Advantech Co., Ltd.advcloudfiles.advantech.com/investor/Shareholder-Annual-Report/106/4-en.pdf · Advantech Co., Ltd. Procedure for the 2017 General Shareholders’ Meeting 1. Call

Advantech Co., Ltd.

Procedure for the 2017 General Shareholders’ Meeting

1. Call the Meeting to Order

2. Chairperson Remarks

3. Management Presentation

5. Matters to be approved

6. Discussion and Election

7. Motions

8. Adjournment

1

I. Agenda of Annual Meeting

Advantech Co., Ltd. Agenda of 2017 General Shareholders’ Meeting

Time: 9:00 a.m. on May 26 (Friday), 2017

Place: (Neihu Headquarters) B1, No. 1, Line 20, Lane 26, Rueiguang Road, Neihu District, Taipei City

1. Call the Meeting to Order

2. Chairperson Remarks

3. Management Presentations

(1) The 2016 Business Report.

(2) Supervisor’s Review Report on the 2016 Financial Statements.

(3) Report of Employees’ compensation and Directors’ compensation of 2016.

(4) The Status of Endorsement and Guarantee in 2016.

4. Matters to be approved

(1) Adoption of the 2016 Business Report and Financial Statements.

(2) Adoption of the Proposal for Distribution of 2016 Earnings.


(1) Issuance of new shares from capital increase by earnings.

(2) Amendment to the “ Articles of Incorporation ”.

(3) Amendment to the “Procedures For Acquisition or Disposal of Assets”.

(4) Amendment to the “Procedures For Lending Funds to Other Parties”.

(5) Amendment to the “Procedures For Endorsement & Guarantee”.

(6) Amendment to the “Procedures For Financial Derivatives Transactions”.

(7) Amendment to the “Rules and Procedures of Shareholders’Meeting”.

(8) Discuss the disposal of Advantech LNC Technology Co., Ltd. Shares.

(9) Re-election of all directors.

(10)Exemption of the limitation of non-competition on the directors of the Company.

7. Motions

8. Adjournment

2

1. Management Presentations

Report No. 1

Cause of action ： The 2016 Business Reports.

Explanation ： The 2016 Business Repor t i s a t tached as At tachment I .

Report No. 2

Cause of action ： Supervisor’s Review Report on the 2016 Financial Statements.

Explanation ： 1. The Supervisor’s Review Report is attached as Attachment II. 2. S u p e r v i s o r s a r e u r g e d t o r e a d o u t t h e r e v i e w r e p o r t .

Report No. 3

Cause of action

Explanation

Report No. 4

： Report of Employees’ compensation and Directors’ compensation of 2016. 1. Pursuant to Article 20 of the company’s Articles of Incorporation,in consideration

of the company’s overall business operations and the payment standard of the industry, it is recommended to appropriate an amount of NT$243,000,000 as bonus to employees and NT$12,300,000 as remuneration to directors and supervisors paid in cash from the net income of 2016.

2. There is no difference between the amount approved by the Board of Directors andthe amount recognized as expense in 2016.

3. The proposal has passed in the Remuneration Committee meeting.

Cause of action ： The Status of Endorsement and Guarantee in 2016.

Explanation ： 1.In compliance with the Company’s “Procedure for Making of Endorsements and Guarantees”.

2.The Company issued a letter of guarantee to endorse and guarantee thesubsidiaries’ purchase of materials and short-term bank loan in response to the subsidiary’s business operation. The balance of endorsement and guarantee amounted to NT$1,954,389 thousand as of December 31, 2016, representing 30.87% of the Company’s paid-in capital.

3.Please review the statement of endorsement and guaranteed amount enclosed.

3

Guarantor (Company)

Subsidiary of the guaranteed company

Category Amount (original currency ___K)

NTD (NTD___K) Remarks

Advantech (ACL)

Advantech Corporation.

short-term bank loan

USD30,000 $967,500 Under the limit (Note2)

Advantech (ACL)

B+B SmartWorx Inc.


USD10,000 322,500 Under the limit (Note2)

Advantech (ACL)

Cermate Technologies Inc.



Advantech (ACL)

Advanixs Corp. short-term bank loan


Advantech (ACL)

Advanixs Corp. Endorsement and guarantee for purchase of materials


Advantech (ACL)

Advantech Technology

(China)Company Ltd.

(AKMC)



Advantech (ACL)

Advantech Intelligent Service.


USD150 4,838 Under the limit (Note2)

Advantech (ACL)

Advantech-LNC Technology Co.,Ltd.



Advantech (ACL)

AdvantechPOS Technology Co.,Ltd.



Advantech (ACL)

AdvantechPOS Technology Co.,Ltd.

Endorsement and guarantee for purchase of materials


Advantech (ACL)

Advantech KR Co., Ltd



Advantech (ACL)

Advantech Australia Pty Limited.



Advantech (ACL)

DLOG Gesellschaft für elektronische Datentechnik mbH


EUR1,000 33,900 Under the limit (Note2)

Advantech (ACL)

Advantech Brasil Ltda



Total $1,954,389 Under the limit (Note1)

Note: The amount of limit is calculated in accordance with the Company’s Rules for Making of Endorsements and Guarantees: (1)Maximum endorsement and guarantee amounted to NT$7,564,074 thousand. (2)Maximum endorsement and guarantee for one single enterprise amounted to NT$ 2,521,358 thousand. (3)The amount of limit referred to above is calculated in accordance with the net value NT$25,213,582

thousand stated in the 2016 audited financial statements.

4

2. Matters to be approvedProposal 1: (Proposed by the Board of Directors)

Cause of action ： Adoption of the 2016 Business Report and Financial Statements.

Explanation ： 1. The 2016 business report and standalone financial statements. (including consolidated financial statements) were composed by the Board of Directors. The Company’s financial statements were audited by independent auditors, M.J. Chiou and C.S. Chen, of Deloitte & Touche and were reviewed by the supervisor along with the business report with a written audit report issued.

2. The Business Report, independent auditor’s report, and FinancialStatements are enclosed as Attachment I and Attachment III.

3. Please acknowledge.Resolution ： Proposal: 2 (Proposed by the Board of Directors)

Cause of action ： Adoption of the Proposal for Distribution of 2016 Earnings.

Explanation ： 1. Please refer to the 2016 prorofit distribution table in Attachment IV.

2. The net income of the company amounted to NT$5,666,862,329 for 2016.Added the beginning unappropriated earnings of NT$2,796,896,578 anddeducted net of the retained earnings adjustment for NT$3,691,230 due tolong-term equity investments, actuarial loss recognized in retained earnings ofNT$24,282,918, the legal reserve of NT$566,686,233 and special reserve ofNT$85,203,650, the distributable earnings for 2016 amounted toNT$7,783,894,876 resulted to be distributed as follows:

(1) The amounts of NT$3,988,366,830 and NT$633,074,100 out of the 2016 earnings are appropriated for distribution as cash dividends and share dividends to shareholders, respectively. There were 633,074,100 shares of common stock outstanding on December 31, 2016 that are entitled to the distribution of shareholder’s dividend at NT$7.3 per share.

(2) The distribution of cash dividend is calculated to the dollar (round up to the dollar). The total amount of the odd shares with a distribution of less than NT$1 will be booked as the other income or other expense of the company.

(3) The current distribution of earnings is scheduled before the dividend benchmark date. If there is any change in the yield rate as a result of any change in the Company’s outstanding shares, a request is to be made in the shareholders’ meeting having the Chairman authorized to handle matters related to the changes.

(4) Upon the approval of the Annual General Shareholder’s Meeting, it is proposed that the Chairman is authorized to resolve the ex-dividend date and other relevant issues.

Resolution ：

5


Proposal: 1 (Proposed by the Board of Directors)

Cause of action ： Issuance of new shares from capital increase by earnings. Please proceed to resolve.

Explanation ： 1. In response to the business development, the Company plans to issue63,307,410shares from capital increase by the 2016 dividends distributed toshareholders at the amount of NT$633,074,100, with the par value per share of NT$10. Based on shareholders and their shareholding ratio listed in the shareholders' roster on the target date for distribution of dividends, 100 shares per 1000 shares will be distributed free of charge; the fractional share that isless than 1 share shall be put together by the stock agency appointed by theCompany within 5 days after the date on which share transfer registration issuspended. The fractional share that is insufficient to make up the balance orput together by the deadline will be subscribed by a person designated by thechairman of the Board.

2. When there is a change in the distribution rate due to change in the number ofshares circulated outside, the shareholders’ meeting shall authorize the Board of Directors to solely handle such a change.

3.Rights and obligations arising from the issuance of new shares are same asthose arising from the issuance of original shares.

4. After the issuance of new shares from capital increase is resolved by the annualshareholders’ meeting and reported to the competent authority, the Board of Directors will be authorized to set the ex-right date and announce it separately.

5. Please proceed to discuss.

Resolution ：


Cause of action ： Amendment to the “ Articles of Incorporation ”.Please proceed to discuss.

Explanation ： 1.In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Articles of Incorporation. Please refer to Attachment V.

2.Please proceed to discuss..

Resolution ：


Cause of action ： Amendment to the “Procedures For Acquisition or Disposal of Assets”. Pleaseproceed to discuss.

Explanation ： 1. The proposal is handled according to Financial Supervisory Commission OrderGin-Guan-Zheng-Fa-Zi No. 1060001296 dated February 9, 2017.

2.In order to comply with the law and relevant regulations and to conform to theneeds of commercial practice, the Company hereby proposes to amend theProcedures For Acquisition or Disposal of Assets . Please refer to AttachmentVI.

3.Please proceed to discuss.

Resolution ：

6


Cause of action ： Amendment to the “Procedures for Lending Funds to Other Parties”. Please proceed to discuss.

Explanation ： 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Lending Funds to Other Parties . Please refer to Attachment VII.


Resolution ：


Cause of action ： Amendment to the “Procedures for Endorsement & Guarantee”. Please proceed to discuss.

Explanation ： 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Endorsement & Guarantee . Please refer to Attachment VIII.


Resolution ：


Cause of action ： Amendment to the “ Procedures for Financial Derivatives Transactions”. Pleaseproceed to discuss.

Explanation ： 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Financial Derivatives Transactions . Please refer to Attachment IX.

2. Please proceed to discuss.Resolution ：


Cause of action ： Amendment to the “ Rules and Procedures of Shareholders’ Meeting ”. Pleaseproceed to discuss.

Explanation 1. In order to comply with the law and relevant regulations and to conform to theneeds of commercial practice, the Company hereby proposes to amend theRules and Procedures of Shareholders’ Meeting . Please refer to Attachment X.

2.Please proceed to discuss.

Resolution ：


Cause of action ： Discuss the disposal of Advantech LNC Technology Co., Ltd. Shares. Please proceed to discuss.

Explanation ： 1. In response to the business development of the Company’s subsidiary,Advantech LNC Technology Co., Ltd. (hereinafter referred to as AdvantechLNC), and the recruitment and retention of professionals required by the Company, theCompany plans to first release 3,000,000 shares of Advantech

7

LNC to thefounding executives of Advantech LNC at the price of NT$18 per share and at the totalamount of NT$54,000,000 in order to improve employees’ coherence and sense ofbelonging, further creating the interest of the Company and shareholders.


Resolution ：

Proposal: 9

Cause of action ： Re-election of all directors. Please Vote.

Explanation ： 1. As the term of the Company’s directors and supervisors is about to expire, thereelection of directors and supervisors shall be held in the shareholders’meeting this year according to Article 13 of the Company’s Articles of Incorporation.

2. The Company plans to set up 7~9 directors (including 3 independent directors)according to Article 13 of the Company’s Articles of Incorporation. In the 13th reelection, 7 directors are planned to be set up (including 3 independent directors) with a term of 3 years and they may be eligible for reelection. The Company plans to establish the audit committee, which is composed of all independent directors, according to Article 13-6 of the Company’s Articles of Incorporation. In addition, supervisors are abolished.

3. According to Article 13 of the Company’s Articles of Incorporation, thecandidate nomination system is adopted for the election of directors. After the Board of Directors reviews the qualifications of nominees based on the roster of candidates for directors and independent directors, qualified nominees are enrolled in the final roster of candidates for directors and independent directors and elected by the Board of Directors.

4. The 3-year term of newly elected directors starts from May 26, 2017 and endson May 25, 2020.

5. According to Company’s Article of Incorporation, the Company’s dissectorsshall be elected from the nomination list.The qualification of the nominees has been reviewed by Board. Personal information of the nominees is as follows:

Category Name Education Experience Current position Shares Held

Director K.C. Liu Department of Telecommunications Engineering, National Chiao Tung University

Founder of Advantech Chairman of Advantech Corporate Investment、 Chairman of Advanixs Corp.、Chairman of Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd.、Chairman of Advantech Technology (China) Company Ltd.、Chairman of Shanghai Advantech Intelligent Services Co., Ltd、Chairman of Xi’an Advantech Software Ltd、 Chairman of Advantech Intelligent Service.、Chairman of K and M Investment Co., Ltd.、 Chairman of AdvanPOS Technology Co., Ltd.、Chairman of

23,292,484

8

Advantech-LNC Technology Co., Ltd.、Chairman of Advanixs Kun ShAN Corporaton 、Chairman of Aimobile Co., Ltd.、Chairman of Advantech Foundation、Chairman of Advantech Japan Co., Ltd.、Chairman of B+B Smartworx Inc.Director of AIDC Investment Corp.、Director of Advantech Europe B.V.、Director of DLoG GmbH、 Director of ADVANTECH INTERNATIONAL PT.、Director of Advantech Electronics,S. De R. L. De C.V.Director of Advantech Technology Co., Ltd. Director of HK Advantech Technology Co., Ltd.、Director of Advantech Automation Corp.、Director of Advantech Automation Corp.(HK) Limited.、 Director of Advantech Brazil Ltd.、Director of Advantech Co. Singapore Pte, Ltd.、Director of Advantech Corp.、Director of Advantech Europe Holding B.V.、Director of Advantech Co., Malaysia Sdn.Bhd.、Director of Advantech Poland Sp z.o.o、Director of Advantech KR Co., Ltd.、Director of Advantech Corporation (Thailand) Co., Ltd.、 Director of Advantech Industrial Computing India Private Limited.、Director ofBetter Auto Holdings Limited.、Director of Famous Now Limited.

Director Ted Hsu EMBA，National Chiao Tung University

Chairman of Eeizprise Inc.、Director of ASUSTeK、Director of Asmedia Technology Inc.、Director of Eusol Biotech Co.,Ltd.

Chief Strategy Officer of ASUSTeK

0

Director AIDC Investment Corp. Representative:Donald Chang

Bachelor Chemical Engineering, Chinese Culture University

President, 3M China Region、 Vice President, 3M Southeast Asia Region、 Managing Director, 3M Southeast Asia Region & 3M Singapore

Independent Director of Chung Hwapulp Corp.

74,636,266

9

Director Advantech Foundation Representative :Chaney Ho

Tatung Institute of Technology,Taiwan

President of Le Wel Co.,Ltd.

Chairman of Advantech Innovative Design Co., Ltd.、Director of Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd、Director of Shanghai Advantech Intelligent Services Co., Ltd、Director of Advantech Technology (China) Company Ltd、

Director of Advantech Co., Malaysia Sdn.Bhd.Director of Advantech KR Co., Ltd.、Director of Advantech Industrial Computing India Private Limited.

18,244,889

Independent Director

Jeff Chen EMBA， Northwestern University

Stanley Black & Decker Inc. VP & President of Asia 、 Stanley Works HQ, VP Global Operations、 Stanley Works Asia, President Asia Operations

Independent Director of Advantech Co.,Ltd.

0


Benson Liu Master, International Business Administration, University of Northrop, USA

Chairman and President of Bristol-Myers Squibb (Taiwan) Ltd.

Independent Director, Global Unichip Corp Independent Director, Polylite Taiwan Co.,Ltd. Vice Chairman, Chinese Corporate Governance Association、

Director, Maywufa Company Ltd.

0


Joseph Yu PhD of Business Administration, University of Michigan

Associate Professor, Department of Business Administration, University of Illinois at Urbana–Champaign、

Member, Taiwan Ministry of Economic Research and Development Committee、Dean, National Chengchi University, Department of Business Administration; Representative for National Chengchi University School of Business

Independent Director, Yuanta Securities Co., Ltd、Independent Director, Yuanta Bank Co., Ltd. Professor, Department of Business Administration, National Chengchi University

249

Election results:

10


Cause of action ： Exemption of the limitation of non-competition on the directors of the Company. Please proceed to discuss.

Explanation ： 1. According to Article 209 of the Company Act, a director who does anything forhimself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.

2. To take good advantage of the specialties and experience of the Company’sdirectors, the release of the prohibition on new directors and their representatives, elected in the 2017 annual shareholders’ meeting, from participation in competitive business is proposed in the shareholders’ meeting for approval according to laws.

Resolution ：

4.Motions

5. Adjournment

11

ATTACHMENTS

12

II. Attachments<Attachment I>

Business Report D e a r s h a r e h o l d e r s :

2016 Summary of Results In 2016, Advantech reported consolidated revenues of NT$ 42 billion, an increase of ten percent over the NT$38 billion of 2015. Net income was NT$5.69 billion and diluted earnings per share were NT$8.96. Gross profit margin was 40.8 percent, compared with 40.4 percent in 2015; and operating profit margin was 15.8 percent, compared with 15.6 percent a year earlier. Net profit margin was 13.54 percent, an increase of 0.05 percentage points from the previous year’s 13.49 percent.

Our Vision for IoT Advantech has been looking at Internet of Things (IoT) opportunities since 2010, in addition to our foundation in embedded systems and industrial PC segments. We position ourselves as “The Accelerator of the Intelligent Planet”. However, given the complexity of the IoT ecosystem, we believe the broad-based penetration of end-user demands and applications will happen in the next 10 to 15 years, but not today. Since 2016, Advantech has gradually experienced rising demand in industrial IoT and factory applications. Looking forward, in addition to more comprehensive internet infrastructure development, the support and acceleration from industrial companies (like GE, Schneider, Honeywell, Siemens, etc.) and service providers (like Microsoft, Amazon, and Google) are the essential catalysts of the IoT industry.

Advantech recognizes three waves of growth in the IoT industry. The first wave happened in 2010 and will gradually mature in 2020. The major beneficiaries are IoT device providers, such as fabless houses. The second wave began in 2015~2016 and is expected to yield results in 2019~2020. The second wave should mature in 2025, at which time a third wave of IoT growth will begin. Advantech foresees that companies with the capability to provide hardware and software integration services will be the major beneficiaries during the second wave of IoT growth. In the future, Advantech will strengthen its role as an accelerator of the intelligent planet, facilitating system integrators’ activities in each vertical market, providing differentiated customer service, and forming cross-sector alliance and vertical market ecosystems.

Advantech’s Key Strategies to Achieve Our 2020 Vision

Develop the WISE-PaaS platform to form a sharing platform.

In 2015, Advantech’s WISE-PaaS was focused on internal software consolidation and architecture development. In 2016, WISE-PaaS successfully launched Edge Intelligence Server (EIS) and Solution Ready Platform (SRP), and penetrated into several customer IoT projects in different vertical markets. In 2017, Advantech will focus on cloud services for the WISE-PaaS platform to provide a reliable and improved IoT cloud computing platform.

Make cross-sector alliances to form a vertical market IoT ecosystem.

IoT is an expansion opportunity to Advantech’s current specialty in embedded systems and industrial PCs. However, the complexities of the IoT system and vertical markets will drive overall market diversity. Therefore, Advantech intends to form different alliances in focused areas, including “M2.COM” in the Wireless IoT Sensor Nodes Standard, and Embedded Linux & Android Alliance

13

(ELAA) in the embedded OS area, to provide more comprehensive services to our system integrator partners.

Invest, incubate, and cooperate to accelerate IoT development and penetration.

In our 2020 vision, Advantech also identified external cooperation and investment as another growing arm in the future to fulfill the natural complexity of the IoT market and strengthen our portfolio and service offerings. In January 2016, Advantech fully consolidated B+B SmartWorx into our operations. In January 2017, Advantech announced investment in Kostec, a specialized, Korea-based medical-monitor company. Both investments were in line with Advantech’s long term strategy in technology centric and vertical development. Also, Advantech initiated more interactions and sponsorship with industrial partners and academic institutes. In addition to talent recruitment and business engagement, Advantech intends to facilitate the development of Taiwan’s IoT supply chain.

2017 Outlook Advantech reported record high revenues and net income in 2016. The 10.5% revenue growth was consistent overall with Advantech’s past 10 year CAGR growth. More importantly, Advantech intends to seek sustainable top-line growth in the long run to optimize investor value. Looking forward in 2017, Advantech expects to achieve its profitable revenue growth target on the back of increasing penetration of IoT adoption, our leadership in intelligent systems, and our differentiated value-added services, which should reduce the uncertainty from macro-economic impacts.

Strengthening Corporate Governance and Business Leadership Advantech has marketed itself as an industrial brand since the beginning and now Advantech has operations in 23 countries around the world. In 2016, Advantech was recognized as a Top 6 Taiwan International Brand, and the only B2B company among the Top 10 Taiwan International Brands. To enhance corporate governance and comply with international trends, Advantech will transform its board organization from supervisory systems to independent directors systems starting from 2017. Our goal is the pursuit of excellence and sustainable operation. Advantech has established its altruistic spirit at the core of its business culture, along with the pursuit of the best and balanced interests of society, shareholders, customers, and employees.

Advantech Co., Ltd.

Chairman K.C. Liu

President Chaney Ho

Chief Financial officer Rorie Kang

14

< Attachment II>

Supervisor’s Review Report

The supervisors have reviewed the 2016 annual business reports, profit distribution proposals and individual financial statements and consolidated financial statements prepared and presented by the Company’s Board of Directors, and the independent auditor’s report issued by CPA Meng Chieh Chiu and CAP Chin Hsiang Chen of Deloitte & Touche with an independent auditor’s report issued.

The supervisor’s report is hereby issued in accordance with Article 219 of the Company Law after reviewing the annual business reports, financial statements, and profit distribution proposals without any nonconformity identified.

Sincerely yours,

The 2017 General Shareholders’ Meeting of Advantech Co., Ltd.

Supervisor: AIDC Investment Corp. Representative: Gary Tseng

March 06, 2017

15




Sincerely yours,


Supervisor: Thomas Chen

March 06, 2017

16




Sincerely yours,


Supervisor: James Wu

March 06, 2017

17

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Advantech Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Advantech Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years 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, 2016 and 2015, 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 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, 2016. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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

Business acquisitions

Due to the operation plan of 2016, the Group acquired 100% of the shares of B+B SmartWorx, Inc. (B+B) for NT$3,296,048 thousand on January 4, 2016.

<Attachment III >

18

The evaluation on fair value of the assets, liabilities, and the amount of goodwill as of the date of acquisition of B+B was based on a specialists’ Purchase Price Allocation Report that involved several financial assumptions and inputs. The judgment of related accounting estimates will affect the presentation of accounts on the financial statements. Since the acquisition is considered to be a significant event and was transacted during the period of the financial statements and should have a material impact on the financial statements, the accuracy of the acquisition transaction of B+B conducted by the Group was deemed to be a key audit matter.

Our key audit procedures performed in respect of the above area included the following:

1. Tested the acquisition balance sheet prepared by management in accordance with the requirements of IFRS3 Business Combinations by:

a. Checking that the record matched against the fair value of the assets and liabilities as of the date ofacquisition.

b. Recalculating the value of goodwill recognized on the acquisition balance sheet.

2. Evaluated and tested the management’s judgments, through the engagement of valuation experts by:

a. Testing the completeness of the identification, recognition, and valuation of the potential intangibleassets of B+B and the fixed assets of its subsidiaries.

b. Testing the valuation methodologies and assumptions used to value each identified intangible asset,fixed asset, and goodwill.

B+B obtained the specialists’ Purchase Price Allocation Report in December 2016. Through the above performed procedures, B+B recognized goodwill at NT$1,768,139 thousand and intangible assets, including client relationships, core techniques, trademarks and software, at NT$1,294,933 thousand in total.

Impairment loss recognized on goodwill

If an asset has an indefinite useful life or there is any indication that an asset is impaired, the management should assess if the carrying amount of the assets is impaired. We have expressed our concerns on the related risks since the impairment assessment of goodwill is based on the management’s significant judgment that involves assumptions of the future profitability and costs of equity and debts; the impairment of goodwill is hence recognized as a critical accounting estimate in Note 5 to the consolidated financial statements.

The consolidated balance of goodwill amounted to NT$2,845,831 thousand as of December 31, 2016. We are mainly concerned about the addition of cash-generating units from the acquisition of B+B, from which thegoodwill from the cash-generating units amounted to NT$1,768,139 thousand. Since the actual operations condition of B+B was not to the level as was evaluated as of the date of acquisition, which might cause an impairment of goodwill, the assessment of impairment of goodwill was deemed to be a key audit matter.


When evaluating the impairment assessment, we tested management’s assumptions and inputs used for testing the impairment for goodwill, including cash flow projections and discount rates.

Other Matter

We have also audited the parent company only financial statements of Advantech Co., Ltd as of and for the years ended December 31, 2016 and 2015 on which we have issued an unmodified opinion.

19

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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, 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 supervisors, 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:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions thatmay cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditors’ report to the relateddisclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify ouropinion. 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.

20

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, includingthe disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision, and performance of the group audit. We remain solelyresponsible 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 a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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

The engagement partners on the audit resulting in this independent auditors’ report are Meng-Chieh Chiu and Chin-Hsiang Chen.

Deloitte & Touche Taipei, Taiwan Republic of China

March 6, 2017

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.

21

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

2016 2015ASSETS Amount % Amount %

CURRENT ASSETSCash and cash equivalents (Notes 4 and 6) $ 4,637,577 12 $ 4,358,259 13Financial assets at fair value through profit or loss - current (Notes 4, 7 and 30) 113,028 - 176,389 1Available-for-sale financial assets - current (Notes 4, 8 and 30) 2,956,586 8 1,755,843 5Debt investments with no active market - current (Notes 4 and 9) 10,007 - 3,171 -Notes receivable (Notes 4, 10 and 31) 965,081 3 970,722 3Trade receivables (Notes 4 and 10) 6,384,834 17 5,428,574 16Trade receivables from related parties (Note 31) 13,957 - 26,775 -Other receivables 13,775 - 40,811 -Inventories (Notes 4 and 11) 5,597,236 15 4,868,860 14Other current assets (Note 17) 489,630 1 456,342 1

Total current assets 21,181,711 56 18,085,746 53

NONCURRENT ASSETSAvailable-for-sale financial assets - noncurrent (Notes 4, 8 and 30) 1,712,578 4 1,747,598 5Investments accounted for using the equity method (Notes 4 and 13) 598,454 2 477,984 2Property, plant and equipment (Notes 4 and 14) 10,089,836 26 9,576,879 28Goodwill (Notes 4, 5 and 15) 2,845,831 7 1,139,559 3Other intangible assets (Notes 4, 5 and 16) 1,317,440 3 227,686 1Deferred tax assets (Notes 4 and 23) 369,156 1 217,989 1Prepayments for business facilities 47,578 - 65,753 -Prepayments for investments (Note 26) - - 2,279,881 7Long-term prepayments for leases (Note 17) 325,224 1 100,875 -Other noncurrent assets (Note 28) 51,145 - 59,183 -

Total noncurrent assets 17,357,242 44 15,893,387 47

TOTAL $ 38,538,953 100 $ 33,979,133 100

LIABILITIES AND EQUITY

CURRENT LIABILITIESShort-term borrowings (Notes 18 and 30) $ 483,750 1 $ 880,625 3Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 30) 10,231 - 6,352 -Trade payables (Note 31) 4,983,381 13 3,226,069 9Other payables (Notes 19 and 22) 3,902,499 10 3,380,317 10Current tax liabilities (Notes 4 and 23) 1,229,400 3 1,057,226 3Short-term warranty provisions (Note 4) 167,122 - 145,646 -Other current liabilities 659,228 2 546,295 2

Total current liabilities 11,435,611 29 9,242,530 27

NONCURRENT LIABILITIESDeferred tax liabilities (Notes 4 and 23) 1,362,687 4 938,491 3Net defined benefit liabilities (Notes 4 and 20) 212,360 1 183,540 1Other noncurrent liabilities 141,398 - 160,795 -

Total noncurrent liabilities 1,716,445 5 1,282,826 4

Total liabilities 13,152,056 34 10,525,356 31

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANYShare capital

Ordinary shares 6,330,741 16 6,318,531 19Advance receipts for share capital 100 - - -

Total share capital 6,330,841 16 6,318,531 19Capital surplus 6,058,884 16 5,587,555 16Retained earnings

Legal reserve 4,473,276 12 3,962,842 12Unappropriated earnings 8,435,785 22 7,098,449 21

Total retained earnings 12,909,061 34 11,061,291 33Other equity

Exchange differences on translation of foreign financial statements (197,633) - 271,859 1Unrealized gains on available-for-sale financial assets 112,429 - 68,265 -

Total other equity (85,204) - 340,124 1

Total equity attributable to owners of the Company 25,213,582 66 23,307,501 69

NON-CONTROLLING INTERESTS 173,315 - 146,276 -

Total equity 25,386,897 66 23,453,777 69

TOTAL $ 38,538,953 100 $ 33,979,133 100

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

(With Deloitte & Touche audit report dated March 6, 2017)

22


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

2016 2015Amount % Amount %

OPERATING REVENUE (Note 31)Sales $ 40,839,800 97 $ 36,978,961 97Other operating revenue 1,162,398 3 1,021,621 3

Total operating revenue 42,002,198 100 38,000,582 100

OPERATING COSTS (Notes 11, 22 and 31) 24,884,649 59 22,655,592 59

GROSS PROFIT 17,117,549 41 15,344,990 41

OPERATING EXPENSES (Notes 22 and 31)Selling and marketing expenses 4,260,554 10 3,889,856 10General and administrative expenses 2,576,210 6 1,982,879 5Research and development expenses 3,649,292 9 3,543,748 10

Total operating expenses 10,486,056 25 9,416,483 25

OPERATING PROFIT 6,631,493 16 5,928,507 16

NONOPERATING INCOMEShare of the profit of associates accounted for using

the equity method (Notes 4 and 13) 65,562 - 110,226 -Interest income 15,989 - 40,613 -Gains (losses) on disposal of property, plant and

equipment (Note 4) 289,633 1 (5,410) -Gains (losses) on disposal of investments (Note 4) (4,873) - 202,458 1Foreign exchange gains (losses), net (Notes 4, 22

and 33) (205,812) - (186,889) -Gains on financial instruments at fair value through

profit or loss (Note 4) 150,982 - 83,798 -Dividend income 132,472 - 139,725 -Other income (Note 8) 78,855 - 121,329 -Finance costs (Note 22) (11,556) - (10,041) -Losses on financial instruments at fair value through

profit or loss (Note 4) (43,324) - (130,409) -Other losses (2,056) - (4,372) -

Total nonoperating income 465,872 1 361,028 1

PROFIT BEFORE INCOME TAX 7,097,365 17 6,289,535 17

INCOME TAX EXPENSE (Notes 4 and 23) 1,408,411 3 1,162,560 3

NET PROFIT FOR THE YEAR 5,688,954 14 5,126,975 14(Continued)

23




OTHER COMPREHENSIVE INCOME (LOSS)Items that will not be reclassified subsequently to

profit or loss (Notes 20, 21 and 23):Remeasurement of defined benefit plans $ (31,247) - $ (19,303) -Share of the other comprehensive income (loss) of

associates accounted for using the equity method 1,574 - (2,424) -

Income tax related to items that will not be reclassified 5,312 - 3,281 -

Items that may be reclassified subsequently to profit or loss (Notes 4, 21 and 23):Exchange differences on translating foreign

operations (576,926) (1) (101,490) -Unrealized gains (losses) on available-for-sale

financial assets 44,164 - (495,012) (2)Share of the other comprehensive income of

associates (4,135) - 2,449 -Income tax related to items that may be

reclassified subsequently to profit or loss 96,161 - 13,620 -

Other comprehensive income (loss) for the year, net of income tax (465,097) (1) (598,879) (2)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 5,223,857 12 $ 4,528,096 12

NET PROFIT ATTRIBUTABLE TO:Owners of the Company $ 5,666,862 13 $ 5,104,346 13Non-controlling interests 22,092 - 22,629 -

$ 5,688,954 14 $ 5,126,975 13

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:Owners of the Company $ 5,217,251 12 $ 4,524,603 12Non-controlling interests 6,606 - 3,493 -

$ 5,223,857 12 $ 4,528,096 12(Continued)

24




EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 24)Basic $ 8.96 $ 8.08Diluted $ 8.90 $ 8.05


(With Deloitte & Touche audit report dated March 6, 2017) (Concluded)

