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Advantech Co., Ltd.
Procedure for the 2017 General Shareholders’ Meeting
1. Call the Meeting to Order
2. Chairperson Remarks
3. Management Presentation
5. Matters to be approved
6. Discussion and Election
7. Motions
8. Adjournment
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I. Agenda of Annual Meeting
Advantech Co., Ltd. Agenda of 2017 General Shareholders’ Meeting
Time: 9:00 a.m. on May 26 (Friday), 2017
Place: (Neihu Headquarters) B1, No. 1, Line 20, Lane 26, Rueiguang Road, Neihu District, Taipei City
1. Call the Meeting to Order
2. Chairperson Remarks
3. Management Presentations
(1) The 2016 Business Report.
(2) Supervisor’s Review Report on the 2016 Financial Statements.
(3) Report of Employees’ compensation and Directors’ compensation of 2016.
(4) The Status of Endorsement and Guarantee in 2016.
4. Matters to be approved
(1) Adoption of the 2016 Business Report and Financial Statements.
(2) Adoption of the Proposal for Distribution of 2016 Earnings.
5. Discussion and Election
(1) Issuance of new shares from capital increase by earnings.
(2) Amendment to the “ Articles of Incorporation ”.
(3) Amendment to the “Procedures For Acquisition or Disposal of Assets”.
(4) Amendment to the “Procedures For Lending Funds to Other Parties”.
(5) Amendment to the “Procedures For Endorsement & Guarantee”.
(6) Amendment to the “Procedures For Financial Derivatives Transactions”.
(7) Amendment to the “Rules and Procedures of Shareholders’Meeting”.
(8) Discuss the disposal of Advantech LNC Technology Co., Ltd. Shares.
(9) Re-election of all directors.
(10)Exemption of the limitation of non-competition on the directors of the Company.
7. Motions
8. Adjournment
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1. Management Presentations
Report No. 1
Cause of action : The 2016 Business Reports.
Explanation : The 2016 Business Repor t i s a t tached as At tachment I .
Report No. 2
Cause of action : Supervisor’s Review Report on the 2016 Financial Statements.
Explanation : 1. The Supervisor’s Review Report is attached as Attachment II. 2. S u p e r v i s o r s a r e u r g e d t o r e a d o u t t h e r e v i e w r e p o r t .
Report No. 3
Cause of action
Explanation
Report No. 4
: Report of Employees’ compensation and Directors’ compensation of 2016. 1. Pursuant to Article 20 of the company’s Articles of Incorporation,in consideration
of the company’s overall business operations and the payment standard of the industry, it is recommended to appropriate an amount of NT$243,000,000 as bonus to employees and NT$12,300,000 as remuneration to directors and supervisors paid in cash from the net income of 2016.
2. There is no difference between the amount approved by the Board of Directors andthe amount recognized as expense in 2016.
3. The proposal has passed in the Remuneration Committee meeting.
Cause of action : The Status of Endorsement and Guarantee in 2016.
Explanation : 1.In compliance with the Company’s “Procedure for Making of Endorsements and Guarantees”.
2.The Company issued a letter of guarantee to endorse and guarantee thesubsidiaries’ purchase of materials and short-term bank loan in response to the subsidiary’s business operation. The balance of endorsement and guarantee amounted to NT$1,954,389 thousand as of December 31, 2016, representing 30.87% of the Company’s paid-in capital.
3.Please review the statement of endorsement and guaranteed amount enclosed.
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Guarantor (Company)
Subsidiary of the guaranteed company
Category Amount (original currency ___K)
NTD (NTD___K) Remarks
Advantech (ACL)
Advantech Corporation.
short-term bank loan
USD30,000 $967,500 Under the limit (Note2)
Advantech (ACL)
B+B SmartWorx Inc.
short-term bank loan
USD10,000 322,500 Under the limit (Note2)
Advantech (ACL)
Cermate Technologies Inc.
short-term bank loan
USD1,550 49,988 Under the limit (Note2)
Advantech (ACL)
Advanixs Corp. short-term bank loan
USD1,600 51,600 Under the limit (Note2)
Advantech (ACL)
Advanixs Corp. Endorsement and guarantee for purchase of materials
USD2,000 64,500 Under the limit (Note2)
Advantech (ACL)
Advantech Technology
(China)Company Ltd.
