receivables and deposits initially as of the date of origination. All other financial assets are initially recognized on the trade date on which the Company becomes a party to the contractual provisions of the instrument. The Company does not recognize a financial asset when the contractual rights to the asset's cash flows expire, or when the Company transfers the rights to the receipt of contractual cash flows on a financial asset in a transaction in which essentially all the risks and benefits of ownership financial assets are transferred. Any participation that is created or retained by the Company in financial assets is recognized as an individual asset or liability. The financial assets and liabilities are offset and the net amount presented in the balance sheet when and only when the Company has the legal right to offset the amounts and intends to settle on a net basis or to realize the asset and settle the liability simultaneously. The Company has the following non-derivative financial assets: Cash and cash equivalents, which correspond to the withdrawal limits of the Single Account of the National Treasury, established by the central financial programming body. These resources are subject to insignificant risk of change in value, and are used in the management of short-term obligations. ii. Non-Derivative Financial Liabilities The Company recognizes financial liabilities initially on the trade date on which the Company becomes a party to the contractual provisions of the instrument. The Company lowers a financial liability when it has its contractual obligations withdrawn, canceled or expired. The Company has the following non-derivative financial liabilities: suppliers and advance of the National Treasury. These financial liabilities are initially recognized at fair value plus any attributable transaction costs. After initial recognition, these financial liabilities are measured by amortized cost using the effective interest method.

The Company evaluated the effect of adjustment to present value (AVP) on asset and liability balances and did not identify material values to be adjusted. iii. Share capital The share capital is composed exclusively of nominative common shares with no par value owned by the Federal Union. c. Inventories These are measured at acquisition cost, including non-recoverable taxes, transportation costs and other costs required to bring inventories to their current condition. We counted the inventories on December 26, 2016. d. Prepaid expenses Prepaid expenses are recorded at their original cost in accordance with the terms of validity of the related contracts. The corresponding expenses are recognized in outcome of the period in accordance with the principle of competence. e. Fixed Assets i. Recognition and measurement 1 - Items of fixed assets are measured at historical cost of acquisition or construction, less accumulated depreciation. Cost includes expenses that are directly attributable to the acquisition of an asset. The cost of assets constructed by the entity itself includes the cost of materials and direct labor and any other costs to put in-place the active and necessary condition so that they are able to operate in the manner intended by management. Gains and losses on alienation of an item of fixed assets are determined by comparing the proceeds from the alienation or expense with the accounting value of fixed assets, and are recognized net of other operating income or expenses in the result. As shown in notes 7, real estate, machinery, equipment and other production items that are being used by the Company are still owned by the Federal Administration. The necessary measures are in progress so that the properties of such assets can be passed on to the Company through capital payment. In 2014, the assets were reversed in accordance with the Subrogation Term in compensation with the AFAC - Advance for Future Capital Increase. 2 - Adequacy to International Standards (IFRS) CEITEC fully complied with accounting practices regarding the convergence and harmonization of Brazilian accounting standards as the International Financial Reporting Standards (IFRS). On 08/15/2016, the contract nº. 016/2016 was signed with the company specialized in asset evaluation of movable assets (Metrópole Soluções Empresariais e Governamentais EIRELI - CNPJ 07.843.902/0001-39), whose works were concluded in the current year, resulting in report nº. CEITEC162016012017, evaluation of assets, for the purpose of determining the recoverable value of the assets (impairment test) and residual useful life, in accordance with CFC Resolutions 1,292/10 and 1,177/09 and other applicable standards to fixed assets and intangible assets. CPC 12 Adjustments to Present Value The average term of the Accounts Receivable and Accounts Payable is less than 90 days, and the prices charged for such purposes do not have any interest in them, thus there is no monetary financing activity, and no adjustment to present value is required CPC 27 Fixed Assets The necessary adjustments were made according to this standard. ICPC 10 Interpretation on Initial Application to Fixed Assets of Technical Pronouncement CPC 27 Fixed Assets The necessary adjustments were made according to this standard. ii. Subsequent costs Subsequent expenses are capitalized to the extent that it is probable that future benefits associated with the expenses will be earned by the Group. Maintenance expenses and recurring repairs are recorded in the result.

