advantech co.,ltd. 2017 annual shareholders’ meeting...

Advantech Co.,Ltd. 2017 Annual Shareholders’ Meeting

Meeting Minutes (Translation)

Time : 09:00 AM,May 26,2017

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

Neihu District, Taipei City

Total outstanding ACL shares : 633,254,100 shares Total shares represented by shareholders present in person or by proxy : 574,350,035 shares Percentage of outstanding share held by shareholders present in person or by proxy : 90.70%

Chairman: K.C Liu, the Chairman of the Board of Directors

Attendees: Joseph Yu (Independent Director), Donald Chang (Director) ,Thomas Chen (Supervisor), James Wu (Supervisor),Chaney Ho (President),Eric Chen (Vice President), Meng Chieh Chiu, CPA, Deloitte, Villis Yang (Director) The aggregate shareholding of the shareholders present in person or by proxy constituted a quorum. The Chairman called the meeting to order.

Chairman’s Address (omitted)

I. Management Presentations 1.The 2016 Business Report (see appendix I)2.Supervisor’s Review Report on the 2016 Financial Statements (see appendix II) 3. Report of Employees’ compensation and Directors’ compensation of 2016.4. The Status of Endorsement and Guarantee in 2016 (see meeting agenda)

II. Proposals1. Adoption of the 2016 Business Report and Financial Statements

(Proposed by the board of directors )

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 Financial Statements are

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enclosed as Attachment I and Attachment III. (3)Please acknowledge.

Voting Results: 574,350,035 shares were represented at the time of voting; 525,513,680 votes were in favor of the proposal (including votes casted electronically: 207,577,803); 228,391 votes were cast against the proposal (including votes castedelectronically: 228,391); 0 votes wereinvalid; 48,607,964 votes were either invalidly cast or abstained (including votes casted electronically: 48,208,129). Approved, that the above proposal be and hereby were accepted as submitted.

2. Adoption of the Proposal for Distribution of 2016 Earnings.(Proposed by the board of directors ) 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 and deducted net of the retained earnings adjustment for NT$3,691,230 due to long-term equity investments, actuarial loss recognized in retained earnings of NT$24,282,918, the legal reserve of NT$566,686,233 and special reserve of NT$85,203,650, the distributable earnings for 2016 amounted to NT$7,783,894,876 resulted to be distributed as follows:

(3) 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.

(4) 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.

(5) 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.

(6) 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.

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III. Discussion and Election1. Issuance of new shares from capital increase by earnings. Please proceed to resolve.

(Proposed by the board of directors)Explanation:(1) In response to the business development, the Company plans to issue 63,307,410 shares

from capital increase by the 2016 dividends distributed to shareholders 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 shares that is less than 1 share shall be put together by the stock agency appointed by the Company within 5 days after the date on which share transfer registration is suspended. The fractional share that is insufficient to make up the balance or put together by the deadline will be subscribed by a person designated by the chairman of the Board.

(2) When there is a change in the distribution rate due to change in the number of shares 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 as those arising from the issuance of original shares.

(4) After the issuance of new shares from capital increase is resolved by the annual shareholders’ 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.

Voting Results: 574,350,035 shares were represented at the time of voting; 503,042,495 votes were in favor of the proposal (including votes casted electronically: 185,106,618); 22,484,906 votes were cast against the proposal (including votes castedelectronically: 22,484,906); 0 votes wereinvalid; 48,822,634 votes were either invalidly cast or abstained (including votes casted electronically: 48,422,799). Approved, that the above proposal be and hereby were accepted as submitted.

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2. Amendment to the “ Articles of Incorporation ”(Proposed by the board of directors)

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 .


3. Amendment to the “Procedures For Acquisition or Disposal of Assets”(Proposed by the board of directors)Explanation:(1) The proposal is handled according to Financial Supervisory Commission Order

Gin-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 the needs of

commercial practice, the Company hereby proposes to amend the Procedures For Acquisition or Disposal of Assets . Please refer to Attachment VI.



4. Amendment to the “Procedures for Lending Funds to Other Parties”.(Proposed by the board of directors)Explanation:

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(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.



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



6. Amendment to the “ Procedures for Financial Derivatives Transactions”.(Proposed by the board of directors)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 .


Voting Results: 574,350,035 shares were represented at the time of voting; 525,739,580 votes

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were in favor of the proposal (including votes casted electronically: 207,803,703); 1,391 votes were cast against the proposal (including votes castedelectronically: 1,391); 0 votes wereinvalid; 48,609,064 votes were either invalidly cast or abstained (including votes casted electronically: 48,209,229). Approved, that the above proposal be and hereby were accepted as submitted.

7. Amendment to the “ Rules and Procedures of Shareholders’ Meeting ”.(Proposed by the board of directors)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 Rules and Procedures of Shareholders’ Meeting . Please refer to Attachment X .



8. Discuss the disposal of Advantech LNC Technology Co., Ltd. Shares.(Proposed by the board of directors)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 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.

(2) Please proceed to discuss.

Voting Results: 574,350,035 shares were represented at the time of voting; 449,428,024 votes were in favor of the proposal (including votes casted electronically: 131,492,147);

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75,886,190 votes were cast against the proposal (including votes castedelectronically: 75,886,190);0 votes wereinvalid; 49,035,821 votes were either invalidly cast or abstained (including votes casted electronically: 48,635,986). Approved, that the above proposal be and hereby were accepted as submitted.

9. Re-election of all directors. Please Vote.Explanation:(1) As the term of the Company’s directors and supervisors is about to expire, the reelection 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, the candidate 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 ends on May 25, 2020.

(5) According to Company’s Article of Incorporation, the Company’s dissectors shall 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.、

23,292,484

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Chairman of 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 of Better Auto Holdings Limited.、Director of Famous Now Limited.

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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

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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

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 ofAdvantech 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.

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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,

Associate Professor, Department of Business

Independent Director, Yuanta Securities Co.,

249

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University of Michigan

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

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

Voting Results: Declared elected by the Chairman of the list is as follows:

Title Shareholders’

NO

Name Elected voting

number

Director 1 K.C. Liu 529,544,496 votes

Director Q1202***** Ted Hsu 492,114,989 votes

Director 163 Advantech Foundation Representative : Chaney Ho 490,770,320 votes

Director 40 AIDC Investment Corp. Representative :Donald Chang 487,445,565 votes

Independent Director P1002***** Benson Liu 510,738,762 votes

Independent Director 17301 Joseph Yu 509,033,352 votes

Independent Director B1006***** Jeff Chen 507,790,289 votes

10. Exemption of the limitation of non-competition on the directors of the Company.(Proposed by the board of directors)Explanation:

(1) According to Article 209 of the Company Act, a director who does anything for himself 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’s directors, 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.

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Newly appointed directors serve as other positions in other companies are as below:

Title Name Company’s English Name

Director K.C. Liu 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 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 of Better Auto Holdings Limited.、Director of Famous Now Limited.

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

Director AIDC Investment Corp. Representative :Donald Chang

Independent Director of Chung Hwapulp Corp.

Director Advantech FoundationRepresentative : Chaney Ho

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 ComputingIndia Private Limited.