(AKMC)
short-term bank loan
USD6,000 193,500 Under the limit (Note2)
Advantech (ACL)
Advantech Intelligent Service.
short-term bank loan
USD150 4,838 Under the limit (Note2)
Advantech (ACL)
Advantech-LNC Technology Co.,Ltd.
short-term bank loan
USD3,500 112,875 Under the limit (Note2)
Advantech (ACL)
AdvantechPOS Technology Co.,Ltd.
short-term bank loan
USD1,000 32,250 Under the limit (Note2)
Advantech (ACL)
AdvantechPOS Technology Co.,Ltd.
Endorsement and guarantee for purchase of materials
USD2,000 64,500 Under the limit (Note2)
Advantech (ACL)
Advantech KR Co., Ltd
short-term bank loan
USD50 1,613 Under the limit (Note2)
Advantech (ACL)
Advantech Australia Pty Limited.
short-term bank loan
USD200 6,450 Under the limit (Note2)
Advantech (ACL)
DLOG Gesellschaft für elektronische Datentechnik mbH
short-term bank loan
EUR1,000 33,900 Under the limit (Note2)
Advantech (ACL)
Advantech Brasil Ltda
short-term bank loan
USD1,500 48,375 Under the limit (Note2)
Total $1,954,389 Under the limit (Note1)
Note: The amount of limit is calculated in accordance with the Company’s Rules for Making of Endorsements and Guarantees: (1)Maximum endorsement and guarantee amounted to NT$7,564,074 thousand. (2)Maximum endorsement and guarantee for one single enterprise amounted to NT$ 2,521,358 thousand. (3)The amount of limit referred to above is calculated in accordance with the net value NT$25,213,582
thousand stated in the 2016 audited financial statements.
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2. Matters to be approvedProposal 1: (Proposed by the Board of Directors)
Cause of action : Adoption of the 2016 Business Report and Financial Statements.
Explanation : 1. The 2016 business report and standalone financial statements. (including consolidated financial statements) were composed by the Board of Directors. The Company’s financial statements were audited by independent auditors, M.J. Chiou and C.S. Chen, of Deloitte & Touche and were reviewed by the supervisor along with the business report with a written audit report issued.
2. The Business Report, independent auditor’s report, and FinancialStatements are enclosed as Attachment I and Attachment III.
3. Please acknowledge.Resolution : Proposal: 2 (Proposed by the Board of Directors)
Cause of action : Adoption of the Proposal for Distribution of 2016 Earnings.
Explanation : 1. Please refer to the 2016 prorofit distribution table in Attachment IV.
2. The net income of the company amounted to NT$5,666,862,329 for 2016.Added the beginning unappropriated earnings of NT$2,796,896,578 anddeducted net of the retained earnings adjustment for NT$3,691,230 due tolong-term equity investments, actuarial loss recognized in retained earnings ofNT$24,282,918, the legal reserve of NT$566,686,233 and special reserve ofNT$85,203,650, the distributable earnings for 2016 amounted toNT$7,783,894,876 resulted to be distributed as follows:
(1) The amounts of NT$3,988,366,830 and NT$633,074,100 out of the 2016 earnings are appropriated for distribution as cash dividends and share dividends to shareholders, respectively. There were 633,074,100 shares of common stock outstanding on December 31, 2016 that are entitled to the distribution of shareholder’s dividend at NT$7.3 per share.
(2) The distribution of cash dividend is calculated to the dollar (round up to the dollar). The total amount of the odd shares with a distribution of less than NT$1 will be booked as the other income or other expense of the company.
(3) The current distribution of earnings is scheduled before the dividend benchmark date. If there is any change in the yield rate as a result of any change in the Company’s outstanding shares, a request is to be made in the shareholders’ meeting having the Chairman authorized to handle matters related to the changes.
(4) Upon the approval of the Annual General Shareholder’s Meeting, it is proposed that the Chairman is authorized to resolve the ex-dividend date and other relevant issues.
Resolution :
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3. Discussion and Election
Proposal: 1 (Proposed by the Board of Directors)
Cause of action : Issuance of new shares from capital increase by earnings. Please proceed to resolve.
Explanation : 1. In response to the business development, the Company plans to issue63,307,410shares from capital increase by the 2016 dividends distributed toshareholders at the amount of NT$633,074,100, with the par value per share of NT$10. Based on shareholders and their shareholding ratio listed in the shareholders' roster on the target date for distribution of dividends, 100 shares per 1000 shares will be distributed free of charge; the fractional share that isless than 1 share shall be put together by the stock agency appointed by theCompany within 5 days after the date on which share transfer registration issuspended. The fractional share that is insufficient to make up the balance orput together by the deadline will be subscribed by a person designated by thechairman of the Board.