iii. Depreciation Items of fixed assets are depreciated by the linear method in the statement of income based on the estimated useful lives of each component of the fixed assets. Items of fixed assets are depreciated from the date they are installed and are available for use, or in case of internally constructed assets, from the day construction is completed and the asset is available for use. Land is not depreciated. f. Intangible 1 - Research and development Expenses on research activities, carried out with the possibility of gaining knowledge and scientific or technological understanding, are recognized in the income statement as incurred. Development activities involve a plan or project aiming at production of new or substantially improved products. Development costs are capitalized only if development costs can be measured reliably, if the product or process is technically and commercially viable, if the future economic benefits are probable, and if the Company has the intention and sufficient resources to complete the development and to use or sell the asset. Capitalized expenditures include the cost of materials, direct labor, and manufacturing costs that are directly attributable to the preparation of the asset for its intended use. Other development expenses are recognized in the income statement as incurred. Capitalized development expenses are measured at cost, less accumulated amortization and impairment losses. 2 - Adequacy to International Standards (IFRS) CEITEC fully complied with accounting practices regarding the convergence and harmonization of Brazilian accounting standards as the International Financial Reporting Standards (IFRS). CPC 04 (R1) Intangible Assets Intangible assets with a defined life are amortized over the economic useful life and evaluated in relation to the impairment loss whenever there is indication of economic loss of the asset. The amortization period and method for an intangible asset with a defined life are reviewed at least at the end of each fiscal year. Changes in the estimated useful life or expected consumption of the future economic benefits of these assets are accounted for through changes in the amortization period or method, as the case may be, and are treated as changes in accounting estimates. i. Computer programs (software) Licenses acquired of computer programs (software) are capitalized and amortized over their estimated useful lives, at the rates described in note 8. ii. Amortization Amortization is calculated in a linear manner, considering the estimated useful life or the contractual period of license use, in the case of software. Amortization methods, useful lives and residual values are reviewed at the close of each financial year and adjusted if appropriate. g. Commercial lease Payments made under an operating lease contract are recognized as expenses in the income statement on a linear basis over the term of the lease agreement. h. Recognition of revenue from subsidies for costing/investment The Company is a public company under the terms of Complementary Law 101/2000. Its revenue is made up of financial resources received from the National Treasury for the expenses of personnel and costing duly committed and by own revenues. The resources received by the Company for the payment of acquisitions of assets and other investment items are shown in the balance sheet in the account of "resources allocated to capital increase". The amounts allocated by the National Treasury through budget execution are recognized in the income statement according to the phase of settlement of the expenses incurred. i. Provisions A provision is recognized, based on a past event, if the Company has a legal or constructive obligation that can be estimated reliably, and it is

probable that an economic resource will be required to settle the obligation. j. Financial income and financial expenses Interest income is recognized in result, using the effective interest method. k. Income tax and social contribution There are no income tax and social contribution balances calculated for the period, due to the tax losses presented. As the Company is still dependent on the budget of the Union, CEITEC expects that by 2021 the company will become independent and profitable. l. Earnings per share The basic earnings per share are calculated by the result of the period attributable to the Company's shareholders and the weighted average of the common and preferred shares outstanding in the respective year. As of December 31, 2016 and 2015, diluted earnings per share are the same, since there are no financial instruments entitled to convertibility in shares. 3. Cash and cash equivalents Withdrawal limit - National Treasury Single Account 12/31/2016 12/31/2015 7.344 2.739 7.344 2.739 The withdrawal limit - National Treasury single account is maintained at the Central Bank of Brazil and used to register the movement of the Company's financial resources at the Federal Government's Integrated Financial Administration System (SIAFI), through a signed technical cooperation agreement with the National Treasury Secretariat - STN, the compensation of these values is registered in current liabilities under account "Advances Resources of National Treasure". 4. Inventory 12/31/2016 12/31/2015 Finished product 74 180 Material production auxiliary 5.069 5.360 Packaging material 17 18 Raw material 2740 3.739 Semi-finished 316 1.651 Consumables 831 844 5.657 Spare parts 6.277 14.704 18.069

5. Taxes to recover 12/31/2016 12/31/2015 Import tax 1 IRRF - Income Tax Withholding 103 103 ICMS – Excise Tax 4.830 4.687 IPI to compensate 145 145 PIS to compensate 1.091 920 COFINS to compensate 5.028 4.238 INSS to Compensate 151 145 11.349 10.238 Current 6.796 8.017 Non current 4.553 2.221 6. Prepaid Expenses It refers to credits related to taxes levied on the acquisition of supplies for manufacturing, fixed assets and intangible assets (ICMS, PIS and COFINS). 12/31/2016 12/31/2015 Assistance and technical support contracted

1.744 1.291

Insurance premiums to expire 422 464 Programs/Software Lease 916 987 3.082 2.742 Current 3.082 2.742 7. Fixed Assets Balance breakdown Improvements Equipment and

facilities Vehicles Furniture and

utensils Fixed assets in progress

Advance to suppliers

Total Fixed Assets

On 12/31/2014 57 102.892 42 3.054 42.214 2.068 150.327 12.099 Acquisitions - 12.000 99 Discharges