Independent Director Joseph Yu Independent Director, Yuanta Securities Co., Ltd、Independent Director, Yuanta Bank Co., Ltd.

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Independent Director Benson Liu Independent Director, Global Unichip Corp Independent Director, Polylite Taiwan Co.,Ltd. Independent Director, Vanguard International Semiconductor Co. Director, Maywufa Company Ltd.

Voting Results: 574,350,035 shares were represented at the time of voting; 423,000,595 votes were in favor of the proposal (including votes casted electronically: 105,064,718); 95,180,712 votes were cast against the proposal (including votes castedelectronically: 95,180,712);0 votes wereinvalid; 56,168,728 votes were either invalidly cast or abstained (including votes casted electronically: 55,768,893). Approved, that the above proposal be and hereby were accepted as submitted.

V. Extemporary Motion: None. VI. Meeting Adjourned: There was no other business and extemporary motion,

the Chairman announced the meeting adjourned.

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<Attachment I> Business Report

Dear shareholders:

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 andarchitecture development. In 2016, WISE-PaaS successfully launched Edge Intelligence Server

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(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 andindustrial PCs. However, the complexities of the IoT system and vertical markets will driveoverall market diversity. Therefore, Advantech intends to form different alliances in focusedareas, including “M2.COM” in the Wireless IoT Sensor Nodes Standard, and Embedded Linux& Android Alliance (ELAA) in the embedded OS area, to provide more comprehensiveservices 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 anothergrowing arm in the future to fulfill the natural complexity of the IoT market and strengthen ourportfolio and service offerings. In January 2016, Advantech fully consolidated B+BSmartWorx into our operations. In January 2017, Advantech announced investment in Kostec,a specialized, Korea-based medical-monitor company. Both investments were in line withAdvantech’s long term strategy in technology centric and vertical development. Also,Advantech initiated more interactions and sponsorship with industrial partners and academicinstitutes. In addition to talent recruitment and business engagement, Advantech intends tofacilitate 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.

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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

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< 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

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Sincerely yours,


Supervisor: Thomas Chen

March 06, 2017

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Sincerely yours,


Supervisor: James Wu

March 06, 2017

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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 >

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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.

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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.

21

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.

22

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)

23


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)

24




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)

25




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)

26

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27


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)

28


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



29

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.

30

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.

31

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.

32

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.

33

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)

34

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)

35

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)

36

ADVANTECH CO., LTD.



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



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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 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)

39

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



40

<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

41

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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

dire

ctor

s ar

e to

be

elec

ted

from

th

e ca

ndid

ates

in

th

e sh

areh

olde

rs’

mee

ting.

Th

e pr

ofes

sion

al

qual

ifica

tions

of

th

e in

depe

nden

t di

rect

ors,

shar

ehol

ding

s, lim

itatio

n of

pa

rt-tim

e jo

b, th

e no

min

atio

n an

d ap

poin

tmen

t met

hod,

an

d ot

her

mat

ters

to

be

co

mpl

ied

with

m

ust

be

proc

esse

d ac

cord

ing

to t

he r

elev

ant

prov

isio

ns o

f th

e co

mpe

tent

aut

horit

ies.

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

.

42

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

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

.

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

. Sup

ervi

sors

will

be

disc

harg

ed o

n th

e da

te 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

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

Sep

up th

e Aud

it C

omm

ittee

.

43

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

info

rmed

in w

ritin

g or

by

E-m

ail o

r fax

. su

perv

isor

s inf

orm

ed in

writ

ing

or b

y E-

mai

l or f

ax.

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.

Th

e 25

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 Ju

ne 1

6, 2

006.

Th

e 26

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 Ju

ne 1

5, 2

007.

Th

e 27

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 Ju

ne 1

2, 2

008.

Th

e 28

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 M

ay 1

5, 2

009.

Th

e 29

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 M

ay 1

8, 2

010.

Th

e 30

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 M

ay 2

5, 2

011.

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.

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.

Upd

ate

the

date

of

the

amen

dmen

t

44

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

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

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.

45

< 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 re

pres

entin

g in

tere

st in

a

fund

, dep

osita

ry re

ceip

ts, c

all (

put)

war

rant

s, be

nefic

ial

inte

rest

secu

ritie

s, an

d as

set-b

acke

d se

curit

ies.

2.R

eal

prop

erty

(in

clud

ing

land

, ho

uses

and

bui

ldin

gs,

inve

stm

ent p

rope

rty, r

ight

s to

use

land

, and

con

stru

ctio

n en

terp

rise

inve

ntor

y) a

nd e

quip

men

t. 3.

Mem

bers

hips

.4.

Pate

nts,

copy

right

s, tra

dem

arks

, fr

anch

ise

right

s, an

dot

her i

ntan

gibl

e as

sets

. 5.

Cla

ims

of fi

nanc

ial i

nstit

utio

ns (i

nclu

ding

rec

eiva

bles

,bi

lls

purc

hase

d an

d di

scou

nted

, lo

ans,

and

over

due

rece

ivab

les)

. 6.

Der

ivat

ives

.7.

Ass

ets

acqu

ired

or d

ispo

sed

of i

n co

nnec

tion

with

mer

gers

, dem

erge

rs, a

cqui

sitio

ns, o

r tra

nsfe

r of s

hare

s in

ac

cord

ance

with

law

8.

Oth

er m

ajor

ass

ets.

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

ebo

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

and

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 a

ll A

udit

Com

mitt

ee m

embe

rs a

nd th

e B

oard

of

Dire

ctor

s, th

ey s

hall

be s

ubm

itted

to th

e sh

areh

olde

rs'

mee

ting

for

appr

oval

; th

e sa

me

appl

ies

whe

n th

ese

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

Acc

ordi

ng to

the

actu

al p

ract

ice

46

Proc

edur

es a

re a

men

ded.

Whe

n th

ese

Proc

edur

es a

re

repo

rted

to t

he B

oard

of

Dire

ctor

s fo

r di

scus

sion

, 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. W

hen

thes

e Pr

oced

ures

are

ado

pted

or

amen

ded,

they

shal

l be

appr

oved

by

mor

e th

an h

alf o

f all

Aud

it C

omm

ittee

mem

bers

and

sub

mitt

ed to

the

Boa

rd

of D

irect

ors f

or a

reso

lutio

n.

If a

ppro

val

of m

ore

than

hal

f of

all

Aud

it C

omm

ittee

m

embe

rs a

s re

quire

d in

the

prec

edin

g pa

ragr

aph

is n

ot

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 di

rect

ors,

and

the

reso

lutio

n of

the

Aud

it C

omm

ittee

sha

ll be

reco

rded

in

the

min

utes

of

the

boar

d m

eetin

g. T

he t

erm

s “a

ll A

udit

Com

mitt

ee m

embe

rs”

and

“all

dire

ctor

s” s

hall

be

coun

ted

as t

he a

ctua

l nu

mbe

r of

per

sons

cur

rent

ly

hold

ing

thos

e po

sitio

ns.

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.

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

.

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

Acc

ordi

ng to

the

actu

al p

ract

ice

47

Whe

n a

trans

actio

n in

volv

ing

the

acqu

isiti

on o

r dis

posa

l of

ass

ets

is s

ubm

itted

to

the

Boa

rd o

f 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

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.