2. When there is a change in the distribution rate due to change in the number ofshares circulated outside, the shareholders’ meeting shall authorize the Board of Directors to solely handle such a change.
3.Rights and obligations arising from the issuance of new shares are same asthose arising from the issuance of original shares.
4. After the issuance of new shares from capital increase is resolved by the annualshareholders’ meeting and reported to the competent authority, the Board of Directors will be authorized to set the ex-right date and announce it separately.
5. Please proceed to discuss.
Resolution :
Proposal: 2 (Proposed by the Board of Directors)
Cause of action : Amendment to the “ Articles of Incorporation ”.Please proceed to discuss.
Explanation : 1.In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Articles of Incorporation. Please refer to Attachment V.
2.Please proceed to discuss..
Resolution :
Proposal: 3 (Proposed by the Board of Directors)
Cause of action : Amendment to the “Procedures For Acquisition or Disposal of Assets”. Pleaseproceed to discuss.
Explanation : 1. The proposal is handled according to Financial Supervisory Commission OrderGin-Guan-Zheng-Fa-Zi No. 1060001296 dated February 9, 2017.
2.In order to comply with the law and relevant regulations and to conform to theneeds of commercial practice, the Company hereby proposes to amend theProcedures For Acquisition or Disposal of Assets . Please refer to AttachmentVI.
3.Please proceed to discuss.
Resolution :
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Proposal: 4 (Proposed by the Board of Directors)
Cause of action : Amendment to the “Procedures for Lending Funds to Other Parties”. Please proceed to discuss.
Explanation : 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Lending Funds to Other Parties . Please refer to Attachment VII.
2. Please proceed to discuss.
Resolution :
Proposal: 5 (Proposed by the Board of Directors)
Cause of action : Amendment to the “Procedures for Endorsement & Guarantee”. Please proceed to discuss.
Explanation : 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Endorsement & Guarantee . Please refer to Attachment VIII.
2. Please proceed to discuss.
Resolution :
Proposal: 6 (Proposed by the Board of Directors)
Cause of action : Amendment to the “ Procedures for Financial Derivatives Transactions”. Pleaseproceed to discuss.
Explanation : 1. In order to comply with the law and relevant regulations and to conform to the needs of commercial practice, the Company hereby proposes to amend the Procedures for Financial Derivatives Transactions . Please refer to Attachment IX.
2. Please proceed to discuss.Resolution :
Proposal: 7 (Proposed by the Board of Directors)
Cause of action : Amendment to the “ Rules and Procedures of Shareholders’ Meeting ”. Pleaseproceed to discuss.
Explanation 1. In order to comply with the law and relevant regulations and to conform to theneeds of commercial practice, the Company hereby proposes to amend theRules and Procedures of Shareholders’ Meeting . Please refer to Attachment X.
2.Please proceed to discuss.
Resolution :
Proposal: 8 (Proposed by the Board of Directors)
Cause of action : Discuss the disposal of Advantech LNC Technology Co., Ltd. Shares. Please proceed to discuss.
Explanation : 1. In response to the business development of the Company’s subsidiary,Advantech LNC Technology Co., Ltd. (hereinafter referred to as AdvantechLNC), and the recruitment and retention of professionals required by the Company, theCompany plans to first release 3,000,000 shares of Advantech
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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.
Resolution :
Proposal: 9
Cause of action : Re-election of all directors. Please Vote.
Explanation : 1. As the term of the Company’s directors and supervisors is about to expire, thereelection of directors and supervisors shall be held in the shareholders’meeting this year according to Article 13 of the Company’s Articles of Incorporation.
2. The Company plans to set up 7~9 directors (including 3 independent directors)according to Article 13 of the Company’s Articles of Incorporation. In the 13th reelection, 7 directors are planned to be set up (including 3 independent directors) with a term of 3 years and they may be eligible for reelection. The Company plans to establish the audit committee, which is composed of all independent directors, according to Article 13-6 of the Company’s Articles of Incorporation. In addition, supervisors are abolished.
3. According to Article 13 of the Company’s Articles of Incorporation, thecandidate nomination system is adopted for the election of directors. After the Board of Directors reviews the qualifications of nominees based on the roster of candidates for directors and independent directors, qualified nominees are enrolled in the final roster of candidates for directors and independent directors and elected by the Board of Directors.