25

AD

VA

NT

EC

H C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S

CO

NSO

LID

AT

ED

ST

AT

EM

EN

TS

OF

CH

AN

GE

S IN

EQ

UIT

Y

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BER

31,

2016

AN

D20

15(I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Equ

ity A

ttri

buta

ble

to O

wne

rs o

f the

Com

pany

Oth

er E

quity

(Not

e 21

)Is

sued

Cap

ital (

Not

es 2

1an

d 25

)E

xcha

nge

Unr

ealiz

ed G

ain

Adv

ance

Rec

eipt

sC

apita

l Sur

plus

Ret

aine

d E

arni

ngs (

Not

es 2

1an

d 27

)D

iffer

ence

s on

(Los

s) o

nN

on-c

ontr

ollin

gfo

r O

rdin

ary

(Not

es 2

1, 2

5U

napp

ropr

iate

dT

rans

latin

gA

vaila

ble-

for-

sale

Inte

rest

sSh

are

Cap

ital

Shar

esT

otal

and

27)

Leg

al R

eser

veE

arni

ngs

Tot

alFo

reig

n O

pera

tions

Fina

ncia

l Ass

ets

Tot

al(N

otes

21

and

27)

Tot

al E

quity

BA

LAN

CE

AT

JAN

UA

RY

1, 2

015

$6,

301,

031

$11

,060

$6,

312,

091

$5,

306,

958

$3,

472,

064

$6,

353,

273

$9,

825,

337

$33

8,35

6$

563,

277

$22

,346

,019

$18

7,00

0$

22,5

33,0

19

App

ropr

iatio

n of

the

2014

ear

rings

Lega

l res

erve

--

--

490,

778

(490

,778

)-

--

--

-C

ash

divi

dend

s on

ordi

nary

sha

res

--

--

-(3

,787

,255

)(3

,787

,255

)-

-(3

,787

,255

)-

(3,7

87,2

55)

Rec

ogni

tion

of e

mpl

oyee

shar

e op

tions

by

the

Com

pany

17,5

00(1

1,06

0)6,

440

24,4

38-

--

--

30,8

78-

30,8

78

Com

pens

atio

n co

st re

cogn

ized

for e

mpl

oyee

shar

e op

tions

--

-26

1,87

7-

--

--

261,

877

-26

1,87

7

Cha

nge

in c

apita

l sur

plus

from

inve

stm

ents

in a

ssoc

iate

s acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

--

-2,

172

--

--

-2,

172

-2,

172

Diff

eren

ce b

etw

een

cons

ider

atio

n pa

id a

nd c

arry

ing

amou

nt o

f sub

sidi

arie

s acq

uire

d-

--

(11,

457)

-(6

2,90

3)(6

2,90

3)-

-(7

4,36

0)(4

4,21

7)(1

18,5

77)

Cha

nges

in p

erce

ntag

e of

ow

ners

hip

inte

rest

in s

ubsi

diar

ies

--

-3,

567

--

--

-3,

567

-3,

567

Net

pro

fit fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

015

--

--

-5,

104,

346

5,10

4,34

6-

-5,

104,

346

22,6

295,

126,

975

Oth

er c

ompr

ehen

sive

loss

for t

he y

ear e

nded

Dec

embe

r 31,

201

5, n

et o

f inc

ome

tax

--

--

-(1

8,23

4)(1

8,23

4)(6

6,49

7)(4

95,0

12)

(579

,743

)(1

9,13

6)(5

98,8

79)

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

015

--

--

-5,

086,

112

5,08

6,11

2(6

6,49

7)(4

95,0

12)

4,52

4,60

33,

493

4,52

8,09

6

BA

LAN

CE

AT

DEC

EMBE

R 3

1, 2

015

6,31

8,53

1-

6,31

8,53

15,

587,

555

3,96

2,84

27,

098,

449

11,0

61,2

9127

1,85

968

,265

23,3

07,5

0114

6,27

623

,453

,777

App

ropr

iatio

n of

the

2015

ear

rings

Lega

l res

erve

--

--

510,

434

(510

,434

)-

--

--

-C

ash

divi

dend

s on

ordi

nary

sha

res

--

--

-(3

,791

,118

)(3

,791

,118

)-

-(3

,791

,118

)-

(3,7

91,1

18)

Rec

ogni

tion

of e

mpl

oyee

shar

e op

tions

by

the

Com

pany

12,2

1010

012

,310

104,

758

--

--

-11

7,06

8-

117,

068

Com

pens

atio

n co

st re

cogn

ized

for e

mpl

oyee

shar

e op

tions

--

-33

8,19

4-

--

--

338,

194

-33

8,19

4

Cha

nge

in c

apita

l sur

plus

from

inve

stm

ents

in a

ssoc

iate

s acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

--

-10

,533

--

--

-10

,533

-10

,533

Diff

eren

ce b

etw

een

cons

ider

atio

n pa

id a

nd c

arry

ing

amou

nt o

f sub

sidi

arie

s acq

uire

d-

--

17,8

44-

(3,6

91)

(3,6

91)

--

14,1

5320

,433

34,5

86

Net

pro

fit fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

016

--

--

-5,

666,

862

5,66

6,86

2-

-5,

666,

862

22,0

925,

688,

954

Oth

er c

ompr

ehen

sive

inco

me

for y

ear e

nded

Dec

embe

r 31,

201

6, n

et o

f inc

ome

tax

--

--

-(2

4,28

3)(2

4,28

3)(4

69,4

92)

44,1

64(4

49,6

11)

(15,

486)

(465

,097

)

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

016

--

--

-5,

642,

579

5,64

2,57

9(4

69,4

92)

44,1

645,

217,

251

6,60

65,

223,

857

BA

LAN

CE

AT

DEC

EMBE

R 3

1, 2

016

$6,

330,

741

$10

0$

6,33

0,84

1$

6,05

8,88

4$

4,47

3,27

6$

8,43

5,78

5$

12,9

09,0

61$

(197

,633

)$

112,

429

$25

,213

,582

$17

3,31

5$

25,3

86,8

97

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

.

(With

Del

oitte

& T

ouch

e au

dit r

epor

t dat

ed M

arch

6, 2

017)

26


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

2016 2015

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $ 7,097,365 $ 6,289,535Adjustments for:

Depreciation expenses 582,040 568,241Amortization expenses 238,048 97,953Amortization expenses for prepayments of lease obligations 6,606 2,577Impairment loss recognized (reversal of impairment loss) on trade

receivables (24,032) 23,360Net loss (gain) on financial assets or liabilities at fair value through

profit or loss (107,658) 46,611Compensation cost of employee share options 338,194 261,877Finance costs 11,556 10,041Interest income (15,989) (40,613)Dividend income (132,472) (139,725)Share of profit of associates (65,562) (110,226)Loss (gain) on disposal of property, plant and equipment (289,633) 5,410Loss (gain) on disposal of investments 4,873 (202,458)

Changes in operating assets and liabilitiesFinancial assets held for trading 174,898 (59,944)Notes receivable 5,641 (20,861)Trade receivables (738,014) (495,148)Trade receivables from related parties 12,807 (21,375)Other receivables 31,402 (1,724)Inventories (446,618) (87,310)Other current assets (8,478) 57,051Other financial assets - 18,650Trade payables 1,569,097 59,874Net defined benefit liabilities (2,427) (1,191)Other payables 600,572 147,567Short-term warranty provisions 21,476 4,292Other current liabilities 112,933 47,395Other noncurrent liabilities (17,857) 36,812

Cash generated from operations 8,958,768 6,496,671Interest received 15,989 38,076Dividends received 132,472 139,725Interest paid (6,285) (1,467)Income tax paid (1,086,369) (850,763)

Net cash generated from operating activities 8,014,575 5,822,242

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of available-for-sale financial assets (6,491,968) (9,713,717)Proceeds from sale of available-for-sale financial assets 5,364,552 11,766,699Acquisition of investments with no active market (6,945) 1,805Acquisition of investments accounted for using the equity method (135,000) -

(Continued)

27


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

2016 2015

Increase in prepayments for investments $ - $ (2,279,881)Net cash flow on the acquisition of subsidiaries (1,369,432) -Dividends received from associates 88,313 81,917Acquisition of property, plant and equipment (1,448,423) (1,333,481)Proceeds from disposal of property, plant and equipment 587,468 22,867Decrease (increase) in refundable deposits 8,038 (16,567)Acquisition of intangible assets (73,435) (73,145)Increase in prepayments for business facilities 46,599 (18,015)

Net cash used from investing activities (3,430,233) (1,561,518)

CASH FLOWS FROM FINANCING ACTIVITIESIncrease (decrease) in short-term loans (396,875) 877,545Decrease in guarantee deposits received (1,540) (602)Payment of cash dividends (3,791,118) (3,787,255)Exercise of employee share options 117,068 30,878Increase (decrease) in non-controlling interests 34,586 (118,577)

Net cash used in financing activities (4,037,879) (2,998,011)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (267,145) (26,461)

NET INCREASE IN CASH AND CASH EQUIVALENTS 279,318 1,236,252

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 4,358,259 3,122,007

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 4,637,577 $ 4,358,259



28

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and the Shareholders Advantech Co., Ltd.

Opinion

We have audited the accompanying financial statements of Advantech Co., Ltd. (the “Company”), which comprise the balance sheets as of December 31, 2016 and 2015, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

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

Key audit matters on the financial statements for the year ended December 31, 2016 were as follows:

Investments accounted for using the equity method

The Company and its subsidiaries acquired 100% share of B+B SmartWorx, Inc. (B+B) for NT$3,296,048 thousand in January 4, 2016 and recognized the acquisition as investment accounted for using the equity method.

29

The evaluation on fair value of the assets, liabilities, and amount of goodwill as of the date of acquisition was based on the specialists’ Purchase Price Allocation Report that involved several financial assumptions and inputs. The judgment of related accounting estimates will affect the presentation of accounts on the financial statements. After considering that the acquisition was a significant event and was transacted during the period of financial statements with a material impact on the financial statements, accuracy of merger transaction of B+B conducted by the Company was deemed to be a key audit matter.

Our key audit procedures performed in respect of the assets and liabilities as of the date of acquisition included the following:

1. Tested the acquisition balance sheet prepared by the management and checked the record bymatching against the fair value of the assets and liabilities as of the date of acquisition.

2. Recalculated the value of goodwill recognized in the acquisition balance sheet.

Impairment assessment of investments accounted for using the equity method

The excess of cost of acquisition of investments accounted for using the equity method over the fair value of investees’ identifiable assets and liability as of the dates of acquisition should be recognized as goodwill. If there is any indication that goodwill is impaired, the management should assess if the carrying amount of goodwill is impaired. We have expressed our concerns on the related risks of impairment assessment on goodwill arising from acquisition of B+B since the impairment assessment of goodwill is based on the management’s significant judgment that involved assumptions of the future profitability and costs of equity and debts; the impairment of goodwill is hence recognized as a critical accounting estimate in Note 5 to the financial statements.


When evaluating the impairment assessment, we tested the management’s assumptions and inputs used for testing the impairment for goodwill, including cash flow projections and discount rates.

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 Company’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 Company or to cease operations, or has no realistic alternative but to do so.

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

30

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 auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

1. Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company's internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditors’ report to the related disclosures in the financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditors’ report. However, futureevents or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, includingthe disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entitiesor business activities within the Company to express an opinion on the financial statements.We are responsible for the direction, supervision and performance of the audit. We remainsolely 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 a statement 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.

31

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

The engagement partners on the audit resulting in this independent auditors’ report are Meng-Chieh Chiu and Chin-Hsiang Chen.

Deloitte & Touche Taipei, Taiwan Republic of China

March 6, 2017

Notice to Readers

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

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

32

ADVANTECH CO., LTD.

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

2016 2015ASSETS Amount % Amount %

CURRENT ASSETSCash and cash equivalents (Notes 4 and 6) $ 2,008,247 6 $ 815,293 3Financial assets at fair value through profit or loss - current (Notes 4, 7 and 25) 34,348 - 7,391 -Available-for-sale financial assets - current (Notes 4, 8 and 25) 700,269 2 - -Notes receivable (Notes 4, 9 and 26) 67,223 - 55,480 -Trade receivables (Notes 4 and 9) 1,543,604 5 1,135,240 4Trade receivables from related parties (Notes 4 and 26) 3,908,448 11 3,977,999 13Other receivables 105,929 - 113,056 -Other receivables from related parties (Note 26) 19,002 - 15,596 -Inventories (Notes 4 and 10) 1,935,873 6 1,673,156 5Other current assets 38,361 - 60,318 -

Total current assets 10,361,304 30 7,853,529 25

NONCURRENT ASSETSAvailable-for-sale financial assets - noncurrent (Notes 4, 8 and 25) 1,694,801 5 1,700,814 6Investments accounted for using the equity method (Notes 4 and 11) 15,208,839 44 13,138,225 42Property, plant and equipment (Notes 4 and 12) 6,938,084 20 6,278,109 20Goodwill (Notes 4 and 13) 111,599 - 111,599 -Other intangible assets (Note 4) 78,321 - 74,049 -Deferred tax assets (Notes 4 and 18) 136,130 1 114,710 1Prepayments for business facilities 22,676 - 15,489 -Prepayment for investments - - 1,968,044 6Other noncurrent assets 5,661 - 10,837 -

Total noncurrent assets 24,196,111 70 23,411,876 75

TOTAL $ 34,557,415 100 $ 31,265,405 100

LIABILITIES AND EQUITY

CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - current (Notes 4, 7 and 25) $ 8,845 - $ 6,352 -Trade payables 1,550,969 4 899,480 3Trade payables to related parties (Note 26) 2,610,642 8 2,687,130 9Other payables (Notes 14 and 17) 2,699,374 8 2,255,915 7Current tax liabilities (Notes 4 and 18) 1,036,650 3 853,769 3Short-term warranty provision (Note 4) 49,155 - 41,410 -Other current liabilities 153,992 - 72,312 -

Total current liabilities 8,109,627 23 6,816,368 22

NONCURRENT LIABILITIESDeferred tax liabilities (Notes 4 and 18) 988,099 3 927,732 3Net defined benefit liabilities (Notes 4, 15 and 17) 211,170 1 182,172 -Other noncurrent liabilities 34,937 - 31,632 -

Total noncurrent liabilities 1,234,206 4 1,141,536 3

Total liabilities 9,343,833 27 7,957,904 25

EQUITYShare capital

Ordinary shares 6,330,741 18 6,318,531 20Advance receipts for share capital 100 - - -

Total share capital 6,330,841 18 6,318,531 20Capital surplus 6,058,884 18 5,587,555 18Retained earnings

Legal reserve 4,473,276 13 3,962,842 13Unappropriated earnings 8,435,785 24 7,098,449 23

Total retained earnings 12,909,061 37 11,061,291 36Other equity

Exchange differences on translating foreign operations (197,633) - 271,859 1Unrealized gains (losses) on available-for-sale financial assets 112,429 - 68,265 -

Total other equity (85,204) - 340,124 1

Total equity 25,213,582 73 23,307,501 75

TOTAL $ 34,557,415 100 $ 31,265,405 100

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

(With Deloitte & Touche audit report dated March 6, 2017)

33

ADVANTECH CO., LTD.

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


OPERATING REVENUE (Notes 4 and 26)Sales $ 30,173,747 99 $ 28,673,906 99Other operating revenue 327,352 1 321,746 1

Total operating revenue 30,501,099 100 28,995,652 100

OPERATING COSTS (Notes 10, 17 and 26) 21,604,247 70 20,758,574 72

GROSS PROFIT 8,896,852 30 8,237,078 28

UNREALIZED LOSS ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES (Note 4) (264,679) (1) (330,254) (1)

REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES (Note 4) 330,254 1 240,811 1

REALIZED GROSS PROFIT 8,962,427 30 8,147,635 28

OPERATING EXPENSES (Notes 17 and 26)Selling and marketing expenses 659,619 2 704,299 3General and administrative expenses 884,172 3 693,290 2Research and development expenses 2,641,219 9 2,568,723 9

Total operating expenses 4,185,010 14 3,966,312 14

OPERATING PROFIT 4,777,417 16 4,181,323 14

NONOPERATING INCOMEShare of the profit of subsidiaries and associates

accounted for using the equity method (Notes 4 and 11) 1,581,818 5 1,344,991 5

Interest income (Note 4) 539 - 1,665 -Gains (losses) on disposal of property, plant and

equipment (Note 4) 146,954 1 (161) -Gains on disposal of investments (Notes 4 and 16) 1,431 - 198,848 1Foreign exchange losses, net (Notes 4, 17 and 28) (140,689) - (88,859) -Gains on financial instruments at fair value through

profit or loss (Note 4) 121,348 - 83,798 -Dividend income (Note 4) 98,800 - 105,445 -Other income (Notes 8 and 26) 101,777 - 112,567 -Finance costs (Note 17) (4,163) - - -

(Continued)

34

ADVANTECH CO., LTD.



Losses on financial instruments at fair value through profit or loss (Note 4) $ (41,381) - $ (67,063) -

Other losses (155) - (53) -

Total nonoperating income 1,866,279 6 1,691,178 6

PROFIT BEFORE INCOME TAX 6,643,696 22 5,872,501 20

INCOME TAX EXPENSE (Notes 4 and 18) 976,834 3 768,155 2

NET PROFIT FOR THE YEAR 5,666,862 19 5,104,346 18

OTHER COMPREHENSIVE INCOMEItems that will not be reclassified subsequently to

profit or loss:Remeasurement of defined benefit plans (Note 15) (31,039) - (18,736) -Share of the other comprehensive loss of

subsidiaries and associates accounted for using the equity method (Note 11) 1,479 - (2,683) -

Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 18) 5,277 - 3,185 -

(24,283) - (18,234) -Items that may be reclassified subsequently to profit

or loss:Exchange differences on translating foreign

operations (Notes 4 and 16) (561,518) (2) (82,566) -Unrealized gains (losses) on available-for-sale

financial assets (Notes 4 and 16) (5,765) - (557,594) (2)Share of other comprehensive income (loss) of

subsidiaries and associates accounted for using the equity method (Notes 4, 11 and 16) 45,794 - 65,031 -

Income tax relating to item that may be reclassified subsequently to profit or loss (Notes 4, 16 and 18) 96,161 - 13,620 -

(425,328) (2) (561,509) (2)

Other comprehensive income (loss) for the year, net of income tax (449,611) (2) (579,743) (2)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 5,217,251 17 $ 4,524,603 16

(Continued)

35

ADVANTECH CO., LTD.



EARNINGS PER SHARE (Note 19)Basic $8.96 $8.08Diluted $8.90 $8.05



36

AD

VA

NT

EC

H C

O.,

LT

D.

STA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

201

6 A

ND

201

5 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Oth

er E

quity

(Not

es 4

and

16)

Exc

hang

e D

iffer

ence

s on

Unr

ealiz

ed G

ain

Issu

ed C

apita

l (N

otes

16

and

20)

Cap

ital S

urpl

us

Ret

aine

d E

arni

ngs (

Not

es 4

,16

and

17)

Tra

nsla

ting

(Los

s) o

n A

dvan

ce R

ecei

pts

(Not

es 4

, 16

Una

ppro

pria

ted

Fore

ign

Ava

ilabl

e-fo

r-sa

le

Shar

e C

apita

lfo

r Sh

are

Cap

ital

Tot

alan

d 20

)L

egal

Res

erve

Ear

ning

sT

otal

Ope

ratio

nsFi

nanc

ial A

sset

sT

otal

Equ

ity

BA

LAN

CE

AT

JAN

UA

RY

1, 2

015

$6,

301,

031

$11

,060

$6,

312,

091

$5,

306,

958

$3,

472,

064

$6,

353,

273

$9,

825,

337

$33

8,35

6$

563,

277

$22

,346

,019

App

ropr

iatio

n of

the

2014

ear

rings

Lega

l res

erve

--

--

490,

778

(490

,778

)-

--

-C

ash

divi

dend

s dis

tribu

ted

by th

e C

ompa

ny-

--

--

(3,7

87,2

55)

(3,7

87,2

55)

--

(3,7

87,2

55)

Issu

e of

ord

inar

y sh

ares

und

er e

mpl

oyee

shar

e op

tions

17,5

00(1

1,06

0)6,

440

24,4

38-

--

--

30,8

78

Com

pens

atio

n co

st re

cogn

ized

for e

mpl

oyee

shar

e op

tions

--

-26

1,87

7-

--

--

261,

877

Cha

nge

in c

apita

l sur

plus

from

inve

stm

ents

in a

ssoc

iate

s acc

ount

ed fo

r usi

ng

equi

ty m

etho

d-

--

2,17

2-

--

--

2,17

2

Diff

eren

ce b

etw

een

cons

ider

atio

ns a

nd c

arry

ing

amou

nts o

f sub

sidi

arie

s acq

uire

d or

disp

osed

of

--

-(1

1,45

7)-

(62,

903)

(62,

903)

--

(74,

360)

Cha

nges

in p

erce

ntag

e of

ow

ners

hip

inte

rest

in su

bsid

iarie

s-

--

3,56

7-

--

--

3,56

7

Net

pro

fit fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

015

--

--

-5,

104,

346

5,10

4,34

6-

-5,

104,

346

Oth

er c

ompr

ehen

sive

inco

me

for t

he y

ear e

nded

Dec

embe

r 31,

201

5, n

et o

f in

com

e ta

x-

--

--

(18,

234)

(18,

234)

(66,

497)

(495

,012

)(5

79,7

43)

Tota

l com

preh

ensi

ve in

com

e fo

rthe

yea

r end

ed D

ecem

ber 3

1, 2

015

--

--

-5,

086,

112

5,08

6,11

2(6

6,49

7)(4

95,0

12)

4,52

4,60

3

BA

LAN

CE

AT

DEC

EMB

ER 3

1, 2

015

6,31

8,53

1-

6,31

8,53

15,

587,

555

3,96

2,84

27,

098,

449

11,0

61,2

9127

1,85

968

,265

23,3

07,5

01

App

ropr

iatio

n of

the

2015

ear

rings

Lega

l res

erve

--

--

510,

434

(510

,434

)-

--

-C

ash

divi

dend

s dis

tribu

ted

by th

e C

ompa

ny-

--

--

(3,7

91,1

18)

(3,7

91,1

18)

--

(3,7

91,1

18)

Issu

e of

ord

inar

y sh

ares

und

er e

mpl

oyee

shar

e op

tions

12,2

1010

012

,310

104,

758

--

--

-11

7,06

8

Com

pens

atio

n co

st re

cogn

ized

for e

mpl

oyee

shar

e op

tions

--

-33

8,19

4-

--

--

338,

194

Cha

nge

in c

apita

l sur

plus

from

inve

stm

ents

in a

ssoc

iate

s acc

ount

ed fo

r usi

ng

equi

ty m

etho

d-

--

10,5

33-

--

--

10,5

33

Diff

eren

ce b

etw

een

cons

ider

atio

ns a

nd c

arry

ing

amou

nts o

f sub

sidi

arie

s acq

uire

d or

disp

osed

of

--

-17

,844

-(3

,691

)(3

,691

)-

-14

,153

Net

pro

fit fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

016

--

--

-5,

666,

862

5,66

6,86

2-

-5,

666,

862

Oth

er c

ompr

ehen

sive

inco

me

for t

he y

ear e

nded

Dec

embe

r 31,

201

6, n

et o

f in

com

e ta

x-

--

--

(24,

283)

(24,

283)

(469

,492

)44

,164

(449

,611

)

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

016

--

--

-5,

642,

579

5,64

2,57

9(4

69,4

92)

44,1

645,

217,

251

BA

LAN

CE

AT

DEC

EMB

ER 3

1, 2

016

$6,

330,

741

$10

0$

6,33

0,84

1$

6,05

8,88

4$

4,47

3,27

6$

8,43

5,78

5$

12,9

09,0

61$

(197

,633

)$

112,

429

$25

,213

,582

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

.

(With

Del

oitte

& T

ouch

e au

dit r

epor

t dat

ed M

arch

6, 2

017)

37

ADVANTECH CO., LTD.

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

2016 2015

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $ 6,643,696 $ 5,872,501Adjustments for:

Depreciation expenses 239,135 242,916Amortization expenses 78,294 74,874Impairment loss recognized (reversal of impairment loss) of trade

receivables 96 (2,203)Net gain on financial assets or liabilities at fair value through profit

or loss (79,967) (16,735)Finance costs 4,163 -Interest income (539) (1,665)Dividend income (98,800) (105,445)Compensation cost of employee share options 338,194 261,877Share of profit of subsidiaries and associates accounted for using the

equity method (1,581,818) (1,344,991)Loss (gain) on disposal of property, plant and equipment (146,954) 161Gain on disposal of investments (1,431) (198,848)Realized loss (gain) on the transactions with subsidiaries and

associates (65,575) 89,443Changes in operating assets and liabilities

Financial assets held for trading 55,503 21,877Notes receivable (11,743) (10,161)Trade receivables (408,460) (139,295)Trade receivables to related parties 69,551 36,412Other receivables 7,127 (26,992)Other receivables to related parties (3,406) 45Inventories (262,717) (268,954)Other current assets 21,957 (8,670)Other financial assets - 18,650Trade payables 651,489 121,548Trade payables to related parties (76,488) 253,194Other payables 357,649 185,158Short-term warranty provision 7,745 5,291Net defined benefit liabilities (2,041) (813)Other current liabilities 81,680 11,088Other noncurrent liabilities 3,305 (1,975)

Cash generated from operations 5,819,645 5,068,288Interest received 539 1,665Dividend received 98,800 105,445Interest paid (4,163) -Income tax paid (653,568) (542,066)

Net cash generated from operating activities 5,261,253 4,633,332(Continued)

38

ADVANTECH CO., LTD.

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

2016 2015

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of available-for-sale financial assets (4,128,000) (3,710,080)Proceeds from sale of available-for-sale financial assets 3,429,410 5,754,213Acquisition of investments accounted for using equity method (293,281) (688,577)Proceeds from disposal of investments accounted for using the equity

method 336,958 -Prepayment for investments - (1,968,044)Proceeds of the capital reduction of investments accounted for using

the equity method 232,330 42,927Payments for property, plant and equipment (930,598) (1,181,375)Proceeds from disposal of property, plant and equipment 239,507 294Decrease in refundable deposits 5,176 187Payments for intangible assets (76,875) (62,714)Proceeds from disposal of intangible assets 58 31Decrease in prepayments for equipment 11,809 14,609Dividends received from subsidiaries and associates 779,257 687,589

Net cash used in investing activities (394,249) (1,110,940)

CASH FLOWS FROM FINANCING ACTIVITIESIncrease in guarantee deposits received - (119)Cash dividends paid (3,791,118) (3,787,255)Exercise of employee share options 117,068 30,878

Net cash used in financing activities (3,674,050) (3,756,496)

NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS 1,192,954 (234,104)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 815,293 1,049,397

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,008,247 $ 815,293



39

<Attachment IV > Advantech Co., Ltd.

2016 Profit Distribution Table

Item Total

Unappropriated retained earnings - beginning 2,796,896,578

Less: Long-term equity investments (3,691,230)

Less: Actuarial loss recognized in retained earnings (24,282,918)

Add: Net income 5,666,862,329

Less: 10% legal reserve appropriated (566,686,233)

Less: Special reserve appropriated (85,203,650)

Current earnings available for distribution 7,783,894,876

Distributions:

Common stock cash dividend ( Dividends Per Share $6.3) (3,988,366,830)

Share dividends ( Dividends Per Share $1 ) (633,074,100)

Unappropriated retained earnings - ending 3,162,453,946

Chairman: K.C. Liu President: Chaney Ho Chief Financial officer: Rorie Kang

40

< A

ttach

men

t V

>

Adv

ante

ch C

o., L

td.

Cor

pora

te C

harte

r (A

rticl

es o

f Inc

orpo

ratio

n) A

rticl

e Am

endm

ents

Tab

leN

o.

Aft

er a

men

dm

ent

Bef

ore

amen

dm

ent

Rem

ark

A

rticl

e 13

Th

e co

mpa

ny h

as s

even

~ n

ine

dire

ctor

s.Nom

inat

ed fo

r a

term

of

thre

e ye

ars

and

they

are

ele

cted

fro

m t

he

capa

ble

cand

idat

es i

n th

e sh

areh

olde

rs’

mee

ting;

als

o,

they

can

be

re-e

lect

ed.

Ther

e m

ust

be a

t le

ast

two

inde

pend

ent d

irect

ors (

not l

ess t

han

one

fifth

of t

he to

tal

num

ber

of d

irect

ors)

out

of

the

num

ber

of d

irect

ors

refe

rred

to

abov

e. T

he i

ndep

ende

nt d

irect

ors

are

to b

e el

ecte

d fr

om

the

cand

idat

es

in

the

shar

ehol

ders

’ m

eetin

g.

The

prof

essi

onal

qu

alifi

catio

ns

of

the

inde

pend

ent

dire

ctor

s, sh

areh

oldi

ngs,

limita

tion

of

part-

time

job,

the

nom

inat

ion

and

appo

intm

ent m

etho

d,

and

othe

r m

atte

rs

to

be

com

plie

d w

ith

mus

t be

pr

oces

sed

acco

rdin

g to

the

rel

evan

t pr

ovis

ions

of

the

com

pete

nt a

utho

ritie

s.

The

com

pany

ha

s se

ven

~ ni

ne

dire

ctor

s an

d th

ree

supe

rvis

ors

who

are

nom

inat

ed f

or a

term

of

thre

e ye

ars

and

elec

ted

from

th

e ca

pabl

e ca

ndid

ates

in

th

e sh

areh

olde

rs’ m

eetin

g; a

lso,

they

can

be

re-e

lect

ed. T

here

m

ust b

e at

leas

t tw

o in

depe

nden

t dire

ctor

s (n

ot le

ss th

an

one

fifth

of

the

tota

l nu

mbe

r of

dire

ctor

s) o

ut o

f th

e nu

mbe

r of

dire

ctor

s re

ferr

ed t

o ab

ove.

The

ind

epen

dent

di

rect

ors

are

to b

e el

ecte

d fr

om t

he c

andi

date

s in

the

sh

areh

olde

rs’

mee

ting.

The

pro

fess

iona

l qu

alifi

catio

ns o

f th

e in

depe

nden

t di

rect

ors,

shar

ehol

ding

s, lim

itatio

n of

pa

rt-tim

e jo

b, t

he n

omin

atio

n an

d ap

poin

tmen

t m

etho

d,

and

othe

r m

atte

rs to

be

com

plie

d w

ith m

ust b

e pr

oces

sed

acco

rdin

g to

the

rel

evan

t pr

ovis

ions

of

the

com

pete

nt

auth

oriti

es.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

13.2

The

exer

cise

of p

ower

by

the

audi

t com

mitt

ee is

as

follo

ws:

1.

Rev

iew

ing

the

oper

atio

ns a

nd fi

nanc

ial c

ondi

tion

ofth

e C

ompa

ny.

2.A

uditi

ng th

e ac

coun

ting

book

s and

doc

umen

ts o

f the

Com

pany

. 3.

Oth

er r

espo

nsib

ilitie

s as

sign

ed i

n ac

cord

ance

with

the

law

and

regu

latio

ns.

The

exer

cise

of p

ower

by

the

supe

rvis

ors i

s as f

ollo

ws:

1.

Rev

iew

ing

the

oper

atio

ns a

nd fi

nanc

ial c

ondi

tion

of th

eC

ompa

ny.

2.A

uditi

ng th

e ac

coun

ting

book

s and

doc

umen

ts o

f the

Com

pany

. 3.

Oth

er r

espo

nsib

ilitie

s as

sign

ed i

n ac

cord

ance

with

the

law

and

regu

latio

ns.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

13.3

The

tota

l sha

res o

f the

Com

pany

hel

d by

all

dire

ctor

s to

be p

roce

ssed

in a

ccor

danc

e w

ith th

e “R

ules

and

Rev

iew

Pr

oced

ures

for D

irect

or a

nd S

uper

viso

r Sha

re

Ow

ners

hip

Rat

ios a

t Pub

lic C

ompa

nies

” pu

blis

hed

by

the

com

pete

nt a

utho

ritie

s.

The

tota

l sha

res o

f the

Com

pany

hel

d by

all

dire

ctor

s and

su

perv

isor

s are

to b

e pr

oces

sed

in a

ccor

danc

e w

ith th

e “R

ules

and

Rev

iew

Pro

cedu

res f

or D

irect

or a

nd

Supe

rvis

or S

hare

Ow

ners

hip

Rat

ios a

t Pub

lic C

ompa

nies

” pu

blis

hed

by th

e co

mpe

tent

aut

horit

ies.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

13.4

The

Com

pany

may

pur

chas

e lia

bilit

y in

sura

nce

for

dire

ctor

s thr

ough

out t

he te

nure

bas

ed o

n th

eir s

cope

of

resp

onsi

bilit

y.

The

Com

pany

may

pur

chas

e lia

bilit

y in

sura

nce

for

dire

ctor

s and

supe

rvis

ors t

hrou

ghou

t the

tenu

re b

ased

on

thei

r sco

pe o

f res

pons

ibili

ty.

Sep

up th

e Aud

it C

omm

ittee

.

41

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

Arti

cle

13.5

The

boar

d of

dire

ctor

s is

aut

horiz

ed t

o de

liber

ate

and

dete

rmin

e th

e re

mun

erat

ion

of a

ll di

rect

ors

acco

rdin

g to

th

eir p

artic

ipat

ion

in a

nd c

ontri

butio

n to

the

Com

pany

’s

busi

ness

ope

ratio

n an

d by

refe

rrin

g to

the

rem

uner

atio

n st

anda

rd o

f the

dom

estic

indu

stry

.