M

ajor

as

sets

or

de

rivat

ives

tra

nsac

tions

sh

all

be

appr

oved

by

mor

e th

an h

alf

of a

ll A

udit

Com

mitt

ee

mem

bers

and

rep

orte

d to

the

Boa

rd o

f D

irect

ors

for

reso

lutio

n.

If a

ppro

val

of m

ore

than

hal

f of

all

Aud

it C

omm

ittee

m

embe

rs i

s no

t 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 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.

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

prec

edin

g pa

ragr

aph,

the

Boa

rd

of

Dire

ctor

s sh

all

take

in

to

full

cons

ider

atio

n ea

ch

inde

pend

ent d

irect

or's

opin

ions

. If a

n in

depe

nden

t dire

ctor

ob

ject

s to

or

expr

esse

s re

serv

atio

ns a

bout

any

mat

ter,

it sh

all b

e re

cord

ed in

the

min

utes

of

the

boar

d of

dire

ctor

s m

eetin

g.

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

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.

Acc

ordi

ng to

the

gove

rnin

g la

w

and

regu

latio

ns

48

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

disc

repa

ncy

and

the

appr

opria

tene

ss o

f th

e tra

nsac

tion

pric

e:(1

) Th

e di

scre

panc

y be

twee

n th

e ap

prai

sal

resu

lt an

dth

e tra

nsac

tion

amou

nt i

s 20

per

cent

or

mor

e of

th

e tra

nsac

tion

amou

nt.

(2)

The

disc

repa

ncy

betw

een

the

appr

aisa

l re

sults

of

two

or m

ore

prof

essi

onal

app

rais

ers

is 1

0 pe

rcen

t or

mor

e of

the

trans

actio

n am

ount

. 4.

No

mor

e th

an 3

mon

ths

may

ela

pse

betw

een

the

date

of th

e ap

prai

sal r

epor

t iss

ued

by a

pro

fess

iona

l app

rais

er

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

he

Com

pany

sha

ll de

term

ine

the

tradi

ng t

erm

s an

d co

nditi

ons

and

tradi

ng

pric

es

base

d on

th

e cu

rren

t va

lue,

ass

esse

d va

lue,

and

rea

l tra

ding

pr

ice

of

near

by

real

pr

oper

ty

and

have

th

e an

alys

is

repo

rt su

bmitt

ed

to

the

Boa

rd

of

Dire

ctor

s. If

the

amou

nt o

f the

tran

sact

ion

is le

ss

than

NT$

300

mill

ion,

this

sha

ll be

app

rove

d by

th

e C

hairm

an o

f th

e B

oard

and

rep

orte

d to

the

la

test

boa

rd m

eetin

g af

terw

ard;

if th

e am

ount

of

the

trans

actio

n is

mor

e th

an N

T$30

0 m

illio

n, th

is

shal

l be

appr

oved

by

the

Boa

rd o

f Dire

ctor

s.

(2) T

he a

cqui

sitio

n or

dis

posa

l of e

quip

men

t sha

ll be

pe

rfor

med

th

roug

h en

quiry

, co

mpa

rison

, ba

rgai

ning

, or

bid

ding

. If

the

am

ount

of

the

trans

actio

n is

le

ss

than

N

T$30

0 m

illio

n (in

clus

ive)

, thi

s sha

ll be

app

rove

d pu

rsua

nt to

the

auth

oriz

atio

n lim

it;

if th

e am

ount

of

th

e tra

nsac

tion

is m

ore

than

NT$

300

mill

ion,

thi

s sh

all b

e ap

prov

ed b

y th

e Pr

esid

ent a

nd th

e B

oard

of

Dire

ctor

s. 3.

Uni

ts R

espo

nsib

le fo

r Im

plem

enta

tion

Afte

r th

e ac

quis

ition

or

disp

osal

of

real

pro

perty

or

equi

pmen

t is

app

rove

d ba

sed

on t

he a

utho

rizat

ion

limit

stip

ulat

ed

in

the

prec

edin

g pa

ragr

aph,

th

e de

partm

ent u

sing

such

real

pro

perty

or e

quip

men

t and

A

dmin

istra

tion

Dep

artm

ent

is

resp

onsi

ble

for

impl

emen

tatio

n.

4.A

ppra

isal

Rep

ort

on R

eal

Prop

erty

or

Oth

er F

ixed

Ass

ets In

ac

quiri

ng

or

disp

osin

g of

re

al

prop

erty

or

eq

uipm

ent

whe

re t

he t

rans

actio

n am

ount

rea

ches

49

and

the

cont

ract

exe

cutio

n da

te;

prov

ided

, w

here

the

pu

blic

ly a

nnou

nced

cur

rent

val

ue f

or th

e sa

me

perio

d is

us

ed a

nd n

ot m

ore

than

6 m

onth

s ha

ve e

laps

ed,

an

opin

ion

may

stil

l be

issu

ed b

y th

e or

igin

al p

rofe

ssio

nal

appr

aise

r.

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

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:

50

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

a

gove

rnm

ent

agen

cy,

the

Com

pany

sha

ll en

gage

a

certi

fied

publ

ic

acco

unta

nt

prio

r to

th

e da

te

of

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.

Eval

uatio

n an

d O

pera

ting

Proc

edur

esTh

e tra

nsac

tion

proc

esse

s of

m

embe

rshi

ps

or

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

d

Acc

ordi

ng to

the

gove

rnin

g la

w

and

regu

latio

ns

51

occu

rren

ce o

f th

e ev

ent

to r

ende

r an

opi

nion

on

the

reas

onab

lene

ss o

f th

e tra

nsac

tion

pric

e; t

he C

PA s

hall

com

ply

with

the

pro

visi

ons

of S

tate

men

t of

Aud

iting

St

anda

rds N

o. 2

0.

Con

ditio

ns a

nd A

utho

rizat

ion

Lim

it (1

) Th

e tra

ding

ter

ms

and

cond

ition

s an

d pr

ices

of

acqu

isiti

on o

r di

spos

al o

f m

embe

rshi

ps s

hall

be

dete

rmin

ed b

y th

e C

ompa

ny b

ased

on

the

mar

ket

fair

pric

e, w

ith t

he a

naly

sis

repo

rt su

bmitt

ed t

o th

e Pr

esid

ent

for

appr

oval

. The

am

ount

of

each

tra

nsac

tion

less

th

an

1%

of

the

Com

pany

’s

paid

-in

capi

tal

or

NT$

300

mill

ion

shal

l be

re

porte

d to

the

Boa

rd o

f D

irect

ors

for

appr

oval

an

d th

e so

ones

t bo

ard

mee

ting

for

futu

re

refe

renc

e;

the

amou

nt

of

each

tra

nsac

tion

exce

edin

g N

T$30

0 m

illio

n sh

all

be r

epor

ted

to

the

Boa

rd o

f Dire

ctor

s for

app

rova

l. (2

) The

trad

ing

term

s an

d co

nditi

ons

and

pric

es o

f ac

quis

ition

or

disp

osal

of

inta

ngib

le a

sset

s sh

all

be d

eter

min

ed b

y th

e C

ompa

ny b

ased

on

the

appr

aisa

l re

port

or m

arke

t fa

ir pr

ice,

with

the

an

alys

is r

epor

t su

bmitt

ed t

o th

e Pr

esid

ent

for

appr

oval

. Th

e am

ount

of

each

tra

nsac

tion

less

th

an 1

0% o

f th

e C

ompa

ny’s

pai

d-in

cap

ital

or

NT$

300

mill

ion

shal

l be

re

porte

d to

th

e C

hairm

an o

f th

e B

oard

for

app

rova

l an

d th

e so

ones

t bo

ard

mee

ting

for

futu

re r

efer

ence

; th

e am

ount

of

each

tra

nsac

tion

exce

edin

g N

T$30

0 m

illio

n sh

all

be

repo

rted

to

the

Boa

rd

of

Dire

ctor

s for

app

rova

l. 3.