4. The 3-year term of newly elected directors starts from May 26, 2017 and endson May 25, 2020.
5. According to Company’s Article of Incorporation, the Company’s dissectorsshall be elected from the nomination list.The qualification of the nominees has been reviewed by Board. Personal information of the nominees is as follows:
Category Name Education Experience Current position Shares Held
Director K.C. Liu Department of Telecommunications Engineering, National Chiao Tung University
Founder of Advantech Chairman of Advantech Corporate Investment、 Chairman of Advanixs Corp.、Chairman of Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd.、Chairman of Advantech Technology (China) Company Ltd.、Chairman of Shanghai Advantech Intelligent Services Co., Ltd、Chairman of Xi’an Advantech Software Ltd、 Chairman of Advantech Intelligent Service.、Chairman of K and M Investment Co., Ltd.、 Chairman of AdvanPOS Technology Co., Ltd.、Chairman of
23,292,484
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Advantech-LNC Technology Co., Ltd.、Chairman of Advanixs Kun ShAN Corporaton 、Chairman of Aimobile Co., Ltd.、Chairman of Advantech Foundation、Chairman of Advantech Japan Co., Ltd.、Chairman of B+B Smartworx Inc.Director of AIDC Investment Corp.、Director of Advantech Europe B.V.、Director of DLoG GmbH、 Director of ADVANTECH INTERNATIONAL PT.、Director of Advantech Electronics,S. De R. L. De C.V.Director of Advantech Technology Co., Ltd. Director of HK Advantech Technology Co., Ltd.、Director of Advantech Automation Corp.、Director of Advantech Automation Corp.(HK) Limited.、 Director of Advantech Brazil Ltd.、Director of Advantech Co. Singapore Pte, Ltd.、Director of Advantech Corp.、Director of Advantech Europe Holding B.V.、Director of Advantech Co., Malaysia Sdn.Bhd.、Director of Advantech Poland Sp z.o.o、Director of Advantech KR Co., Ltd.、Director of Advantech Corporation (Thailand) Co., Ltd.、 Director of Advantech Industrial Computing India Private Limited.、Director ofBetter Auto Holdings Limited.、Director of Famous Now Limited.
Director Ted Hsu EMBA,National Chiao Tung University
Chairman of Eeizprise Inc.、Director of ASUSTeK、Director of Asmedia Technology Inc.、Director of Eusol Biotech Co.,Ltd.
Chief Strategy Officer of ASUSTeK
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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
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Director Advantech Foundation Representative :Chaney Ho
Tatung Institute of Technology,Taiwan
President of Le Wel Co.,Ltd.
Chairman of Advantech Innovative Design Co., Ltd.、Director of Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd、Director of Shanghai Advantech Intelligent Services Co., Ltd、Director of Advantech Technology (China) Company Ltd、
Director of Advantech Co., Malaysia Sdn.Bhd.Director of Advantech KR Co., Ltd.、Director of Advantech Industrial Computing India Private Limited.
18,244,889
Independent Director
Jeff Chen EMBA, Northwestern University
Stanley Black & Decker Inc. VP & President of Asia 、 Stanley Works HQ, VP Global Operations、 Stanley Works Asia, President Asia Operations
Independent Director of Advantech Co.,Ltd.
0
Independent Director
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
Independent Director
Joseph Yu PhD of Business Administration, University of Michigan
Associate Professor, Department of Business Administration, University of Illinois at Urbana–Champaign、
Member, Taiwan Ministry of Economic Research and Development Committee、Dean, National Chengchi University, Department of Business Administration; Representative for National Chengchi University School of Business
Independent Director, Yuanta Securities Co., Ltd、Independent Director, Yuanta Bank Co., Ltd. Professor, Department of Business Administration, National Chengchi University
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Election results:
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Proposal: 10 (Proposed by the Board of Directors)
Cause of action : Exemption of the limitation of non-competition on the directors of the Company. Please proceed to discuss.
Explanation : 1. According to Article 209 of the Company Act, a director who does anything forhimself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.
2. To take good advantage of the specialties and experience of the Company’sdirectors, the release of the prohibition on new directors and their representatives, elected in the 2017 annual shareholders’ meeting, from participation in competitive business is proposed in the shareholders’ meeting for approval according to laws.
Resolution :
4.Motions
5. Adjournment
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II. Attachments<Attachment I>
Business Report D e a r s h a r e h o l d e r s :
2016 Summary of Results In 2016, Advantech reported consolidated revenues of NT$ 42 billion, an increase of ten percent over the NT$38 billion of 2015. Net income was NT$5.69 billion and diluted earnings per share were NT$8.96. Gross profit margin was 40.8 percent, compared with 40.4 percent in 2015; and operating profit margin was 15.8 percent, compared with 15.6 percent a year earlier. Net profit margin was 13.54 percent, an increase of 0.05 percentage points from the previous year’s 13.49 percent.