The

boar

d of

dire

ctor

s is

aut

horiz

ed t

o de

liber

ate

and

dete

rmin

e th

e re

mun

erat

ion

of

all

dire

ctor

s an

d su

perv

isor

s ac

cord

ing

to

thei

r pa

rtici

patio

n in

an

d co

ntrib

utio

n to

the

Com

pany

’s b

usin

ess

oper

atio

n an

d by

re

ferr

ing

to t

he r

emun

erat

ion

stan

dard

of

the

dom

estic

in

dust

ry.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

13.6

The

Com

pany

ha

s an

A

udit

Com

mitt

ee

setu

p in

ac

cord

ance

with

Arti

cle

14.4

of t

he S

ecur

ities

Exc

hang

e A

ct,

whi

ch

is

orga

nize

d by

al

l th

e in

depe

nden

t di

rect

ors.

The

exer

cise

of

po

wer

by

th

e A

udit

Com

mitt

ee a

nd it

s m

embe

rs a

nd th

e re

late

d m

atte

rs a

re

to b

e pr

oces

sed

in a

ccor

danc

e w

ith th

e pr

ovis

ions

of t

he

com

pete

nt a

utho

ritie

s.

The

Com

pany

ha

s an

A

udit

Com

mitt

ee

setu

p in

ac

cord

ance

with

Arti

cle

14.4

of

the

Secu

ritie

s Ex

chan

ge

Act

, whi

ch is

org

aniz

ed b

y al

l the

inde

pend

ent d

irect

ors.

The

exer

cise

of

pow

er b

y th

e A

udit

Com

mitt

ee a

nd i

ts

mem

bers

and

the

rel

ated

mat

ters

are

to

be p

roce

ssed

in

acco

rdan

ce

with

th

e pr

ovis

ions

of

th

e co

mpe

tent

au

thor

ities

. Su

perv

isor

s w

ill b

e di

scha

rged

on

the

date

th

e A

udit

Com

mitt

ee e

stab

lishe

d, w

hich

will

be

in e

ffect

on

the

expi

ry d

ate

of th

e te

rm o

f offi

ce in

201

7.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

14.1

The

Com

pany

may

at

any

time

in c

ase

of e

mer

genc

y co

nven

e a

boar

d m

eetin

g an

d w

ith

the

dire

ctor

s

info

rmed

in w

ritin

g or

by

E-m

ail o

r fax

.

The

Com

pany

may

at

any

time

in c

ase

of e

mer

genc

y co

nven

e a

boar

d m

eetin

g an

d w

ith t

he d

irect

ors

and

supe

rvis

ors i

nfor

med

in w

ritin

g or

by

E-m

ail o

r fax

.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

18

The

Com

pany

’s b

oard

of

dire

ctor

s sh

all

at t

he e

nd o

f ea

ch f

isca

l ye

ar h

ave

the

follo

win

g co

mpo

sed

(1)

Bus

ines

s R

epor

t (2

) Fi

nanc

ial

Rep

orts

(3

) Pr

ofit

Dis

tribu

tion

Prop

osal

s fo

r ac

know

ledg

emen

t in

th

e sh

areh

olde

rs’ m

eetin

g.

The

Com

pany

’s b

oard

of

dire

ctor

s sh

all

at t

he e

nd o

f ea

ch

fisca

l ye

ar

have

th

e fo

llow

ing

com

pose

d (1

) B

usin

ess

Rep

ort

(2)

Fina

ncia

l R

epor

ts

(3)

Prof

it D

istri

butio

n Pr

opos

als

for t

he a

udit

of th

e su

perv

isor

s 30

da

ys

prio

r to

th

e sh

areh

olde

rs’

mee

ting

and

for

ackn

owle

dgem

ent i

n th

e sh

areh

olde

rs’ m

eetin

g.

Sep

up th

e Aud

it C

omm

ittee

.

Arti

cle

22

The

Cor

pora

te C

harte

r (A

rticl

e of

Inc

orpo

ratio

n) w

as

esta

blis

hed

on S

epte

mbe

r 25

, 19

81 (

the

first

tim

e ~

Twen

tieth

are

om

itted

). Th

e 21

st a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

, 200

3.

The

22nd

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

7, 2

003.

Th

e 23

rd a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

4, 2

005.

Th

e 24

th a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on N

ovem

ber 1

8, 2

005.

The

Cor

pora

te C

harte

r (A

rticl

e of

Inc

orpo

ratio

n) w

as

esta

blis

hed

on S

epte

mbe

r 25

, 19

81 (

the

first

tim

e ~

Twen

tieth

are

om

itted

). Th

e 21

st a

men

dmen

t of t

he C

orpo

rate

Cha

rter (

Arti

cle

of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

, 200

3.

The

22nd

am

endm

ent

of t

he C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

May

27,

200

3.

The

23rd

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

24,

200

5.

The

24th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

Nov

embe

r 18,

200

5.

Upd

ate

the

date

of

the

amen

dmen

t

42

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

The

25th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

June

16,

200

6.

The

26th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

June

15,

200

7.

The

27th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

June

12,

200

8.

The

28th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

May

15,

200

9.

The

29th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

May

18,

201

0.

The

30th

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

May

25,

201

1.

The

31st

am

endm

ent o

f th

e C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

June

13,

201

2.

The

32nd

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on Ju

ne 1

8, 2

014.

Th

e 33

rd a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

8, 2

015.

Th

e 34

rd a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

5, 2

016.

Th

e 35

rd a

men

dmen

t of

the

Cor

pora

te C

harte

r (A

rticl

e of

Inco

rpor

atio

n) w

as m

ade

on M

ay 2

6, 2

017.

The

25th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

June

16,

200

6.

The

26th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

June

15,

200

7.

The

27th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

June

12,

200

8.

The

28th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

15,

200

9.

The

29th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

18,

201

0.

The

30th

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

25,

201

1.

The

31st

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

June

13,

201

2.

The

32nd

am

endm

ent

of t

he C

orpo

rate

Cha

rter

(Arti

cle

of In

corp

orat

ion)

was

mad

e on

June

18,

201

4.

The

33rd

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

28,

201

5.

The

34rd

am

endm

ent o

f the

Cor

pora

te C

harte

r (A

rticl

e of

In

corp

orat

ion)

was

mad

e on

May

25,

201

6.

43

< A

ttach

men

t V

I >

Adv

ante

ch C

o., L

td.

Proc

edur

es fo

r the

Acq

uisi

tion

or D

ispo

sal o

f Ass

ets

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

Arti

cle

3 Th

e te

rm “

asse

ts”

as u

sed

in t

hese

Pro

cedu

res

incl

udes

th

e fo

llow

ing:

1.

Inve

stm

ents

in

stoc

ks,

gove

rnm

ent

bond

s, co

rpor

ate

bond

s, fin

anci

al b

onds

, sec

uriti

es r

epre

sent

ing

inte

rest

in

a fu

nd, d

epos

itary

rece

ipts

, cal

l (pu

t) w

arra

nts,

bene

ficia

l in

tere

st se

curit

ies,

and

asse

t-bac

ked

secu

ritie

s. 2.

Rea

l pr

oper

ty (

incl

udin

g la

nd,

hous

es a

nd b

uild

ings

,in

vest

men

t pro

perty

, rig

hts

to u

se la

nd, a

nd c

onst

ruct

ion

ente

rpris

e in

vent

ory)

and

equ

ipm

ent.

3.M

embe

rshi

ps.

4.Pa

tent

s, co

pyrig

hts,

trade

mar

ks,

fran

chis

e rig

hts,

and

othe

r int

angi

ble

asse

ts.

5.C

laim

s of

fina

ncia

l ins

titut

ions

(inc

ludi

ng r

ecei

vabl

es,

bills

pu

rcha

sed

and

disc

ount

ed,

loan

s, an

d ov

erdu

e re

ceiv

able

s).

6.D

eriv

ativ

es.

7.A

sset

s ac

quire

d or

dis

pose

d of

in

conn

ectio

n w

ithm

erge

rs, d

emer

gers

, acq

uisi

tions

, or t

rans

fer o

f sha

res

in

acco

rdan

ce w

ith la

w

8.O

ther

maj

or a

sset

s.

The

term

“as

sets

” as

use

d in

thes

e Pr

oced

ures

incl

udes

the

follo

win

g:

1.In

vest

men

ts i

n st

ocks

, go

vern

men

t bo

nds,

corp

orat

e bo

nds,

finan

cial

bon

ds, s

ecur

ities

repr

esen

ting

inte

rest

in a

fu

nd,

depo

sita

ry r

ecei

pts,

call

(put

) w

arra

nts,

bene

ficia

l in

tere

st se

curit

ies,

and

asse

t-bac

ked

secu

ritie

s. 2.

Rea

l pr

oper

ty (

incl

udin

g la

nd,

hous

es a

nd b

uild

ings

,in

vest

men

t pr

oper

ty,

right

s to

use

lan

d, a

nd c

onst

ruct

ion

ente

rpris

e in

vent

ory)

and

equ

ipm

ent.

3.M

embe

rshi

ps.

4.Pa

tent

s, co

pyrig

hts,

trade

mar

ks,

fran

chis

e rig

hts,

and

othe

r int

angi

ble

asse

ts.

5.D

eriv

ativ

es.

6.A

sset

s ac

quire

d or

dis

pose

d of

in

conn

ectio

n w

ithm

erge

rs,

dem

erge

rs,

acqu

isiti

ons,

or t

rans

fer

of s

hare

s in

ac

cord

ance

with

law

7.

Oth

er m

ajor

ass

ets.

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

Arti

cle

6 A

fter

thes

e Pr

oced

ures

hav

e be

en a

ppro

ved

by m

ore

than

hal

f of

all

Aud

it C

omm

ittee

mem

bers

and

the

B

oard

of

Dire

ctor

s, th

ey s

hall

be s

ubm

itted

to

the

shar

ehol

ders

' m

eetin

g fo

r ap

prov

al;

the

sam

e ap

plie

s w

hen

thes

e Pr

oced

ures

ar

e am

ende

d.

Whe

n th

ese

Proc

edur

es a

re r

epor

ted

to t

he B

oard

of

Dire

ctor

s fo

r di

scus

sion

, th

e B

oard

of

Dire

ctor

s sh

all

take

int

o fu

ll co

nsid

erat

ion

each

inde

pend

ent d

irect

or's

opin

ions

. If a

n in

depe

nden

t dire

ctor

obj

ects

to o

r exp

ress

es re

serv

atio

ns

abou

t any

mat

ter,

it sh

all b

e re

cord

ed in

the

min

utes

of

Thes

e Pr

oced

ures

are

est

ablis

hed

in a

ccor

danc

e w

ith t

he

Reg

ulat

ions

Gov

erni

ng t

he A

cqui

sitio

n an

d D

ispo

sal

of

Ass

ets

by P

ublic

Com

pani

es p

rom

ulga

ted

by t

he F

SC.

Afte

r th

ese

Proc

edur

es h

ave

been

app

rove

d by

the

Boa

rd

of D

irect

ors,

they

sha

ll be

sub

mitt

ed t

o ea

ch s

uper

viso

r, an

d th

en to

a s

hare

hold

ers'

mee

ting

for a

ppro

val;

the

sam

e ap

plie

s w

hen

the

proc

edur

es a

re a

men

ded.

If a

ny d

irect

or

expr

esse

s di

ssen

t an

d it

is c

onta

ined

in

the

min

utes

or

a w

ritte

n st

atem

ent,

the

com

pany

sha

ll su

bmit

the

dire

ctor

's di

ssen

ting

opin

ion

to e

ach

supe

rvis

or.

Acc

ordi

ng to

the

actu

al p

ract

ice

44

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

the

boar

d of

dire

ctor

s m

eetin

g. W

hen

thes

e Pr

oced

ures

ar

e ad

opte

d or

am

ende

d, th

ey s

hall

be a

ppro

ved

by m

ore

than

ha

lf of

al

l A

udit

Com

mitt

ee

mem

bers

an

d su

bmitt

ed to

the

Boa

rd o

f Dire

ctor

s for

a re

solu

tion.

If

app

rova

l of

mor

e th

an h

alf

of a

ll A

udit

Com

mitt

ee

mem

bers

as

requ

ired

in th

e pr

eced

ing

para

grap

h is

not

ob

tain

ed,

thes

e Pr

oced

ures

may

be

impl

emen

ted

if ap

prov

ed b

y m

ore

than

two-

third

s of

all

dire

ctor

s, an

d th

e re

solu

tion

of th

e A

udit

Com

mitt

ee s

hall

be re

cord

ed

in t

he m

inut

es o

f th

e bo

ard

mee

ting.

The

ter

ms

“all

Aud

it C

omm

ittee

mem

bers

” an

d “a

ll di

rect

ors”

sha

ll be

co

unte

d as

the

act

ual

num

ber

of p

erso

ns c

urre

ntly

ho

ldin

g th

ose

posi

tions

.

Whe

n th

ese

Proc

edur

es a

re s

ubm

itted

to

the

Boa

rd o

f D

irect

ors

for

disc

ussi

on

purs

uant

to

th

e pr

eced

ing

para

grap

h, t

he B

oard

of

Dire

ctor

s sh

all

take

int

o fu

ll co

nsid

erat

ion

each

ind

epen

dent

dire

ctor

's op

inio

ns. I

f an

in

depe

nden

t di

rect

or o

bjec

ts t

o or

exp

ress

es r

eser

vatio

ns

abou

t any

mat

ter,

it sh

all b

e re

cord

ed in

the

min

utes

of t

he

boar

d m

eetin

g.

Arti

cle

8 Th

e C

ompa

ny’s

acq

uisi

tion

or d

ispo

sal o

f ass

ets

shal

l be

appr

oved

by

th

e B

oard

of

D

irect

ors

unde

r th

e C

ompa

ny’s

pro

cedu

res

or o

ther

law

s or

regu

latio

ns. I

f a

dire

ctor

exp

ress

es d

isse

nt a

nd i

t is

con

tain

ed i

n th

e m

inut

es o

r a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e di

rect

or's

diss

entin

g op

inio

n to

the

Aud

it C

omm

ittee

. W

hen

a tra

nsac

tion

invo

lvin

g th

e ac

quis

ition

or d

ispo

sal

of a

sset

s is

sub

mitt

ed t

o th

e B

oard

of

Dire

ctor

s fo

r di

scus

sion

pur

suan

t to

the

pre

cedi

ng p

arag

raph

, th

e B

oard

of D

irect

ors

shal

l tak

e in

to fu

ll co

nsid

erat

ion

each

in

depe

nden

t di

rect

or's

opin

ions

. If

an

in

depe

nden

t di

rect

or o

bjec

ts t

o or

exp

ress

es r

eser

vatio

ns a

bout

any

m

atte

r, it

shal

l be

reco

rded

in th

e m

inut

es o

f the

boa

rd o

f di

rect

ors m

eetin

g.

Maj

or

asse

ts

or

deriv

ativ

es

trans

actio

ns

shal

l be

ap

prov

ed b

y m

ore

than

hal

f of

all

Aud

it C

omm

ittee

m

embe

rs a

nd r

epor

ted

to t

he B

oard

of

Dire

ctor

s fo

r re

solu

tion.

If

app

rova

l of

mor

e th

an h

alf

of a

ll A

udit

Com

mitt

ee

mem

bers

is

not

obta

ined

, th

ese

proc

edur

es m

ay b

e im

plem

ente

d if

appr

oved

by

mor

e th

an tw

o-th

irds

of a

ll

The

Com

pany

's ac

quis

ition

or

disp

osal

of

asse

ts t

hat

is

subj

ect t

o th

e ap

prov

al o

f the

Boa

rd o

f Dire

ctor

s und

er th

e C

ompa

ny's

proc

edur

es o

r ot

her

law

s or

reg

ulat

ions

, if

a di

rect

or e

xpre

sses

dis

sent

and

it

is c

onta

ined

in

the

min

utes

or a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e di

rect

or's

diss

entin

g op

inio

n to

eac

h su

perv

isor

. W

hen

a tra

nsac

tion

invo

lvin

g th

e ac

quis

ition

or

disp

osal

of

ass

ets

is s

ubm

itted

to

the

Boa

rd o

f D

irect

ors

for

disc

ussi

on p

ursu

ant t

o th

e pr

eced

ing

para

grap

h, th

e B

oard

of

D

irect

ors

shal

l ta

ke

into

fu

ll co

nsid

erat

ion

each

in

depe

nden

t dire

ctor

's op

inio

ns. I

f an

inde

pend

ent d

irect

or

obje

cts

to o

r ex

pres

ses

rese

rvat

ions

abo

ut a

ny m

atte

r, it

shal

l be

reco

rded

in th

e m

inut

es o

f th

e bo

ard

of d

irect

ors

mee

ting.

Acc

ordi

ng to

the

actu

al p

ract

ice

45

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

dire

ctor

s, an

d th

e re

solu

tion

of t

he A

udit

Com

mitt

ee

shal

l be

rec

orde

d in

the

min

utes

of

the

boar

d m

eetin

g.

The

term

s “a

ll A

udit

Com

mitt

ee m

embe

rs”

and

“all

dire

ctor

s” s

hall

be c

ount

ed a

s th

e ac

tual

num

ber

of

pers

ons c

urre

ntly

hol

ding

thos

e po

sitio

ns.

Arti

cle

9 In

acq

uirin

g or

dis

posi

ng o

f re

al p

rope

rty o

r eq

uipm

ent

whe

re

the

trans

actio

n am

ount

re

ache

s 20

%

of

the

Com

pany

’s p

aid-

in c

apita

l or

NT$

300

mill

ion

or m

ore,

th

e C

ompa

ny,

unle

ss t

rans

actin

g w

ith a

gov

ernm

ent

agen

cy,

enga

ging

ot

hers

to

bu

ild

on

its

own

land

, en

gagi

ng o

ther

s to

bui

ld o

n re

nted

land

, or

acqu

iring

or

disp

osin

g of

equ

ipm

ent f

or b

usin

ess

use,

sha

ll ob

tain

an

appr

aisa

l re

port

prio

r to

the

dat

e of

occ

urre

nce

of t

he

even

t fr

om a

pro

fess

iona

l ap

prai

ser

and

shal

l fu

rther

co

mpl

y w

ith th

e fo

llow

ing

prov

isio

ns:

1.W

here

due

to s

peci

al c

ircum

stan

ces

it is

nec

essa

ry to

give

a li

mite

d pr

ice,

spe

cifie

d pr

ice,

or s

peci

al p

rice

asa

refe

renc

e ba

sis

for

the

trans

actio

n pr

ice,

th

etra

nsac

tion

shal

l be

subm

itted

for

appr

oval

in a

dvan

ceby

the

Boa

rd o

f D

irect

ors,

and

the

sam

e pr

oced

ure

shal

l be

follo

wed

for

any

fut

ure

chan

ges

to th

e te

rms

and

cond

ition

s of t

he tr

ansa

ctio

n.2.

Whe

re th

e tra

nsac

tion

amou

nt is

NT$

1 bi

llion

or m

ore,

appr

aisa

ls f

rom

tw

o or

mor

e pr

ofes

sion

al a

ppra

iser

ssh

all b

e ob

tain

ed.

3.W

here

any

one

of t

he fo

llow

ing

circ

umst

ance

s ap

plie

sw

ith r

espe

ct t

o th

e pr

ofes

sion

al a

ppra

iser

's ap

prai

sal

resu

lts, u

nles

s al

l the

app

rais

al re

sults

for t

he a

sset

s to

be a

cqui

red

are

high

er th

an th

e tra

nsac

tion

amou

nt, o

ral

l the

app

rais

al re

sults

for t

he a

sset

s to

be

disp

osed

of

are

low

er t

han

the

trans

actio

n am

ount

, a

certi

fied

publ

ic a

ccou

ntan

t sh

all

be e

ngag

ed t

o pe

rfor

m t

heap

prai

sal

in

acco

rdan

ce

with

th

e pr

ovis

ions

of

Stat

emen

t of

Aud

iting

Sta

ndar

ds N

o. 2

0 an

d re

nder

asp

ecifi

c op

inio

n re

gard

ing

the

reas

on

for

the

Proc

edur

es fo

r Acq

uisi

tion

or D

ispo

sal o

f Rea

l Pro

perty

or

Equi

pmen

t

1.Ev

alua

tion

and

Ope

ratin

g Pr

oced

ures

The

trans

actio

n pr

oces

ses

of

real

pr

oper

ty

and

equi

pmen

t sha

ll be

han

dled

in a

ccor

danc

e w

ith th

e op

erat

ing

proc

edur

es f

or f

ixed

ass

et c

ircul

atio

n in

th

e C

ompa

ny’s

inte

rnal

con

trol s

yste

m.

2.Pr

oced

ures

fo

r D

eter

min

ing

Trad

ing

Term

s an

dC

ondi

tions

and

Aut

horiz

atio

n Li

mit

(1) W

hen

acqu

iring

or d

ispo

sing

of r

eal p

rope

rty, t

heC

ompa

ny s

hall

dete

rmin

e th

e tra

ding

ter

ms

and

cond

ition

s an

d tra

ding

pr

ices

ba

sed

on

the

curr

ent

valu

e, a

sses

sed

valu

e, a

nd r

eal

tradi

ng

pric

e of

ne

arby

re

al

prop

erty

an

d ha

ve

the

anal

ysis

re

port

subm

itted

to

th

e B

oard

of

D

irect

ors.

If th

e am

ount

of t

he tr

ansa

ctio

n is

less

th

an N

T$30

0 m

illio

n, th

is s

hall

be a

ppro

ved

by

the

Cha

irman

of

the

Boa

rd a

nd r

epor

ted

to t

he

late

st b

oard

mee

ting

afte

rwar

d; if

the

amou

nt o

f th

e tra

nsac

tion

is m

ore

than

NT$

300

mill

ion,

this

sh

all b

e ap

prov

ed b

y th

e B

oard

of D

irect

ors.

(2

) The

acq

uisi

tion

or d

ispo

sal o

f equ

ipm

ent s

hall

be

perf

orm

ed

thro

ugh

enqu

iry,

com

paris

on,

barg

aini

ng,

or b

iddi

ng.

If t

he a

mou

nt o

f th

e tra

nsac

tion

is

less

th

an

NT$

300

mill

ion

(incl

usiv

e), t

his s

hall

be a

ppro

ved

purs

uant

to th

e au

thor

izat

ion

limit;

if

the

amou

nt

of

the

trans

actio

n is

mor

e th

an N

T$30

0 m

illio

n, t

his

shal

l be

appr

oved

by

the

Pres

iden

t and

the

Boa

rd

of D

irect

ors.

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

46

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

disc

repa

ncy

and

the

appr

opria

tene

ss o

f th

e tra

nsac

tion

pric

e:

(1)

The

disc

repa

ncy

betw

een

the

appr

aisa

l re

sult

and

the

trans

actio

n am

ount

is

20 p

erce

nt o

r m

ore

of

the

trans

actio

n am

ount

. (2

) Th

e di

scre

panc

y be

twee

n th

e ap

prai

sal

resu

lts o

f tw

o or

mor

e pr

ofes

sion

al a

ppra

iser

s is

10

perc

ent

or m

ore

of th

e tra

nsac

tion

amou

nt.

4.N

o m

ore

than

3 m

onth

s m

ay e

laps

e be

twee

n th

e da

teof

the

appr

aisa

l rep

ort i

ssue

d by

a p

rofe

ssio

nal a

ppra

iser

an

d th

e co

ntra

ct e

xecu

tion

date

; pr

ovid

ed,

whe

re t

he

publ

icly

ann

ounc

ed c

urre

nt v

alue

for

the

sam

e pe

riod

is

used

and

not

mor

e th

an 6

mon

ths

have

ela

psed

, an

op

inio

n m

ay s

till b

e is

sued

by

the

orig

inal

pro

fess

iona

l ap

prai

ser.

3.U

nits

Res

pons

ible

for I

mpl

emen

tatio

nA

fter

the

acqu

isiti

on o

r di

spos

al o

f re

al p

rope

rty o

r eq

uipm

ent

is a

ppro

ved

base

d on

the

aut

horiz

atio

n lim

it st

ipul

ated

in

th

e pr

eced

ing

para

grap

h,

the

depa

rtmen

t usi

ng su

ch re

al p

rope

rty o

r equ

ipm

ent a

nd

Adm

inis

tratio

n D

epar

tmen

t is

re

spon

sibl

e fo

r im

plem

enta

tion.

4.

App

rais

al R

epor

t on

Rea

l Pr

oper

ty o

r O

ther

Fix

edA

sset

s In

acqu

iring

or

di

spos

ing

of

real

pr

oper

ty

or

equi

pmen

t w

here

the

tra

nsac

tion

amou

nt r

each

es

NT$

300

mill

ion

or m

ore,

the

Com

pany

, un

less

tra

nsac

ting

with

a g

over

nmen

t ag

ency

, en

gagi

ng

othe

rs to

bui

ld o

n its

ow

n la

nd, e

ngag

ing

othe

rs to

bu

ild o

n re

nted

lan

d, o

r ac

quiri

ng o

r di

spos

ing

of

equi

pmen

t for

bus

ines

s use

, sha

ll ob

tain

an

appr

aisa

l re

port

prio

r to

the

dat

e of

occ

urre

nce

of t

he e

vent

fr

om

a pr

ofes

sion

al

appr

aise

r an

d sh

all

furth

er

com

ply

with

the

follo

win

g pr

ovis

ions

: (1

) W

here

du

e to

sp

ecia

l ci

rcum

stan

ces

it is

ne

cess

ary

to g

ive

a lim

ited

pric

e, s

peci

fied

pric

e,

or s

peci

al p

rice

as a

ref

eren

ce b

asis

for

the

tra

nsac

tion

pric

e,

the

trans

actio

n sh

all

be

subm

itted

for

app

rova

l in

adva

nce

by th

e B

oard

of

Dire

ctor

s, an

d th

e sa

me

proc

edur

e sh

all

be

follo

wed

for a

ny fu

ture

cha

nges

to th

e te

rms

and

cond

ition

s of t

he tr

ansa

ctio

n.

(2) W

here

the

trans

actio

n am

ount

is N

T$1

billi

on o

r m

ore,

app

rais

als

from

tw

o or

mor

e pr

ofes

sion

al

appr

aise

rs sh

all b

e ob

tain

ed.

(3)

Whe

re a

ny o

ne o

f th

e fo

llow

ing

circ

umst

ance

s ap

plie

s w

ith

resp

ect

to

the

prof

essi

onal

ap

prai

ser's

ap

prai

sal

resu

lts,

unle

ss

all

the

appr

aisa

l res

ults

for t

he a

sset

s to

be

acqu

ired

are

high

er t

han

the

trans

actio

n am

ount

, or

all

the

47

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

appr

aisa

l res

ults

for

the

asse

ts to

be

disp

osed

of

are

low

er th

an th

e tra

nsac

tion

amou

nt, a

cer

tifie

d pu

blic

acc

ount

ant

shal

l be

eng

aged

to

perf

orm

th

e ap

prai

sal

in a

ccor

danc

e w

ith t

he p

rovi

sion

s of

St

atem

ent

of

Aud

iting

St

anda

rds

No.

20

pu

blis

hed

by th

e R

OC

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent

Foun

datio

n (A

RD

F) a

nd r

ende

r a

spec

ific

opin

ion

rega

rdin

g th

e re

ason

for

the

di

scre

panc

y an

d th

e ap

prop

riate

ness

of

th

e tra

nsac

tion

pric

e:

A.

The

disc

repa

ncy

betw

een

the

appr

aisa

l re

sult

and

the

trans

actio

n am

ount

is

20

perc

ent

or

mor

e of

th

e tra

nsac

tion

amou

nt.

B.

The

disc

repa

ncy

betw

een

the

appr

aisa

l re

sults

of

tw

o or

m

ore

prof

essi

onal

ap

prai

sers

is

10 p

erce

nt o

r m

ore

of t

he

trans

actio

n am

ount

. (4

) N

o m

ore

than

3 m

onth

s m

ay e

laps

e be

twee

n th

eda

te

of

the

appr

aisa

l re

port

issu

ed

by

apr

ofes

sion

al a

ppra

iser

and

the

cont

ract

exe

cutio

nda

te;

prov

ided

, w

here

the

pub

licly

ann

ounc

edcu

rren

t val

ue fo

r the

sam

e pe

riod

is u

sed

and

not

mor

e th

an 6

mon

ths

have

ela

psed

, an

opi

nion

may

stil

l be

iss

ued

by t

he o

rigin

al p

rofe

ssio

nal

appr

aise

r. (5

) W

here

the

Com

pany

acq

uire

s or

dis

pose

s of

asse

ts

thro

ugh

cour

t au

ctio

n pr

oced

ures

, th

eev

iden

tiary

doc

umen

tatio

n is

sued

by

the

cour

tm

ay b

e su

bstit

uted

for

the

app

rais

al r

epor

t or

CPA

opi

nion

. A

rticl

e 11

W

here

th

e C

ompa

ny

acqu

ires

or

disp

oses

of

m

embe

rshi

ps o

r in

tang

ible

ass

ets

and

the

trans

actio

n am

ount

rea

ches

20%

of

the

Com

pany

’s p

aid-

in c

apita

l or

NT$

300

mill

ion

or m

ore,

exc

ept i

n tra

nsac

tions

with

Proc

edur

es fo

r Acq

uisi

tion

or D

ispo

sal o

f Mem

bers

hips

or

Inta

ngib

le A

sset

s 1.

Eva

luat

ion

and

Ope

ratin

g Pr

oced

ures

The

trans

actio

n pr

oces

ses

of

mem

bers

hips

or

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

48

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

a go

vern

men

t ag

ency

, th

e C

ompa

ny s

hall

enga

ge a

ce

rtifie

d pu

blic

ac

coun

tant

pr

ior

to

the

date

of

oc

curr

ence

of

the

even

t to

ren

der

an o

pini

on o

n th

e re

ason

able

ness

of

the

trans

actio

n pr

ice;

the

CPA

sha

ll co

mpl

y w

ith t

he p

rovi

sion

s of

Sta

tem

ent

of A

uditi

ng

Stan

dard

s No.

20.

inta

ngib

le a

sset

s sh

all

be h

andl

ed i

n ac

cord

ance

w

ith

the

oper

atin

g pr

oced

ures

fo

r fix

ed

asse

t ci

rcul

atio

n in

th

e C

ompa

ny’s

in

tern

al

cont

rol

syst

em.

2.Pr

oced

ures

fo

r D

eter

min

ing

Trad

ing

Term

s an

dC

ondi

tions

and

Aut

horiz

atio

n Li

mit

(1)

The

tradi

ng t

erm

s an

d co

nditi

ons

and

pric

es o

f ac

quis

ition

or

disp

osal

of

mem

bers

hips

sha

ll be

de

term

ined

by

the

Com

pany

bas

ed o

n th

e m

arke

t fa

ir pr

ice,

with

the

ana

lysi

s re

port

subm

itted

to

the

Pres

iden

t fo

r ap

prov

al. T

he a

mou

nt o

f ea

ch

trans

actio

n le

ss

than

1%

of

th

e C

ompa

ny’s

pa

id-in

ca

pita

l or

N

T$30

0 m

illio

n sh

all

be

repo

rted

to t

he B

oard

of

Dire

ctor

s fo

r ap

prov

al

and

the

soon

est

boar

d m

eetin

g fo

r fu

ture

re

fere

nce;

th

e am

ount

of

ea

ch

trans

actio

n ex

ceed

ing

NT$

300

mill

ion

shal

l be

rep

orte

d to

th

e B

oard

of D

irect

ors f

or a

ppro

val.

(2) T

he tr

adin

g te

rms

and

cond

ition

s an

d pr

ices

of

acqu

isiti

on o

r di

spos

al o

f in

tang

ible

ass

ets

shal

l be

det

erm

ined

by

the

Com

pany

bas

ed o

n th

eap

prai

sal

repo

rt or

mar

ket

fair

pric

e, w

ith t

he

anal

ysis

rep

ort

subm

itted

to

the

Pres

iden

t fo

r ap

prov

al.

The

amou

nt o

f ea

ch t

rans

actio

n le

ss

than

10%

of

the

Com

pany

’s p

aid-

in c

apita

l or

N

T$30

0 m

illio

n sh

all

be

repo

rted

to

the

Cha

irman

of

the

Boa

rd f

or a

ppro

val

and

the

soon

est

boar

d m

eetin

g fo

r fu

ture

ref

eren

ce;

the

amou

nt o

f ea

ch t

rans

actio

n ex

ceed

ing

NT$

300

mill

ion

shal

l be

re

porte

d to

th

e B

oard

of

D

irect

ors f

or a

ppro

val.