Uni

ts R

espo

nsib

le fo

r Im

plem

enta

tion

Afte

r the

acq

uisi

tion

or d

ispo

sal o

f m

embe

rshi

ps o

r in

tang

ible

as

sets

is

ap

prov

ed

base

d on

th

e au

thor

izat

ion

limit

stip

ulat

ed

in

the

prec

edin

g pa

ragr

aph,

the

depa

rtmen

t usi

ng s

uch

mem

bers

hips

or

int

angi

ble

asse

ts a

nd F

inan

ce D

epar

tmen

t or

A

dmin

istra

tion

Dep

artm

ent

are

resp

onsi

ble

for

impl

emen

tatio

n.

52

4.A

ppra

isal

Rep

ort o

n M

embe

rshi

ps o

r Int

angi

ble

Ass

ets

Whe

re

the

Com

pany

ac

quire

s or

di

spos

es

of

mem

bers

hips

or

in

tang

ible

as

sets

an

d th

e tra

nsac

tion

amou

nt re

ache

s N

T$30

mill

ion

or m

ore,

ex

cept

in

trans

actio

ns w

ith a

gov

ernm

ent

agen

cy,

the

Com

pany

sh

all

enga

ge

a ce

rtifie

d pu

blic

ac

coun

tant

prio

r to

the

dat

e of

occ

urre

nce

of t

he

even

t to

rend

er a

n op

inio

n on

the

reas

onab

lene

ss o

f th

e tra

nsac

tion

pric

e; t

he C

PA s

hall

com

ply

with

th

e pr

ovis

ions

of

Stat

emen

t of

Aud

iting

Sta

ndar

ds

No.

20

publ

ishe

d by

the

AR

DF.

A

rticl

e 14

W

hen

the

Com

pany

inte

nds

to a

cqui

re o

r dis

pose

of r

eal

prop

erty

fro

m o

r to

a r

elat

ed p

arty

, re

gard

less

of

the

amou

nt,

or w

hen

it in

tend

s to

acq

uire

or

disp

ose

of

asse

ts o

ther

than

real

pro

perty

from

or t

o a

rela

ted

party

at

the

am

ount

rea

chin

g 20

% o

f th

e C

ompa

ny’s

pai

d-in

ca

pita

l, 10

% o

f its

tota

l ass

ets o

r NT$

300

mill

ion,

exc

ept

in

tradi

ng

of

gove

rnm

ent

bond

s or

bo

nds

unde

r re

purc

hase

and

res

ale

agre

emen

ts,

or s

ubsc

riptio

n or

re

purc

hase

of

dom

estic

mon

ey m

arke

t fu

nds

issu

ed b

y se

curit

ies i

nves

tmen

t tru

st e

nter

pris

es, t

he C

ompa

ny m

ay

not p

roce

ed to

ent

er in

to a

tran

sact

ion

cont

ract

or m

ake

a pa

ymen

t unt

il th

e fo

llow

ing

mat

ters

hav

e be

en a

ppro

ved

by m

ore

than

hal

f of a

ll A

udit

Com

mitt

ee m

embe

rs a

nd

the

Boa

rd o

f Dire

ctor

s:

1.Th

e pu

rpos

e, n

eces

sity

and

ant

icip

ated

ben

efit

of th

e

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

rel

ated

par

ty, r

egar

dles

s of

the

amou

nt a

nd e

xcep

t in

trad

ing

of g

over

nmen

t bon

ds o

r bon

ds u

nder

repu

rcha

se

and

resa

le a

gree

men

ts,

or s

ubsc

riptio

n or

red

empt

ion

of

dom

estic

mon

ey m

arke

t fu

nds,

the

Com

pany

may

not

pr

ocee

d to

ent

er i

nto

a tra

nsac

tion

cont

ract

or

mak

e a

paym

ent

until

the

fol

low

ing

mat

ters

hav

e be

en a

ppro

ved

by

the

Boa

rd

of

Dire

ctor

s an

d re

cogn

ized

by

th

e su

perv

isor

s:

1.Th

e pu

rpos

e, n

eces

sity

and

ant

icip

ated

ben

efit

of t

heac

quis

ition

or d

ispo

sal o

f ass

ets.

2.Th

e re

ason

for

cho

osin

g th

e re

late

d pa

rty a

s a

tradi

ngco

unte

rpar

ty.

Acc

ordi

ng to

the

gove

rnin

g la

w

and

regu

latio

ns

53

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

here

ason

able

ness

of t

he p

relim

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

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

3.W

ith r

espe

ct to

the

acqu

isiti

on o

f re

al p

rope

rty f

rom

are

late

d pa

rty,

info

rmat

ion

rega

rdin

g ap

prai

sal

of t

here

ason

able

ness

of

the

prel

imin

ary

trans

actio

n te

rms

inac

cord

ance

with

Arti

cle

15 a

nd A

rticl

e 16

.4.

The

date

and

pric

e at

whi

ch th

e re

late

d pa

rty o

rigin

ally

acqu

ired

the

real

pr

oper

ty,

the

orig

inal

tra

ding

coun

terp

arty

, an

d th

at

tradi

ng

coun

terp

arty

'sre

latio

nshi

p to

the

com

pany

and

the

rela

ted

party

.5.

Mon

thly

cas

h flo

w f

orec

asts

for

the

year

com

men

cing

from

the

ant

icip

ated

mon

th o

f si

gnin

g of

the

con

tract

,an

d ev

alua

tion

of th

e ne

cess

ity o

f th

e tra

nsac

tion,

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 a

CPA

's op

inio

n ob

tain

ed

in

com

plia

nce

with

th

epr

eced

ing

artic

le.

7.R

estri

ctiv

e co

vena

nts

and

othe

r im

porta

nt s

tipul

atio

nsas

soci

ated

with

the

trans

actio

n.Th

e ca

lcul

atio

n of

the

trans

actio

n am

ount

s re

ferr

ed to

in

the

prec

edin

g pa

ragr

aph

shal

l be

mad

e in

acc

orda

nce

with

Pa

ragr

aph

2 of

A

rticl

e 27

he

rein

, an

d “w

ithin

th

e pr

eced

ing

year

” as

use

d he

rein

refe

rs to

the

year

pre

cedi

ng

the

date

of

occu

rren

ce o

f th

e cu

rren

t tra

nsac

tion.