Our Vision for IoT Advantech has been looking at Internet of Things (IoT) opportunities since 2010, in addition to our foundation in embedded systems and industrial PC segments. We position ourselves as “The Accelerator of the Intelligent Planet”. However, given the complexity of the IoT ecosystem, we believe the broad-based penetration of end-user demands and applications will happen in the next 10 to 15 years, but not today. Since 2016, Advantech has gradually experienced rising demand in industrial IoT and factory applications. Looking forward, in addition to more comprehensive internet infrastructure development, the support and acceleration from industrial companies (like GE, Schneider, Honeywell, Siemens, etc.) and service providers (like Microsoft, Amazon, and Google) are the essential catalysts of the IoT industry.
Advantech recognizes three waves of growth in the IoT industry. The first wave happened in 2010 and will gradually mature in 2020. The major beneficiaries are IoT device providers, such as fabless houses. The second wave began in 2015~2016 and is expected to yield results in 2019~2020. The second wave should mature in 2025, at which time a third wave of IoT growth will begin. Advantech foresees that companies with the capability to provide hardware and software integration services will be the major beneficiaries during the second wave of IoT growth. In the future, Advantech will strengthen its role as an accelerator of the intelligent planet, facilitating system integrators’ activities in each vertical market, providing differentiated customer service, and forming cross-sector alliance and vertical market ecosystems.
Advantech’s Key Strategies to Achieve Our 2020 Vision
Develop the WISE-PaaS platform to form a sharing platform.
In 2015, Advantech’s WISE-PaaS was focused on internal software consolidation and architecture development. In 2016, WISE-PaaS successfully launched Edge Intelligence Server (EIS) and Solution Ready Platform (SRP), and penetrated into several customer IoT projects in different vertical markets. In 2017, Advantech will focus on cloud services for the WISE-PaaS platform to provide a reliable and improved IoT cloud computing platform.
Make cross-sector alliances to form a vertical market IoT ecosystem.
IoT is an expansion opportunity to Advantech’s current specialty in embedded systems and industrial PCs. However, the complexities of the IoT system and vertical markets will drive overall market diversity. Therefore, Advantech intends to form different alliances in focused areas, including “M2.COM” in the Wireless IoT Sensor Nodes Standard, and Embedded Linux & Android Alliance
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(ELAA) in the embedded OS area, to provide more comprehensive services to our system integrator partners.
Invest, incubate, and cooperate to accelerate IoT development and penetration.
In our 2020 vision, Advantech also identified external cooperation and investment as another growing arm in the future to fulfill the natural complexity of the IoT market and strengthen our portfolio and service offerings. In January 2016, Advantech fully consolidated B+B SmartWorx into our operations. In January 2017, Advantech announced investment in Kostec, a specialized, Korea-based medical-monitor company. Both investments were in line with Advantech’s long term strategy in technology centric and vertical development. Also, Advantech initiated more interactions and sponsorship with industrial partners and academic institutes. In addition to talent recruitment and business engagement, Advantech intends to facilitate the development of Taiwan’s IoT supply chain.
2017 Outlook Advantech reported record high revenues and net income in 2016. The 10.5% revenue growth was consistent overall with Advantech’s past 10 year CAGR growth. More importantly, Advantech intends to seek sustainable top-line growth in the long run to optimize investor value. Looking forward in 2017, Advantech expects to achieve its profitable revenue growth target on the back of increasing penetration of IoT adoption, our leadership in intelligent systems, and our differentiated value-added services, which should reduce the uncertainty from macro-economic impacts.
Strengthening Corporate Governance and Business Leadership Advantech has marketed itself as an industrial brand since the beginning and now Advantech has operations in 23 countries around the world. In 2016, Advantech was recognized as a Top 6 Taiwan International Brand, and the only B2B company among the Top 10 Taiwan International Brands. To enhance corporate governance and comply with international trends, Advantech will transform its board organization from supervisory systems to independent directors systems starting from 2017. Our goal is the pursuit of excellence and sustainable operation. Advantech has established its altruistic spirit at the core of its business culture, along with the pursuit of the best and balanced interests of society, shareholders, customers, and employees.
Advantech Co., Ltd.
Chairman K.C. Liu
President Chaney Ho
Chief Financial officer Rorie Kang
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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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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: Thomas Chen
March 06, 2017
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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: 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.