3.U

nits

Res

pons

ible

for I

mpl

emen

tatio

nA

fter t

he a

cqui

sitio

n or

dis

posa

l of

mem

bers

hips

or

inta

ngib

le

asse

ts

is

appr

oved

ba

sed

on

the

auth

oriz

atio

n lim

it st

ipul

ated

in

th

e pr

eced

ing

49

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

para

grap

h, th

e de

partm

ent u

sing

suc

h m

embe

rshi

ps

or i

ntan

gibl

e as

sets

and

Fin

ance

Dep

artm

ent

or

Adm

inis

tratio

n D

epar

tmen

t ar

e re

spon

sibl

e fo

r im

plem

enta

tion.

4.

App

rais

al R

epor

t on

Mem

bers

hips

or I

ntan

gibl

e A

sset

sW

here

th

e C

ompa

ny

acqu

ires

or

disp

oses

of

m

embe

rshi

ps

or

inta

ngib

le

asse

ts

and

the

trans

actio

n am

ount

reac

hes

NT$

30 m

illio

n or

mor

e,

exce

pt i

n tra

nsac

tions

with

a g

over

nmen

t ag

ency

, th

e C

ompa

ny

shal

l en

gage

a

certi

fied

publ

ic

acco

unta

nt p

rior

to t

he d

ate

of o

ccur

renc

e of

the

ev

ent t

o re

nder

an

opin

ion

on th

e re

ason

able

ness

of

the

trans

actio

n pr

ice;

the

CPA

sha

ll co

mpl

y w

ith

the

prov

isio

ns o

f St

atem

ent

of A

uditi

ng S

tand

ards

N

o. 2

0 pu

blis

hed

by th

e A

RD

F.

Arti

cle

14

Whe

n th

e C

ompa

ny in

tend

s to

acq

uire

or d

ispo

se o

f rea

l pr

oper

ty f

rom

or

to a

rel

ated

par

ty,

rega

rdle

ss o

f th

e am

ount

, or

whe

n it

inte

nds

to a

cqui

re o

r di

spos

e of

as

sets

oth

er th

an re

al p

rope

rty fr

om o

r to

a re

late

d pa

rty

at t

he a

mou

nt r

each

ing

20%

of

the

Com

pany

’s p

aid-

in

capi

tal,

10%

of i

ts to

tal a

sset

s or N

T$30

0 m

illio

n, e

xcep

t in

tra

ding

of

go

vern

men

t bo

nds

or

bond

s un

der

repu

rcha

se a

nd r

esal

e ag

reem

ents

, or

sub

scrip

tion

or

repu

rcha

se o

f do

mes

tic m

oney

mar

ket

fund

s is

sued

by

secu

ritie

s in

vest

men

t tru

st e

nter

pris

es,

the

Com

pany

m

ay n

ot p

roce

ed t

o en

ter

into

a t

rans

actio

n co

ntra

ct o

r m

ake

a pa

ymen

t un

til t

he f

ollo

win

g m

atte

rs h

ave

been

ap

prov

ed b

y m

ore

than

hal

f of

all

Aud

it C

omm

ittee

m

embe

rs a

nd th

e B

oard

of D

irect

ors:

1.

The

purp

ose,

nec

essi

ty a

nd a

ntic

ipat

ed b

enef

it of

the

acqu

isiti

on o

r dis

posa

l of a

sset

s.2.

The

reas

on fo

r cho

osin

g th

e re

late

d pa

rty a

s a

tradi

ngco

unte

rpar

ty.

3.W

ith re

spec

t to

the

acqu

isiti

on o

f rea

l pro

perty

from

are

late

d pa

rty,

info

rmat

ion

rega

rdin

g ap

prai

sal

of t

he

Whe

n th

e C

ompa

ny in

tend

s to

acq

uire

or

disp

ose

of r

eal

prop

erty

from

or t

o a

rela

ted

party

and

whe

n it

inte

nds

to

acqu

ire o

r di

spos

e of

ass

ets

othe

r th

an r

eal p

rope

rty f

rom

or

to a

rela

ted

party

, reg

ardl

ess

of th

e am

ount

and

exc

ept

in tr

adin

g of

gov

ernm

ent b

onds

or b

onds

und

er re

purc

hase

an

d re

sale

agr

eem

ents

, or

sub

scrip

tion

or r

edem

ptio

n of

do

mes

tic m

oney

mar

ket

fund

s, th

e C

ompa

ny m

ay n

ot

proc

eed

to e

nter

int

o a

trans

actio

n co

ntra

ct o

r m

ake

a pa

ymen

t un

til t

he f

ollo

win

g m

atte

rs h

ave

been

app

rove

d by

th

e B

oard

of

D

irect

ors

and

reco

gniz

ed

by

the

supe

rvis

ors:

1.

The

purp

ose,

nec

essi

ty a

nd a

ntic

ipat

ed b

enef

it of

the

acqu

isiti

on o

r dis

posa

l of a

sset

s.2.

The

reas

on f

or c

hoos

ing

the

rela

ted

party

as

a tra

ding

coun

terp

arty

.3.

With

res

pect

to th

e ac

quis

ition

of

real

pro

perty

fro

m a

rela

ted

party

, in

form

atio

n re

gard

ing

appr

aisa

l of

the

reas

onab

lene

ss o

f th

e pr

elim

inar

y tra

nsac

tion

term

s in

acco

rdan

ce w

ith A

rticl

e 15

and

Arti

cle

16.

4.Th

e da

te a

nd p

rice

at w

hich

the

rela

ted

party

orig

inal

ly

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

50

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

reas

onab

lene

ss o

f the

pre

limin

ary

trans

actio

n te

rms

in

acco

rdan

ce w

ith A

rticl

e 15

and

Arti

cle

16.

4.Th

e da

te

and

pric

e at

w

hich

th

e re

late

d pa

rtyor

igin

ally

acq

uire

d th

e re

al p

rope

rty,

the

orig

inal

tra

ding

cou

nter

party

, an

d th

at t

radi

ng c

ount

erpa

rty's

rela

tions

hip

to th

e co

mpa

ny a

nd th

e re

late

d pa

rty.

5.M

onth

ly c

ash

flow

fore

cast

s fo

r the

yea

r com

men

cing

from

the

antic

ipat

ed m

onth

of s

igni

ng o

f the

con

tract

,an

d ev

alua

tion

of th

e ne

cess

ity o

f the

tran

sact

ion,

and

reas

onab

lene

ss o

f the

fund

s util

izat

ion.

6.A

n ap

prai

sal r

epor

t fro

m a

pro

fess

iona

l app

rais

er o

r aC

PA's

opin

ion

obta

ined

in

co

mpl

ianc

e w

ith

the

prec

edin

g ar

ticle

.7.

Res

trict

ive

cove

nant

s an

d ot

her i

mpo

rtant

stip

ulat

ions

asso

ciat

ed w

ith th

e tra

nsac

tion.

The

calc

ulat

ion

of th

e tra

nsac

tion

amou

nts

refe

rred

to in

th

e pr

eced

ing

para

grap

h sh

all

be m

ade

in a

ccor

danc

e w

ith A

rticl

e 30

her

ein,

and

“w

ithin

the

prec

edin

g ye

ar”

as u

sed

here

in r

efer

s to

the

yea

r pr

eced

ing

the

date

of

occu

rren

ce o

f th

e cu

rren

t tra

nsac

tion.

Ite

ms

that

hav

e be

en a

nnou

nced

in

acco

rdan

ce w

ith t

hese

Pro

cedu

res

need

not

be

coun

ted

tow

ard

the

trans

actio

n am

ount

. W

ith

resp

ect

to

the

acqu

isiti

on

or

disp

osal

of

bu

sine

ss-u

se e

quip

men

t be

twee

n th

e C

ompa

ny a

nd i

ts

pare

nt c

ompa

ny o

r sub

sidi

arie

s, th

e C

ompa

ny’s

Boa

rd o

f D

irect

ors

may

pu

rsua

nt

to

Arti

cle

9 de

lega

te

the

Cha

irman

of t

he B

oard

to d

ecid

e su

ch m

atte

rs w

hen

the

trans

actio

n is

with

in a

cer

tain

am

ount

and

hav

e th

e de

cisi

ons

subs

eque

ntly

sub

mitt

ed to

and

rat

ified

by

the

next

boa

rd o

f dire

ctor

s mee

ting.

W

hen

a m

atte

r is

subm

itted

to th

e B

oard

of D

irect

ors

for

disc

ussi

on p

ursu

ant

to t

he p

rece

ding

par

agra

ph,

the

Boa

rd o

f Dire

ctor

s sh

all t

ake

into

full

cons

ider

atio

n ea

ch

inde

pend

ent

dire

ctor

's op

inio

ns.

If

an

inde

pend

ent

dire

ctor

obj

ects

to

or e

xpre

sses

res

erva

tions

abo

ut a

ny

acqu

ired

the

real

pr

oper

ty,

the

orig

inal

tra

ding

co

unte

rpar

ty,

and

that

tra

ding

co

unte

rpar

ty's

rela

tions

hip

to th

e co

mpa

ny a

nd th

e re

late

d pa

rty.

5.M

onth

ly c

ash

flow

for

ecas

ts f

or th

e ye

ar c

omm

enci

ngfr

om t

he a

ntic

ipat

ed m

onth

of

sign

ing

of t

he c

ontra

ct,

and

eval

uatio

n of

the

nece

ssity

of

the

trans

actio

n, a

ndre

ason

able

ness

of t

he fu

nds u

tiliz

atio

n.6.

An

appr

aisa

l rep

ort f

rom

a p

rofe

ssio

nal a

ppra

iser

or

aC

PA's

opin

ion

obta

ined

in

co

mpl

ianc

e w

ith

the

prec

edin

g ar

ticle

.7.

Res

trict

ive

cove

nant

s an

d ot

her

impo

rtant

stip

ulat

ions

asso

ciat

ed w

ith th

e tra

nsac

tion.

The

calc

ulat

ion

of th

e tra

nsac

tion

amou

nts

refe

rred

to in

th

e pr

eced

ing

para

grap

h sh

all b

e m

ade

in a

ccor

danc

e w

ith

Para

grap

h 2

of

Arti

cle

27

here

in,

and

“with

in

the

prec

edin

g ye

ar”

as u

sed

here

in re

fers

to th

e ye

ar p

rece

ding

th

e da

te o

f oc

curr

ence

of

the

curr

ent

trans

actio

n. I

tem

s th

at h

ave

been

app

rove

d by

the

Boa

rd o

f D

irect

ors

and

reco

gniz

ed b

y th

e su

perv

isor

s ne

ed n

ot b

e co

unte

d to

war

d th

e tra

nsac

tion

amou

nt.

With

resp

ect t

o th

e ac

quis

ition

or d

ispo

sal o

f bus

ines

s-us

e eq

uipm

ent b

etw

een

the

Com

pany

and

its

subs

idia

ries,

the

Com

pany

's B

oard

of D

irect

ors

may

pur

suan

t to

Para

grap

h 2

of A

rticl

e 9

dele

gate

the

Cha

irman

of

the

Boa

rd t

o de

cide

suc

h m

atte

rs w

hen

the

trans

actio

n is

with

in a

ce

rtain

am

ount

an

d ha

ve

the

deci

sion

s su

bseq

uent

ly

subm

itted

to

and

ratif

ied

by t

he n

ext

boar

d of

dire

ctor

s m

eetin

g.

Whe

n a

mat

ter i

s su

bmitt

ed to

the

Boa

rd o

f Dire

ctor

s fo

r di

scus

sion

pu

rsua

nt

to

the

prec

edin

g pa

ragr

aph,

th

e B

oard

of D

irect

ors

shal

l tak

e in

to fu

ll co

nsid

erat

ion

each

in

depe

nden

t di

rect

or's

opin

ions

. If

an

in

depe

nden

t di

rect

or o

bjec

ts t

o or

exp

ress

es r

eser

vatio

ns a

bout

any

m

atte

r, it

shal

l be

reco

rded

in th

e m

inut

es o

f the

boa

rd o

f di

rect

ors m

eetin

g.

51

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

mat

ter,

it sh

all b

e re

cord

ed in

the

min

utes

of t

he b

oard

of

dire

ctor

s mee

ting.

If

app

rova

l of

mor

e th

an h

alf

of a

ll A

udit

Com

mitt

ee

mem

bers

as

requ

ired

in th

e pr

eced

ing

para

grap

h is

not

ob

tain

ed,

thes

e pr

oced

ures

may

be

impl

emen

ted

if ap

prov

ed b

y m

ore

than

two-

third

s of

all

dire

ctor

s, an

d th

e re

solu

tion

of th

e A

udit

Com

mitt

ee s

hall

be re

cord

ed

in t

he m

inut

es o

f th

e bo

ard

mee

ting.

The

ter

ms

“all

Aud

it C

omm

ittee

mem

bers

” an

d “a

ll di

rect

ors”

sha

ll be

co

unte

d as

the

act

ual

num

ber

of p

erso

ns c

urre

ntly

ho

ldin

g th

ose

posi

tions

. A

rticl

e 17

W

here

the

Com

pany

acq

uire

s re

al p

rope

rty f

rom

a

rela

ted

party

and

the

res

ults

of

appr

aisa

ls c

ondu

cted

in

acco

rdan

ce w

ith A

rticl

e 15

and

Arti

cle

16 a

re u

nifo

rmly

lo

wer

than

the

trans

actio

n pr

ice,

the

follo

win

g st

eps s

hall

be ta

ken:

1.

A sp

ecia

l res

erve

shal

l be

set a

side

in a

ccor

danc

e w

ithPa

ragr

aph

1,

Arti

cle

41

of

the

Secu

ritie

s an

dEx

chan

ge A

ct a

gain

st th

e di

ffer

ence

bet

wee

n th

e re

alpr

oper

ty tr

ansa

ctio

n pr

ice

and

the

appr

aise

d co

st, a

ndm

ay n

ot b

e di

strib

uted

or

used

for

cap

ital i

ncre

ase

oris

suan

ce o

f bo

nus

shar

es.

Whe

re a

pub

lic c

ompa

nyus

es t

he e

quity

met

hod

to a

ccou

nt f

or it

s in

vest

men

tin

ano

ther

com

pany

, the

n th

e sp

ecia

l res

erve

cal

led

for

unde

r Pa

ragr

aph

1, A

rticl

e 41

of

the

Secu

ritie

s an

dEx

chan

ge

Act

sh

all

be

set

asid

e pr

o ra

ta

in

apr

opor

tion

cons

iste

nt

with

th

e sh

are

of

publ

icco

mpa

ny's

equi

ty st

ake

in th

e ot

her c

ompa

ny.

2.Th

e A

udit

Com

mitt

ee s

hall

com

ply

with

Arti

cle

218

of th

e C

ompa

ny A

ct.

3.A

ctio

ns

take

n pu

rsua

nt

to

subp

arag

raph

1

and

subp

arag

raph

2 s

hall

be r

epor

ted

to a

sha

reho

lder

s m

eetin

g, a

nd t

he d

etai

ls o

f th

e tra

nsac

tion

shal

l be

di

sclo

sed

in t

he a

nnua

l re

port

and

any

inve

stm

ent

pros

pect

us.

Whe

re th

e C

ompa

ny a

cqui

res

real

pro

perty

from

a re

late

d pa

rty

and

the

resu

lts

of

appr

aisa

ls

cond

ucte

d in

ac

cord

ance

with

Arti

cle

15 a

nd A

rticl

e 16

are

uni

form

ly

low

er th

an th

e tra

nsac

tion

pric

e, th

e fo

llow

ing

step

s sh

all

be ta

ken:

1.

A s

peci

al r

eser

ve s

hall

be s

et a

side

in a

ccor

danc

e w

ithPa

ragr

aph

1, A

rticl

e 41

of t

he S

ecur

ities

and

Exc

hang

eA

ct a

gain

st t

he d

iffer

ence

bet

wee

n th

e re

al p

rope

rtytra

nsac

tion

pric

e an

d th

e ap

prai

sed

cost

, and

may

not

be

dist

ribut

ed o

r us

ed f

or c

apita

l in

crea

se o

r is

suan

ce o

fbo

nus

shar

es. W

here

a p

ublic

com

pany

use

s th

e eq

uity

met

hod

to

acco

unt

for

its

inve

stm

ent

in

anot

her

com

pany

, th

en t

he s

peci

al r

eser

ve c

alle

d fo

r un

der

Para

grap

h 1,

Arti

cle

41 o

f the

Sec

uriti

es a

nd E

xcha

nge

Act

sha

ll be

set

asi

de p

ro ra

ta in

a p

ropo

rtion

con

sist

ent

with

the

shar

e of

pub

lic c

ompa

ny's

equi

ty s

take

in th

eot

her c

ompa

ny.

2.Su

perv

isor

s sh

all

com

ply

with

Arti

cle

218

of t

heC

ompa

ny A

ct.

3.A

ctio

ns

take

n pu

rsua

nt

to

subp

arag

raph

1

and

subp

arag

raph

2 s

hall

be r

epor

ted

to a

sha

reho

lder

s m

eetin

g, a

nd t

he d

etai

ls o

f th

e tra

nsac

tion

shal

l be

di

sclo

sed

in t

he a

nnua

l re

port

and

any

inve

stm

ent

pros

pect

us.

Acc

ordi

ng to

the

actu

al p

ract

ice

52

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

The

Com

pany

that

has

set

asi

de a

spe

cial

res

erve

und

er

the

prec

edin

g pa

ragr

aph

may

not

util

ize

the

spec

ial

rese

rve

until

it

has

reco

gniz

ed a

los

s on

dec

line

in

mar

ket v

alue

of t

he a

sset

s it

purc

hase

d at

a p

rem

ium

, or

they

hav

e be

en d

ispo

sed

of, o

r ad

equa

te c

ompe

nsat

ion

has

been

mad

e, o

r the

sta

tus

quo

ante

has

bee

n re

stor

ed,

or t

here

is

othe

r ev

iden

ce c

onfir

min

g th

at t

here

was

no

thin

g un

reas

onab

le a

bout

the

trans

actio

n, a

nd th

e FS

C

has g

iven

its c

onse

nt.

Whe

n th

e C

ompa

ny o

btai

ns re

al p

rope

rty fr

om a

rela

ted

party

, it

shal

l al

so c

ompl

y w

ith t

he p

rece

ding

tw

o pa

ragr

aphs

if th

ere

is o

ther

evi

denc

e in

dica

ting

that

the

acqu

isiti

on w

as n

ot a

n ar

m’s

leng

th tr

ansa

ctio

n.

The

Com

pany

tha

t ha

s se

t as

ide

a sp

ecia

l re

serv

e un

der

the

prec

edin

g pa

ragr

aph

may

no

t ut

ilize

th

e sp

ecia

l re

serv

e un

til it

has

reco

gniz

ed a

loss

on

decl

ine

in m

arke

t va

lue

of th

e as

sets

it p

urch

ased

at a

pre

miu

m, o

r the

y ha

ve

been

dis

pose

d of

, or

ade

quat

e co

mpe

nsat

ion

has

been

m

ade,

or t

he s

tatu

s qu

o an

te h

as b

een

rest

ored

, or t

here

is

othe

r ev

iden

ce

conf

irmin

g th

at

ther

e w

as

noth

ing

unre

ason

able

abo

ut th

e tra

nsac

tion,

and

the

FSC

has

giv

en

its c

onse

nt.

Whe

n th

e C

ompa

ny o

btai

ns r

eal

prop

erty

fro

m a

rel

ated

pa

rty,

it sh

all

also

co

mpl

y w

ith

the

prec

edin

g tw

o pa

ragr

aphs

if

ther

e is

oth

er e

vide

nce

indi

catin

g th

at t

he

acqu

isiti

on w

as n

ot a

n ar

m’s

leng

th tr

ansa

ctio

n.

Arti

cle

21

The

Com

pany

eng

agin

g in

der

ivat

ives

tra

ding

sha

ll es

tabl

ish

a lo

g bo

ok i

n w

hich

det

ails

of

the

type

s an

d am

ount

s of

der

ivat

ives

tra

ding

eng

aged

in,

Boa

rd o

f D

irect

ors’

app

rova

l dat

es, a

nd th

e m

atte

rs re

quire

d to

be

care

fully

eva

luat

ed u

nder

Sub

para

grap

h 4

of A

rticl

e 19

an

d Su

bpar

agra

ph 2

of P

arag

raph

1 a

nd S

ubpa

ragr

aph

1 of

Par

agra

ph 2

of A

rticl

e 20

shal

l be

reco

rded

in d

etai

l in

the

log

book

. A

pu

blic

co

mpa

ny's

inte

rnal

au

dit

pers

onne

l sh

all

perio

dica

lly m

ake

a de

term

inat

ion

of t

he s

uita

bilit

y of

in

tern

al c

ontro

ls o

n de

rivat

ives

and

con

duct

a m

onth

ly

audi

t of h

ow fa

ithfu

lly d

eriv

ativ

es tr

adin

g by

the

tradi

ng

depa

rtmen

t ad

here

s to

the

pro

cedu

res

for

enga

ging

in

deriv

ativ

es t

radi

ng, a

nd p

repa

re a

n au

dit

repo

rt. I

f an

y m

ater

ial

viol

atio

n is

dis

cove

red,

the

Aud

it C

omm

ittee

sh

all b

e no

tifie

d in

writ

ing.

The

Com

pany

en

gagi

ng

in

deriv

ativ

es

tradi

ng

shal

l es

tabl

ish

a lo

g bo

ok i

n w

hich

det

ails

of

the

type

s an

d am

ount

s of

der

ivat

ives

tra

ding

eng

aged

in,

Boa

rd o

f D

irect

ors’

app

rova

l dat

es, a

nd th

e m

atte

rs r

equi

red

to b

e ca

refu

lly e

valu

ated

und

er S

ubpa

ragr

aph

4 of

Arti

cle

19

and

Subp

arag

raph

2 o

f Par

agra

ph 1

and

Sub

para

grap

h 1

of

Para

grap

h 2

of A

rticl

e 20

sha

ll be

reco

rded

in d

etai

l in

the

log

book

. A

pu

blic

co

mpa

ny's

inte

rnal

au

dit

pers

onne

l sh

all

perio

dica

lly m

ake

a de

term

inat

ion

of t

he s

uita

bilit

y of

in

tern

al c

ontro

ls o

n de

rivat

ives

and

con

duct

a m

onth

ly

audi

t of

how

fai

thfu

lly d

eriv

ativ

es tr

adin

g by

the

tradi

ng

depa

rtmen

t ad

here

s to

the

pro

cedu

res

for

enga

ging

in

deriv

ativ

es t

radi

ng,

and

prep

are

an a

udit

repo

rt. I

f an

y m

ater

ial

viol

atio

n is

dis

cove

red,

all

supe

rvis

ors

shal

l be

no

tifie

d in

writ

ing.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

22

The

Com

pany

th

at

cond

ucts

a

mer

ger,

dem

erge

r, ac

quis

ition

, or t

rans

fer o

f sha

res,

prio

r to

conv

enin

g th

e bo

ard

of d

irect

ors t

o re

solv

e on

the

mat

ter,

shal

l eng

age

a C

PA,

atto

rney

, or

sec

uriti

es u

nder

writ

er t

o gi

ve a

n op

inio

n on

the

rea

sona

blen

ess

of t

he s

hare

exc

hang

e ra

tio, a

cqui

sitio

n pr

ice,

or

dist

ribut

ion

of c

ash

or o

ther

The

Com

pany

th

at

cond

ucts

a

mer

ger,

dem

erge

r, ac

quis

ition

, or

trans

fer

of s

hare

s, pr

ior

to c

onve

ning

the

boar

d of

dire

ctor

s to

reso

lve

on th

e m

atte

r, sh

all e

ngag

e a

CPA

, at

torn

ey,

or s

ecur

ities

und

erw

riter

to

give

an

opin

ion

on t

he r

easo

nabl

enes

s of

the

sha

re e

xcha

nge

ratio

, ac

quis

ition

pric

e, o

r di

strib

utio

n of

cas

h or

oth

er

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

53

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

prop

erty

to s

hare

hold

ers,

and

subm

it it

to th

e B

oard

of

Dire

ctor

s fo

r de

liber

atio

n an

d pa

ssag

e. H

owev

er,

an

opin

ion

rend

ered

by

an e

xper

t on

the

reas

onab

lene

ss o

f a

mer

ger

with

sub

sidi

arie

s w

hose

100

% o

f sh

ares

is

sued

or

tota

l cap

ital a

re d

irect

ly o

r ind

irect

ly h

eld

by

the

Com

pany

or

a m

erge

r be

twee

n su

bsid

iarie

s w

hose

10

0% o

f sh

ares

iss

ued

or t

otal

cap

ital

are

dire

ctly

or

indi

rect

ly h

eld

by th

e C

ompa

ny m

ay b

e ex

empt

ed.

prop

erty

to

shar

ehol

ders

, and

sub

mit

it to

the

Boa

rd o

f D

irect

ors f

or d

elib

erat

ion

and

pass

age.

Arti

cle

30

Proc

edur

es fo

r Pub

lic D

iscl

osur

e of

Info

rmat

ion

Und

er a

ny o

f the

follo

win

g ci

rcum

stan

ces,

the

Com

pany

ac

quiri

ng o

r dis

posi

ng o

f ass

ets

shal

l pub

licly

ann

ounc

e an

d re

port

the

rele

vant

in

form

atio

n on

th

e FS

C's

desi

gnat

ed

web

site

in

th

e ap

prop

riate

fo

rmat

as

pr

escr

ibed

by

regu

latio

ns w

ithin

2 d

ays

com

men

cing

im

med

iate

ly fr

om th

e da

te o

f occ

urre

nce

of th

e ev

ent:

1.A

cqui

sitio

n or

dis

posa

l of

real

pro

perty

fro

m o

r to

are

late

d pa

rty, r

egar

dles

s of

the

amou

nt, o

r acq

uisi

tion

or d

ispo

sal o

f as

sets

oth

er th

an r

eal p

rope

rty f

rom

or

to

a re

late

d pa

rty

whe

re

the

trans

actio

n am

ount

reac

hes

20 p

erce

nt o

r m

ore

of p

aid-

in c

apita

l, 10

perc

ent

or m

ore

of t

he c

ompa

ny's

tota

l as

sets

, or

NT$

300

mill

ion

or m

ore;

pro

vide

d, t

his

shal

l no

tap

ply

to tr

adin

g of

gov

ernm

ent b

onds

or b

onds

und

erre

purc

hase

and

res

ale

agre

emen

ts, o

r su

bscr

iptio

n or

repu

rcha

se o

f dom

estic

mon

ey m

arke

t fun

ds is

sued

by

secu

ritie

s inv

estm

ent t

rust

ent

erpr

ises

.2.

Mer

ger,

dem

erge

r, ac

quis

ition

, or t

rans

fer o

f sha

res.

3.Lo

sses

from

der

ivat

ives

trad

ing

reac

hing

the

limits

on

aggr

egat

e lo

sses

or

loss

es o

n in

divi

dual

con

tract

s se

tou

t in

the

proc

edur

es a

dopt

ed b

y th

e C

ompa

ny.

4.W

here

the

typ

e of

ass

et a

cqui

red

or d

ispo

sed

iseq

uipm

ent

for

busi

ness

use

, the

tra

ding

cou

nter

party

is

not

a r

elat

ed p

arty

, an

d th

e tra

nsac

tion

amou

nt

mee

ts o

ne o

f the

follo

win

g re

quire

men

ts:

(1) T

he p

aid-

in c

apita

l is

less

than

NT$

10 b

illio

n an

d

Proc

edur

es fo

r Pub

lic D

iscl

osur

e of

Info

rmat

ion

Und

er a

ny o

f th

e fo

llow

ing

circ

umst

ance

s, th

e C

ompa

ny

acqu

iring

or

disp

osin

g of

ass

ets

shal

l pu

blic

ly a

nnou

nce

and

repo

rt th

e re

leva

nt

info

rmat

ion

on

the

FSC

's de

sign

ated

web

site

in th

e ap

prop

riate

form

at a

s pr

escr

ibed

by

reg

ulat

ions

with

in 2

day

s co

mm

enci

ng i

mm

edia

tely

fr

om th

e da

te o

f occ

urre

nce

of th

e ev

ent:

1.A

cqui

sitio

n or

dis

posa

l of

rea

l pr

oper

ty f

rom

or

to a

rela

ted

party

, or

acqu

isiti

on o

r di

spos

al o

f as

sets

oth

erth

an r

eal p

rope

rty f

rom

or

to a

rel

ated

par

ty w

here

the

trans

actio

n am

ount

rea

ches

20

perc

ent

or m

ore

ofpa

id-in

cap

ital,

10 p

erce

nt o

r m

ore

of t

he c

ompa

ny's

tota

l ass

ets,

or N

T$30

0 m

illio

n or

mor

e; p

rovi

ded,

this

shal

l not

app

ly to

trad

ing

of g

over

nmen

t bon

ds o

r bon

dsun

der r

epur

chas

e an

d re

sale

agr

eem

ents

, or s

ubsc

riptio

nor

rede

mpt

ion

of d

omes

tic m

oney

mar

ket f

unds

.2.

Mer

ger,

dem

erge

r, ac

quis

ition

, or t

rans

fer o

f sha

res.

3.Lo

sses

fro

m d

eriv

ativ

es tr

adin

g re

achi

ng th

e lim

its o

nag

greg

ate

loss

es o

r lo

sses

on

indi

vidu

al c

ontra

cts

set

out i

n th

e pr

oced

ures

ado

pted

by

the

Com

pany

.4.

Whe

re a

n as

set

trans

actio

n ot

her

than

any

of

thos

ere

ferr

ed t

o in

the

pre

cedi

ng t

hree

sub

para

grap

hs,

a di

spos

al o

f re

ceiv

able

s by

a f

inan

cial

inst

itutio

n, o

r an

in

vest

men

t in

the

mai

nlan

d C

hina

are

a re

ache

s 20

pe

rcen

t or

mor

e of

pai

d-in

cap

ital o

r N

T$30

0 m

illio

n;

prov

ided

, th

is

shal

l no

t ap

ply

to

the

follo

win

g ci

rcum

stan

ces:

Acc

ordi

ng to

the

gove

rnin

g la

w a

nd

regu

latio

ns

54

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

the

trans

actio

n am

ount

is m

ore

than

NT$

500

mill

ion.

(2

) The

pai

d-in

cap

ital i

s mor

e th

an N

T$10

bill

ion

and

the

trans

actio

n am

ount

is m

ore

than

NT$

1 bi

llion

. 5.

Whe

re l

and

is a

cqui

red

unde

r an

arr

ange

men

t on

enga

ging

oth

ers

to b

uild

on

the

Com

pany

's ow

n la

nd,

enga

ging

ot

hers

to

bu

ild

on

rent

ed

land

, jo

int

cons

truct

ion

and

allo

catio

n of

hou

sing

uni

ts,

join

t co

nstru

ctio

n an

d al

loca

tion

of o

wne

rshi

p pe

rcen

tage

s, or

join

t con

stru

ctio

n an

d se

para

te sa

le, a

nd th

e am

ount

th

e C

ompa

ny e

xpec

ts t

o in

vest

in

the

trans

actio

n is

le

ss th

an N

T$50

0 m

illio

n.

6.W

here

an

asse

t tra

nsac

tion

othe

r th

an a

ny o

f th

ose

refe

rred

to

in t

he p

rece

ding

fiv

e su

bpar

agra

phs,

adi

spos

al o

f rec

eiva

bles

by

a fin

anci

al in

stitu

tion,

or a

nin

vest

men

t in

the

mai

nlan

d C

hina

are

a re

ache

s 20

perc

ent o

r mor

e of

pai

d-in

cap

ital o

r NT$

300

mill

ion;

prov

ided

, th

is

shal

l no

t ap

ply

to

the

follo

win

gci

rcum

stan

ces:

(1) T

radi

ng o

f gov

ernm

ent b

onds

. (2

) Se

curit

ies

tradi

ng b

y in

vest

men

t pr

ofes

sion

als

on

fore

ign

or

dom

estic

se

curit

ies

exch

ange

s or

over

-the-

coun

ter

mar

kets

, or

su

bscr

iptio

n of

co

rpor

ate

bond

s an

d ge

nera

l fin

anci

al b

onds

not

in

volv

ing

no e

quity

in

the

dom

estic

prim

ary

mar

ket

or s

ecur

ities

by

a se

curit

ies

firm

due

to

busi

ness

ne

eds

or a

sec

uriti

es f

irm r

ecom

men

ded

for

liste

d co

mpa

nies

at

th

e em

ergi

ng

stoc

k m

arke

t in

ac

cord

ance

with

the

regu

latio

ns o

f Tai

pei E

xcha

nge.

(3) T

radi

ng o

f bon

ds u

nder

repu

rcha

se/re

sale

agr

eem

ents

, or

sub

scrip

tion

or r

epur

chas

e of

dom

estic

mon

ey

mar

ket

fund

s is

sued

by

secu

ritie

s in

vest

men

t tru

st

ente

rpris

es.

The

amou

nt o

f tra

nsac

tions

abo

ve s

hall

be c

alcu

late

d as

fo

llow

s an

d “W

ithin

the

pre

cedi

ng y

ear”

as

used

in

the

prec

edin

g pa

ragr

aph

refe

rs to

the

year

pre

cedi

ng th

e da

te (1

) Tra

ding

of g

over

nmen

t bon

ds.