Ite

ms

that

hav

e be

en a

ppro

ved

by t

he B

oard

of

Dire

ctor

s an

d re

cogn

ized

by

the

supe

rvis

ors

need

not

be

coun

ted

tow

ard

the

trans

actio

n am

ount

. W

ith re

spec

t to

the

acqu

isiti

on o

r dis

posa

l of b

usin

ess-

use

54

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

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

.

equi

pmen

t bet

wee

n th

e C

ompa

ny a

nd it

s su

bsid

iarie

s, th

e C

ompa

ny's

Boa

rd o

f Dire

ctor

s m

ay p

ursu

ant t

o Pa

ragr

aph

2 of

Arti

cle

9 de

lega

te t

he C

hairm

an o

f th

e B

oard

to

deci

de s

uch

mat

ters

whe

n th

e tra

nsac

tion

is w

ithin

a

certa

in

amou

nt

and

have

th

e de

cisi

ons

subs

eque

ntly

su

bmitt

ed t

o an

d ra

tifie

d by

the

nex

t bo

ard

of d

irect

ors

mee

ting.

W

hen

a m

atte

r is

subm

itted

to th

e B

oard

of D

irect

ors

for

disc

ussi

on

purs

uant

to

th

e pr

eced

ing

para

grap

h,

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

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.

Arti

cle

17

Whe

re t

he C

ompa

ny a

cqui

res

real

pro

perty

fro

m a

W

here

the

Com

pany

acq

uire

s re

al p

rope

rty fr

om a

rela

ted

Acc

ordi

ng to

the

55

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 th

e eq

uity

met

hod

to a

ccou

nt fo

r its

inve

stm

ent i

nan

othe

r co

mpa

ny, t

hen

the

spec

ial

rese

rve

calle

d fo

run

der

Para

grap

h 1,

Arti

cle

41 o

f th

e Se

curit

ies

and

Exch

ange

A

ct

shal

l be

se

t as

ide

pro

rata

in

a

prop

ortio

n co

nsis

tent

w

ith

the

shar

e of

pu

blic

com

pany

's eq

uity

stak

e in

the

othe

r com

pany

.2.

The

Aud

it C

omm

ittee

sha

ll co

mpl

y w

ith A

rticl

e 21

8of

the

Com

pany

Act

.3.

Act

ions

ta

ken

purs

uant

to

su

bpar

agra

ph

1 an

dsu

bpar

agra

ph 2

sha

ll be

rep

orte

d to

a s

hare

hold

ers

mee

ting,

and

the

det

ails

of

the

trans

actio

n sh

all

be

disc

lose

d in

the

ann

ual

repo

rt an

d an

y in

vest

men

t pr

ospe

ctus

. Th

e C

ompa

ny th

at h

as s

et a

side

a s

peci

al r

eser

ve u

nder

th

e pr

eced

ing

para

grap

h m

ay n

ot u

tiliz

e th

e sp

ecia

l re

serv

e un

til i

t ha

s re

cogn

ized

a l

oss

on d

eclin

e in

party

an

d th

e re

sults

of

ap

prai

sals

co

nduc

ted

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

shal

l be

take

n:

1.A

spe

cial

res

erve

sha

ll be

set

asi

de in

acc

orda

nce

with

Para

grap

h 1,

Arti

cle

41 o

f the

Sec

uriti

es a

nd E

xcha

nge

Act

aga

inst

the

diff

eren

ce b

etw

een

the

real

pro

perty

trans

actio

n pr

ice

and

the

appr

aise

d co

st, a

nd m

ay n

ot b

edi

strib

uted

or

used

for

cap

ital

incr

ease

or

issu

ance

of

bonu

s sh

ares

. Whe

re a

pub

lic c

ompa

ny u

ses

the

equi

tym

etho

d to

ac

coun

t fo

r its

in

vest

men

t in

an

othe

rco

mpa

ny,

then

the

spe

cial

res

erve

cal

led

for

unde

rPa

ragr

aph

1, A

rticl

e 41

of t

he S

ecur

ities

and

Exc

hang

eA

ct s

hall

be s

et a

side

pro

rata

in a

pro

porti

on c

onsi

sten

tw

ith th

e sh

are

of p

ublic

com

pany

's eq

uity

sta

ke in

the

othe

r com

pany

.2.

Supe

rvis

ors

shal

l co

mpl

y w

ith A

rticl

e 21

8 of

the

Com

pany

Act

. 3.

Act

ions

ta

ken

purs

uant

to

su

bpar

agra

ph

1 an

dsu

bpar

agra

ph 2

sha

ll be

rep

orte

d to

a s

hare

hold

ers

mee

ting,

and

the

det

ails

of

the

trans

actio

n sh

all

be

disc

lose

d in

the

ann

ual

repo

rt an

d an

y in

vest

men

t pr

ospe

ctus

. Th

e C

ompa

ny t

hat

has

set

asid

e a

spec

ial

rese

rve

unde

r th

e pr

eced

ing

para

grap

h m

ay

not

utili

ze

the

spec

ial

rese

rve

until

it h

as re

cogn

ized

a lo

ss o

n de

clin

e in

mar

ket

actu

al p

ract

ice

56

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.

valu

e of

the

asse

ts it

pur

chas

ed a

t a p

rem

ium

, or t

hey

have

be

en d

ispo

sed

of,

or a

dequ

ate

com

pens

atio

n ha

s be

en

mad

e, o

r the

sta

tus

quo

ante

has

bee

n re

stor

ed, o

r the

re is

ot

her

evid

ence

co

nfirm

ing

that

th

ere

was

no

thin

g un

reas

onab

le a

bout

the

trans

actio

n, a

nd th

e FS

C h

as g

iven

its

con

sent

. W

hen

the

Com

pany

obt

ains

rea

l pr

oper

ty f

rom

a r

elat

ed

party

, it

shal

l al

so

com

ply

with

th

e pr

eced

ing

two

para

grap

hs i

f th

ere

is o

ther

evi

denc

e in

dica

ting

that

the

ac

quis

ition

was

not

an

arm

’s le

ngth

tran

sact

ion.

A

rticl

e 21

Th

e C

ompa

ny e

ngag

ing

in d

eriv

ativ

es t

radi

ng s

hall

esta

blis

h a

log

book

in

whi

ch d

etai

ls o

f th

e ty

pes

and

amou

nts

of d

eriv

ativ

es t

radi

ng e

ngag

ed i

n, B

oard

of

Dire

ctor

s’ a

ppro

val d

ates

, and

the

mat

ters

requ

ired

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 P

arag

raph

2 o

f Arti

cle

20 sh

all b

e re

cord

ed in

det

ail i

n th

e lo

g bo

ok.

A

publ

ic

com

pany

's in

tern

al

audi

t pe

rson

nel

shal

l pe

riodi

cally

mak

e a

dete

rmin

atio

n of

the

sui

tabi

lity

of

inte

rnal

con

trols

on

deriv

ativ

es a

nd c

ondu

ct a

mon

thly

au

dit o

f how

faith

fully

der

ivat

ives

trad

ing

by th

e tra

ding

de

partm

ent

adhe

res

to t

he p

roce

dure

s fo

r en

gagi

ng i

n de

rivat

ives

tra

ding

, and

pre

pare

an

audi

t re

port.