Advance Suppliers (2.057) (2.057) Compl. Depr. Sub-rogation (7.230) (529) - (7.759) Depreciations (19) (13.487) (21) (491) (14.018 On 12/31/2015 38 94.175 21 2.133 42.214 11 138.592 Acquisitions - 1.758 - 25 - - - 1.783 Impairment Depreciation (1) (3.632) - (71) - - - (3.704) Reclassifications - (15) - 14 - - 1 - Depreciations (19) (15.704) (21) (628) - - - (16.372) On 12/31/2016 18 76.582 - 1.473 - 42.214 12 120.299 Annual depreciation rates - % 4 from 5.5 to 48% 33,33% from 5.5 to 48% 10% a) Assigned cost (deemed cost) In 2014, the Company calculated and recorded the Deemed Cost of fixed assets having contracted the specialized company UNISIS Administração Patrimonial Ltda. to prepare the report necessary to support the accounting records, being the object of this evaluation the totality of the assets recorded in fixed assets. b) Land and real estate used by the Company The Federal Government made investments in the order of R$ 400 million in the construction of the facilities used by the Company. A large part of these investments were made by the Ministry of Science, Technology and Innovation (MCTI) in the construction of the headquarters and manufacturing facilities. The transfer of ownership of this property to the Company, which currently belongs to the aforementioned Ministry, is being made available with MCTI and public agencies, pursuant to the terms of the Official Letter No. 432/SPOA of the MCTI dated December 9, 2009. With reference to the land, owned by the City Hall of Porto Alegre, where the plant is installed, the Ministry of Science, Technology and Innovation has a Sixty-Year Free-Use Assignment Term, renewable for more five years from August 3, 2004. c) Machinery and equipment Part of the machines and equipment used by the Company was donated by the company Motorola do Brasil S.A. to the State of Rio Grande do Sul, with a charge to condition the use by the laboratories of the Civil Association Center for Excellence in Advanced Electronic Technology – CEITEC. Subsequently, the State of Rio Grande do Sul, through the Secretariat of Science and Technology, made the donation of such equipment to the Union, represented by the Ministry of Science, Technology and Innovation, and said Association remained with the temporary custody of assets by the time of the legal sub-rogation of assets to the Company. 8. Intangible Rights of use software Brands and patents Total of intangible assets On 12/31/2014 11.906 - 413 12.319 Acquisitions 1.897 - 1.897 Amortization Compl. Sub-rogation (2.338) - (2.338) Amortization (1.235) - (1.235)

On 12/31/2015 10.230 413 10.643 Acquisitions 1.172 - 1.172 Impairment Depreciation (195) (195) Amortization (1.618) - (1.618) On 12/31/2016 9.589 413 10.002 Annual amortization rates - % from 20 to 33% 20% The recognized intangible assets refer to rights to use software related to the industrial area and to the licensing of technical studies and radiofrequency projects carried out by the Company. The industrial projects developed by the Company are still in the process of maturing, so all expenses related to these are recorded directly in the income statement, as determined by Technical Pronouncement CPC 04 (R1) - Intangible Assets. The projects developed by the Civil Association Center of Excellence in Advanced Electronic Technology, financed with funds from the National Bank for Economic and Social Development (BNDES) and Financing of Studies and Projects (FINEP), have been finalized. Due to the transfer of obligations and rights from that Association to this Company, the rendering of accounts are under the responsibility of this, being in the final stage of closing and obtaining the respective certificates of discharge. The projects referred to are related to the following areas: bovine traceability; Digital TV modulator; Altus project; and specific integrated circuit for use in industrial automation solutions. 9. Suppliers 12/31/2016 12/31/2015 National Supplier 608 6.141 Foreign Supplier - 3.131 608 9.272 Current 608 9.272 The Company's exposure to currency and liquidity risks related to accounts payable to suppliers and other accounts payable is disclosed in note 21. 10. Obligations and tax provisions 12/31/2016 12/31/2015 IRRF to Collect 1 INSS to Collect 8 47 ISS withheld to Collect 11 77 PIS/Cofins to Collect 5 IRPJ Collect - 522 CSLL Collect - 188

Imports Taxes 54 578 79 1.412 Current 79 1.412 11. Labor Obligations and Provisions 12/31/2016 12/31/201

5 Provision for holidays 2.083 2.049 Provision INSS without vacations 569 559 Provision FGTS without vacations 166 164 INSS to Pay - 1.127 FGTS to Collect 17 310 Payroll Loan - 1 2.835 4.210 12. Provision for Deferred Income Tax and Social Contribution Deferred income tax and social contribution were calculated in the year of 2015 on the value of the equity valuation adjustment (R$ 27,207), at the rates of 15% of IRPJ and 10% of additional (R$ 6,802), 9% CSLL (R$ 2,448), according to Notes n° 7 & 8. In 2016, we reversed the deferred taxes, since we believe it is not practicable to maintain such amounts in Current and Noncurrent Liabilities, since we do not have realization expectations (profits): DESCRIPTION 12/31/2016 12/31/2015 Balance Adjustment Asset Evaluation - PL