(2)

Secu

ritie

s tra

ding

by

in

vest

men

t pr

ofes

sion

als

on

fore

ign

or

dom

estic

se

curit

ies

exch

ange

s or

over

-the-

coun

ter

mar

kets

, or

subs

crip

tion

of s

ecur

ities

by

a s

ecur

ities

firm

, eith

er in

the

prim

ary

mar

ket o

r in

acco

rdan

ce w

ith re

leva

nt re

gula

tions

. (3

) Tr

adin

g of

bon

ds u

nder

rep

urch

ase/

resa

le a

gree

men

ts,

or s

ubsc

riptio

n or

red

empt

ion

of d

omes

tic m

oney

m

arke

t fun

ds.

(4)

Whe

re t

he t

ype

of a

sset

acq

uire

d or

dis

pose

d is

eq

uipm

ent/m

achi

nery

for

bus

ines

s us

e, t

he t

radi

ng

coun

terp

arty

is n

ot a

rel

ated

par

ty, a

nd th

e tra

nsac

tion

amou

nt is

less

than

NT$

500

mill

ion.

(5

) W

here

lan

d is

acq

uire

d un

der

an a

rran

gem

ent

on

enga

ging

oth

ers

to b

uild

on

the

Com

pany

's ow

n la

nd,

enga

ging

ot

hers

to

bu

ild

on

rent

ed

land

, jo

int

cons

truct

ion

and

allo

catio

n of

hou

sing

uni

ts,

join

t co

nstru

ctio

n an

d al

loca

tion

of o

wne

rshi

p pe

rcen

tage

s, or

join

t con

stru

ctio

n an

d se

para

te s

ale,

and

the

amou

nt

the

Com

pany

exp

ects

to in

vest

in th

e tra

nsac

tion

is le

ss

than

NT$

500

mill

ion.

Th

e am

ount

of

trans

actio

ns a

bove

sha

ll be

cal

cula

ted

as

follo

ws

and

“With

in t

he p

rece

ding

yea

r” a

s us

ed i

n th

e pr

eced

ing

para

grap

h re

fers

to th

e ye

ar p

rece

ding

the

date

of

oc

curr

ence

of

th

e cu

rren

t tra

nsac

tion.

Ite

ms

duly

an

noun

ced

in a

ccor

danc

e w

ith th

e re

gula

tions

nee

d no

t be

coun

ted

tow

ard

the

trans

actio

n am

ount

.

1.Th

e am

ount

of a

ny in

divi

dual

tran

sact

ion.

2.Th

e cu

mul

ativ

e tra

nsac

tion

amou

nt o

f ac

quis

ition

s an

ddi

spos

als

of th

e sa

me

type

of

unde

rlyin

g as

set w

ith th

esa

me

tradi

ng c

ount

erpa

rty w

ithin

the

prec

edin

g ye

ar.

3.Th

e cu

mul

ativ

e tra

nsac

tion

amou

nt o

f re

al p

rope

rtyac

quis

ition

s an

d di

spos

als

(cum

ulat

ive

acqu

isiti

ons

and

disp

osal

s, re

spec

tivel

y) w

ithin

the

sam

e de

velo

pmen

t pr

ojec

t with

in th

e pr

eced

ing

year

.

55

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

of o

ccur

renc

e of

the

cur

rent

tra

nsac

tion.

Ite

ms

duly

an

noun

ced

in a

ccor

danc

e w

ith t

he r

egul

atio

ns n

eed

not

be c

ount

ed to

war

d th

e tra

nsac

tion

amou

nt.

1.

The

amou

nt o

f any

indi

vidu

al tr

ansa

ctio

n.2.

The

cum

ulat

ive

trans

actio

n am

ount

of a

cqui

sitio

ns a

nddi

spos

als

of th

e sa

me

type

of u

nder

lyin

g as

set w

ith th

esa

me

tradi

ng c

ount

erpa

rty w

ithin

the

prec

edin

g ye

ar.

3.Th

e cu

mul

ativ

e tra

nsac

tion

amou

nt o

f re

al p

rope

rty

acqu

isiti

ons a

nd d

ispo

sals

(cum

ulat

ive

acqu

isiti

ons a

nddi

spos

als,

resp

ectiv

ely)

with

in t

he s

ame

deve

lopm

ent

proj

ect w

ithin

the

prec

edin

g ye

ar.

4.Th

e cu

mul

ativ

e tra

nsac

tion

amou

nt o

f acq

uisi

tions

and

disp

osal

s (c

umul

ativ

e ac

quis

ition

s an

d di

spos

als,

resp

ectiv

ely)

of t

he s

ame

secu

rity

with

in th

e pr

eced

ing

year

.“W

ithin

the

pre

cedi

ng y

ear”

as

used

in

the

prec

edin

g pa

ragr

aph

refe

rs t

o th

e ye

ar p

rece

ding

the

dat

e of

oc

curr

ence

of

th

e cu

rren

t tra

nsac

tion.

Ite

ms

duly

an

noun

ced

in a

ccor

danc

e w

ith th

ese

Proc

edur

es n

eed

not

be c

ount

ed to

war

d th

e tra

nsac

tion

amou

nt.

The

Com

pany

sha

ll co

mpi

le m

onth

ly r

epor

ts o

n th

e st

atus

of d

eriv

ativ

es tr

adin

g en

gage

d in

up

to th

e en

d of

th

e pr

eced

ing

mon

th b

y its

elf

and

any

subs

idia

ries

that

ar

e no

t do

mes

tic

publ

ic

com

pani

es

and

ente

r th

e in

form

atio

n in

the

pres

crib

ed fo

rmat

into

the

info

rmat

ion

repo

rting

web

site

des

igna

ted

by th

e FS

C b

y th

e 10

th d

ay

of e

ach

mon

th.

Whe

n th

e C

ompa

ny a

t the

tim

e of

pub

lic a

nnou

ncem

ent

mak

es a

n er

ror

or o

mis

sion

in

an i

tem

req

uire

d by

re

gula

tions

to b

e pu

blic

ly a

nnou

nced

and

so

is r

equi

red

to c

orre

ct i

t, al

l th

e ite

ms

shal

l be

aga

in p

ublic

ly

anno

unce

d an

d re

porte

d in

the

ir en

tiret

y w

ithin

2 d

ays

com

men

cing

im

med

iate

ly f

rom

the

dat

e of

kno

win

g of

th

e er

ror o

r om

issi

on.

The

Com

pany

acq

uirin

g or

disp

osin

g of

ass

ets s

hall

keep

4.Th

e cu

mul

ativ

e tra

nsac

tion

amou

nt o

f ac

quis

ition

s an

ddi

spos

als

(cum

ulat

ive

acqu

isiti

ons

and

disp

osal

s,re

spec

tivel

y) o

f th

e sa

me

secu

rity

with

in th

e pr

eced

ing

year

.“W

ithin

the

pre

cedi

ng y

ear”

as

used

in

the

prec

edin

g pa

ragr

aph

refe

rs

to

the

year

pr

eced

ing

the

date

of

oc

curr

ence

of

th

e cu

rren

t tra

nsac

tion.

Ite

ms

duly

an

noun

ced

in a

ccor

danc

e w

ith th

ese

Proc

edur

es n

eed

not

be c

ount

ed to

war

d th

e tra

nsac

tion

amou

nt.

The

Com

pany

sha

ll co

mpi

le m

onth

ly re

ports

on

the

stat

us

of d

eriv

ativ

es t

radi

ng e

ngag

ed i

n up

to

the

end

of t

he

prec

edin

g m

onth

by

itsel

f and

any

subs

idia

ries t

hat a

re n

ot

dom

estic

pub

lic c

ompa

nies

and

ent

er t

he i

nfor

mat

ion

in

the

pres

crib

ed

form

at

into

th

e in

form

atio

n re

porti

ng

web

site

des

igna

ted

by t

he F

SC b

y th

e 10

th d

ay o

f ea

ch

mon

th.

Whe

n th

e C

ompa

ny a

t th

e tim

e of

pub

lic a

nnou

ncem

ent

mak

es a

n er

ror

or o

mis

sion

in

an i

tem

req

uire

d by

re

gula

tions

to b

e pu

blic

ly a

nnou

nced

and

so

is re

quire

d to

co

rrec

t it,

all t

he it

ems

shal

l be

agai

n pu

blic

ly a

nnou

nced

an

d re

porte

d in

thei

r ent

irety

.

56

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

all

rele

vant

co

ntra

cts,

mee

ting

min

utes

, lo

g bo

oks,

appr

aisa

l re

ports

an

d C

PA,

atto

rney

, an

d se

curit

ies

unde

rwrit

er

opin

ions

at

th

e co

mpa

ny

head

quar

ters

, w

here

the

y sh

all

be r

etai

ned

for

5 ye

ars

exce

pt w

here

an

othe

r act

pro

vide

s oth

erw

ise.

A

rticl

e 30

Th

ese

Proc

edur

es w

ere

esta

blis

hed

on M

ay 3

, 199

7.Th

e 1st

am

endm

ent w

as m

ade

on N

ovem

ber 2

9, 1

999.

Th

e 2nd

am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 3rd

am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

4th a

men

dmen

t was

mad

e on

May

27,

200

4.

The

5th a

men

dmen

t was

mad

e on

June

16,

200

6.

The

6th a

men

dmen

t was

mad

e on

June

15,

200

7.

The

7th a

men

dmen

t was

mad

e on

June

13,

201

2.

The

8th a

men

dmen

t was

mad

e on

June

18,

201

4.

The

9th a

men

dmen

t was

mad

e on

May

26,

201

7.

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1st

am

endm

ent w

as m

ade

on N

ovem

ber 2

9, 1

999.

Th

e 2nd

am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 3rd

am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

4th a

men

dmen

t was

mad

e on

May

27,

200

4.

The

5th a

men

dmen

t was

mad

e on

June

16,

200

6.

The

6th a

men

dmen

t was

mad

e on

June

15,

200

7.

The

7th a

men

dmen

t was

mad

e on

June

13,

201

2.

The

8th a

men

dmen

t was

mad

e on

June

18,

201

4.

Upd

ate

the

date

of

the

amen

dmen

t

57

< A

ttach

men

t V

II>

Adv

ante

ch C

o., L

td.

Proc

edur

es fo

r Len

ding

Fun

ds to

Oth

er P

artie

s N

o.

Aft

er a

men

dm

ent

Bef

ore

amen

dm

ent

Rem

ark

A

rticl

e 3

Lend

ing

Cou

nter

parts

Le

ndin

g co

unte

rpar

ts i

n ne

ed o

f sh

ort-t

erm

fin

anci

ng

shal

l be

limite

d to

a s

ubsi

diar

y in

whi

ch th

e C

ompa

ny

hold

s 50%

of t

he v

otin

g sh

ares

or c

ompa

nies

with

the

de

fact

o co

ntro

l ha

ving

the

nee

d of

sho

rt-te

rm f

inan

cing

du

e to

bus

ines

s nee

ds.

The

phra

se “

shor

t-ter

m”

men

tione

d ab

ove

shal

l m

ean

with

in o

ne y

ear o

r a b

usin

ess c

ycle

(whi

chev

er is

long

er).

Fore

ign

com

pani

es, o

f w

hich

the

Com

pany

dire

ctly

or

indi

rect

ly h

olds

100

% o

f the

vot

ing

shar

es, i

f eng

aged

in

the

lend

ing

busi

ness

, w

ill

be

exem

pt

from

th

e re

stric

tions

refe

rred

to in

the

first

par

agra

ph o

f Arti

cle

4.

Lend

ing

Cou

nter

parts

C

ompa

nies

or f

irms i

n ne

ed o

f sho

rt-te

rm fi

nanc

ing.

Le

ndin

g co

unte

rpar

ts i

n ne

ed o

f sh

ort-t

erm

fin

anci

ng

shal

l be

lim

ited

to a

sub

sidi

ary

in w

hich

the

Com

pany

ho

lds

50%

of t

he v

otin

g sh

ares

or c

ompa

nies

with

the

de

fact

o co

ntro

l hav

ing

the

need

of s

hort-

term

fina

ncin

g du

e to

bus

ines

s nee

ds.

The

phra

se “

shor

t-ter

m”

men

tione

d ab

ove

shal

l m

ean

with

in o

ne y

ear o

r a b

usin

ess c

ycle

(whi

chev

er is

long

er).

Fore

ign

com

pani

es,

of w

hich

the

Com

pany

dire

ctly

or

indi

rect

ly h

olds

100

% o

f the

vot

ing

shar

es, i

f eng

aged

in

the

lend

ing

busi

ness

, will

be

exem

pt fr

om th

e re

stric

tions

re

ferr

ed to

in th

e fir

st p

arag

raph

of A

rticl

e 4.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

4 Le

ndin

g A

mou

nt a

nd F

inan

cing

Lim

it Th

e to

tal a

mou

nt le

nt to

oth

ers (

loan

able

fund

s) sh

all n

ot

exce

ed 2

0% o

f th

e ne

t val

ue o

f th

e C

ompa

ny. T

he to

tal

lend

ing

amou

nt o

f an

ind

ivid

ual

borr

ower

sha

ll no

t ex

ceed

50%

of t

he to

tal a

mou

nt o

f loa

nabl

e fu

nds.

Lend

ing

Am

ount

and

Fin

anci

ng L

imit

1. T

he t

otal

am

ount

len

t to

oth

ers

(loan

able

fun

ds)

shal

lno

t exc

eed

20%

of t

he n

et v

alue

of t

he C

ompa

ny. T

he

tota

l le

ndin

g am

ount

of

an i

ndiv

idua

l bo

rrow

er s

hall

not e

xcee

d 50

% o

f the

tota

l am

ount

of l

oana

ble

fund

s. 2.

In t

he c

ase

of l

endi

ng f

unds

to

com

pani

es o

r fir

ms

who

hav

e a

busi

ness

rel

atio

nshi

p w

ith t

he C

ompa

ny,

the

tota

l le

ndin

g am

ount

of

an i

ndiv

idua

l bo

rrow

ersh

all n

ot e

xcee

d 50

% o

f th

e to

tal a

mou

nt o

f lo

anab

lefu

nds

or th

e to

tal a

mou

nt o

f th

e bu

sine

ss tr

ansa

ctio

nsbe

twee

n th

e C

ompa

ny a

nd th

e bo

rrow

er, w

hich

ever

islo

wer

, an

d th

e m

axim

um a

mou

nt s

tipul

ated

in

the

prec

edin

g pa

ragr

aph.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

8 Pr

oced

ures

for F

und

Lend

ing

and

Det

aile

d R

evie

w

1.A

pplic

atio

n:A

. W

hen

appl

ying

for

a l

oan

with

the

Com

pany

, a

borr

ower

sh

all

subm

it th

e ap

plic

atio

n fo

rm

or

an

offic

ial l

ette

r sp

ecify

ing

the

amou

nt, t

erm

and

pur

pose

Proc

edur

es fo

r Fun

d Le

ndin

g an

d D

etai

led

Rev

iew

1.

App

licat

ion:

A.

Whe

n ap

plyi

ng f

or a

loa

n w

ith t

he C

ompa

ny,

a bo

rrow

er s

hall

subm

it th

e ap

plic

atio

n fo

rm o

r an

offi

cial

le

tter

spec

ifyin

g th

e am

ount

, te

rm a

nd p

urpo

se o

f th

e

Acc

ordi

ng to

the

actu

al p

ract

ice

58

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

of th

e lo

an to

the

Com

pany

’s F

inan

ce D

epar

tmen

t.

B.

Whe

re a

loa

n is

giv

en d

ue t

o ne

eds

aris

ing

from

bu

sine

ss

deal

ings

, th

e fin

ance

un

it sh

all

eval

uate

w

heth

er th

e am

ount

of

the

loan

is c

omm

ensu

rate

with

th

e am

ount

of t

rans

actio

ns a

nd in

com

plia

nce

with

thes

e O

pera

tiona

l Pro

cedu

res.

C

. W

here

a b

orro

wer

in

need

of

shor

t-ter

m f

inan

cing

ap

plie

s fo

r a

loan

, th

e C

ompa

ny s

hall

eval

uate

the

ne

cess

ity o

f fin

anci

ng a

nd i

nves

tigat

e th

e bo

rrow

er’s

cr

edit

stat

us.

D

. Th

e lo

an,

afte

r be

ing

verif

ied

to b

e fe

asib

le u

pon

anal

ysis

, sh

all

be s

ubm

itted

to

the

Cha

irman

of

the

Boa

rd a

nd th

e bo

ard

mee

ting

for a

ppro

val.

2.

Cre

dit I

nves

tigat

ion

and

Ris

k A

sses

smen

tA

. For

a fi

rst-t

ime

borr

ower

, the

bor

row

er s

hall

prov

ide

basi

c in

form

atio

n an

d fin

anci

al in

form

atio

n to

faci

litat

e th

e cr

edit

inve

stig

atio

n.

B. F

or a

sub

sequ

ent

borr

ower

, the

cre

dit

inve

stig

atio

n sh

all b

e ca

rrie

d ou

t whe

n th

e bo

rrow

er a

pplie

s fo

r th

e re

new

al. I

n ca

se o

f a

maj

or o

r ur

gent

eve

nt, t

he c

redi

t in

vest

igat

ion

shal

l be

carr

ied

out a

t any

tim

e de

pend

ing

on th

e ac

tual

nee

ds.

C. I

f the

bor

row

er is

in g

ood

finan

cial

con

ditio

n an

d ha

s ha

d th

e an

nual

fin

anci

al s

tate

men

ts a

udite

d by

CPA

s, th

e in

vest

igat

ion

repo

rt m

ade

for

less

tha

n a

year

and

th

e au

dito

rs’ r

epor

t may

be

adop

ted

as th

e re

fere

nce.

D

. W

hen

carr

ying

out

the

cre

dit

inve

stig

atio

n, t

he

Com

pany

sha

ll m

ake

a de

taile

d as

sess

men

t of

the

im

pact

of

th

e lo

an

on

the

Com

pany

’s

busi

ness

op

erat

ions

, fin

anci

al

cond

ition

s, an

d sh

areh

olde

rs’

equi

ty.

3.C

ontra

ct S

igni

ng a

nd Id

entit

y Ve

rific

atio

nA

. The

per

son

in c

harg

e of

lend

ing

fund

s sha

ll fil

l in

the

loan

con

tract

bas

ed o

n th

e ap

prov

ed c

ondi

tions

to

proc

eed

with

the

cont

ract

sign

ing.

loan

to th

e C

ompa

ny’s

Fin

ance

Dep

artm

ent.

B

. W

here

a l

oan

is g

iven

due

to

need

s ar

isin

g fr

om

busi

ness

dea

lings

, the

fina

nce

unit

shal

l eva

luat

e w

heth

er

the

amou

nt o

f the

loan

is c

omm

ensu

rate

with

the

amou

nt

of tr

ansa

ctio

ns a

nd in

com

plia

nce

with

thes

e O

pera

tiona

l Pr

oced

ures

.

C.

Whe

re a

bor

row

er i

n ne

ed o

f sh

ort-t

erm

fin

anci

ng

appl

ies

for

a lo

an,

the

Com

pany

sha

ll ev

alua

te t

he

nece

ssity

of

finan

cing

and

inv

estig

ate

the

borr

ower

’s

cred

it st

atus

.

D.

The

loan

, af

ter

bein

g ve

rifie

d to

be

feas

ible

upo

n an

alys

is, s

hall

be s

ubm

itted

to th

e C

hairm

an o

f the

Boa

rd

and

the

boar

d m

eetin

g fo

r app

rova

l.

2.C

redi

t Inv

estig

atio

n an

d R

isk

Ass

essm

ent

A. F

or a

firs

t-tim

e bo

rrow

er, t

he b

orro

wer

sha

ll pr

ovid

e ba

sic

info

rmat

ion

and

finan

cial

inf

orm

atio

n to

fac

ilita

te

the

cred

it in

vest

igat

ion.

B

. Fo

r a

subs

eque

nt b

orro

wer

, th

e cr

edit

inve

stig

atio

n sh

all

be c

arrie

d ou

t w

hen

the

borr

ower

app

lies

for

the

rene

wal

. In

cas

e of

a m

ajor

or

urge

nt e

vent

, th

e cr

edit

inve

stig

atio

n sh

all b

e ca

rrie

d ou

t at a

ny ti

me

depe

ndin

g on

the

actu

al n

eeds

.

C

. If t

he b

orro

wer

is in

goo

d fin

anci

al c

ondi

tion

and

has

had

the

annu

al fi

nanc

ial s

tate

men

ts a

udite

d by

CPA

s, th

e in

vest

igat

ion

repo

rt m

ade

for

less

tha

n a

year

and

the

au

dito

rs’ r

epor

t may

be

adop

ted

as th

e re

fere

nce.

D

. W

hen

carr

ying

ou

t th

e cr

edit

inve

stig

atio

n,

the

Com

pany

sha

ll m

ake

a de

taile

d as

sess

men

t of t

he im

pact

of

th

e lo

an

on

the

Com

pany

’s

busi

ness

op

erat

ions

, fin

anci

al c

ondi

tions

, and

shar

ehol

ders

’ equ

ity.

3.C

ontra

ct S

igni

ng a

nd Id

entit

y Ve

rific

atio

nA

. The

per

son

in c

harg

e of

lend

ing

fund

s sh

all f

ill in

the

loan

co

ntra

ct

base

d on

th

e ap

prov

ed

cond

ition

s to

pr

ocee

d w

ith th

e co

ntra

ct si

gnin

g.

B.

Afte

r th

e bo

rrow

er a

nd t

he j

oint

gua

rant

or s

ign

the

59

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

B. A

fter

the

borr

ower

and

the

join

t gua

rant

or s

ign

the

loan

con

tract

, th

e pe

rson

in

char

ge s

hall

perf

orm

the

pr

oced

ures

for v

erify

ing

thei

r ide

ntiti

es.

4.

App

rais

al o

f Col

late

ral V

alue

and

Set

ting

of R

ight

sW

hen

appl

ying

for

a l

oan,

a b

orro

wer

, af

ter

bein

g ve

rifie

d to

pro

vide

col

late

ral,

shal

l pro

vide

a p

ledg

e on

eq

uiva

lent

rea

l pro

perty

or

secu

ritie

s or

the

prom

isso

ry

note

, whi

ch m

atur

es o

n th

e ex

pect

ed d

ate

of re

paym

ent

and

is si

gned

by

the

join

t gua

rant

or, f

or th

e C

ompa

ny a

s se

curit

y. W

hen

the

join

t gu

aran

tor

is a

com

pany

or

a fir

m, t

he C

ompa

ny s

hall

exam

ine

whe

ther

its

artic

les

of

inco

rpor

atio

n an

d m

inut

es o

f th

e bo

ard

mee

ting

perm

it th

e gu

aran

tee.

5.

Insu

ranc

eEx

cept

fo

r la

nd

and

secu

ritie

s, fir

e in

sura

nce

and

rela

ted

insu

ranc

e sh

all

be

purc

hase

d fo

r ot

her

colla

tera

ls a

t the

am

ount

not

less

than

the

colla

tera

l in

pled

ge.

The

Com

pany

sh

all

be

spec

ified

as

th

e be

nefic

iary

in th

e in

sura

nce

polic

y. T

he n

ame,

qua

ntity

, pl

ace

of

stor

age,

an

d in

sura

nce

cond

ition

s an

d en

dors

emen

ts o

f th

e su

bjec

t sp

ecifi

ed i

n th

e in

sura

nce

polic

y sh

all

be c

onsi

sten

t w

ith t

he l

oan

cond

ition

s ap

prov

ed b

y th

e C

ompa

ny.

Th

e pe

rson

in

char

ge s

hall

notif

y th

e bo

rrow

er o

f a

rene

wal

bef

ore

the

term

of t

he in

sura

nce

expi

res.

6.A

ppro

pria

tion

The

loan

will

be

appr

opria

ted

afte

r a b

orro

wer

sig

n th

e co

ntra

ct, s

ubm

it th

e pr

omis

sory

not

e, s

et th

e m

ortg

age,

an

d pu

rcha

se th

e in

sura

nce.

7.

Acc

ount

Kee

ping

Whe

n th

e C

ompa

ny

com

plet

es

the

proc

edur

es

for

lend

ing

each

fun

d, F

inan

ce D

epar

tmen

t sh

all

mak

e an

en

try fo

r col

late

ral o

r cre

dit g

uara

ntee

obt

aine

d.

8.Th

e C

ompa

ny s

hall

esta

blis

h a

log

book

for

its

loan

activ

ities

and

reco

rd in

det

ail t

he fo

llow

ing

info

rmat

ion

loan

con

tract

, th

e pe

rson

in

char

ge s

hall

perf

orm

the

pr

oced

ures

for v

erify

ing

thei

r ide

ntiti

es.

4.

App

rais

al o

f Col

late

ral V

alue

and

Set

ting

of R

ight

sW

hen

appl

ying

fo

r a

loan

, a

borr

ower

, af

ter

bein

g ve

rifie

d to

pro

vide

col

late

ral,

shal

l pr

ovid

e a

pled

ge o

n eq

uiva

lent

rea

l pr

oper

ty o

r se

curit

ies

or t

he p

rom

isso

ry

note

, whi

ch m

atur

es o

n th

e ex

pect

ed d

ate

of r

epay

men

t an

d is

sig

ned

by th

e jo

int g

uara

ntor

, for

the

Com

pany

as

secu

rity.

Whe

n th

e jo

int

guar

anto

r is

a c

ompa

ny o

r a

firm

, the

Com

pany

sha

ll ex

amin

e w

heth

er it

s ar

ticle

s of

in

corp

orat

ion

and

min

utes

of

the

boar

d m

eetin

g pe

rmit

the

guar

ante

e.

5.In

sura

nce

Exce

pt f

or la

nd a

nd s

ecur

ities

, fire

insu

ranc

e an

d re

late

d in

sura

nce

shal

l be

pur

chas

ed f

or o

ther

col

late

rals

at

the

amou

nt

not

less

th

an

the

colla

tera

l in

pl

edge

. Th

e C

ompa

ny s

hall

be s

peci

fied

as t

he b

enef

icia

ry i

n th

e in

sura

nce

polic

y. T

he n

ame,

qua

ntity

, pl

ace

of s

tora

ge,

and

insu

ranc

e co

nditi

ons a

nd e

ndor

sem

ents

of t

he su

bjec

t sp

ecifi

ed in

the

insu

ranc

e po

licy

shal

l be

cons

iste

nt w

ith

the

loan

con

ditio

ns a

ppro

ved

by th

e C

ompa

ny.

Th

e pe

rson

in

char

ge s

hall

notif

y th

e bo

rrow

er o

f a

rene

wal

bef

ore

the

term

of t

he in

sura

nce

expi

res.

6.A

ppro

pria

tion

The

loan

will

be

appr

opria

ted

afte

r a

borr

ower

sig

n th

e co

ntra

ct,

subm

it th

e pr

omis

sory

not

e, s

et t

he m

ortg

age,

an

d pu

rcha

se th

e in

sura

nce.

7.

Acc

ount

Kee

ping

Whe

n th

e C

ompa

ny c

ompl

etes

the

proc

edur

es fo

r len

ding

ea

ch f

und,

Fin

ance

Dep

artm

ent

shal

l m

ake

an e

ntry

for

co

llate

ral o

r cre

dit g

uara

ntee

obt

aine

d.

8.Th

e C

ompa

ny s

hall

esta

blis

h a

log

book

for

its

loa

nac

tiviti

es a

nd r

ecor

d in

det

ail

the

follo

win

g in

form

atio

n fo

r fut

ure

refe

renc

e: th

e en

tity

to w

hich

the

loan

is g

iven

, th

e am

ount

, th

e da

te

of

pass

age

by

the

Boa

rd

of

60

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

for

futu

re r

efer

ence

: th

e en

tity

to w

hich

the

loa

n is

gi

ven,

the

amou

nt, t

he d

ate

of p

assa

ge b

y th

e B

oard

of

Dire

ctor

s, th

e da

te th

e lo

an is

app

ropr

iate

d, a

nd m

atte

rs

to b

e ev

alua

ted

in a

ccor

danc

e w

ith A

rticl

e 7.

9.

If,

due

to c

hang

es o

f ci

rcum

stan

ces,

the

party

to

who

m th

e C

ompa

ny g

ives

a lo

an n

o lo

nger

sat

isfie

s th

e cr

iteria

set f

orth

her

ein,

or t

he b

alan

ce o

f a lo

an e

xcee

ds

the

limits

, a

corr

ectiv

e pl

an s

hall

be p

rovi

ded

to t

he

Aud

it C

omm

ittee

and

the

prop

osed

cor

rect

ions

sha

ll be

im

plem

ente

d w

ithin

the

perio

d sp

ecifi

ed in

the

plan

.

Dire

ctor

s, th

e da

te th

e lo

an is

app

ropr

iate

d, a

nd m

atte

rs

to b

e ev

alua

ted

in a

ccor

danc

e w

ith A

rticl

e 7.

9.

If, d

ue to

cha

nges

of c

ircum

stan

ces,

the

party

to w

hom

the

Com

pany

giv

es a

loan

no

long

er s

atis

fies

the

crite

ria

set

forth

her

ein,

or

the

bala

nce

of a

loa

n ex

ceed

s th

e lim

its,

a co

rrec

tive

plan

sh

all

be

prov

ided

to

al

l su

perv

isor

s an

d th

e pr

opos

ed

corr

ectio

ns

shal

l be

im

plem

ente

d w

ithin

the

perio

d sp

ecifi

ed in

the

plan

.

Arti

cle

13

Impl

emen

tatio

n an

d A

men

dmen

t Th

ese

Ope

ratio

nal P

roce

dure

s sh

all b

e ap

prov

ed b

y th

e B

oard

of D

irect

ors a

nd th

en se

nt to

the

Aud

it C

omm

ittee

an

d pr

opos

ed a

t the

sha

reho

lder

s’ m

eetin

g fo

r ap

prov

al.

If a

ny d

irect

or e

xpre

sses

obj

ectio

n on

the

reco

rd o

r in

a

writ

ten

stat

emen

t, th

e C

ompa

ny

shal

l su

bmit

the

obje

ctio

n to

the

Aud

it C

omm

ittee

and

the

shar

ehol

ders

’ m

eetin

g fo

r dis

cuss

ion

any

amen

dmen

t her

eto

is s

ubje

ct

to th

e sa

me

proc

edur

es.

If t

he C

ompa

ny h

as e

stab

lishe

d in

depe

nden

t di

rect

ors,

whe

n su

bmitt

ing

thes

e O

pera

tiona

l Pr

oced

ures

to

the

Boa

rd

of

Dire

ctor

s fo

r di

scus

sion

pu

rsua

nt

to

the

prec

edin

g pa

ragr

aph,

it

shal

l co

nsid

er t

he d

isse

ntin

g op

inio

ns fr

om a

ll in

depe

nden

t dire

ctor

s fu

lly a

nd li

st th

e co

nsen

ting

and

obje

ctin

g op

inio

ns a

nd t

heir

reas

ons

in

the

mee

ting

min

utes

of t

he B

oard

of D

irect

ors.

Impl

emen

tatio

n an

d A

men

dmen

t Th

ese

Ope

ratio

nal

Proc

edur

es s

hall

be a

ppro

ved

by t

he

Boa

rd o

f D

irect

ors

and

then

sen

t to

all

supe

rvis

ors

and

prop

osed

at t

he s

hare

hold

ers’

mee

ting

for a

ppro

val.

If a

ny

dire

ctor

exp

ress

es o

bjec

tion

on th

e re

cord

or

in a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e ob

ject

ion

to th

e su

perv

isor

s an

d th

e sh

areh

olde

rs’

mee

ting

for

disc

ussi

on

any

amen

dmen

t her

eto

is su

bjec

t to

the

sam

e pr

oced

ures

. If

the

Com

pany

has

est

ablis

hed

inde

pend

ent

dire

ctor

s, w

hen

subm

ittin

g th

ese

Ope

ratio

nal

Proc

edur

es t

o th

e B

oard

of

D

irect

ors

for

disc

ussi

on

purs

uant

to

th

e pr

eced

ing

para

grap

h,

it sh

all

cons

ider

th

e di

ssen

ting

opin

ions

fro

m a

ll in

depe

nden

t dire

ctor

s fu

lly a

nd li

st th

e co

nsen

ting

and

obje

ctin

g op

inio

ns a

nd th

eir r

easo

ns in

the

mee

ting

min

utes

of t

he B

oard

of D

irect

ors.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

14

Proc

edur

es fo

r Man

agin

g Fu

nds L

ent t

o Su

bsid

iarie

s:

1.Fo

r a su

bsid

iary

in w

hich

the

Com

pany

dire

ctly

or

indi

rect

ly h

olds

mor

e th

an 5

0% o

f the

vot

ing

shar

es a

nd

whi

ch is

not

a p

ublic

com

pany

of t

he R

epub

lic o

f Chi

na,

thes

e O

pera

tiona

l Pro

cedu

res s

hall

be fo

llow

ed. T

he n

et

valu

e sh

all b

e ca

lcul

ated

bas

ed o

n th

e C

ompa

ny’s

net

va

lue.