Our key audit procedures performed in respect of the above area included the following:
When evaluating the impairment assessment, we tested management’s assumptions and inputs used for testing the impairment for goodwill, including cash flow projections and discount rates.
Other Matter
We have also audited the parent company only financial statements of Advantech Co., Ltd as of and for the years ended December 31, 2016 and 2015 on which we have issued an unmodified opinion.
19
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including supervisors, are responsible for overseeing the Group’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Group’s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions thatmay cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditors’ report to the relateddisclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report.However, future events or conditions may cause the Group to cease to continue as a going concern.
20
5. Evaluate the overall presentation, structure and content of the consolidated financial statements, includingthe disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision, and performance of the group audit. We remain solelyresponsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Meng-Chieh Chiu and Chin-Hsiang Chen.
Deloitte & Touche Taipei, Taiwan Republic of China
March 6, 2017
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.
21
ADVANTECH CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015(In Thousands of New Taiwan Dollars)
2016 2015ASSETS Amount % Amount %
CURRENT ASSETSCash and cash equivalents (Notes 4 and 6) $ 4,637,577 12 $ 4,358,259 13Financial assets at fair value through profit or loss - current (Notes 4, 7 and 30) 113,028 - 176,389 1Available-for-sale financial assets - current (Notes 4, 8 and 30) 2,956,586 8 1,755,843 5Debt investments with no active market - current (Notes 4 and 9) 10,007 - 3,171 -Notes receivable (Notes 4, 10 and 31) 965,081 3 970,722 3Trade receivables (Notes 4 and 10) 6,384,834 17 5,428,574 16Trade receivables from related parties (Note 31) 13,957 - 26,775 -Other receivables 13,775 - 40,811 -Inventories (Notes 4 and 11) 5,597,236 15 4,868,860 14Other current assets (Note 17) 489,630 1 456,342 1
Total current assets 21,181,711 56 18,085,746 53
NONCURRENT ASSETSAvailable-for-sale financial assets - noncurrent (Notes 4, 8 and 30) 1,712,578 4 1,747,598 5Investments accounted for using the equity method (Notes 4 and 13) 598,454 2 477,984 2Property, plant and equipment (Notes 4 and 14) 10,089,836 26 9,576,879 28Goodwill (Notes 4, 5 and 15) 2,845,831 7 1,139,559 3Other intangible assets (Notes 4, 5 and 16) 1,317,440 3 227,686 1Deferred tax assets (Notes 4 and 23) 369,156 1 217,989 1Prepayments for business facilities 47,578 - 65,753 -Prepayments for investments (Note 26) - - 2,279,881 7Long-term prepayments for leases (Note 17) 325,224 1 100,875 -Other noncurrent assets (Note 28) 51,145 - 59,183 -
Total noncurrent assets 17,357,242 44 15,893,387 47
TOTAL $ 38,538,953 100 $ 33,979,133 100
LIABILITIES AND EQUITY
CURRENT LIABILITIESShort-term borrowings (Notes 18 and 30) $ 483,750 1 $ 880,625 3Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 30) 10,231 - 6,352 -Trade payables (Note 31) 4,983,381 13 3,226,069 9Other payables (Notes 19 and 22) 3,902,499 10 3,380,317 10Current tax liabilities (Notes 4 and 23) 1,229,400 3 1,057,226 3Short-term warranty provisions (Note 4) 167,122 - 145,646 -Other current liabilities 659,228 2 546,295 2
Total current liabilities 11,435,611 29 9,242,530 27