23.028 25.117

Balance CSLL - Temporary Differences - PL

(2.260)

Balance IRPJ - Temporary Differences - PL

- (6.279)

23.028 16.578 Amount Realized by Depreciation 2.089 2.089 IR (25%) - (522) CS (9%) - (188) Net realized value - 1.379 Accumulated Balance IR/CS - 8.540

13. Resources allocated to capital increase As described in Note 1, it corresponds to the funds received from the Union for investments and future share capital increase in the Company, which were capitalized up to the limit of authorized capital. In compliance with Technical Pronouncement CPC n. 39 - Financial Instruments, item 11, in 2014, we began to classify the resources destined to the capital increase in Non-Current Liabilities DESCRIPTION 12/31/2016 12/31/2015 Initial balance 170.283 151.158 Increase – Investment Subvention 5.617 9.737 Capital Increase by Subrogation Civil Association Assets - Depreciation

- (10.097)

SELIC update 24.310 19.485 Balance AFAC - Advance for future capital increase (Final Balance)

200.210 170.283

14. Equity a. Subscribed Capital It is R$ 42,000 (forty-two million Reais) divided into 42,000 common, nominative shares with no par value. b. Asset Evaluation Adjustment It refers to the effects of the deemed cost adjustment of items of fixed and intangible assets, as described in notes 07 and 08, less deferred taxes provision, in the year 2015. In 2016, we reversed deferred taxes in current and noncurrent liabilities, to the account of origin, assets evaluation adjustment in equity, because we understand that there is no reason to carry out liability maintenance at this time because we have no expectation of realization. c. Capital increase CEITEC began the negotiations for capital increase in 2011, according to Minutes No. 28 of the Board of Directors. In the year 2015, an updated proposal was sent to the Ministry of Science and Technology and Innovation following the guidelines of Technical Note CGOF/MCTI n° 10/2014. We are awaiting the publication of the Presidential Decree. The requested increase corresponds to resources received from the investment subsidy, through the budget of the Union - AFAC (Advance for Future Capital Increase) for the years 2011 to 2014 in the amount of R$ 114,780,241.85 (one hundred and fourteen million, seven hundred and eighty thousand, two hundred and forty one Reais ands eighty five cents), to be updated by the Selic rate as the date of the Meeting, in accordance with article 166, IV, Law 6,404/76. 15. Net Income 12/31/2016 12/31/2015 Gross Revenue Sales 4.552 4.305 Deductions

Taxes (565) (550) Sales Net Revenue 3.987 3.755 16. Expenses with staff 12/31/2016 12/31/2015 Salaries (23.549) (19.693) Social charges (8.977) (8.619) Benefits (2.269) (5.203) (34.795) (33.515) 17. General and Administrative Expenses 12/31/2016 12/31/2015 Consumables (6.518) (6.171) Third Party Services (7.926) (15.666) Professional Technical Services (4.108) (2.672) Technical assistance and support (1.947) (1.022) Depreciation and amortization (17.338) (14.057) Maintenance (2.874) (1.016) Electricity (3.719) (5.342) Software Leasing (1.099) (1.998) Rent and lease (54) (11) Water and sewage (826) (976) Tickets and allowances (298) (807) Insurance (702) (753) Advertising and publications (105) (205) Taxes and fees (111) (244) Others (161) (560) (47.786) (51.500) 18. Management Fees The amount of compensation paid by the company to its directors and managers is as follows: 12/31/2016 12/31/2015 Board of Directors' Fees (1.083) (1.034)

Board Members' Fees (268) (306) Social charges (208) (251) (1.559) (1.591) 19. Other operating expenses (revenues) 12/31/2016 12/31/2015 Subsidies for costing 70.887 72.030 Other 4 4 Other Operating Expenses (12) - 70.879 72.034 20. Financial result 12/31/2016 12/31/2015 Update of authorized capital (24.310) (19.485) Passive exchange variation (244) (823) Fines and charging interest on late payments

(133) (45)

IOF (19) (14) Other financial expenses (37) (38) Expense (24.743) (20.405) Active exchange variation (*) 613 1.398 Discounts obtained / Fines received 8 76 Revenue 621 1.474 The authorized capital increase refers to the updating by the SELIC rate of resources received from the Union for the purpose of increasing the Company's capital, as defined by Article 51 of Decree No. 6,638. (*) Exchange rate variations reflect the impact of changes in prices in US dollar. 21. Financial instruments The Company presents exposure to the following risks arising from the use of financial instruments: a. Credit risk b. Liquidity risk c. Market risk This note presents information on the Company's exposure to each of the aforementioned risks, the Company's objectives, policies and processes for