If

any

mat

eria

l vi

olat

ion

is d

isco

vere

d, t

he A

udit

Com

mitt

ee

shal

l be

notif

ied

in w

ritin

g.

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

57

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

pr

oper

ty to

sha

reho

lder

s, an

d su

bmit

it to

the

Boa

rd o

f D

irect

ors

for

delib

erat

ion

and

pass

age.

How

ever

, an

op

inio

n re

nder

ed b

y an

exp

ert o

n th

e re

ason

able

ness

of

a m

erge

r w

ith s

ubsi

diar

ies

who

se 1

00%

of

shar

es

issu

ed o

r to

tal c

apita

l are

dire

ctly

or i

ndire

ctly

hel

d by

th

e C

ompa

ny o

r a

mer

ger

betw

een

subs

idia

ries

who

se

100%

of

shar

es i

ssue

d or

tot

al c

apita

l ar

e di

rect

ly o

r in

dire

ctly

hel

d by

the

Com

pany

may

be

exem

pted

.

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

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.

Acc

ordi

ng to

th

e go

vern

ing

law

and

re

gula

tions

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

er

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

n

Acc

ordi

ng to

th

e go

vern

ing

law

and

re

gula

tions

58

repu

rcha

se a

nd r

esal

e ag

reem

ents

, or

subs

crip

tion

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 th

e tra

nsac

tion

amou

nt is

mor

e th

an N

T$50

0 m

illio

n.

(2) T

he p

aid-

in c

apita

l is m

ore

than

NT$

10 b

illio

n an

d th

e tra

nsac

tion

amou

nt is

mor

e th

an N

T$1

billi

on.

5.W

here

lan

d is

acq

uire

d un

der

an a

rran

gem

ent

onen

gagi

ng o

ther

s to

bui

ld o

n th

e C

ompa

ny's

own

land

, en

gagi

ng

othe

rs

to

build

on

re

nted

la

nd,

join

t co

nstru

ctio

n an

d al

loca

tion

of h

ousi

ng u

nits

, jo

int

cons

truct

ion

and

allo

catio

n of

ow

ners

hip

perc

enta

ges,

or jo

int c

onst

ruct

ion

and

sepa

rate

sale

, and

the

amou

nt

the

Com

pany

exp

ects

to

inve

st i

n th

e tra

nsac

tion

is

less

than

NT$

500

mill

ion.

6.

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 f

ive

subp

arag

raph

s, a

disp

osal

of r

ecei

vabl

es b

y a

finan

cial

inst

itutio

n, o

r an

or re

dem

ptio

n of

dom

estic

mon

ey m

arke

t fun

ds.

2.M

erge

r, de

mer

ger,

acqu

isiti

on, o

r tra

nsfe

r of s

hare

s.3.

Loss

es f

rom

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

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

thr

ee s

ubpa

ragr

aphs

, a

disp

osal

of

rece

ivab

les

by a

fin

anci

al in

stitu

tion,

or

an

inve

stm

ent

in t

he m

ainl

and

Chi

na a

rea

reac

hes

20

perc

ent o

r m

ore

of p

aid-

in c

apita

l or

NT$

300

mill

ion;

pr

ovid

ed,

this

sh

all

not

appl

y to

th

e fo

llow

ing

circ

umst

ance

s:

(1) T

radi

ng o

f gov

ernm

ent b

onds

. (2

) Se

curit

ies

tradi

ng

by

inve

stm

ent

prof

essi

onal

s on

fo

reig

n or

do

mes

tic

secu

ritie

s ex

chan

ges o

r ov

er-th

e-co

unte

r m

arke

ts, o

r su

bscr

iptio

n of

sec

uriti

es

by a

sec

uriti

es fi

rm, e

ither

in th

e pr

imar

y m

arke

t or i

n ac

cord

ance

with

rele

vant

regu

latio

ns.

(3)

Trad

ing

of b

onds

und

er r

epur

chas

e/re

sale

agr

eem

ents

, or

sub

scrip

tion

or r

edem

ptio

n of

dom

estic

mon

ey

mar

ket f

unds

. (4

) W

here

the

typ

e of

ass

et a

cqui

red

or d

ispo

sed

is

equi

pmen

t/mac

hine

ry f

or b

usin

ess

use,

the

tra

ding

co

unte

rpar

ty is

not

a r

elat

ed p

arty

, and

the

trans

actio

n am

ount

is le

ss th

an N

T$50

0 m

illio

n.

(5)

Whe

re l

and

is a

cqui

red

unde

r an

arr

ange

men

t on

en

gagi

ng o

ther

s to

bui

ld o

n th

e C

ompa

ny's

own

land

, en

gagi

ng

othe

rs

to

build

on

re

nted

la

nd,

join

t co

nstru

ctio

n an

d al

loca

tion

of h

ousi

ng u

nits

, jo

int

cons

truct

ion

and

allo

catio

n of

ow

ners

hip

perc

enta

ges,

59

inve

stm

ent

in t

he m

ainl

and

Chi

na a

rea

reac

hes

20

perc

ent o

r mor

e of

pai

d-in

cap

ital o

r NT$

300

mill

ion;

pr

ovid

ed,

this

sh

all

not

appl

y to

th

e fo

llow

ing

circ

umst

ance

s:

(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

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.

or jo

int c

onst

ruct

ion

and

sepa

rate

sal

e, a

nd th

e am

ount

th

e C

ompa

ny e

xpec

ts to

inve

st in

the

trans

actio

n is

less

th

an N

T$50

0 m

illio

n.

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

of

occu

rren

ce

of

the

curr

ent

trans

actio

n.

Item

s du

ly

anno

unce

d in

acc

orda

nce

with

the

regu

latio

ns n

eed

not b

e co

unte

d 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

acqu

isiti

ons

and

disp

osal

s of

the

sam

e ty

pe o

f un

derly

ing

asse

t with

the

sam

e tra

ding

cou

nter

party

with

in th

e pr

eced

ing

year

.3.

The

cum

ulat

ive

trans

actio

n am

ount

of

real

pro

perty

acqu

isiti

ons

and

disp

osal

s (c

umul

ativ

e ac

quis

ition

s an

ddi

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 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

60

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

al

l re

leva

nt

cont

ract

s, m

eetin

g m

inut

es,

log

book

s, ap

prai

sal

repo

rts

and

CPA

, at

torn

ey,

and

secu

ritie

s un

derw

riter

op

inio

ns

at

the

com

pany

he

adqu

arte

rs,

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

.

61

whe

re t

hey

shal

l be

ret

aine

d fo

r 5

year

s ex

cept

whe

re

anot

her a

ct p

rovi

des o

ther

wis

e.

Arti

cle

30

Thes

e Pr

oced

ures

wer

e es

tabl

ishe

d on

May

3, 1

997.

The

1st a

men

dmen

t was

mad

e on

Nov

embe

r 29,

199

9.

The

2nd a

men

dmen

t was

mad

e on

May

30,

200

2.

The

3rd a

men

dmen

t was

mad

e on

May

2, 2

003.