The

Com

pany

shal

l sub

mit

the

prev

ious

mon

th's

bala

nce

of it

s loa

ned

fund

s to

Fina

nce

Dep

artm

ent b

y th

e 5t

h da

y of

eac

h m

onth

.

Proc

edur

es fo

r Man

agin

g Fu

nds L

ent t

o Su

bsid

iarie

s:

For a

subs

idia

ry in

whi

ch th

e C

ompa

ny d

irect

ly o

r in

dire

ctly

hol

ds m

ore

than

50%

of t

he v

otin

g sh

ares

and

w

hich

is n

ot a

pub

lic c

ompa

ny o

f the

Rep

ublic

of C

hina

, th

ese

Ope

ratio

nal P

roce

dure

s sha

ll be

follo

wed

. The

net

va

lue

shal

l be

calc

ulat

ed b

ased

on

the

Com

pany

’s n

et

valu

e. T

he C

ompa

ny sh

all s

ubm

it th

e pr

evio

us m

onth

's ba

lanc

e of

its l

oane

d fu

nds t

o Fi

nanc

e D

epar

tmen

t by

the

5th

day

of e

ach

mon

th.

Acc

ordi

ng to

the

actu

al p

ract

ice

61

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

2.In

tern

al a

udito

rs o

f the

Com

pany

shal

l per

form

the

audi

t on

the

lend

ing

of fu

nds o

f the

subs

idia

ries b

ased

on

the

annu

al a

udit

plan

. In

the

case

that

a m

ater

ial

viol

atio

n is

foun

d, in

tern

al a

udito

rs sh

all c

ontin

uous

ly

follo

w u

p th

e im

prov

emen

ts a

nd su

bmit

the

follo

w-u

p re

port

to th

e B

oard

of D

irect

ors a

nd th

e A

udit

Com

mitt

ee.

Inte

rnal

aud

itors

of t

he C

ompa

ny sh

all p

erfo

rm th

e au

dit

on th

e le

ndin

g of

fund

s of t

he su

bsid

iarie

s bas

ed o

n th

e an

nual

aud

it pl

an. I

n th

e ca

se th

at a

mat

eria

l vio

latio

n is

fo

und,

inte

rnal

aud

itors

shal

l con

tinuo

usly

follo

w u

p th

e im

prov

emen

ts a

nd su

bmit

the

follo

w-u

p re

port

to th

e B

oard

of D

irect

ors a

nd a

ll su

perv

isor

s.

Arti

cle

15

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 2n

d am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

3rd

amen

dmen

t was

mad

e on

May

15,

200

9.

The

4th

amen

dmen

t was

mad

e on

May

18,

201

0.

The

5th

amen

dmen

t was

mad

e on

June

13,

201

3.

The

6th

amen

dmen

t was

mad

e on

May

26,

201

7.

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 2n

d am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

3rd

amen

dmen

t was

mad

e on

May

15,

200

9.

The

4th

amen

dmen

t was

mad

e on

May

18,

201

0.

The

5th

amen

dmen

t was

mad

e on

June

13,

201

3.

Upd

ate

the

date

of

the

amen

dmen

t

62

< A

ttach

men

t V

III>

Adv

ante

ch C

o., L

td.

Proc

edur

es fo

r End

orse

men

t & G

uara

ntee

N

o.

Aft

er a

men

dm

ent

Bef

ore

amen

dm

ent

Rem

ark

A

rticl

e 5.

1Le

vel o

f Aut

horiz

atio

n En

dors

emen

ts a

nd/o

r gua

rant

ees

mad

e by

the

Com

pany

sh

all

be c

ondu

cted

afte

r re

ceiv

ing

appr

oval

fro

m t

he

Cha

irman

and

the

Boa

rd o

f Dire

ctor

s. A

pre

dete

rmin

ed

limit

(5%

of

th

e C

ompa

ny’s

ne

t va

lue)

m

ay

be

dele

gate

d to

the

Cha

irman

by

the

Boa

rd o

f Dire

ctor

s to

fa

cilit

ate

exec

utio

n an

d su

ch

endo

rsem

ent

and/

or

guar

ante

e sh

all b

e re

porte

d to

the

mos

t upc

omin

g bo

ard

mee

ting

for

ratif

icat

ion

and

to

the

shar

ehol

ders

’ m

eetin

g fo

r fut

ure

refe

renc

e.

In

case

th

e ab

ove

limits

ha

ve

to

be

exce

eded

to

ac

com

mod

ate

busi

ness

nee

ds, a

ppro

val b

y a

reso

lutio

n of

the

Boa

rd o

f D

irect

ors

shal

l be

obt

aine

d an

d ov

er

half

of

all

the

dire

ctor

s sh

all

join

tly

endo

rse

the

pote

ntia

l los

s th

at m

ay b

e br

ough

t abo

ut b

y ex

ceed

ing

the

limits

. The

Boa

rd o

f Dire

ctor

s sha

ll al

so re

vise

thes

e pr

oced

ures

and

hav

e th

em r

atifi

ed a

t the

sha

reho

lder

s’ m

eetin

g. If

the

revi

sed

proc

edur

es a

re n

ot ra

tifie

d at

the

shar

ehol

ders

’ m

eetin

g, t

he B

oard

of

Dire

ctor

s sh

all

furn

ish

a pl

an c

onta

inin

g a

timet

able

to

with

draw

the

ex

cess

por

tion.

If

, due

to c

hang

es o

f circ

umst

ance

s, th

e pa

rty to

who

m

the

Com

pany

pr

ovid

es

an

endo

rsem

ent

and/

or

guar

ante

e no

lo

nger

sa

tisfie

s th

e cr

iteria

se

t fo

rth

here

in, o

r th

e am

ount

of

endo

rsem

ent a

nd/o

r gu

aran

tee

exce

eds t

he li

mits

, a c

orre

ctiv

e pl

an sh

all b

e pr

ovid

ed to

th

e A

udit

Com

mitt

ee a

nd th

e pr

opos

ed c

orre

ctio

ns s

hall

be im

plem

ente

d w

ithin

the

perio

d sp

ecifi

ed in

the

plan

.

Leve

l of A

utho

rizat

ion

Endo

rsem

ents

and

/or

guar

ante

es m

ade

by t

he C

ompa

ny

shal

l be

con

duct

ed a

fter

rece

ivin

g ap

prov

al f

rom

the

C

hairm

an a

nd t

he B

oard

of

Dire

ctor

s. A

pre

dete

rmin

ed

limit

(5%

of t

he C

ompa

ny’s

net

val

ue) m

ay b

e de

lega

ted

to t

he C

hairm

an b

y th

e B

oard

of

Dire

ctor

s to

fac

ilita

te

exec

utio

n an

d su

ch e

ndor

sem

ent

and/

or g

uara

ntee

sha

ll be

rep

orte

d to

the

mos

t up

com

ing

boar

d m

eetin

g fo

r ra

tific

atio

n an

d to

the

sha

reho

lder

s’ m

eetin

g fo

r fu

ture

re

fere

nce.

In

ca

se

the

abov

e lim

its

have

to

be

ex

ceed

ed

to

acco

mm

odat

e bu

sine

ss n

eeds

, app

rova

l by

a re

solu

tion

of

the

Boa

rd o

f Dire

ctor

s sh

all b

e ob

tain

ed a

nd o

ver h

alf o

f al

l th

e di

rect

ors

shal

l jo

intly

end

orse

the

pot

entia

l lo

ss

that

may

be

brou

ght a

bout

by

exce

edin

g th

e lim

its. T

he

Boa

rd o

f Dire

ctor

s sh

all a

lso

revi

se th

ese

proc

edur

es a

nd

have

the

m r

atifi

ed a

t th

e sh

areh

olde

rs’

mee

ting.

If

the

revi

sed

proc

edur

es a

re n

ot r

atifi

ed a

t th

e sh

areh

olde

rs’

mee

ting,

the

Boa

rd o

f D

irect

ors

shal

l fu

rnis

h a

plan

co

ntai

ning

a ti

met

able

to w

ithdr

aw th

e ex

cess

por

tion.

If

, due

to c

hang

es o

f circ

umst

ance

s, th

e pa

rty to

who

m th

e C

ompa

ny p

rovi

des

an e

ndor

sem

ent

and/

or g

uara

ntee

no

long

er s

atis

fies

the

crite

ria s

et fo

rth h

erei

n, o

r the

am

ount

of

end

orse

men

t an

d/or

gua

rant

ee e

xcee

ds t

he l

imits

, a

corr

ectiv

e pl

an sh

all b

e pr

ovid

ed to

all

supe

rvis

ors a

nd th

e pr

opos

ed c

orre

ctio

ns s

hall

be i

mpl

emen

ted

with

in t

he

perio

d sp

ecifi

ed in

the

plan

.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

11

Inte

rnal

aud

itors

of

the

Com

pany

sha

ll pe

rfor

m t

he

audi

t on

the

Com

pany

’s e

ndor

sem

ent a

nd/o

r gu

aran

tee

Inte

rnal

aud

itors

of

the

Com

pany

sha

ll pe

rfor

m th

e au

dit

on th

e C

ompa

ny’s

end

orse

men

t and

/or g

uara

ntee

pro

file

at

Acc

ordi

ng to

the

actu

al p

ract

ice

63

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

prof

ile a

t le

ast

once

per

qua

rter

and

prod

uce

writ

ten

audi

ting

repo

rts. I

n th

e ca

se th

at a

mat

eria

l vio

latio

n is

fo

und,

inte

rnal

aud

it sh

all i

mm

edia

tely

not

ify th

e A

udit

Com

mitt

ee in

writ

ing.

leas

t on

ce

per

quar

ter

and

prod

uce

writ

ten

audi

ting

repo

rts.

In t

he c

ase

that

a m

ater

ial

viol

atio

n is

fou

nd,

inte

rnal

aud

it sh

all i

mm

edia

tely

not

ify th

e su

perv

isor

s in

w

ritin

g.

Arti

cle

12

Thes

e Pr

oced

ures

sha

ll be

im

plem

ente

d up

on a

ppro

val

of th

e B

oard

of

Dire

ctor

s, th

e A

udit

Com

mitt

ee a

nd th

e sh

areh

olde

rs’

mee

ting.

If

an

y di

rect

or

expr

esse

s ob

ject

ion

on t

he r

ecor

d or

in

a w

ritte

n st

atem

ent,

the

Com

pany

sh

all

subm

it th

e ob

ject

ion

to

the

Aud

it C

omm

ittee

and

the

shar

ehol

ders

’ mee

ting

for d

iscu

ssio

n.

Any

am

endm

ent h

eret

o is

subj

ect t

o th

e sa

me

proc

edur

esIf

the

Com

pany

has

est

ablis

hed

inde

pend

ent

dire

ctor

s, w

hen

subm

ittin

g th

ese

Proc

edur

es t

o th

e B

oard

of

Dire

ctor

s fo

r di

scus

sion

pu

rsua

nt

to

the

prec

edin

g pa

ragr

aph,

it sh

all c

onsi

der t

he d

isse

ntin

g op

inio

ns fr

om

all

inde

pend

ent

dire

ctor

s fu

lly a

nd l

ist

the

cons

entin

g an

d ob

ject

ing

opin

ions

and

thei

r rea

sons

in th

e m

eetin

g m

inut

es o

f the

Boa

rd o

f Dire

ctor

s.

Thes

e Pr

oced

ures

sha

ll be

impl

emen

ted

upon

app

rova

l of

the

Boa

rd

of

Dire

ctor

s, al

l su

perv

isor

s an

d th

e sh

areh

olde

rs’ m

eetin

g. If

any

dire

ctor

exp

ress

es o

bjec

tion

on th

e re

cord

or i

n a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e ob

ject

ion

to

the

supe

rvis

ors

and

the

shar

ehol

ders

’ m

eetin

g fo

r di

scus

sion

. A

ny a

men

dmen

t he

reto

is su

bjec

t to

the

sam

e pr

oced

ures

. If

the

Com

pany

has

est

ablis

hed

inde

pend

ent d

irect

ors,

whe

n su

bmitt

ing

thes

e Pr

oced

ures

to th

e B

oard

of

Dire

ctor

s for

dis

cuss

ion

purs

uant

to th

e pr

eced

ing

para

grap

h, it

shal

l con

side

r the

dis

sent

ing

opin

ions

from

al

l ind

epen

dent

dire

ctor

s ful

ly a

nd li

st th

e co

nsen

ting

and

obje

ctin

g op

inio

ns a

nd th

eir r

easo

ns in

the

mee

ting

min

utes

of t

he B

oard

of D

irect

ors.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

13

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

2nd

amen

dmen

t was

mad

e on

June

16,

200

6.

The

3rd

amen

dmen

t was

mad

e on

May

15,

200

9.

The

4th

amen

dmen

t was

mad

e on

May

18,

201

0.

The

5th

amen

dmen

t was

mad

e on

May

26,

201

7.

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

2nd

amen

dmen

t was

mad

e on

June

16,

200

6.

The

3rd

amen

dmen

t was

mad

e on

May

15,

200

9.

The

4th

amen

dmen

t was

mad

e on

May

18,

201

0.

Upd

ate

the

date

of

the

amen

dmen

t

64

< A

ttach

men

t IX

>A

dvan

tech

Co.

, Ltd

. Pr

oced

ures

for F

inan

cial

Der

ivat

ives

Tra

nsac

tions

N

o.

Aft

er a

men

dm

ent

Bef

ore

amen

dm

ent

Rem

ark

A

rticl

e 8

Impl

emen

tatio

n an

d A

men

dmen

t Th

ese

Proc

edur

e sh

all

be

subm

itted

to

th

e A

udit

Com

mitt

ee a

nd th

e sh

areh

olde

rs’

mee

ting

for

appr

oval

af

ter t

he re

solu

tion

of th

e B

oard

of D

irect

ors;

the

sam

e pr

oced

ure

shal

l ap

ply

with

any

am

endm

ent.

If a

ny

dire

ctor

exp

ress

es d

isse

nt a

nd i

t is

con

tain

ed i

n th

e m

inut

es o

r a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e di

rect

or's

diss

entin

g op

inio

n to

the

Aud

it C

omm

ittee

. Whe

re th

e po

sitio

n of

inde

pend

ent d

irect

or

has

been

cr

eate

d by

th

e C

ompa

ny,

the

Boa

rd

of

Dire

ctor

s sh

all

take

in

to

full

cons

ider

atio

n ea

ch

inde

pend

ent

dire

ctor

's op

inio

ns.

If

an

inde

pend

ent

dire

ctor

obj

ects

to o

r ex

pres

ses

rese

rvat

ions

abo

ut a

ny

mat

ter,

it sh

all b

e re

cord

ed in

the

min

utes

of

the

boar

d m

eetin

g.

Impl

emen

tatio

n an

d A

men

dmen

t Th

ese

Proc

edur

e sh

all b

e su

bmitt

ed to

eac

h su

perv

isor

and

th

e sh

areh

olde

rs’ m

eetin

g fo

r app

rova

l afte

r the

reso

lutio

n of

the

Boa

rd o

f Dire

ctor

s; th

e sa

me

proc

edur

e sh

all a

pply

w

ith a

ny a

men

dmen

t. If

any

dire

ctor

exp

ress

es d

isse

nt a

nd

it is

con

tain

ed i

n th

e m

inut

es o

r a

writ

ten

stat

emen

t, th

e C

ompa

ny s

hall

subm

it th

e di

rect

or's

diss

entin

g op

inio

n to

ea

ch

supe

rvis

or.

Whe

re

the

posi

tion

of

inde

pend

ent

dire

ctor

has

bee

n cr

eate

d by

the

Com

pany

, the

Boa

rd o

f D

irect

ors

shal

l ta

ke

into

fu

ll co

nsid

erat

ion

each

in

depe

nden

t dire

ctor

's op

inio

ns. I

f an

inde

pend

ent d

irect

or

obje

cts

to o

r ex

pres

ses

rese

rvat

ions

abo

ut a

ny m

atte

r, it

shal

l be

reco

rded

in th

e m

inut

es o

f the

boa

rd m

eetin

g.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

9 Th

ese

Proc

edur

es w

ere

esta

blis

hed

on M

ay 3

, 199

7.

The

1st a

men

dmen

t was

mad

e on

Apr

il 18

, 199

8.

The

2nd

amen

dmen

t was

mad

e on

May

2, 2

003.

Th

e 3r

d am

endm

ent w

as m

ade

on M

ay 2

4, 2

005.

Th

e 4t

h am

endm

ent w

as m

ade

on M

ay 1

8, 2

010

The

5th

amen

dmen

t was

mad

e on

June

18,

201

4.

The

6th

amen

dmen

t was

mad

e on

May

26,

201

7.

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on A

pril

18, 1

998.

Th

e 2n

d am

endm

ent w

as m

ade

on M

ay 2

, 200

3.

The

3rd

amen

dmen

t was

mad

e on

May

24,

200

5.

The

4th

amen

dmen

t was

mad

e on

May

18,

201

0 Th

e 5t

h am

endm

ent w

as m

ade

on Ju

ne 1

8, 2

014.

Upd

ate

the

date

of

the

amen

dmen

t

65

< A

ttach

men

t X

>A

dvan

tech

Co.

, Ltd

. R

ules

and

Pro

cedu

re fo

r Sha

reho

lder

s’ M

eetin

gs

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

Arti

cle

14.1

The

elec

tion

of d

irect

ors,

if an

y, i

n th

e sh

areh

olde

rs’

mee

ting

shou

ld b

e ha

ndle

d in

acc

orda

nce

with

the

re

leva

nt n

orm

s of

the

Com

pany

and

the

ele

ctio

n re

sult

shou

ld

be

anno

unce

d im

med

iate

ly

in

the

mee

ting,

in

clud

ing

the

nam

e of

th

e el

ecte

d di

rect

ors

and

supe

rvis

ors a

nd th

e re

spec

tive

num

ber o

f vot

ing

right

s. Th

e ba

llots

cas

ted

in th

e el

ectio

n re

ferr

ed to

abo

ve s

hall

be

seal

ed

and

sign

ed

by

the

ballo

t in

spec

tors

fo

r sa

feke

epin

g fo

r at

leas

t one

yea

r; ho

wev

er, t

hey

shou

ld

be r

eser

ved

until

the

end

of th

e le

gal p

roce

edin

g th

at is

fil

ed b

y th

e sh

areh

olde

rs in

acc

orda

nce

with

Arti

cle

189

of th

e C

ompa

ny L

aw.

The

elec

tion

of d

irect

ors

and

supe

rvis

ors,

if an

y, i

n th

e sh

areh

olde

rs’

mee

ting

shou

ld b

e ha

ndle

d in

acc

orda

nce

with

the

rele

vant

nor

ms

of th

e C

ompa

ny a

nd th

e el

ectio

n re

sult

shou

ld b

e an

noun

ced

imm

edia

tely

in

the

mee

ting,

in

clud

ing

the

nam

e of

th

e el

ecte

d di

rect

ors

and

supe

rvis

ors a

nd th

e re

spec

tive

num

ber o

f vot

ing

right

s. Th

e ba

llots

cas

ted

in th

e el

ectio

n re

ferr

ed to

abo

ve s

hall

be

seal

ed

and

sign

ed

by

the

ballo

t in

spec

tors

fo

r sa

feke

epin

g fo

r at l

east

one

yea

r; ho

wev

er, t

hey

shou

ld b

e re

serv

ed u

ntil

the

end

of th

e le

gal p

roce

edin

g th

at is

file

d by

the

shar

ehol

ders

in a

ccor

danc

e w

ith A

rticl

e 18

9 of

the

Com

pany

Law

.

Acc

ordi

ng to

the

actu

al p

ract

ice

Arti

cle

19

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on A

pril

24, 1

999.

Th

e 2n

d am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 3r

d am

endm

ent w

as m

ade

on Ju

ne 1

6, 2

006.

Th

e 4t

h am

endm

ent w

as m

ade

on M

ay 1

8, 2

010

The

5th

amen

dmen

t was

mad

e on

June

13,

201

2.

The

6th

amen

dmen

t was

mad

e on

May

26,

201

7.

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

Th

e 1s

t am

endm

ent w

as m

ade

on A

pril

24, 1

999.

Th

e 2n

d am

endm

ent w

as m

ade

on M

ay 3

0, 2

002.

Th

e 3r

d am

endm

ent w

as m

ade

on Ju

ne 1

6, 2

006.

Th

e 4t

h am

endm

ent w

as m

ade

on M

ay 1

8, 2

010

The

5th

amen

dmen

t was

mad

e on

June

13,

201

2.

Upd

ate

the

date

of

the

amen

dmen

t

66

APPENDICES

67

III. Appendices< Appendix I >

Corporate Charter (Articles of Incorporation) (Before Amendment)

C h a p t e r 1 General Rules A r t i c l e 1 ： The Company was organized in accordance with the provisions of the Company

Law and was known as “Advantech Co., Ltd.” A r t i c l e 2 ： The Company’s business operation is as follows:

1. CC01060 Wire communications machinery and equipment manufacturing2. CC01070 Wireless communications machinery and equipment manufacturing3. CC01080 Electronic Components Manufacturing4. CC01110 Computer and peripheral equipment manufacturing5. CE01010 General equipment manufacturing6. E605010 Computer equipment installation industry7. EZ05010 Instrument and meters installation engineering8. I301010 IT software services industry9. I301020 Data processing services10. I301030 Electronic information supply services11. CC01101 RF controlled telecommunications equipment manufacturing12. F401021 RF controlled telecommunications equipment importing13. IG03010 Energy and Technical Services14. CC01030 Electrical appliances and audio-video electronic productsmanufacturing 15. F113020 Electrical appliances wholesale16. F213010 Electrical appliances retail17. ZZ99999 In addition to the licensed businesses, may conduct other businessesthat are not prohibited or restricted.

A r t i c l e 2 . 1 ： The Company for business needs may conduct the making of endorsement and guarantee.

A r t i c l e 3 ： The Company’s headquarters is in Taipei and may setup offshore branches with the resolution of the board of directors.

A r t i c l e 4 ： The Company may have announcements made in accordance with Article 28 of the Company Law.

C h a p t e r 1 Shares A r t i c l e 5 ： The Company’s total capital amounted to NT$8 billion with 800 million shares

authorized at NT$10 par. The board of directors is authorized to have stock shares issue separately. For the total capital referred to above, NT$500 million is reserved for exercising stock option with warrant or bonds with attached warrants. The Company has stock shares transferred to employees at a price below the average repurchase price; also, the transaction prior to the transfer of shares should be presented in the most recent shareholders’ meeting that is attended by the shareholders with a majority shareholding and approved by the attending shareholders with two thirds of the shareholding.

A r t i c l e 5 . 1 ： When the Company issuing employee warrants at a price below the Company’s common stock closing price on the issuing date, the transaction of share issuance should be presented in the shareholders’ meeting that is attended by the shareholders with a majority shareholding and approved by the attending shareholders with two thirds of the shareholding.

A r t i c l e 6 ： Deleted A r t i c l e 6 . 1 ： The Company may be requested by Taiwan Depository and Clearing Corp. to

issue large denomination stocks.

68

A r t i c l e 7 ： The Company’s stock shares are ordered with the signature or seal of three or more directors affixed and numbered; also, are issued after proper certification. The Company is exempted from having the stock shares printed out after issuance; however, the Company should contact the securities depository and clearing institution for registration.

A r t i c l e 8 ： The registration for any change made to the Shareholder Registry should be ceased 60 days prior to the general shareholders’ meeting, 30 days prior to the extraordinary shareholders’ meeting, or 5 days prior to the Company’s deciding to distribute dividends and bonuses or other benefits.

C h a p t e r 3 Shareholders’ meeting A r t i c l e 9 ： Shareholders’ meeting includes general shareholders’ meeting and extraordinary

shareholders’ meeting. General shareholders’ meeting is held annually and it is convened by the board of directors lawfully six months after the fiscal year. Extraordinary shareholders’ meeting is convened when it is necessary.

A r t i c l e 1 0 ： Shareholders who are unable to attend the shareholders’ meeting in person may have a representative appointed to attend the meeting by issuing the proxy that is printed by the Company with the scope of authorization specified and then signed or sealed. The proxy referred to above is regulated in accordance with the “Regulations for the Use of Proxies for Shareholders’ Meeting of Public Companies.”

A r t i c l e 1 1 ： It is one voting right per share for the shareholders of the Company, except for those subject to restrictions or those who have no voting right according to the Company Law.

A r t i c l e 1 2 ： The resolution reached in the shareholders’ meeting, unless otherwise provided by law, can be enforced after being presented in the shareholders’ meeting that is attended by a majority of shareholders in person or by proxy and approved by the attending shareholders with a majority shareholding.

C h a p t e r 4 Directors and supervisors A r t i c l e 1 3 ： The company has seven ~ nine directors and three supervisors nominated for a

term of three years and they are elected from the capable candidates in the shareholders’ meeting; also, they can be re-elected. There must be at least two independent directors (not less than one fifth of the total number of directors) out of the number of directors referred to above. The independent directors are to be elected from the candidates in the shareholders’ meeting. The professional qualifications of the independent directors, shareholdings, limitation of part-time job, the nomination and appointment method, and other matters to be complied with must be processed according to the relevant provisions of the competent authorities.

Ar t i c l e 13 .1 ： The exercise of power by the board of directors is as follows: 1. The elaboration of the Corporate Charter2. The elaboration of the Company’s business plan3. The elaboration of the Company’s profit distribution4. The elaboration of the Company’s capital increase and decrease5. The review and approval of the Company’s budget and the preparation of theCompany’s final account 6. The elaboration of the acquisition and disposal of fixed assets by the Companyand the investment in other businesses 7. The powers endowed in accordance with the law and regulations and in theshareholders’ meeting

Ar t i c l e 13 .2 ： The exercise of power by the supervisors is as follows: 1. Reviewing the operations and financial condition of the Company2. Auditing the accounting books and documents of the Company3. Other responsibilities assigned in accordance with the law and regulations

69

Art ic l e 13 .3 ： The total shares of the Company held by all directors and supervisors are to be processed in accordance with the “Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies” published by the competent authorities.

Ar t i c l e 13 .4 ： The Company may purchase liability insurance for directors and supervisors throughout the tenure based on their scope of responsibility.

Ar t i c l e 13 .5

Ar t i c l e 13 .6

： The board of directors is authorized to deliberate and determine the remuneration of all directors and supervisors according to their participation in and contribution to the Company’s business operation and by referring to the remuneration standard of the domestic industry. The Company has an Audit Committee setup in accordance with Article 14.4 of the Securities Exchange Act, which is organized by all the independent directors. The exercise of power by the Audit Committee and its members and the related matters are to be processed in accordance with the provisions of the competent authorities. Supervisors will be discharged on the date the Audit Committee established, which will be in effect on the expiry date of the term of office in 2017.

A r t i c l e 1 4 ： The Board of Directors is formed by the directors. The Chairman is elected by a majority of the attending directors at the board meeting that is attended by two thirds of the directors.

Ar t i c l e 14 .1 The Company may at any time in case of emergency convene a board meeting and with the directors and supervisors informed in writing or by E-mail or fax.

A r t i c l e 1 5 ： When the Chairman is unable to exercise powers due to a leave or for other reasons, the matter regarding the deputy of the Chairman should be handled in accordance with Article 208 of the Company Law.

Ar t i c l e 15 .1 ： The resolutions of the board of directors, unless otherwise provided by the Company Law and the Corporate Charter, shall be exercised with the consent of a majority of the attending directors at the board meeting that is attended by a majority of the directors. Directors should attend board meetings in person. The director who is unable to attend board meetings in person may authorize another director in writing to attend the board meetings; however, a proxy should be issued each time with the scope of authorization detailed to have one and only deputy delegated.

A r t i c l e 1 6 ： Deleted

C h a p t e r 5 Managers A r t i c l e 1 7 ： The Company may have several managers appointed; also, the appointment,

dismissal, and remuneration should be processed in accordance with Article 29 of the Company Law.

C h a p t e r 6 Accountant A r t i c l e 1 8 ： The Company’s board of directors shall at the end of each fiscal year have the

following composed (1) Business Report (2) Financial Reports (3) Profit Distribution Proposals for the audit of the supervisors 30 days prior to the shareholders’ meeting and for acknowledgement in the shareholders’ meeting.

A r t i c l e 1 9 ： Deleted Ar t i c l e 19 .1 ： The Company engages in high-tech computer and Internet-related industries and

is in the growth stage of the business life cycle. In response to the overall business environment and industry growth characteristics and the pursuit of the Company’s sustainable development, the long-term interests of shareholders, the stable operating performance goal, and the stable growth of earnings per share in accordance with the Company’s future capital expenditure budget and fund needs, the Company’s stock dividend distribution is limited to 75% of the total dividend planned for distribution.

70

A r t i c l e 2 0 ： The company’s annual profits, if any, should be with 1~20% appropriated as bonus to employees; also, it is to be resolved in the board meeting with stock dividend or cash distributed to employees, including employees of the subsidiaries that meet certain conditions. The Company’s Board of Directors may determine to appropriate an amount less than 1% of the profits referred to above as remuneration to directors and supervisors. The proposed bonus to employees and remuneration to directors and supervisors should be presented in the shareholders’ meeting for a resolution. If the company is with accumulated losses, an amount for making up the losses should be reserved in advance before appropriating bonus to employees and remuneration to directors and supervisors according to the ratio referred to above.

Ar t i c l e 20 .1 ： The Company’s reinvestment may exceed 40% of the paid-in capital and with the board of directors authorized to execute it.

Ar t i c l e 20 .2 The company’s annual earnings, if any, are subject to paying taxes, making up losses, appropriating 10% legal reserve thereafter or it can be exempted if the legal reserve amount is equivalent to the company’s paid-in capital amount. The remaining balance thereafter should be applied to have the special reserve appropriated or reversed lawfully. The board of directors should present a proposal for the distribution of the remaining amount, if any, plus the accumulated unappropriated earnings as shareholders’ dividend and bonus in the shareholders’ meeting.

C h a p t e r 7 Annexes A r t i c l e 2 1 ： The matters that are not addressed in the Corporate Charter should be processed

in accordance with the Company Law and the related regulations. A r t i c l e 2 2 The Corporate Charter (Article of Incorporation) was established on September

25, 1981 (the first time ~ Twentieth are omitted). The 21st amendment of the Corporate Charter (Article of Incorporation) was made on May 2, 2003. The 22nd amendment of the Corporate Charter (Article of Incorporation) was made on May 27, 2003. The 23rd amendment of the Corporate Charter (Article of Incorporation) was made on May 24, 2005. The 24th amendment of the Corporate Charter (Article of Incorporation) was made on November 18, 2005. The 25th amendment of the Corporate Charter (Article of Incorporation) was made on June 16, 2006. The 26th amendment of the Corporate Charter (Article of Incorporation) was made on June 15, 2007. The 27th amendment of the Corporate Charter (Article of Incorporation) was made on June 12, 2008. The 28th amendment of the Corporate Charter (Article of Incorporation) was made on May 15, 2009. The 29th amendment of the Corporate Charter (Article of Incorporation) was made on May 18, 2010. The 30th amendment of the Corporate Charter (Article of Incorporation) was made on May 25, 2011. The 31st amendment of the Corporate Charter (Article of Incorporation) was made on June 13, 2012 The 32nd amendment of the Corporate Charter (Article of Incorporation) was made on June 18, 2014. The 33rd amendment of the Corporate Charter (Article of Incorporation) was made on May 28, 2015. The 34rd amendment of the Corporate Charter (Article of Incorporation) was made on May 25, 2016.

71

<Appendix II> Advantech Co., Ltd.

Procedures for the Acquisition or Disposal of Assets (before Amendment)

C h a p t e r I A r t i c l e 1

:

General Principles The Company’s Procedures for the Acquisition and Disposal of Assets (these Procedures) are established in accordance with the provisions of Article 36-1 of the Securities and Exchange Act and the regulations of Financial Supervisory Commission (the FSC).

A r t i c l e 2 : The Company shall handle the acquisition or disposal of assets in compliance with these Procedures; provided, where another law or regulation provides otherwise, such provisions shall govern.

A r t i c l e 3 : The term “assets” as used in these Procedures includes the following: 1. Investments in stocks, government bonds, corporate bonds, financial bonds,

securities representing interest in a fund, depositary receipts, call (put)warrants, beneficial interest securities, and asset-backed securities.

2. Real property (including land, houses and buildings, investment property,rights to use land, and construction enterprise inventory) and equipment.

3. Memberships.4. Patents, copyrights, trademarks, franchise rights, and other intangible assets.5. Derivatives.6. Assets acquired or disposed of in connection with mergers, demergers,

acquisitions, or transfer of shares in accordance with law 7. Other major assets.

A r t i c l e 4 : Terms used in these Procedures are defined as follows: 1. Derivatives: Forward contracts, options contracts, futures contracts,

leverage contracts, and swap contracts, and compound contractscombining the above products, whose value is derived from assets,interest rates, foreign exchange rates, indexes or other interests. The term“forward contracts” does not include insurance contracts, performancecontracts, after-sales service contracts, long-term leasing contracts, orlong-term purchase (sales) agreements.