measuring and managing of risk, and the Company's capital management. Structure of risk management Credit risk Credit risk is the risk that the Company will incur in losses if a counterparty in a financial instrument fails to comply with its contractual obligations. Credit risk is mainly related to amounts receivable from the National Treasury. Exposure to credit risks The book value of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the date of the financial statements was: Cash and cash equivalents 12/31/2016 12/31/2015 7.344 2.739 7.344 2.739 The above amounts are all derived from counterparties in the domestic market and there are no overdue balances. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulties in complying with the obligations associated with its financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that it always has sufficient liquidity to meet its obligations under the normal and stress conditions without causing unacceptable losses or risks of damaging the Company's reputation. The Company constantly monitors its operational cash flow requirements and seeks to increase its cash return on investments. The Company guarantees that it has sufficient cash balance to overcome its need for operating working capital, including compliance with financial obligations. This excludes the potential impact of extreme circumstances that can not be reasonably predicted, such as natural disasters. In addition, the Company receives amounts from the Ministry of Science, Technology and Innovation for the payment of accounts payable, with the nature of donation. The following are the contractual maturities of financial liabilities, including estimated interest payments: December 31, 2015 Book value Contractual cash flow 12 months 2 years 3 years More than 3 years Non-Derivative Financial Liabilities Advances from the National Treasury 2.739 2.739 2.739 - - - Suppliers 9.272 9.272 9.272 - - - Total 12.011 12.011 12.011 - - - December 31, 2016 Book value Contractual cash flow 12 months 2 years 3 years More than 3 years Non-Derivative Financial Liabilities Advances from the National Treasury 7.344 7.344 7.344 - - - Suppliers 608 608 608 - - - Total 7.952 7.952 7.952 - - -

Market risk Market risk is the risk that changes in market prices, such as exchange rates and interest rates, impact on the Company's earnings. The goal of market risk management is to manage and control risk exposures, within acceptable parameters, and at the same time to increase return. Exchange Rate Risk It arises from the possibility of fluctuations in the exchange rates of foreign currencies used by the Company mainly for the acquisition of products and services. The Company does not contract derivative financial instruments to hedge against exchange rate risk. With respect to monetary assets and liabilities denominated in foreign currency, the Company seeks to maintain its net exposure to an acceptable level. Exposure to foreign currency The Company's exposure to foreign currency risk (US dollar) as of December 31, 2016 amounts to R$ 974 (nine hundred and seventy-four thousand) and 2015 in the amount of R$ 3,706 (three million, seven hundred and six thousand) referred to values incurred in foreign currency. In a simulation of exchange rate stress, that is, adopting a variation of the quotation of the American currency of three standard deviations from the historical average for the last 12 months, the exchange impact on the company is R$ 6 (six thousand) and in 2015 it was R$ 23 (twenty three thousand). Fair value The fair values of financial assets and liabilities, together with the book values presented in the balance sheet, are as follows: 12/31/2016 12/31/2015 Book value Fair value Book value Fair value Cash and cash equivalents

7.344 7.344 2.739 2.739

National Treasury Advances

7.344 7.344 2.739 2.739

Suppliers 608 608 9.272 9.272 The Company considers that, due to the terms and nature of the balances related to the financial instruments shown above, the book value substantially reflects the fair value on each data-base. 22. Related parts The Company is controlled by the Federal Government and the outstanding amounts with its parent company derive from the transfers received and receivable from the Federal Government's Integrated Financial Administration System (SIAFI). The transactions with related parties are summarized in the table below: With the Federal Union 12/31/2016 12/31/2015

Current and non-current assets Cash and cash equivalents 7.344 2.739 Special credits - SIAFI - Current and noncurrent liabilities National Treasury Advances 7.344 2.739 Obligations incurred to pay - 12/31/2016 12/31/2015 Revenue - Subsidy for costing 70.887 72.030 Management Fees (1.559) (1.591) 23. Contingencies The Company's Management, based on the opinion of the Legal Advisory, recorded an accounting provision of R$ 9,242, which are evaluated with a probability of probable loss. In turn, the amount of R$ 24,966 refers to the amounts classified as contingent liabilities. The table below shows the amount by nature: NATURE CLASSIFICATION VALUE DESCRIPTION Labor Likely 9.242 Labor complaints Labor Possible 1.555 Labor complaint Tax Remote 23.411 Administrative Tax Process In the last quarter of 2016, the methodology for analysis and estimation of fiscal risk was re-adjusted, using the Brazilian Accounting Standard TG 25, as proposed by the representatives of the independent auditors. In a meeting with CONJUR held on November 8, 2016 (Minutes 01/2016), which was duly informed to the Company's administrators (Minutes nº. 89/2016 of the Board of Directors). In spite of this change, it remained a scenario in which the substantial majority, both quantitatively and from a qualitative point of view, comes from the labor area. That is: the largest amount of lawsuits filed against the Company relates to the contracting of outsourced services, while the greater financial impact is related to a class action lawsuit, that is, a lawsuit filed on behalf of all Company employees, whose outcome can cause considerable multiplier effect. As mentioned, the information and disclosure format of the Tax Risks Worksheet followed the model proposed by the external audit, based on the aforementioned standards. Regarding the quantification of the amounts of these labor lawsuits, it should be noted that the value of the case was used for the actions that are still in the formative phase (discussion of merit or knowledge process). This decision stems from three factors: (a) the uncertainty in defining the possible financial impact of the Complainants until the end of the knowledge phase (i.e., 1st degree judgment); (b) the complexity of the risk assessment arising from service outsourcing contracts; and (c) the existence of cases with specificities of causes and pretensions postulated by Complainants. Thus, it was decided to maintain, for prudence, the value of the case as a criterion for estimating the risk of the Labor Complaints until the resolution of the formative phase, culminating in an agreement - in which case the negotiated value becomes the criterion or sentence recognizing in whole or in part the pretension of the Complainant. It should be noted, as appropriate, that in some of the actions, Expert Witness Reports have already been submitted by experts appointed by the respective judges. However, this Legal Consultancy opted to disregard such expert analyzes, as parameters for estimating values, because: (a) the reports do not deal with the estimation of values properly, but rather evaluation of the fulfillment of legal