Th

e 4th

am

endm

ent w

as m

ade

on M

ay 2

7, 2

004.

Th

e 5th

am

endm

ent w

as m

ade

on Ju

ne 1

6, 2

006.

Th

e 6th

am

endm

ent w

as m

ade

on Ju

ne 1

5, 2

007.

Th

e 7th

am

endm

ent w

as m

ade

on Ju

ne 1

3, 2

012.

Th

e 8th

am

endm

ent w

as m

ade

on Ju

ne 1

8, 2

014.

Th

e 9th

am

endm

ent w

as m

ade

on M

ay 2

6, 2

017.

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 t

he

amen

dmen

t

62

< 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

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

Arti

cle

3 Le

ndin

g C

ount

erpa

rts

Lend

ing

coun

terp

arts

in

need

of

shor

t-ter

m f

inan

cing

sh

all b

e lim

ited

to a

sub

sidi

ary

in w

hich

the

Com

pany

ho

lds 5

0% o

f the

vot

ing

shar

es o

r com

pani

es w

ith th

e de

fa

cto

cont

rol

havi

ng t

he n

eed

of s

hort-

term

fin

anci

ng

due

to b

usin

ess n

eeds

. Th

e ph

rase

“sh

ort-t

erm

” m

entio

ned

abov

e sh

all

mea

nw

ithin

one

yea

r or a

bus

ines

s cyc

le (w

hich

ever

is lo

nger

).Fo

reig

n co

mpa

nies

, of

whi

ch t

he C

ompa

ny d

irect

ly o

r in

dire

ctly

hol

ds 1

00%

of t

he v

otin

g sh

ares

, if e

ngag

ed in

th

e le

ndin

g bu

sine

ss,

will

be

ex

empt

fr

om

the

rest

rictio

ns re

ferr

ed to

in th

e fir

st p

arag

raph

of A

rticl

e 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

th

e ac

tual

pr

actic

e

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.Th

e to

tal a

mou

nt le

nt 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

heto

tal

lend

ing

amou

nt o

f an

ind

ivid

ual

borr

ower

sha

llno

t exc

eed

50%

of t

he to

tal a

mou

nt o

f loa

nabl

e fu

nds.

2.In

the

cas

e of

len

ding

fun

ds t

o co

mpa

nies

or

firm

sw

ho h

ave

a bu

sine

ss r

elat

ions

hip

with

the

Com

pany

, th

e to

tal

lend

ing

amou

nt o

f an

ind

ivid

ual

borr

ower

sh

all n

ot e

xcee

d 50

% o

f th

e to

tal a

mou

nt o

f lo

anab

le

Acc

ordi

ng to

th

e ac

tual

pr

actic

e

63

fund

s or

the

tota

l am

ount

of

the

busi

ness

tran

sact

ions

be

twee

n th

e C

ompa

ny a

nd th

e bo

rrow

er, w

hich

ever

is

low

er,

and

the

max

imum

am

ount

stip

ulat

ed i

n th

e pr

eced

ing

para

grap

h.

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

of

the

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

de

alin

gs,

the

finan

ce

unit

shal

l ev

alua

te

whe

ther

the

amou

nt o

f th

e lo

an is

com

men

sura

te w

ith

the

amou

nt o

f tra

nsac

tions

and

in c

ompl

ianc

e w

ith th

ese

Ope

ratio

nal P

roce

dure

s.

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,

shal

l be

sub

mitt

ed t

o th

e C

hairm

an o

f th

e B

oard

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

info

rmat

ion

to fa

cilit

ate

the

cred

it in

vest

igat

ion.

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 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 d

ealin

gs, t

he fi

nanc

e un

it sh

all e

valu

ate

whe

ther

th

e am

ount

of t

he lo

an is

com

men

sura

te w

ith th

e am

ount

of

tran

sact

ions

and

in c

ompl

ianc

e w

ith th

ese

Ope

ratio

nal

Proc

edur

es.

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

, sha

ll be

sub

mitt

ed to

the

Cha

irman

of t

he B

oard

an

d 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 f

irst-t

ime

borr

ower

, the

bor

row

er s

hall

prov

ide

basi

c in

form

atio

n an

d fin

anci

al i

nfor

mat

ion

to f

acili

tate

th

e cr

edit

inve

stig

atio

n.

Acc

ordi

ng to

th

e ac

tual

pr

actic

e

64

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.

B

. Afte

r th

e bo

rrow

er a

nd th

e jo

int g

uara

ntor

sig

n th

e lo

an c

ontra

ct,

the

pers

on i

n ch

arge

sha

ll pe

rfor

m t

he

proc

edur

es fo

r ver

ifyin

g th

eir i

dent

ities

.

4.A

ppra

isal

of C

olla

tera

l Val

ue a

nd S

ettin

g of

Rig

hts

Whe

n ap

plyi

ng f

or a

loa

n, a

bor

row

er,

afte

r be

ing

verif

ied

to p

rovi

de c

olla

tera

l, sh

all p

rovi

de a

ple

dge

on

equi

vale

nt r

eal p

rope

rty o

r se

curit

ies

or th

e pr

omis

sory

no

te, w

hich

mat

ures

on

the

expe

cted

dat

e of

repa

ymen

t

B.

For

a su

bseq

uent

bor

row

er,

the

cred

it in

vest

igat

ion

shal

l be

car

ried

out

whe

n th

e bo

rrow

er a

pplie

s fo

r th

e re

new

al.

In c

ase

of a

maj

or o

r ur

gent

eve

nt,

the

cred

it 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

fina

ncia

l sta

tem

ents

aud

ited

by C

PAs,

the

inve

stig

atio

n re

port

mad

e fo

r le

ss t

han

a ye

ar a

nd t

he

audi

tors

’ rep

ort m

ay b

e ad

opte

d as

the

refe

renc

e.

D.

Whe

n ca

rryi

ng

out

the

cred

it in

vest

igat

ion,

th

e C

ompa

ny s

hall

mak

e a

deta

iled

asse

ssm

ent o

f the

impa

ct

of

the

loan

on

th

e C

ompa

ny’s

bu

sine

ss

oper

atio

ns,

finan

cial

con

ditio

ns, a

nd sh

areh

olde

rs’ e

quity

. 3.

Con

tract

Sig

ning

and

Iden

tity

Verif

icat

ion

A. T

he p

erso

n in

cha

rge

of le

ndin

g fu

nds

shal

l fill

in th

e lo

an

cont

ract

ba

sed

on

the

appr

oved

co

nditi

ons

to

proc

eed

with

the

cont

ract

sign

ing.

B

. A

fter

the

borr

ower

and

the

joi

nt g

uara

ntor

sig

n th

e lo

an c

ontra

ct,

the

pers

on i

n ch

arge

sha

ll pe

rfor

m t

he

proc

edur

es fo

r ver

ifyin

g th

eir i

dent

ities

.