NONCURRENT LIABILITIESDeferred tax liabilities (Notes 4 and 23) 1,362,687 4 938,491 3Net defined benefit liabilities (Notes 4 and 20) 212,360 1 183,540 1Other noncurrent liabilities 141,398 - 160,795 -
Total noncurrent liabilities 1,716,445 5 1,282,826 4
Total liabilities 13,152,056 34 10,525,356 31
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANYShare capital
Ordinary shares 6,330,741 16 6,318,531 19Advance receipts for share capital 100 - - -
Total share capital 6,330,841 16 6,318,531 19Capital surplus 6,058,884 16 5,587,555 16Retained earnings
Legal reserve 4,473,276 12 3,962,842 12Unappropriated earnings 8,435,785 22 7,098,449 21
Total retained earnings 12,909,061 34 11,061,291 33Other equity
Exchange differences on translation of foreign financial statements (197,633) - 271,859 1Unrealized gains on available-for-sale financial assets 112,429 - 68,265 -
Total other equity (85,204) - 340,124 1
Total equity attributable to owners of the Company 25,213,582 66 23,307,501 69
NON-CONTROLLING INTERESTS 173,315 - 146,276 -
Total equity 25,386,897 66 23,453,777 69
TOTAL $ 38,538,953 100 $ 33,979,133 100
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 6, 2017)
22
ADVANTECH CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2016 2015Amount % Amount %
OPERATING REVENUE (Note 31)Sales $ 40,839,800 97 $ 36,978,961 97Other operating revenue 1,162,398 3 1,021,621 3
Total operating revenue 42,002,198 100 38,000,582 100
OPERATING COSTS (Notes 11, 22 and 31) 24,884,649 59 22,655,592 59
GROSS PROFIT 17,117,549 41 15,344,990 41
OPERATING EXPENSES (Notes 22 and 31)Selling and marketing expenses 4,260,554 10 3,889,856 10General and administrative expenses 2,576,210 6 1,982,879 5Research and development expenses 3,649,292 9 3,543,748 10
Total operating expenses 10,486,056 25 9,416,483 25
OPERATING PROFIT 6,631,493 16 5,928,507 16
NONOPERATING INCOMEShare of the profit of associates accounted for using
the equity method (Notes 4 and 13) 65,562 - 110,226 -Interest income 15,989 - 40,613 -Gains (losses) on disposal of property, plant and
equipment (Note 4) 289,633 1 (5,410) -Gains (losses) on disposal of investments (Note 4) (4,873) - 202,458 1Foreign exchange gains (losses), net (Notes 4, 22
and 33) (205,812) - (186,889) -Gains on financial instruments at fair value through
profit or loss (Note 4) 150,982 - 83,798 -Dividend income 132,472 - 139,725 -Other income (Note 8) 78,855 - 121,329 -Finance costs (Note 22) (11,556) - (10,041) -Losses on financial instruments at fair value through
profit or loss (Note 4) (43,324) - (130,409) -Other losses (2,056) - (4,372) -
Total nonoperating income 465,872 1 361,028 1
PROFIT BEFORE INCOME TAX 7,097,365 17 6,289,535 17
INCOME TAX EXPENSE (Notes 4 and 23) 1,408,411 3 1,162,560 3
NET PROFIT FOR THE YEAR 5,688,954 14 5,126,975 14(Continued)
23
ADVANTECH CO., LTD. AND SUBSIDIARIES
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 %
OTHER COMPREHENSIVE INCOME (LOSS)Items that will not be reclassified subsequently to
profit or loss (Notes 20, 21 and 23):Remeasurement of defined benefit plans $ (31,247) - $ (19,303) -Share of the other comprehensive income (loss) of
associates accounted for using the equity method 1,574 - (2,424) -
Income tax related to items that will not be reclassified 5,312 - 3,281 -
Items that may be reclassified subsequently to profit or loss (Notes 4, 21 and 23):Exchange differences on translating foreign
operations (576,926) (1) (101,490) -Unrealized gains (losses) on available-for-sale
financial assets 44,164 - (495,012) (2)Share of the other comprehensive income of
associates (4,135) - 2,449 -Income tax related to items that may be
reclassified subsequently to profit or loss 96,161 - 13,620 -