conditions to assist in the declaration of eventual rights related to labor benefits; (b) there are challenges of the allegedly debtor parties; and, finally, (c) the Company's legal area does not have regimental attributions or technical capacity or structure to perform typical acts of accounting. Continuing to the appeal phase, the sentence has the provisional value stipulation, which was chosen to use in the interregnum of the appeal phase, as it approaches more the final result of the liquidation with the final calculation of the amount effectively due, with one exception applicable to the process 0021796-60.2014.5.04.0021, whose estimate followed the parameters reported by the company to the Executive Office of the MCTIC, Círcular Letter n° 209/2016-RH/PRES, of August 14, 2016. Regarding the disclosure of the contingent liability arising from the tax risk, it was resumed the disclosure the Administrative Proceeding 10516.720029/2012-05, which is filed with the Administrative Council of Tax Resources, since it deals with a large amount of potential liabilities, despite still being appreciated in the field of administrative justice. In addition, it was decided to carry out the update of the amount according to the calculation memory provided by the Accounting Department of the company. Finally, it was decided to withdraw civil liabilities from fiscal risk analysis in light of the methodology change, since it was decided to classify all civil proceedings as having a remote risk of resources outflow. 24. Insurance The assets, interests and liabilities are insured by amounts that the Administration has considered sufficient to cover eventual incidents. The risk assumptions adopted, given its nature, are not part of the scope of an audit of the financial statements, therefore, they were not analyzed by our independent auditors. Contract with ACE Seguradora S.A., effective from November 3, 2016 to November 3, 2017, according to insurance policy: Coverage - Insured amounts Fire of fixed assets 282,095 25. Reconciliation of balances by corporate accounting and by SIAFI In compliance with the Decision of the Federal Audit Court (TCU), published in the Official Gazette of November 6, 2006, S.1, p.86, we present the reconciliation of the balances recorded by the corporate accounting system and the SIAFI system, on December 31, 2016. The accounting bookkeeping in accordance with Law 6404/76 does not include all the registration requirements that Law No. 4,320/64 requires, either in nomenclature, depending on the account, between current and non-current, as well as in the light of Receivable and/or Deferred Resources and registry of Payable Residues for the budget of the preceding financial year. Below we show the values for the year 2016 that make up the accounting form in each of the mentioned laws, clarifying the origins of the differences pointed out, and such differences of values refer to the records and appropriations required to meet each of said laws The differences pointed out in some cases refer to the short time available for the accounting adjustment records made available by the higher bodies for the closing of public accounting, which is based on SIAFI, while corporate accounting allows a greater flexibility in closing periods, enabling a better conciliation and review of the records made. Corporate Balance SIAFI Balance Difference Note Bank account movement - 25 (25) a Customers 218 - 218 Inventories 14.704 9.593 5.111 b