2. Assets acquired or disposed through mergers, demergers, acquisitions, ortransfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as the consideration therefor (hereinafter “transfer of shares”) under Article 156, paragraph 8 of the Company Act.

3. Related party or subsidiary: As defined in the Regulations Governing thePreparation of Financial Reports by Securities Issuers.

4. Professional appraiser: Refers to a real property appraiser or other personduly authorized by law to engage in the value appraisal of real property or other fixed assets.

5. Date of occurrence: Refers to the date of contract signing, date of payment,date of consignment trade, date of transfer, dates of boards of directors resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt of approval by the competent authority shall apply.

6. Mainland China area investment: Refers to investments in the mainland

72

China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.

A r t i c l e 5

C h a p t e r I I S e c t i o n 1

: Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or underwriter's opinions shall not be a related party of any party to the transaction. Disposition Procedures Establishment of Disposition Procedures

A r t i c l e 6 : These Procedures are established in accordance with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies promulgated by the FSC. After these Procedures have been approved by the Board of Directors, they shall be submitted to each supervisor, and then to a shareholders' meeting for approval; the same applies when the procedures are amended. If any director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor. When these Procedures are submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.

A r t i c l e 7 : The Limit of Investment in Non-business Real Property and Securities The limit of the above assets acquired by the Company and its subsidiaries is set up respectively as follows: 1. The total amount of non-business real property and short-term securities

purchased by the Company shall be no more than 30% of the Company’sshareholders’ equity and the investment of short-term securities shall be nomore than 10% of the Company’s shareholders’ equity.

2. The total amount of non-business real property and short-term securitiespurchased by each subsidiary of the Company and the respective investmentof short-term securities shall be no more than each subsidiary’s shareholders’equity.

3. The total amount of long-term securities invested by the Company shall beno more than its capital and the investment in a single company (actualinvested funds) shall be no more than 40% of the Company’s capital.

4. The total amount of long-term securities invested by each subsidiary of theCompany and the respective investment in a single company (actual investedfunds) shall be no more than its capital.

A r t i c l e 8

S e c t i o n 2

: With respect to the Company's acquisition or disposal of assets that is subject to the approval of the Board of Directors under the Company's procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. When a transaction involving the acquisition or disposal of assets is submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting. Acquisition or Disposal of Assets

A r t i c l e 9 : Procedures for Acquisition or Disposal of Real Property or Equipment 2. Evaluation and Operating Procedures

73

The transaction processes of real property and equipment shall be handled in accordance with the operating procedures for fixed asset circulation in the Company’s internal control system.

2. Procedures for Determining Trading Terms and Conditions andAuthorization Limit

(1) When acquiring or disposing of real property, the Company shall determine the trading terms and conditions and trading prices based on the current value, assessed value, and real trading price of nearby real property and have the analysis report submitted to the Board of Directors. If the amount of the transaction is less than NT$300 million, this shall be approved by the Chairman of the Board and reported to the latest board meeting afterward; if the amount of the transaction is more than NT$300 million, this shall be approved by the Board of Directors.

(2) The acquisition or disposal of equipment shall be performed through enquiry, comparison, bargaining, or bidding. If the amount of the transaction is less than NT$300 million (inclusive), this shall be approved pursuant to the authorization limit; if the amount of the transaction is more than NT$300 million, this shall be approved by the President and the Board of Directors.

3. Units Responsible for ImplementationAfter the acquisition or disposal of real property or equipment is approvedbased on the authorization limit stipulated in the preceding paragraph, thedepartment using such real property or equipment and AdministrationDepartment is responsible for implementation.

4. Appraisal Report on Real Property or Other Fixed AssetsIn acquiring or disposing of real property or equipment where the transactionamount reaches NT$300 million or more, the Company, unless transactingwith a government agency, engaging others to build on its own land,engaging others to build on rented land, or acquiring or disposing ofequipment for business use, shall obtain an appraisal report prior to the dateof occurrence of the event from a professional appraiser and shall furthercomply with the following provisions:(1) Where due to special circumstances it is necessary to give a limited price,

specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the Board of Directors, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.

(2) Where the transaction amount is NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.

(3) Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (ARDF) and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price: A. The discrepancy between the appraisal result and the transaction

amount is 20 percent or more of the transaction amount. B. The discrepancy between the appraisal results of two or more

professional appraisers is 10 percent or more of the transaction amount.

74

(4) No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.

(5) Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.

A r t i c l e 1 0 : Procedures for Acquisition or Disposal of Securities 1. Evaluation and Operating Procedures

The transaction processes of securities shall be handled in accordance withthe operating procedures for investment circulation in the Company’s internalcontrol system.

2.Procedures for Determining Trading Terms and Conditions and Authorization Limit

(1) The trading terms and conditions and authorization limit of securities traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) shall be determined by the responsible unit based on the market condition and the Company’s authorization limit and handled by the related unit supervisors. The amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.

(2) The trading terms and conditions and authorization limit of securities not traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) shall be determined by the Company by obtaining financial statements of the issuing company for the most recent period, certified or reviewed by a certified public accountant, for reference in appraising the trading price and taking into account the net value per share, profitability, and trend of future development and handled by the related unit supervisors. The amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.

(3) The acquisition of money market funds with fixed income shall be approved by the authorized financial officer.

3. Units Responsible for ImplementationAfter the investment in securities is approved based on the authorization limitof the Company, the finance unit is responsible for implementation.

4. Expert OpinionThe Company acquiring or disposing of securities shall, prior to the date ofoccurrence of the event, obtain financial statements of the issuing companyfor the most recent period, certified or reviewed by a certified publicaccountant, for reference in appraising the transaction price, and if the dollaramount of the transaction is 20 percent of the Company’s paid-in capital orNT$300 million or more, the Company shall additionally engage a certifiedpublic accountant prior to the date of occurrence of the event to provide anopinion regarding the reasonableness of the transaction price. If the CPAneeds to use the report of an expert as evidence, the CPA shall do so inaccordance with the provisions of Statement of Auditing Standards No. 20published by the ARDF. This requirement does not apply, however, topublicly quoted prices of securities that have an active market, or whereotherwise provided by regulations of the FSC.(1) Securities acquired through cash contribution in an incorporation by

promotion or by public offering. (2) Securities issued at face value by an issuing company carrying out a

75

cash capital increase in accordance with relevant laws and regulations, with this Corporation as a sponsor of the issue.

(3) Securities issued by an investee company wholly invested by this Corporation that is carrying out a cash capital increase, with this Corporation as a sponsor of the issue.

(4) Securities listed and traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) and emerging stocks.

(5) Government bonds or bonds in repurchase or reverse purchase agreements.

(6) Domestic funds or overseas funds. (7)TWSE or GTSM listed securities acquired or disposed of in accordance

with the TWSE or GTSM rules governing the purchase of listed securities by reverse auction or rules governing the auction of listed securities.

(8) Securities acquired through this Corporation’s sponsorship of a cash capital increase by a public company, when the securities acquired are not privately placed.

(9) Subscription to fund shares before the establishment of a fund in accordance with Article 11, paragraph 1 of the Securities Investment Trust and Consulting Act and the Financial Supervisory Commission’s 1 November 2004 Order No. Financial-Supervisory-Securities-IV-0930005249.

(10) Subscription or redemption of domestic private placement funds, provided that the trust agreement for the fund specifies an investment strategy in which, aside from securities margin transactions and open positions held in securities-related products, the investment scope of the remaining portion is the same as that of a publicly offered fund.

Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.

A r t i c l e 1 1 : Procedures for Acquisition or Disposal of Memberships or Intangible Assets 2. Evaluation and Operating Procedures

The transaction processes of memberships or intangible assets shall behandled in accordance with the operating procedures for fixed assetcirculation in the Company’s internal control system.

2. Procedures for Determining Trading Terms and Conditions andAuthorization Limit (1) The trading terms and conditions and prices of acquisition or disposal of

memberships shall be determined by the Company based on the market fair price, with the analysis report submitted to the President for approval. The amount of each transaction less than 1% of the Company’s paid-in capital or NT$300 million shall be reported to the Board of Directors for approval and the soonest board meeting for future reference; the amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.

(2) The trading terms and conditions and prices of acquisition or disposal of intangible assets shall be determined by the Company based on theappraisal report or market fair price, with the analysis report submitted to the President for approval. The amount of each transaction less than 10% of the Company’s paid-in capital or NT$300 million shall be reported to the Chairman of the Board for approval and the soonest board meeting for future reference; the amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.

3. Units Responsible for Implementation

76

After the acquisition or disposal of memberships or intangible assets is approved based on the authorization limit stipulated in the preceding paragraph, the department using such memberships or intangible assets and Finance Department or Administration Department are responsible for implementation.

4. Appraisal Report on Memberships or Intangible AssetsWhere the Company acquires or disposes of memberships or intangible assets and the transaction amount reaches NT$30 million or more, except in transactions with a government agency, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF.

Ar t i c l e 1 1 .1 : The calculation of the transaction amounts referred to in the preceding three articles shall be done in accordance with Paragraph 2 of Article 30, herein, and “within the preceding year” as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.

A r t i c l e 1 2

S e c t i o n 3

: Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion. Related Party Transactions

A r t i c l e 1 3 : When the Company engages in any acquisition or disposal of assets from or to a related party, in addition to ensuring that the necessary resolutions are adopted and the reasonableness of the transaction terms is appraised, if the transaction amount reaches 10 percent or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with the provisions of Article 11.1. The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article 11.1 herein. When judging whether a trading counterparty is a related party, in addition to legal formalities, the substance of the relationship shall also be considered.

A r t i c l e 1 4 : When the Company intends to acquire or dispose of real property from or to a related party and when it intends to acquire or dispose of assets other than real property from or to a related party, regardless of the amount and except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Board of Directors and recognized by the supervisors: 1. The purpose, necessity and anticipated benefit of the acquisition or disposal

of assets.2. The reason for choosing the related party as a trading counterparty.3. With respect to the acquisition of real property from a related party,

information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 15 and Article 16.

4. The date and price at which the related party originally acquired the realproperty, the original trading counterparty, and that trading counterparty'srelationship to the company and the related party.

5. Monthly cash flow forecasts for the year commencing from the anticipatedmonth of signing of the contract, and evaluation of the necessity of thetransaction, and reasonableness of the funds utilization.

6. An appraisal report from a professional appraiser or a CPA's opinion

77

obtained in compliance with the preceding article. 7. Restrictive covenants and other important stipulations associated with the

transaction.The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Paragraph 2 of Article 27 herein, and “within the preceding year” as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the Board of Directors and recognized by the supervisors need not be counted toward the transaction amount. With respect to the acquisition or disposal of business-use equipment between the Company and its subsidiaries, the Company's Board of Directors may pursuant to Paragraph 2 of Article 9 delegate the Chairman of the Board to decide such matters when the transaction is within a certain amount and have the decisions subsequently submitted to and ratified by the next board of directors meeting. When a matter is submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting.

A r t i c l e 1 5 : The Company that acquires real property from a related party shall evaluate the reasonableness of the transaction costs by the following means: 1. Based upon the related party's transaction price plus necessary interest on

funding and the costs to be duly borne by the buyer. “Necessary interest onfunding” is imputed as the weighted average interest rate on borrowing in theyear the Company purchases the property; provided, it may not be higherthan the maximum non-financial industry lending rate announced by theMinistry of Finance.

2. Total loan value appraisal from a financial institution where the related partyhas previously created a mortgage on the property as security for a loan;provided, the actual cumulative amount loaned by the financial institutionshall have been 70 percent or more of the financial institution's appraisedloan value of the property and the period of the loan shall have been 1 year ormore. However, this shall not apply where the financial institution is a relatedparty of one of the trading counterparties.

Where land and structures thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding paragraph. The Company that acquires real property from a related party and appraises the cost of the real property in accordance with Paragraph 1 and Paragraph 2 shall also engage a CPA to check the appraisal and render a specific opinion. Where the Company acquires real property from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 14 and the preceding three paragraphs do not apply: 1. The related party acquired the real property through inheritance or as a gift.2. More than 5 years will have elapsed from the time the related party signed

the contract to obtain the real property to the signing date for the currenttransaction.

3. The real property is acquired through signing of a joint development contractwith the related party, or through engaging a related party to build realproperty, either on the company's own land or on rented land.

A r t i c l e 1 6 : When the results of the Company's appraisal conducted in accordance with Paragraph 1 and Paragraph 2 of the preceding article are uniformly lower than

78

the transaction price, the matter shall be handled in compliance with Article 17. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply: 1. Where the related party acquired undeveloped land or leased land for

development, it may submit proof of compliance with one of the following conditions:

(1) Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The "Reasonable construction profit" shall be deemed the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.

(2) Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.

(3) Completed leasing transactions by unrelated parties for other floors of the same property from within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance with standard property leasing market practices.

2. Where the Company acquiring real property from a related party providesevidence that the terms of the transaction are similar to the terms oftransactions completed for the acquisition of neighboring or closely valuedparcels of land of a similar size by unrelated parties within the precedingyear.

Completed transactions for neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.

A r t i c l e 1 7 : Where the Company acquires real property from a related party and the results of appraisals conducted in accordance with Article 15 and Article 16 are uniformly lower than the transaction price, the following steps shall be taken: 1. A special reserve shall be set aside in accordance with Paragraph 1, Article

41 of the Securities and Exchange Act against the difference between thereal property transaction price and the appraised cost, and may not bedistributed or used for capital increase or issuance of bonus shares. Where apublic company uses the equity method to account for its investment inanother company, then the special reserve called for under Paragraph 1,Article 41 of the Securities and Exchange Act shall be set aside pro rata in aproportion consistent with the share of public company's equity stake in theother company.

2. Supervisors shall comply with Article 218 of the Company Act.3. Actions taken pursuant to subparagraph 1 and subparagraph 2 shall be

reported to a shareholders meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.

79

S e c t i o n I V

The Company that has set aside a special reserve under the preceding paragraph may not utilize the special reserve until it has recognized a loss on decline in market value of the assets it purchased at a premium, or they have been disposed of, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the FSC has given its consent. When the Company obtains real property from a related party, it shall also comply with the preceding two paragraphs if there is other evidence indicating that the acquisition was not an arm’s length transaction. Engaging in Derivatives Trading

A r t i c l e 1 8 : The Company engaging in derivatives trading shall pay strict attention to control of the following important risk management and auditing matters, and incorporate them into their Procedures: 1. Trading Principles and Policies: Shall include the types of derivatives that

may be traded, operating or hedging strategies, segregation of duties,essentials of performance evaluation, total amount of derivatives contractsthat may be traded, and the maximum loss limit on total trading and forindividual contracts.

2. Risk management measures.3. Internal audit system.4. Regular evaluation methods and the handling of irregular circumstances.

A r t i c l e 1 9 : The company engaging in derivatives trading shall adopt the following risk management measures: 1. Risk management shall address credit, market, liquidity, cash flow,

operational, and legal risks. 2. The personnel that deal with the transaction of derivatives, make

confirmation of these transactions and make settlements of these transactions shall not be the same.

3. The evaluation, supervision and control of risk-related matters also shall bereported by persons from a different department to the Board of Directors orto the high-level managers who are not responsible for setting policies fortransactions or position

4. The position held in the trading of derivatives shall be evaluated at leastonce a week, but the hedging transaction made for business purposes shallbe evaluated at least twice a month, and the evaluation reports shall be givento high-level managers authorized by the Board of Directors.

5. Other important risk management measures.A r t i c l e 2 0 : Where the Company engaging in derivatives trading, its Board of Directors

shall faithfully supervise and manage such trading in accordance with the following principles: 1. Designate senior management personnel to pay continuous attention to

monitoring and controlling derivatives trading risk. 2. Periodically evaluate whether derivatives trading performance is consistent

with established operational strategy and whether the risk undertaken iswithin the Company's permitted scope of tolerance.

Senior management personnel authorized by the Board of Directors shall manage derivatives trading in accordance with the following principles: 1. Periodically evaluate the risk management measures currently employed are

appropriate and are faithfully conducted in accordance with these Proceduresand the Procedures for Engaging in Derivatives Transactions formulated bythe Company.

2. When irregular circumstances are found in the course of supervising tradingand profit-loss circumstances, appropriate measures shall be adopted and areport immediately made to the Board of Directors; where the company has

80

independent directors, an independent director shall be present at the meeting and express an opinion.

The Company shall report to the soonest board meeting after it authorizes the relevant personnel to handle derivatives trading in accordance with its Procedures for Engaging in Derivatives Transactions.

A r t i c l e 2 1 : The Company engaging in derivatives trading shall establish a log book in which details of the types and amounts of derivatives trading engaged in, Board of Directors’ approval dates, and the matters required to be carefully evaluated under Subparagraph 4 of Article 19 and Subparagraph 2 of Paragraph 1 and Subparagraph 1 of Paragraph 2 of Article 20 shall be recorded in detail in the log book. A public company's internal audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, all supervisors shall be notified in writing.

S e c t i o n V A r t i c l e 2 2

:

Mergers and Consolidations, Splits, Acquisitions, and Assignment of Shares The Company that conducts a merger, demerger, acquisition, or transfer of shares, prior to convening the board of directors to resolve on the matter, shall engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the Board of Directors for deliberation and passage.

A r t i c l e 2 3 : The Company participating in a merger, demerger, acquisition, or transfer of shares shall prepare a public report to shareholders detailing important contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders meeting and include it along with the expert opinion referred to in the first paragraph of the preceding article when sending shareholders notification of the shareholders’ meeting for reference in deciding whether to approve the merger, demerger, or acquisition. Provided, where a provision of another act exempts the Company from convening a shareholders meeting to approve the merger, demerger, or acquisition, this restriction shall not apply. Where the shareholders meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders meeting, the companies participating in the merger, demerger or acquisition shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders meeting.

A r t i c l e 2 4 : A company participating in a merger, demerger, or acquisition shall convene a board meeting and shareholders’ meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. A company participating in a transfer of shares shall call a board meeting on the day of the transaction, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for 5 years for reference: 1. Basic identification data for personnel: Including the occupational titles,

81

names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or transfer of another company's shares prior to disclosure of the information.

2. Dates of material events: Including the signing of any letter of intent ormemorandum of understanding, the hiring of a financial or legal advisor, theexecution of a contract, and the convening of a board of directors meeting.

3. Important documents and minutes: Including merger, demerger, acquisition,and share transfer plans, any letter of intent or memorandum ofunderstanding, material contracts, and minutes of board of directorsmeetings.

When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall, within 2 days commencing immediately from the date of passage of a resolution by the board of directors, report (in the prescribed format and via the Internet-based information system) the information set out in subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation. Where any of the companies participating in a merger, demerger, acquisition, or transfer of another company's shares is neither listed on an exchange nor has its shares traded on an OTC market, the company(s) so listed or traded shall sign an agreement with such company whereby the latter is required to abide by the provisions of paragraphs 3 and 4.

A r t i c l e 2 5 : Every person participating in or privy to the plan for merger, demerger, acquisition, or transfer of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, demerger, acquisition, or transfer of shares.

A r t i c l e 2 6 : The Company participating in a merger, demerger, acquisition, or transfer of shares may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or transfer of shares: 1. Cash capital increase, issuance of convertible corporate bonds, or the

issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.

2. An action, such as a disposal of major assets, which affects the company'sfinancial operations.

3. An event, such as a major disaster or major change in technology, whichaffects shareholder equity or share price.

4. An adjustment where any of the companies participating in the merger,demerger, acquisition, or transfer of shares from another company, buysback treasury stock.

5. An increase or decrease in the number of entities or companies participatingin the merger, demerger, acquisition, or transfer of shares.

6. Other terms/conditions that the contract stipulates may be altered and thathave been publicly disclosed.

A r t i c l e 2 7 : The contract for participation by the Company in a merger, demerger, acquisition, or of shares shall record the rights and obligations of the companies participating in the merger, demerger, acquisition, or transfer of shares, and shall also record the following:

82

1. Handling of breach of contract.2. Principles for the handling of equity-type securities previously issued or

treasury stock previously bought back by any company that is extinguishedin a merger or that is demerged.

3. The amount of treasury stock participating companies are permitted underlaw to buy back after the record date of calculation of the share exchangeratio, and the principles for handling thereof.

4. The manner of handling changes in the number of participating entities orcompanies.

5. Preliminary progress schedule for plan execution, and anticipatedcompletion date.

6. Scheduled date for convening the legally mandated shareholders meeting ifthe plan exceeds the deadline without completion, and relevant procedures.

A r t i c l e 2 8 : After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders meeting to resolve on the matter anew.

A r t i c l e 2 9

C h a p t e r I I I

: Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the Company shall sign an agreement with the non-public company whereby the latter is required to abide by the provisions of Article 24, Article 25, and Article 28. Public Disclosure of Information

A r t i c l e 3 0 : Procedures for Public Disclosure of Information Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the appropriate format as prescribed by regulations within 2 days commencing immediately from the date of occurrence of the event: 1. Acquisition or disposal of real property from or to a related party, or

acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds.

2. Merger, demerger, acquisition, or transfer of shares.3. Losses from derivatives trading reaching the limits on aggregate losses or

losses on individual contracts set out in the procedures adopted by theCompany.

4.Where an asset transaction other than any of those referred to in thepreceding three subparagraphs, a disposal of receivables by a financialinstitution, or an investment in the mainland China area reaches 20 percentor more of paid-in capital or NT$300 million; provided, this shall not applyto the following circumstances:

(1) Trading of government bonds. (2) Securities trading by investment professionals on foreign or domestic

securities exchanges or over-the-counter markets, or subscription of securities by a securities firm, either in the primary market or in accordance

83

A r t i c l e 3 1 :

with relevant regulations. (3) Trading of bonds under repurchase/resale agreements, or subscription or

redemption of domestic money market funds. (4) Where the type of asset acquired or disposed is equipment/machinery for

business use, the trading counterparty is not a related party, and the transaction amount is less than NT$500 million.

(5) Where land is acquired under an arrangement on engaging others to build on the Company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the Company expects to invest in the transaction is less than NT$500 million.

The amount of transactions above shall be calculated as follows and “Within the preceding year” as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with the regulations need not be counted toward the transaction amount. 1. The amount of any individual transaction.2. The cumulative transaction amount of acquisitions and disposals of the same

type of underlying asset with the same trading counterparty within thepreceding year.

3. The cumulative transaction amount of real property acquisitions anddisposals (cumulative acquisitions and disposals, respectively) within the same development project within the preceding year.

4. The cumulative transaction amount of acquisitions and disposals (cumulativeacquisitions and disposals, respectively) of the same security within thepreceding year.

“Within the preceding year” as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Procedures need not be counted toward the transaction amount. The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month. When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety. The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the company headquarters, where they shall be retained for 5 years except where another act provides otherwise. Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the information reporting website designated by the FSC within 2 days commencing immediately from the date of occurrence of the event: 1. Change, termination, or rescission of a contract signed in regard to the

original transaction.2. The merger, demerger, acquisition, or transfer of shares is not completed by

the scheduled date set forth in the contract.3. Change to the originally publicly announced and reported information.

84

A r t i c l e 3 2 : Subsidiaries of the Company shall comply with the following regulations: 1. A subsidiary of the Company shall acquire or dispose of assets in accordance

with these Procedures.2. Information required to be publicly announced and reported in accordance

with the provisions of these Procedures on acquisitions and disposals ofassets by a subsidiary of the Company that is not itself a public company inTaiwan shall be reported by the Company.

3. The paid-in capital or total assets of the Company shall be the standard fordetermining whether or not a subsidiary referred to in the precedingparagraph requiring a public announcement and regulatory filing in the eventthe type of transaction specified therein reaches 20 percent of paid-in capitalor 10 percent of the total assets.

A r t i c l e 3 3 : These Procedures were established on May 3, 1997.The 1st amendment was made on November 29, 1999. The 2nd amendment was made on May 30, 2002. The 3rd amendment was made on May 2, 2003. The 4th amendment was made on May 27, 2004. The 5th amendment was made on June 16, 2006. The 6th amendment was made on June 15, 2007. The 7th amendment was made on June 13, 2012. The 8th amendment was made on June 18, 2014.

85

< Appendix III >

Advantech Co., Ltd. Procedures for Lending Funds to Other Parties

(before Amendment) A r t i c l e 1 : Purpose

These Operational Procedures are established by the Company to regulate the lending of funds to others for the purpose of maintaining the Company’s interests. Matters not specified in these Procedures shall be handled in accordance with related laws and regulations.

A r t i c l e 2 : Scope of Application The lending activities of the Company shall be in accordance with these Operational Procedures. The subsidiaries and parent company referred to in these Operational Procedures shall be recognized according to the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The Company’s financial statements are prepared based on International Financial Reporting Standards. The net value referred in these Operational Procedure shall refer to the owners’ equity on the parent company’s balance sheet of the Company’s financial statements.

A r t i c l e 3 : Lending Counterparts Companies or firms in need of short-term financing. Lending counterparts in need of short-term financing shall be limited to a subsidiary in which the Company holds 50% of the voting shares or companies with the de facto control having the need of short-term financing due to business needs. The phrase “short-term” mentioned above shall mean within one year or a business cycle (whichever is longer). Foreign companies, of which the Company directly or indirectly holds 100% of the voting shares, if engaged in the lending business, will be exempt from the restrictions referred to in the first paragraph of Article 4.

A r t i c l e 4 : Lending Amount and Financing Limit 3. The total amount lent to others (loanable funds) shall not exceed 20% of the net

value of the Company. The total lending amount of an individual borrower shall not exceed 50% of the total amount of loanable funds.

4. In the case of lending funds to companies or firms who have a businessrelationship with the Company, the total lending amount of an individualborrower shall not exceed 50% of the total amount of loanable funds or thetotal amount of the business transactions between the Company and theborrower, whichever is lower, and the maximum amount stipulated in thepreceding paragraph.

A r t i c l e 5 : Unit in Charge Unless otherwise specified, the finance unit shall be in charge of lending funds to others.

A r t i c l e 6 : Term of Loan The term of the loan shall be limited to one year; however, due to the actual needs, the term of the loan may be extended once prior to expiration with the approval of the Board of Directors. Loans between the Company and its parent company shall be approved by the Board of Directors and authorization may also be given to the Chairman of the Board, within a certain capital limit for a specific borrowing counterparty and

86

within a period not to exceed one year, to give loans in installments or to make a revolving credit line available for the counterparty to draw down. If the Company has established independent directors, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.

A r t i c l e 7 : Methods of Interest Calculation 1. Daily accrual: The amount of interest is calculated by the sum of the daily loan

balance (total cumulative amount) multiplied by the annual interest rate and divided by 365. The annual interest rate shall not be less than Bank of Taiwan’s base rate on short-term loan +1% or the Company’s cost of funds at that time.

2. Unless otherwise stipulated, the interest on loan shall be deduced from theappropriation of the loan.

A r t i c l e 8 : Procedures for Fund Lending and Detailed Review1. Application:

A. When applying for a loan with the Company, a borrower shall submit theapplication form or an official letter specifying the amount, term and purpose of the loan to the Company’s Finance Department.

B. Where a loan is given due to needs arising from business dealings, the finance unit shall evaluate whether the amount of the loan is commensurate with the amount of transactions and in compliance with these Operational Procedures.

C. Where a borrower in need of short-term financing applies for a loan, the Company shall evaluate the necessity of financing and investigate the borrower’s credit status.

D. The loan, after being verified to be feasible upon analysis, shall be submitted to the Chairman of the Board and the board meeting for approval.

2. Credit Investigation and Risk AssessmentA. For a first-time borrower, the borrower shall provide basic information and

financial information to facilitate the credit investigation. B. For a subsequent borrower, the credit investigation shall be carried out when

the borrower applies for the renewal. In case of a major or urgent event, the credit investigation shall be carried out at any time depending on the actual needs.

C. If the borrower is in good financial condition and has had the annual financial statements audited by CPAs, the investigation report made for less than a year and the auditors’ report may be adopted as the reference.

D. When carrying out the credit investigation, the Company shall make a detailed assessment of the impact of the loan on the Company’s business operations, financial conditions, and shareholders’ equity.

3. Contract Signing and Identity VerificationA. The person in charge of lending funds shall fill in the loan contract based on

the approved conditions to proceed with the contract signing. B. After the borrower and the joint guarantor sign the loan contract, the person

in charge shall perform the procedures for verifying their identities. 4. Appraisal of Collateral Value and Setting of Rights

When applying for a loan, a borrower, after being verified to provide collateral,shall provide a pledge on equivalent real property or securities or thepromissory note, which matures on the expected date of repayment and issigned by the joint guarantor, for the Company as security. When the jointguarantor is a company or a firm, the Company shall examine whether itsarticles of incorporation and minutes of the board meeting permit the guarantee.

5. InsuranceExcept for land and securities, fire insurance and related insurance shall be

87

purchased for other collaterals at the amount not less than the collateral in pledge. The Company shall be specified as the beneficiary in the insurance policy. The name, quantity, place of storage, and insurance conditions and endorsements of the subject specified in the insurance policy shall be consistent with the loan conditions approved by the Company. The person in charge shall notify the borrower of a renewal before the term of the insurance expires.

6. AppropriationThe loan will be appropriated after a borrower sign the contract, submit thepromissory note, set the mortgage, and purchase the insurance.

7. Account KeepingWhen the Company completes the procedures for lending each fund, FinanceDepartment shall make an entry for collateral or credit guarantee obtained.

8. The Company shall establish a log book for its loan activities and record indetail the following information for future reference: the entity to which theloan is given, the amount, the date of passage by the Board of Directors, thedate the loan is appropriated, and matters to be evaluated in accordance withArticle 7.

9. If, due to changes of circumstances, the party to whom the Company gives aloan no longer satisfies the criteria set forth herein, or the balance of a loanexceeds the limits, a corrective plan shall be provided to all supervisors and theproposed corrections shall be implemented within the period specified in theplan.

A r t i c l e 9 : Control Actions upon the Loans Upon the release of the funds, the Company shall pay attention to the borrower’s and guarantor’s financial, business and credit status, etc. In cases involving collateral, the Company shall pay attention to its guarantee value and any change thereto. In case of a major change, the Chairman of the Board shall be notified immediately and appropriate measures shall be taken based on the instructions.

A r t i c l e 1 0 : Cancellation of Mortgage When a borrower applies for the cancellation of mortgage, the Company shall ascertain whether the loan and interest have been paid back in full. The cancellation of mortgage may be handled after the borrower has paid back the loan and interest in full.

A r t i c l e 1 1 : Procedures for Disposing of Overdue Debts A borrower shall pay back the loan and interest within the time limit. Unless the borrower has put forward a proposal to extend the term of the loan for less than a year with the approval of the Board of Directors, if the borrower fails to pay back the loan and interest within the time limit as scheduled, the Company may dispose of the collateral or lodge a claim with the guarantor in accordance with the law. The above proposal to extend the term of the loan can only be made once.

A r t i c l e 1 2 : Procedures for Announcement and Report 1.The Company shall announce and report the balance of loaned funds by theCompany and its subsidiaries in the preceding month in Market Observation Post System, before the 10th day of the month. If the loan meets any of the following circumstances stipulated in the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, it shall be reported in Market Observation Post System within two days upon occurrence of the fact, the date of occurrence to be counted as the first day:

（1） The balance of the loaned funds by the Company and its subsidiaries exceeds 20% of the net value of the Company, as specified in its latest financial statement.

（2） The balance of funds lent to any single entity by the Company and its

88

subsidiaries exceeds 10% of the net worth of the Company, as specified in its latest financial statement.

（3） The increase of new loans by the Company or its subsidiaries reaches NTD10 million or more, or is more than 2% of the net worth of the Company, as specified in its latest financial statement. “Date of occurrence” in these Operational Procedures means the date of contract signing, date of payment, dates of boards of directors resolutions, or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier.

2.The Company shall announce and report on behalf of any of its subsidiaries thatare not a domestic public company any matters that such subsidiary is required to announce and report pursuant to the 3rd subparagraph in the preceding paragraph.

3. The Company shall evaluate the status of loans of funds, and shall set asidesufficient allowance for bad debts. It shall also adequately disclose relevantinformation in its financial reports and provide the certifying CPAs withrelevant materials for the performance of necessary audit procedures.

Ar t i c l e 1 2 .1 Penalty for Violation of These Procedures by Managers and Persons-in-charge In accordance with the Company’s personnel management regulations and employee handbook, managers and persons-in-charge who violate these Operational Procedures shall be punished based on the severity of violation.

A r t i c l e 1 3 Implementation and Amendment These Operational Procedures shall be approved by the Board of Directors and then sent to all supervisors and proposed at the shareholders’ meeting for approval. If any director expresses objection on the record or in a written statement, the Company shall submit the objection to the supervisors and the shareholders’ meeting for discussion any amendment hereto is subject to the same procedures. If the Company has established independent directors, when submitting these Operational Procedures to the Board of Directors for discussion pursuant to the preceding paragraph, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.

A r t i c l e 1 4 Procedures for Managing Funds Lent to Subsidiaries: 1. For a subsidiary in which the Company directly or indirectly holds more than

50% of the voting shares and which is not a public company of the Republic of China, these Operational Procedures shall be followed. The net value shall be calculated based on the Company’s net value. The Company shall submit the previous month's balance of its loaned funds to Finance Department by the 5th day of each month.