4.A

ppra

isal

of C

olla

tera

l Val

ue a

nd S

ettin

g of

Rig

hts

Whe

n ap

plyi

ng

for

a lo

an,

a bo

rrow

er,

afte

r be

ing

verif

ied

to p

rovi

de c

olla

tera

l, sh

all

prov

ide

a pl

edge

on

equi

vale

nt r

eal

prop

erty

or

secu

ritie

s or

the

pro

mis

sory

no

te, w

hich

mat

ures

on

the

expe

cted

dat

e of

rep

aym

ent

and

is s

igne

d by

the

join

t gua

rant

or, f

or th

e C

ompa

ny a

s

65

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

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

,

66

activ

ities

and

reco

rd in

det

ail t

he fo

llow

ing

info

rmat

ion

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

.

the

amou

nt,

the

date

of

pa

ssag

e by

th

e B

oard

of

D

irect

ors,

the

date

the

loan

is a

ppro

pria

ted,

and

mat

ters

to

be

eval

uate

d in

acc

orda

nce

with

Arti

cle

7.

9.If

, due

to c

hang

es o

f circ

umst

ance

s, th

e pa

rty to

who

mth

e C

ompa

ny g

ives

a lo

an n

o lo

nger

sat

isfie

s th

e cr

iteria

se

t fo

rth h

erei

n, o

r th

e ba

lanc

e of

a l

oan

exce

eds

the

limits

, a

corr

ectiv

e pl

an

shal

l be

pr

ovid

ed

to

all

supe

rvis

ors

and

the

prop

osed

co

rrec

tions

sh

all

be

impl

emen

ted

with

in th

e pe

riod

spec

ified

in th

e pl

an.

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

th

e ac

tual

pr

actic

e

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

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 A

ccor

ding

to

the

actu

al

67

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

.

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.

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

.

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.

prac

tice

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

68

< 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

Arti

cle

5.1

Leve

l of A

utho

rizat

ion

Endo

rsem

ents

and

/or g

uara

ntee

s m

ade

by th

e 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 th

e B

oard

of D

irect

ors.

A p

rede

term

ined

lim

it (5

%

of

the

Com

pany

’s

net

valu

e)

may

be

de

lega

ted

to th

e C

hairm

an b

y th

e B

oard

of D

irect

ors

to

faci

litat

e ex

ecut

ion

and

such

en

dors

emen

t an

d/or

gu

aran

tee

shal

l be

repo

rted

to th

e m

ost u

pcom

ing

boar

d m

eetin

g fo

r ra

tific

atio

n an

d to

th

e sh

areh

olde

rs’

mee

ting

for f

utur

e 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 t

he B

oard

of

Dire

ctor

s sh

all

be o

btai

ned

and

over

ha

lf of

al

l th

e di

rect

ors

shal

l jo

intly

en

dors

e th

e po

tent

ial l

oss

that

may

be

brou

ght a

bout

by

exce

edin

g th

e lim

its. T

he B

oard

of D

irect

ors s

hall

also

revi

se th

ese

proc

edur

es a

nd h

ave

them

rat

ified

at t

he s

hare

hold

ers’

mee

ting.

If th

e re

vise

d pr

oced

ures

are

not

ratif

ied

at th

e sh

areh

olde

rs’

mee

ting,

the

Boa

rd o

f D

irect

ors

shal

l

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

Acc

ordi

ng to

the

actu

al p

ract

ice

69

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

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

.

cont

aini

ng a

tim

etab

le to

with

draw

the

exce

ss p

ortio

n.

If, d

ue to

cha

nges

of c

ircum

stan

ces,

the

party

to w

hom

the

Com

pany

pro

vide

s an

end

orse

men

t an

d/or

gua

rant

ee n

o lo

nger

sat

isfie

s th

e cr

iteria

set

forth

her

ein,

or t

he a

mou

nt

of e

ndor

sem

ent

and/

or g

uara

ntee

exc

eeds

the

lim

its,

a co

rrec

tive

plan

shal

l be

prov

ided

to a

ll su

perv

isor

s and

the

prop

osed

cor

rect

ions

sha

ll be

im

plem

ente

d w

ithin

the

pe

riod

spec

ified

in th

e pl

an.

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

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.

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

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.

Acc

ordi

ng to

the

actu

al p

ract

ice

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

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

Acc

ordi

ng to

the

actu

al p

ract

ice

70

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

para

grap

h, it

shal

l con

side

r the

dis

sent

ing

opin

ions

from

al

l in

depe

nden

t di

rect

ors

fully

and

lis

t 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.

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.

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

71

< A

ttach

men

t IX

>

Adv

ante

ch C

o., L

td.

Proc

edur

es fo

r Fin

anci

al D

eriv

ativ

es T

rans

actio

ns

No.

A

fter

am

end

men

t B

efor

e am

end

men

t R

emar

k

Arti

cle

8 Im

plem

enta

tion

and

Am

endm

ent

Thes

e Pr

oced

ure

shal

l be

su

bmitt

ed

to

the

Aud

it C

omm

ittee

and

the

shar

ehol

ders

’ m

eetin

g fo

r ap

prov

al

afte

r the

reso

lutio

n of

the

Boa

rd o

f Dire

ctor

s; th

e sa

me

proc

edur

e sh

all

appl

y w

ith a

ny a

men

dmen

t. If

any

di

rect

or e

xpre

sses

dis

sent

and

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 t

he A

udit

Com

mitt

ee. W

here

the

posi

tion

of in

depe

nden

t dire

ctor

ha

s be

en

crea

ted

by

the

Com

pany

, th

e B

oard

of

D

irect

ors

shal

l ta

ke

into

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 to

or

expr

esse

s re

serv

atio

ns a

bout

any

m

atte

r, it

shal

l be

reco

rded

in th

e m

inut

es o

f th

e bo

ard

mee

ting.

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.

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.

Upd

ate

the

date

of

the

amen

dmen

t

72

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.

Th

e 6t

h am

endm

ent w

as m

ade

on M

ay 2

6, 2

017.

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.

73

< A

ttach

men

t X

>

Adv

ante

ch C

o., L

td.

Rul

es a

nd P

roce

dure

for S

hare

hold

ers’

Mee

tings

N

o.

Aft

er a

men

dm

ent

Bef

ore

amen

dm

ent

Rem

ark

Arti

cle

14.1

Th

e el

ectio

n of

dire

ctor

s, if

any,

in

the

shar

ehol

ders

’ m

eetin

g sh

ould

be

hand

led

in a

ccor

danc

e w

ith t

he

rele

vant

nor

ms

of t

he C

ompa

ny a

nd t

he e

lect

ion

resu

lt sh

ould

be

an

noun

ced

imm

edia

tely

in

th

e m

eetin

g,

incl

udin

g th

e na

me

of

the

elec

ted

dire

ctor

s an

d su

perv

isor

s and

the

resp

ectiv

e nu

mbe

r of v

otin

g rig

hts.

The

ballo

ts c

aste

d in

the

elec

tion

refe

rred

to a

bove

sha

ll be

se

aled

an

d si

gned

by

th

e ba

llot

insp

ecto

rs

for

safe

keep

ing

for

at le

ast o

ne y

ear;

how

ever

, the

y sh

ould

be

res

erve

d un

til th

e en

d of

the

lega

l pro

ceed

ing

that

is

filed

by

the

shar

ehol

ders

in a

ccor

danc

e w

ith A

rticl

e 18

9 of

the

Com

pany

Law

.

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

74

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