Advance to employees and suppliers 3.405 2.067 1.338 b Prepaid expenses - 19 (19) b Judicial Deposits 281 240 41 b Tax credits - noncurrent 4.553 - 4.553 c Fixed Assets 120.287 137.673 (17.386) b/d Intangible 10.002 5.373 4.629 b/d Deposits and pledges - 25 (25) a National Treasury Advances 7.344 - 7.344 e Suppliers 608 25 583 b Obligations and tax provisions 96 124 (28) b Labor obligations and provision 2.818 3.296 (478) b Labor contingencies 9.242 538 8.704 b Resources allocated to capital increase 200.210 169.887 30.323 b Accumulated results (117.757) (65.920) (51.837) f a) Difference of criterion between the balance sheet and the Siafi determined in the account deposits and pledges to comply with the Law of Corporations; b) Balance difference determined by conciliation, carried out after the closing date of SIAFI; c) Difference arising from the transfer between current and non-current to comply with the Law of Corporations; d) Accounting Adjustment of Assets Evaluation according to Notes 06 and 07 as evaluation report; e) Amount accounted for in advance of the national treasury in response to corporate accounting; f) Amount calculated in the result between the corporate accounting system and public accounting; 26. Remuneration of employees and Administrators In compliance with CGPAR Resolution No. 03 of December 31, 2010, we report the average salary and compensation, advantages and benefits of employees and managers. See table below: In 2016 Highest pay Lowest pay Employees 27 3 Administrators 29 3 Average Salary of Employees 9. - Average salary of administrators 10 - In 2015 Highest pay Lowest pay Employees 26 2 Administrators 29 3 Average Salary of Employees 7 - Average salary of administrators 10 -

EXECUTIVE BOARD Elton Santa Fe Zacarias (President) Paulo de Tarso Mendes Luna (Counselor) Elaine Paz (Counselor) Manoel Augusto Cardoso da Fonseca (Counselor) Cleber Cristiano Prodanov (Counselor) FISCAL COUNCIL Marcio Nahas Ribeiro (President) Ruy Takahashi (Counselor) João Luiz dos Santos Santos (Counselor) BOARD OF DIRECTORS Paulo de Tarso Mendes Luna (President) Luiz Fernando Salvadori Zachia (Director) Sérgio Roberto de Lima e Silva Filho (Director) TECHNICAL RESPONSIBLE Marina Ledesma Trindade (Accountant - CRC/RS 071335/0-1) REPORT OF THE INDEPENDENT AUDITORS ON THE FINANCIAL STATEMENTS To Directors and Shareholders of Centro Nacional de Tecnologia Eletrônica Avançada S/A - CEITEC Porto Alegre/RS Opinion We have audited the financial statements of Centro Nacional de Tecnologia Eletrônica Avançada S/A - CEITEC, which comprise the balance sheet as of December 31, 2016 and the related statements of income, changes in equity and cash flows for the year ended on that date, as well as the corresponding explanatory notes, including the summary of the main accounting policies. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Centro Nacional de Tecnologia Eletrônica Avançada S/A - CEITEC as of December 31, 2016, the performance of its operations, and its cash flows for the year then ended, in accordance with the accounting practices adopted in Brazil. Basis for opinion Our audit was conducted in accordance with Brazilian and international auditing standards. Our responsibilities, in accordance with such standards, are described in the following section entitled "Responsibilities of the Auditor for the Audit of Financial Statements." We are independent from the Company, in accordance with the relevant ethical principles set forth in the Professional Code of Ethics of the Accountant and professional standards issued by the Federal Accounting Council, and we comply with the other ethical responsibilities in accordance with these standards. We believe that the audit evidence we have obtained is sufficient and appropriate to substantiate our opinion. Emphases As mentioned in note 2, letter "c", on December 12, 2016, the Company's stock physical inventory was accomplished, with the adoption of procedures

to ensure its results, and by 2017, the procedures should be improved. Our conclusion does not contain any modification on this matter. As mentioned in note 23, the methodology for analyzing and estimating risks of labor claims was changed, recognizing the possible contingent liabilities as determined by NBC TG 25, and such methodology should be improved in 2017. Our conclusion does not contain any modification on this matter. The aforementioned financial statements were prepared in accordance with accounting practices adopted in Brazil, applicable to an institution in normal activity, which presuppose the realization of the assets, as well as the settlement of the obligations in the normal course of business. As shown in the balance sheet and in the statement of changes in equity, CEITEC has a negative shareholders' equity (uncovered liability) of R$ 52,717 thousand. The Company is a publicly owned company, whose resources are provided by the Federal Government through specific budget allocation. As mentioned in note 14, letter "c", the negotiations for the capital increase in 2011 were initiated, according to the minutes Nº 28 of the Board of Directors. In the year 2015 an updated proposal was sent to the Ministry of Science and Technology and Innovation following the guidelines of Technical Note CGOF/MCTI n° 10/2014. The requested increase corresponds to the resources received from the investment subsidy, through the budget of the Union - AFAC (Advance for Future Capital Increase) for the years 2011 to 2014 in the amount of R$ 114,780 thousand, to be updated at the SELIC rate according to the date of the meeting, pursuant to article 166 of Law 6404/76. We are awaiting the publication of the Presidential Decree. In addition, we call attention to Explanatory Note 21 - Liquidity Risk - that the Company guarantees that it has a sufficient cash balance to overcome its need for operating working capital, including compliance with financial obligations, and receives from the Ministry of Science, Technology and Innovation amounts for the payment of accounts payable, with nature of donation. Our conclusion does not contain any modification on this matter. Another subjects The amounts corresponding to the year ended on December 31, 2015, presented for comparison purposes, were previously audited by other independent auditors who issued a report dated on February 12, 2016, which did not contain any modification. Other information accompanying the financial statements and the auditor's report The Company's management is responsible for such other information that comprises the management report. Our opinion on the financial statements does not cover the management report and we do not express any form of audit conclusion about this report. In connection with the audit of financial statements, our responsibility is to read the management report and, in so doing, to consider whether this report is materially inconsistent with the financial statements or with our knowledge obtained in the audit or, otherwise, appears to be distorted in a way that is relevant. If, based on the work performed, we find that there is a material misstatement in the management report, we are required to report this fact. We have nothing to report on this. Accounting and governance responsibilities of financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting practices adopted in Brazil and by the internal controls that it has determined to be necessary to enable the preparation of financial statements free of material misstatement, whether caused by fraud or error. In preparing the financial statements, management is responsible for evaluating the Company's ability to continue operating, disclosing, when applicable, matters related to its operational continuity and the use of this accounting basis in the preparation of the financial statements, unless the Administration intends to liquidate the company or to cease its operations, or has no realistic alternative to avoid the closure of operations. Those responsible for the Company's governance are those responsible for supervising the process of preparing the financial statements. Responsibilities of the auditor for the audit of the financial statements Our objectives are to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether

caused by fraud or error, and to issue an audit report containing our opinion. Reasonable security is a high level of security, but not a guarantee that the audit conducted in accordance with Brazilian and international auditing standards will always detect any relevant material misstatements. Distortions may be due to fraud or error and are considered relevant when, individually or together, they can influence, from a reasonable perspective, the economic decisions of users taken on the basis of said financial statements. As part of the audit performed, in accordance with Brazilian and international auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. Besides that, • We identify and evaluate the risks of material misstatement in the financial statements, whether caused by fraud or error, plan and perform audit procedures in response to such risks, and obtain audit evidence that is appropriate and sufficient to substantiate our opinion. The risk of not detecting material misstatement resulting from fraud is greater than that of error, since fraud may involve circumvention of internal controls, collusion, forgery, omission or intentional misrepresentation. • We obtain an understanding of the internal controls relevant to the audit to plan appropriate audit procedures in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls. • We evaluate the adequacy of the accounting policies used and the reasonableness of the accounting estimates and respective disclosures made by management. • We conclude on the adequacy of management's use of the accounting basis for operational continuity and, based on the audit evidence obtained, whether there is a material uncertainty regarding events or conditions that may raise significant doubt regarding the capacity for the Company’s operational continuity If we conclude that there is material uncertainty, we should draw attention in our audit report to the respective disclosures in the financial statements or include modification in our opinion if the disclosures are inadequate. Our findings are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to no longer be in operational continuity. We communicate with those responsible for governance regarding, inter alia, the planned scope, timing of the audit and significant audit findings, including any significant weaknesses in internal controls that we have identified during our work. Porto Alegre/ RS, February 17, 2017. L. G. SANTOS - AUDITORES & ASSOCIADOS S/S. CRC/RS 4.420/O LUIZ GUSTAVO OLIVEIRA DOS SANTOS Accountant/ CRC/ RS n° 039.777/O-5. STATEMENT BY DIRECTORS ON THE INDEPENDENT AUDITORS’ OPINION We declare, as directors of the Centro Nacional de Tecnologia Eletrônica Avançada, a federal public company headquartered in Porto Alegre, Estrada João de Oliveira Remiao, No. 777, CEP 91.787-750, enrolled with CNPJ under No. 10.770.641/0001-89, that we review, discuss and agree with all of the Financial Statements, as well as with the opinions expressed in the Independent Auditors' report to the financial statements for the fiscal year ended on December 31, 2016, dated of February 17, 2017. Paulo de Tarso Mendes Luna (President) Luiz Fernando Salvadori Zachia (Director) Sérgio Roberto de Lima e Silva Filho (Director)

OPINION 01/2017 The Fiscal Council of Centro Nacional de Tecnologia Eletrônica Avançada S.A. - CEITEC, in the use of its legal and statutory duties, examined the Management Report, as well as the Balance Sheet and other Financial Statements for the year ended on December 31, 2016, In view of the Report of the Independent Auditors - L.G. Santos - Auditores & Acionistas S/S, dated of February 17, 2017, without exceptions, prepared in accordance with the Auditing standards applicable in Brazil. The Fiscal Council unanimously believes that these corporate documents adequately reflect, in all material respects, the equity, financial and management situation of CEITEC S.A. Porto Alegre, February 21, 2017. MÁRCIO NAHAS RIBEIRO President RUY TAKEO TAKAHASHI Counselor JOÃO LUIZ DOS SANTOS SANTOS Counselor