2. Internal auditors of the Company shall perform the audit on the lending of fundsof the subsidiaries based on the annual audit plan. In the case that a material violation is found, internal auditors shall continuously follow up the improvements and submit the follow-up report to the Board of Directors and all supervisors.

A r t i c l e 1 5 These Procedures were established on May 3, 1997. The 1st amendment was made on May 30, 2002. The 2nd amendment was made on May 2, 2003. The 3rd amendment was made on May 15, 2009. The 4th amendment was made on May 18, 2010. The 5th amendment was made on June 13, 2013.

89

< Appendix IV > Advantech Co., Ltd.

Procedures for Endorsement & Guarantee (before Amendment)

A r t i c l e 1 : Purpose These Procedures are established to maintain the sound operation and interests of the Company and to reduce its operational risks.

A r t i c l e 2 : The Company shall comply with these Procedures in addition to its Articles of Incorporation when engaging in endorsements and guarantees. Matters not specified in these Procedures shall be handled in accordance with related laws and regulations. The subsidiaries and parent company referred in these Procedures shall be recognized according to the Statement of Financial Accounting Standards (SFAS) No. 5 and No. 7 published by Accounting Research and Development Foundation.

A r t i c l e 3 : Object of the Endorsement and/or Guarantee The parties to whom the Company may provide endorsement and/or guarantee include the following: 1. A company which has a business relationship with the Company.2. A company in which the Company directly or indirectly holds more than 50%of the voting shares. 3. A company which directly or indirectly holds more than 50% of theCompany’s voting shares. The Company may provide endorsement and/or guarantee to a company in which the Company directly or indirectly holds 100% of the voting shares. The term “voting shares which are directly or indirectly held” mentioned in the subparagraph 2 and 3 of the preceding paragraph refers to the combination of a company’s voting shares which are directly held by the Company’s and those which are held by another company in which the Company holds more than 50% of the voting shares. The term “another company” mentioned above includes the company itself and another company in which the company directly or indirectly holds more than 50% of the voting shares, and so on.

A r t i c l e 4 : The words “endorsements” and/or “guarantees” used herein are defined as: 1. Financing endorsement and/or guarantee

A. Endorsement and/or guarantee of customers’ notes for cash financing witha discount.

B. Endorsement and/or guarantee of the notes issued by the Company to nonfinancial institutions and entities for the Company’s own financing needs.

C. Endorsement and/or guarantee of another company for its financing needs. 2. Endorsement and/or guarantee of customs duties due for the Company or

other companies.3. Other endorsements/guarantees which are not included under thesubparagraphs 1 and 2 of this article.

Any creation by the Company of a pledge or mortgage on its chattel or real property as security for the loans of another company shall also comply with these Procedures.

A r t i c l e 5 : Limits on Endorsements and Guarantees 1. The total amount of the endorsements/guarantees provided by the Company toothers shall not exceed 30% of the Company’s net value, but the amount of endorsement/guarantee provided by the Company to any single entity shall not exceed 10% of the Company’s net value. The total amount of the endorsement/guarantee provided by the Company and

90

its subsidiaries shall not exceed 30% of the Company’s net value, and the amount of endorsement/guarantee provided by the Company to any single entity shall not exceed 10% of the Company’s net value. 2. The total amount of the endorsement/guarantee made due to needs arisingfrom business dealings shall not exceed the total amount of transactions (purchase or sales, whichever is higher) with the Company in the last year and the maximum amount stipulated in the preceding paragraph. 3. The Company may, based on its actual needs, request the guaranteed companyto create a pledge on its chattel or real property as security.

A r t i c l e 5 . 1 : Level of Authorization Endorsements and/or guarantees made by the Company shall be conducted after receiving approval from the Chairman and the Board of Directors. A predetermined limit (5% of the Company’s net value) may be delegated to the Chairman by the Board of Directors to facilitate execution and such endorsement and/or guarantee shall be reported to the most upcoming board meeting for ratification and to the shareholders’ meeting for future reference. In case the above limits have to be exceeded to accommodate business needs, approval by a resolution of the Board of Directors shall be obtained and over half of all the directors shall jointly endorse the potential loss that may be brought about by exceeding the limits. The Board of Directors shall also revise these procedures and have them ratified at the shareholders’ meeting. If the revised procedures are not ratified at the shareholders’ meeting, the Board of Directors shall furnish a plan containing a timetable to withdraw the excess portion. If, due to changes of circumstances, the party to whom the Company provides an endorsement and/or guarantee no longer satisfies the criteria set forth herein, or the amount of endorsement and/or guarantee exceeds the limits, a corrective plan shall be provided to all supervisors and the proposed corrections shall be implemented within the period specified in the plan.

A r t i c l e 6 : Operating Procedures for Endorsements and Guarantees Detailed Review Procedures: 1. When the guaranteed company requests endorsement, the application unit ofthe Company shall fill in the Guarantee (Cancellation) Application Form specifying the reason and purpose of endorsement and attach notes and the guaranteed company’s financial information for approval. 2. The finance unit shall examine:

A. Whether the reason for endorsement is reasonable enough. B. Whether it is necessary to measure the amount of endorsement based on

the financial status of the guaranteed company. C. Whether the accumulated amount is within the limit. D. The status of credit and the impact on the Company’s business

operations, financial conditions, and shareholders’ equity. E. Whether the amount of endorsement and/or guarantee made due to needs

arising from business relationship is commensurate with the amount of transactions in an analysis report.

F. Whether collateral must be obtained and appraisal of the value thereof. 3. The Company shall assess and recognize contingent losses brought about byendorsements and/or guarantees, and shall adequately disclose relevant information in its financial reports and provide the certifying CPAs with relevant materials for the performance of necessary audit procedures and reporting. 4. If the party to whom the Company provides an endorsement and/or guaranteeis a subsidiary whose net value is below 50% of its paid-up capital, follow-up management shall be continuously implemented by the Company.

A r t i c l e 7 : Approval and Cancellation of Endorsed Nots:

91

1. Endorsed notes may be returned to the guaranteed company after thefollowing procedures are complete:

A. Stamp the official seal. B. Copy the both sides of the endorsed notes and retain it for future reference. C. Record the endorsed notes in the Endorsement and Cancellation Registry to

manage the amount of endorsement. 2. If the endorsed nots are required to be cancelled due to debts or renewal, theapplication unit shall fill in the Guarantee (Cancellation) Application Form and submit the form and the original endorsed notes to the finance unit for cancellation. 3. The finance unit shall record the cancelled endorsed notes in theEndorsement and Cancellation Registry to reduce the accumulated amount of endorsement.

A r t i c l e 8 : Use of Official Seal and Security Procedures: The Company shall apply for registration with the Ministry of Economic Affairs for its official seal and for a special-purpose seal for endorsements and/or guarantees. The official seal shall be kept by the Company’s designated personnel. These Procedures and the Regulations Governing Seals must be followed for sealing and note issuance purposes. The Company’s designated personnel in charge of keeping the official seal shall be approved by the Board of Directors. The same procedure shall apply with any change. When providing an endorsement/guarantee to a foreign company, the endorsement/guarantee letter shall be executed and signed by the person designated by the Board of Directors.

A r t i c l e 8 . 1 : Procedures for Managing Endorsements/Guarantees Provided for Subsidiaries: 1. For a subsidiary in which the Company directly or indirectly holds more than

50% of the voting shares and which is not a public company of the Republic of China, these Procedures shall be followed. The net value shall be calculated based on the Company’s net value. The Company shall submit the previous month's balance of endorsements/guarantees of itself and its subsidiaries to Finance Department by the 5th day of each month.

2. Internal auditors of the Company shall perform the audit on endorsementand/or guarantee profile of the subsidiaries based on the annual audit plan. In the case that a material violation is found, internal auditors shall continuously follow up the improvements and submit the follow-up report to the Chairman of the Board.

A r t i c l e 9 : The finance unit shall establish a log book for its endorsement/guarantee activities and record in detail the following information for future reference: the entity for which the endorsement/guarantee is made, the amount, the content of the endorsement/guarantee, the date of passage by the Board of Directors or of authorization by the Chairman of the Board, the date the endorsement/guarantee is made, the content of the collateral and the appraisal of the value, and conditions and the date of cancellation of the endorsement/guarantee.

A r t i c l e 9 . 1 : Deadline and Standards for Announcement and Report: The Company shall announce and report the balance of endorsements and/or guarantees made by itself and its subsidiaries for the previous month in Market Observation Post System by the 10th day of each month. If the balance of endorsements and/or guarantees meets one of the following levels, the Company shall announce and report such event in Market Observation Post System within two days of the occurrence, the date of occurrence to be counted as the first day: 1. The aggregate balance of endorsements and/or guarantees by the Company

and its subsidiaries reaches 50% or more of the Company’s net value as

92

stated in the latest financial statement. 2. The balance of endorsements and/or guarantees by the Company and its

subsidiaries for a single enterprise reaches 20% or more of the Company’s net value as stated in the latest financial statement.

3. The balance of endorsements and/or guarantees by the Company and itssubsidiaries for an individual enterprise is more than NT$10 million or the aggregate amount of all endorsements and/or guarantees for long-term nature of 5 investments in, and balance of loans to, such enterprise reaches 30% of the Company’s net value as stated in its latest financial statement.

4. The amount of new endorsements and/or guarantees made by the Companyor its subsidiaries is more than NT$30 million or more than 5% of the Company’s net value as stated in its latest financial statement.

The Company shall announce and report on behalf of any of its subsidiaries that are not a domestic public company any matters that such subsidiary is required to announce and report in Market Observation Post System pursuant to the subparagraph 4 of the preceding paragraph.

A r t i c l e 1 0 : The Company shall assess and recognize contingent losses brought about by endorsements and/or guarantees, and shall adequately disclose relevant information in its financial reports and provide the certifying CPAs with relevant materials for the performance of necessary audit procedures and reporting.

A r t i c l e 1 1 : Internal auditors of the Company shall perform the audit on the Company’s endorsement and/or guarantee profile at least once per quarter and produce written auditing reports. In the case that a material violation is found, internal audit shall immediately notify the supervisors in writing.

Ar t i c l e 1 1 .1 : Penalty for Violation of These Procedures by Managers and ersons-in-charge: In accordance with the Company’s personnel management regulations and employee handbook, managers and persons-in-charge who violate these Procedures shall be punished based on the severity of violation.

A r t i c l e 1 2 : These Procedures shall be implemented upon approval of the Board of Directors, all supervisors and the shareholders’ meeting. If any director expresses objection on the record or in a written statement, the Company shall submit the objection to the supervisors and the shareholders’ meeting for discussion. Any amendment hereto is subject to the same procedures. If the Company has established independent directors, when submitting these Procedures to the Board of Directors for discussion pursuant to the preceding paragraph, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.

A r t i c l e 1 3 These Procedures were established on May 3, 1997. The 1st amendment was made on May 2, 2003. The 2nd amendment was made on June 16, 2006. The 3rd amendment was made on May 15, 2009. The 4th amendment was made on May 18, 2010.

93

< Appendix V > Advantech Co., Ltd.

Procedures for Financial Derivatives Transactions (before Amendment)

A r t i c l e 1 : Purpose 1. These Procedures are enacted to establish the risk management system fderivatives transactions for the purpose of fulfilling information disclosure and protecting investors. 2. These Procedures are enacted in accordance with Article 36.1 of the Securities aExchange Act and the Regulations Governing the Acquisition and Disposal of Asseby Public Companies. Matters not specified in these Procedures shall be handled accordance with related laws and regulations.

A r t i c l e 2 : Trading Principles and Policies 1. Type of transactions: The type of derivatives transactions which the Companyengages in is limited to forward contracts and options. The term “forward contracts” does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) agreements. 2. Operational or hedging and strategies: The Company shall engage in derivativestransactions for the purpose of avoiding exchange risks arising from the operations, foreign currency assets and liabilities, and derivative financial transactions. 3. Division of responsibilities:

A. Finance Department: Finance Department is responsible to manage foreign exchange operations, collect market information, determine the market trend and risks, and get familiar with financial products and operational skills. In addition, Finance Department shall manage the position in foreign exchange and avoid foreign exchange risks based on the Company’s policies and authorization.

B. Accounting Department: Accounting Department is responsible to control the Company’s overall position in foreign exchange and settle realized and unrealized exchange gains and losses on a regular basis in order to facilitate the hedging operations engaged by Finance Department. In addition, Accounting Department shall keep account based on settlement vouchers and transaction-related documents.

C.Audit Department: Audit Department is responsible to make a determination of the suitability of internal controls on derivatives, conduct the audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, analyze the trading cycle, and prepare an audit report. If any material violation is discovered, the Board of Directors shall be notified.

4. Performance Evaluation: The Company shall record the detail of derivativesoperations (including amount, exchange rate, bank, and due date) in thetransaction list on a daily basis to control the profit and loss; in addition, theCompany shall settle the exchange gains and losses on a monthly, quarterly,semi-yearly, and yearly basis.

5. Total amount of contracts and the upper limit of loss for all and individualcontracts:

Hedging Operation The total amount of contracts which the Company may engage in is limited to 75% of the balance of cash, accounts receivable and accounts payable in foreign currency plus the net position in foreign currency for the next six months. The upper limit of loss for all and individual contracts is 50% of the amount of contracts. Transactional Operation

94

The Company does not engage in transactional operations. A r t i c l e 3 : Operational Procedures

1. Level of authorized amount: The level of the authorized amount is set up basedon changes in the Company’s revenue and accumulated net position:

Level Daily Amount of Transaction Authorized Amount of Internal Approval 1. Chairman US$20 million or more 2. President and CFO US$10 million or more US$20 million (inclusive) 3. Financial Officer US$10 million(inclusive) US$10 million (inclusive) 4. Financial Manager US$ 5 million (inclusive) -

2. Implemented by: The designated person of Finance Department.3. Operating procedures are described below:A. A trader of Finance Department shall place an order with a bank within the

authorized amount. If the value of a transaction exceeds the authorized amount stipulated in Article 3 of these Procedures, the trader shall obtain the prior written approval of decision-making supervisors.

B. After the transaction is confirmed, the trader shall fill in the Transaction Form based on the deal closed with the bank to ensure the validity of the transaction.

C. When the confirmation documents regarding foreign exchange transactions are to be sealed, the approved Instruction on Foreign Exchange Transactions shall be attached as well.

D. When an exchange gain or loss occurs in the settlement of the foreign exchange transaction, the person in charge of the settlement shall collect the payment based on the approved Instruction on Foreign Exchange Transactions, Foreign Exchange Transaction Form and Forward Foreign Exchange Settlement Form, which are used as the basis of account keeping.

E. Finance Department shall compile the Monthly Report on Foreign Exchange Transactions and submit it to Accounting Department to be used as the basis of accounting evaluation.

A r t i c l e 4 : Risk Management Measures 1. Credit risk management: Trading partners shall be limited to banks havingbusiness dealings with the Company. 2. Market risk management: Markets shall be limited to publicly traded foreignexchange markets and exclude futures markets. 3. Liquidity risk management: Products with high liquidity (that can square theposition in the market at any time) shall be selected to ensure the trading liquidity. Trading financial institutions must have the sufficient information to trade in any market at any time. 4. Cash flow risk management: The source of funds used in derivatives transactionsshall be limited to the Company’s own funds to ensure the stability of working capital. 5. Operational risk management:

A. The Company shall comply with its authorized amount and operating procedures, and have them reviewed in the internal audit to avoid operational risks.

B. The personnel that deal with the transaction of derivatives, make confirmation of these transactions and make settlements of these transactions shall not be the same.

C. The evaluation, supervision and control of risk-related matters also shall be reported by persons from a different department to the Board of Directors or to the high-level managers who are not responsible for setting policies for transactions or position.

D. The position held in the trading of derivatives shall be evaluated at least once a week, but the hedging transaction made for business purposes shall be

95

evaluated at least twice a month, and the evaluation reports shall be given to high-level managers authorized by the Board of Directors.

6. Legal risk management: The Company shall have the documents to be signedwith financial institutions reviewed by the dedicated person in charge of foreign exchange and legal affairs or legal consultation prior to the official signing in order to avoid legal risks.

A r t i c l e 5 : Procedures for Handling Accounting The Company shall handle accounting in accordance with the financial and accounting reporting standards and related regulations stipulated by competent authorities.

A r t i c l e 6 : Method of Periodic Evaluation and Abnormality Handling 1. The position held in the trading of derivatives shall be evaluated at least twice amonth, and the evaluation reports shall be given to high-level managers authorized by the Board of Directors. 2. The Board of Directors shall designate senior management personnel toperiodically supervise and evaluate whether the trading performance is consistent with established trading procedures and whether the risk undertaken is within the Company’s permitted scope of tolerance. When irregular circumstances are found in the course of supervision and evaluation, appropriate measures shall be taken immediately and a report shall be made to the Board of Directors.

A r t i c l e 7 : Internal Audit System Internal auditors shall check the suitability of internal control of derivatives transactions periodically and inspect monthly the compliance of the trading departments with these Procedures and analyze the trading cycle in order to make the auditing report. The Company shall file the auditing report and the implementing status of annual auditing plans of internal audits to the Exchange Commission of the Ministry of Finance (SEC) before the end of February of next year and also shall report the improvement situation for any abnormal affairs to the SEC before the end of May of next year.

A r t i c l e 7 . 1 : Information Disclosure: The Company shall report the information on Market Observation Post System in accordance with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies If a subsidiary of the Company, which is not itself a public company in Taiwan, has information required to be reported on Market Observation Post System in accordance with the regulations of the preceding paragraphs, such information shall be reported by the Company.

A r t i c l e 7 . 2 : Deleted. A r t i c l e 8 : Implementation and Amendment

These Procedure shall be submitted to each supervisor and the shareholders’ meeting for approval after the resolution of the Board of Directors; the same procedure shall apply with any amendment. If any director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created by the Company, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.

A r t i c l e 9 : These Procedures were established on May 3, 1997. The 1st amendment was made on April 18, 1998. The 2nd amendment was made on May 2, 2003. The 3rd amendment was made on May 24, 2005. The 4th amendment was made on May 18, 2010 The 5th amendment was made on June 18, 2014.

96

< Appendix VI > Advantech Co., Ltd.

Rules and Procedure for Shareholders’ Meetings (before Amendment)

A r t i c l e 1 ： The process of the Company shareholders’ meeting is subject to the “Rules of Procedure for Shareholders’ Meetings.”

A r t i c l e 2 ： The Company shall include the information of shareholders reporting time, reporting place, and others on the written notice. The shareholder’s reporting to meeting referred to above should be processed at least thirty minutes before the meeting in session; there should be clearly marked signs at the reporting place with sufficient and competent staff at the place to assist. The shareholders or theshareholders’ commissioned representatives (hereinafter referred to as “the Shareholders”) shall attend the meeting with the attendance certificate, attendance cards, or other identification documents presented; the proxies shall attend the meeting with the identity documents presented for verification. The shareholders or theshareholders’ commissioned representatives while attending the meeting should sign on the attendance registry or submit the attendance card instead; also, the number of attending shares is calculated in accordance with the number of shares documented on the attendance card.

A r t i c l e 2 . 1 ： The attendance and resolution in the shareholders’ meeting shall be based on the shares.

A r t i c l e 2 . 2 ： The Company may assign the commissioned lawyer, accountant, or the relevant personnel to attend the shareholders’ meeting.

A r t i c l e 2 . 3 ： Shareholders’ meeting will be held at the Company’s premise or a suitable location for the convenience of the shareholders. The starting time of the shareholders’ meeting should not be before 9:00am or after 3:00pm.

A r t i c l e 2 . 4 ： The Company should have the proceeding of the shareholders’ meeting from the shareholder’s reporting to meeting, meeting in session, to votes counting recorded in audio or video uninterruptedly. The audio-visual materials referred to above shall be kept for at least one year; however, they should be reserved until the end of the legal proceeding that is filed by the shareholders in accordance with Article 189 of the Company Law.

A r t i c l e 3 ： The Chairman is to announce the meeting in session when the attending shareholders are with a majority shareholding. If the attending shareholders are without the statutory shareholding at the meeting time, the Chairman may announce to have the meeting postponed. If the attending shareholders are without the statutory shareholding but with one thirds of the total number of shares issued after two postpones (30 minutes per postpone), it can be processed in accordance with Article 175 of the Company Law and a pseudo resolution can be reached with the consent of a majority votes. For the proceeding referred to above, if the attending shareholders qualify the statutory shareholding, the Chairman may announce the meeting in session at any time and has the pseudo resolution submitted in the shareholders’ meeting for ratification.

A r t i c l e 4 ： The shareholders’ meeting should be conducted in accordance with the procedures prescribed in the agenda and no change can be made without a resolution reached in the shareholders’ meeting. The agenda is drafted up in accordance with the following provisions: 1. General shareholders’ meeting: The agenda is to be drafted up by the Board of

97

Directors. 2. Extraordinary shareholders’ meeting: The agenda is to be drafted up by theauthorized convening department. The Chairman may not announce to have the meeting adjourned before the proposals (including motions) in the two agenda referred to above resolved. Once the meeting is adjourned, shareholders may not elect another Chairman to continue the meeting at the current meeting place or another location.

A r t i c l e 5 ： The Chairman may announce to have a recess during the meeting in session. A r t i c l e 6 ： The attending shareholders who wish to speak at the meeting must first fill out the

speech note with the gist, shareholders account number, and name detailed to the Chairman in advance and the Chairman shall prioritize the speaking order. Attending shareholders who have submitted a speech note but failed to give a speech at the meeting is deemed as a non-speaker. If the speech made by the shareholder differs from the contents of the speech note submitted, the speech shall prevail. The attending shareholders may not interrupt the speaking shareholder without the consent of the Chairman and the speaking shareholder. The Chairman must have the interfering shareholder restrained from interrupting the speaking shareholder’s speech.

A r t i c l e 7 ： The motions should be discussed in accordance with the prioritized agenda. For any violation against the planned procedures or agenda, the Chairman may immediately stop the speaking shareholder and announce ending the discussion in due course or ceasing the discussion when it is necessary.

A r t i c l e 8 ： The shareholder is to have the proposal explained in five minutes and the Chairman or the personnel designated by the Chairman are to answer the questions of the shareholders. The inquiry or reply of the shareholder is limited to three minutes unless it is otherwise permitted by the Chairman.

A r t i c l e 9 ： Deleted A r t i c l e 1 0 ： Each shareholder may not speak more than twice on the same proposal and five

minutes each time. For any violation against the planned procedures or agenda referred to above, the Chairman may immediately stop the speaking shareholder.

Article 10.1 ： The legal person attending the shareholders’ meeting by proxy may have only one representative designated to attend the meeting. For the two or more representatives designated by the legal person shareholder to attend the meeting, only one of them may speak on the same proposal.

A r t i c l e 1 1 ： The proposal that is announced by the Chairman ceased for discussion should be put to vote for a resolution. The voting right of each shareholder is calculated in accordance with the Corporate Charter.

A r t i c l e 1 2 ： The vote on the motion, unless otherwise provided by the Company Law, is approved by the attending shareholders with a majority shareholding. If there is no objection raised when the Chairman consulted the attending shareholders, it is deemed as approved and the effect is same as voting.

Article 12.1 ： The Chairman is to have the amendment or substitute of a motion consolidated and prioritized its voting order. When one of the motions is passed, the other motions shall be deemed as vetoed without the need of further voting.

Article 12.2 The Chairman is to have ballot inspectors and tellers designated for the vote on motions. Ballot inspectors must be a shareholder of the Company. The results of the vote should be announced in the meeting and recorded.

A r t i c l e 1 3 ： For the shareholders attending the shareholders’ meeting by proxy, except for the agencies for trust businesses or stock services approved by the securities authorities, when one person delegated by more than two shareholders at the same time, the voting rights by proxy shall not exceed 3% of the total number of voting rights issued; also, the number of voting right exceeding the threshold will not be accounted for.

98

A r t i c l e 1 4

Article 14.1

： The shareholders who may have a conflict of interest regarding a motion to be resolved in the shareholders’ meeting may not vote on the said motion and may not exercise voting right on behalf of other shareholders by proxy. The election of directors and supervisors, if any, in the shareholders’ meeting should be handled in accordance with the relevant norms of the Company and the election result should be announced immediately in the meeting, including the name of the elected directors and supervisors and the respective number of voting rights. The ballots casted in the election referred to above shall be sealed and signed by the ballot inspectors for safekeeping for at least one year; however, they should be reserved until the end of the legal proceeding that is filed by the shareholders in accordance with Article 189 of the Company Law.

A r t i c l e 1 5 ： The meeting in session should be suspended in case of air raid drill and the meeting should be resumed in one hour after the evacuation alert is lifted.

Article 15.1 ： The Chairman may direct pickets (or security guards) to assist maintaining the order at the meeting place. The pickets (or security guards) who are at the meeting place to assist maintaining order should wear the “picket” armband.

A r t i c l e 1 6 ： The resolutions reached in the shareholders’ meeting should be documented in the minutes of meeting for the signature or seal of the Chairman; also the minutes of meeting should be distributed to all shareholders within twenty days after the meeting. The Company’s minutes of meeting can be distributed to shareholders by an announcement after the public offering of the Company’s shares. The preparation and distribution of the minutes of meeting referred to above can be completed in an electronic form.

A r t i c l e 1 7 ： The matters that are not addressed in the “Rules of Procedure for Shareholders’ Meetings” should be processed in accordance with the Company Law and the related regulations.

A r t i c l e 1 8 ： The “Rules of Procedure for Shareholders’ Meetings” is in effect after it is passed in the shareholders’ meeting, same for the amendments made.

A r t i c l e 1 9 ： The “Rules of Procedure for Shareholders’ Meetings” was established on May 3, 1997. The 1st amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on April 24, 1999. The 2nd amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on May 30, 2002. The 3rd amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 16, 2006. The 4th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on May 18, 2010. The 5th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 13, 2012. The 6th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 13, 2013.

99

< Appendix VII > Advantech Co., Ltd.

Rules for the Election of Directors A r t i c l e 1 ： The Company’s directors are elected in accordance with the “Rules for the Election

of Directors.” A r t i c l e 2 ： The Company’s election of directors should be handled in accordance with the

cumulative suffrage system. The voter’s name can be replaced with the attendance card number printed on the ballot. Ballots are printed by the board of directors and are enclosed in the agenda for distributing to shareholders in accordance with their ID number and name. The vote of suffrage for each shareholder is noted on the ballot. For the Company’s election of directors, each stock share contains the suffrage equivalent to the number of directors to be elected, which can be casted to one or more than one candidate.

A r t i c l e 3 ： The Company’s directors are elected as independent directors and non-independent directors in that order in accordance with the number of chairs designated in the Corporate Charter (Articles of Incorporation) and the electoral votes from top down. If there are two or more candidates received the same votes of suffrage resulting more candidates elected than the chairs designated, the candidates who received the same votes of suffrage are to take a draw for a solution; also, the Chairman is to take a draw on behalf of the absentees.

A r t i c l e 4 ： Ballots are printed by the board of directors. The ballots in addition with the corporate seal affixed should be prepared with the voter’s ID number and the votes of suffrage noted on the ballots.

A r t i c l e 5 ： The Chairman is to have several ballot inspectors and tellers designated at the beginning of the election to perform the relevant job duties. Ballot inspectors must be a shareholder of the Company.

A r t i c l e 6 ： Ballot boxes should be prepared for the election of directors; also, the ballot boxes are to be opened by the ballot inspectors after voting. Votes casted for the election of independent directors and non-independent directors are counted and elected separately.

A r t i c l e 7 ： The missions of the ballot inspectors are as followings: 1.Inspect the ballot boxes openly before the voting process started.2.Maintain order and observe whether there is any negligence or violation committed.3.Examine the votes of suffrage at the end of the voting.4.Check whether there is any invalid ballot.5.Ballot inspectors are to record the votes received by each candidate.

A r t i c l e 8 ： Voters include natural persons, legal persons, and their representatives. The account number and name of the candidate must be noted in each ballot. If the candidate is a government agency or legal person, the candidate column on the ballot must be detailed with the name of the government agency or legal person. If there is more than one representative appointed, the name of all the representatives must be listed separately. Please state the ID Card number and name of the candidate who is not a shareholder on the ballot before casting it in the ballot box.

A r t i c l e 9 ： Ballots are invalid in any of the following circumstances: 1.Votes that are not in compliance with the “Rules for the Election of Directors and

Supervisors.” 2.The number of elected candidates exceeds the number of chairs designated.3.The total votes casted by the voters exceed the valid votes held.4.The shareholder’s account number and name of the candidate who is a shareholderdiffers from the Shareholder Registry, or, the name and ID Card number of the candidate who is not a shareholder is found with nonconformity.

100

5.Unidentifiable ballot due to illegible or incomplete corrections6.The name of the candidate is same as other shareholder but failed to state thecandidate’s shareholder account number or ID Card number for identification. 7.Ballot contains not only the candidate’s name, shareholder account number or IDCard number and the votes of suffrage, but also other unauthorized information. 8. Blank ballots that are casted in the ballot box9. Ballots that are not casted in the designated voting zone

A r t i c l e 1 0 ： Ballot inspectors are to verify the validity of any ballot in question. Invalid ballots should be affixed with a “void” mark and a signature or seal at the end of counting votes. Ballot inspectors are to check the sum of the valid and invalid ballots upon the completion of voting and then document the valid votes and suffrage in the form and then the Chairman is to announce the name of the elected candidates publicly.

A r t i c l e 1 1 ： The Company is to issue a certificate of election to each elected director . A r t i c l e 1 2 ： The matters that are not addressed in the “Rules for the Election of Directors and

Supervisors” should be processed in accordance with the Company Law, Corporate Charter, and the related regulations.

A r t i c l e 1 3 ： The “Rules for the Election of Directors and Supervisors” is in effect after it is passed in the shareholders’ meeting, same for the amendments made.

A r t i c l e 1 4 ： The “Rules for the Election of Directors and Supervisors” was established on May 3, 1997 with the 1st amendment made on April 24, 1999, the 2nd amendment made on May 30, 2002, and the 3rd amendment made on June 15, 2007. The 4th amendment of the Rules for the Election of Directors and Supervisors was made on May 28, 2015.

101

< Appendix VIII >

Current Shareholding of Directors and Supervisors

1. The total shares of the Company held by all directors and supervisors are to be processed in

accordance with the “Rules and Review Procedures for Director and Supervisor Share Ownership

Ratios at Public Companies:”

(1) As of March 28, 2017 (final day for stock transfer), the Company had issued 633,254,100

shares of stock. The board of directors should hold 4% of the stock shares issued by law, that

was, 25,330,164 shares. All supervisors should hold 0.4% of the stock shares issued by law,

that was, 2,533,016 shares.

(2) The Company has two independent directors elected. The board of directors other than

independent directors and supervisors should hold 80% of the stock shares calculated in the

preceding paragraph; therefore, the Company’s board of directors should hold 20,264,131

shares and supervisors should hold 2,026,413 shares.

2. As of March 28, 2017 (final day for stock transfer), the shareholding of the Company’s directors andsupervisors on the shareholders’ registry was as follows:

Title Name Representative

Shareholding on the shareholder’s registry

Shares % Ratio (%)

Chairman K.C. Liu 23,292,484 3.68%

Director Advantech Foundation. Donald Chang 18,244,889 2.88%

Director Ted Hsu 0 0

Independent Director Jeff Chen 0 0

Independent Director Joseph Yu 249 0

Total 41,537,622 6.56%

Supervisor AIDC Investment Corp. Gary Tseng 74,636,266 11.79%

Supervisor Thomas Chen 543,963 0.09%

Supervisor James Wu 0 0

Total 75,180,229 11.88%

102

< Appendix IX >

Impact of Stock Dividend Issuance on the Company ’s Business Performance and Earnings per Share

Year Item

2016

Beginning paid-in Capital (NT$) 6,330,741

Dividend Distrbution

Cash dividend per share (NT$) 6.30Stock dividend per share for capital increase from retained earnings (Share)

0.1

Stock dividend per share for capital increase from capital reserve (Share)

-

Business Performance Variation

Operating Profit

N/A

Year-on-year increase / decrease (%) of operating profit

Net profit after Year-on-year increase / decrease (%) of net profit after tax Earnings per share

Year-on-year increase / decrease (%) of earnings per share

Average return over investment (annualized)

Pro forma earnings per share and its P/E ratio

If cash dividend is distributed instead of capital increase

Pro forma earnings per share (NTD)

N/A

Pro forma average return over investment (annualized)

If no capital increase from capital reserve

Pro forma earnings per share (NTD) Pro forma average return over investment (annualized)

If no capital reserve and cash dividend is distributed instead of capital increase from retained earnings

Pro forma earnings per share (NTD) Pro forma average return over investment (annualized)

N/A

103

Documents

Advantech Co., Ltd.advcloudfiles.advantech.com/investor/Shareholder-Annual-Report/106/4-en.pdf · Advantech Co., Ltd. Procedure for the 2017 General Shareholders’ Meeting 1. Call