Other comprehensive income (loss) for the year, net of income tax (465,097) (1) (598,879) (2)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 5,223,857 12 $ 4,528,096 12
NET PROFIT ATTRIBUTABLE TO:Owners of the Company $ 5,666,862 13 $ 5,104,346 13Non-controlling interests 22,092 - 22,629 -
$ 5,688,954 14 $ 5,126,975 13
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:Owners of the Company $ 5,217,251 12 $ 4,524,603 12Non-controlling interests 6,606 - 3,493 -
$ 5,223,857 12 $ 4,528,096 12(Continued)
24
ADVANTECH CO., LTD. AND SUBSIDIARIES
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 %
EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 24)Basic $ 8.96 $ 8.08Diluted $ 8.90 $ 8.05
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 6, 2017) (Concluded)
25
AD
VA
NT
EC
H C
O.,
LT
D. A
ND
SU
BSI
DIA
RIE
S
CO
NSO
LID
AT
ED
ST
AT
EM
EN
TS
OF
CH
AN
GE
S IN
EQ
UIT
Y
FOR
TH
E Y
EA
RS
EN
DE
D D
EC
EM
BER
31,
2016
AN
D20
15(I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs)
Equ
ity A
ttri
buta
ble
to O
wne
rs o
f the
Com
pany
Oth
er E
quity
(Not
e 21
)Is
sued
Cap
ital (
Not
es 2
1an
d 25
)E
xcha
nge
Unr
ealiz
ed G
ain
Adv
ance
Rec
eipt
sC
apita
l Sur
plus
Ret
aine
d E
arni
ngs (
Not
es 2
1an
d 27
)D
iffer
ence
s on
(Los
s) o
nN
on-c
ontr
ollin
gfo
r O
rdin
ary
(Not
es 2
1, 2
5U
napp
ropr
iate
dT
rans
latin
gA
vaila
ble-
for-
sale
Inte
rest
sSh
are
Cap
ital
Shar
esT
otal
and
27)
Leg
al R
eser
veE
arni
ngs
Tot
alFo
reig
n O
pera
tions
Fina
ncia
l Ass
ets
Tot
al(N
otes
21
and
27)
Tot
al E
quity
BA
LAN
CE
AT
JAN
UA
RY
1, 2
015
$6,
301,
031
$11
,060
$6,
312,
091
$5,
306,
958
$3,
472,
064
$6,
353,
273
$9,
825,
337
$33
8,35
6$
563,
277
$22
,346
,019
$18
7,00
0$
22,5
33,0
19
App
ropr
iatio
n of
the
2014
ear
rings
Lega
l res
erve
--
--
490,
778
(490
,778
)-
--
--
-C
ash
divi
dend
s on
ordi
nary
sha
res
--
--
-(3
,787
,255
)(3
,787
,255
)-
-(3
,787
,255
)-
(3,7
87,2
55)
Rec
ogni
tion
of e
mpl
oyee
shar
e op
tions
by
the
Com
pany
17,5
00(1
1,06
0)6,
440
24,4
38-
--
--
30,8
78-
30,8
78
Com
pens
atio
n co
st re
cogn
ized
for e
mpl
oyee
shar
e op
tions
--
-26
1,87
7-
--
--
261,
877
-26
1,87
7
Cha
nge
in c
apita
l sur
plus
from
inve
stm
ents
in a
ssoc
iate
s acc
ount
ed fo
r usi
ng th
e eq
uity
met
hod
--
-2,
172
--
--
-2,
172
-2,
172
Diff
eren
ce b
etw
een
cons
ider
atio
n pa
id a
nd c
arry
ing
amou
nt o
f sub
sidi
arie
s acq
uire
d-
--
(11,
457)
-(6
2,90
3)(6
2,90
3)-
-(7
4,36
0)(4
4,21
7)(1
18,5
77)
Cha
nges
in p
erce
ntag
e of
ow
ners
hip
inte
rest
in s
ubsi
diar
ies
--
-3,
567
--
--
-3,
567
-3,
567
Net
pro
fit fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
015
--
--
-5,
104,
346
5,10
4,34
6-
-5,
104,
346
22,6
295,
126,
975
Oth
er c
ompr
ehen
sive
loss
for t
he y
ear e
nded
Dec
embe
r 31,
201
5, n
et o
f inc
ome
tax
--
--
-(1
8,23
4)(1
8,23
4)(6
6,49
7)(4
95,0
12)
(579
,743
)(1
9,13
6)(5
98,8
79)
Tota
l com
preh
ensi
ve in
com
e fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
015
--
--
-5,
086,
112
5,08
6,11
2(6
6,49
7)(4
95,0
12)
4,52
4,60
33,
493
4,52
8,09
6
BA
LAN
CE
AT
DEC
EMBE
R 3
1, 2
015
6,31
8,53
1-
6,31
8,53
15,
587,
555
3,96
2,84
27,
098,
449
11,0
61,2
9127
1,85
968
,265
23,3
07,5
0114
6,27
623
,453
,777
App
ropr
iatio
n of
the
2015
ear
rings
Lega
l res
erve
--
--
510,
434
(510
,434
)-
--
--
-C
ash
divi
dend
s on
ordi
nary
sha
res
--
--
-(3
,791
,118
)(3
,791
,118
)-
-(3
,791
,118
)-
(3,7
91,1
18)
Rec
ogni
tion
of e
mpl
oyee
shar
e op
tions
by
the
Com
pany
12,2
1010
012
,310
104,
758
--
--
-11
7,06
8-
117,
068
Com
pens
atio
n co
st re
cogn
ized
for e
mpl
oyee
shar
e op
tions
--
-33
8,19
4-
--
--
338,
194
-33
8,19
4
Cha
nge
in c
apita
l sur
plus
from
inve
stm
ents
in a
ssoc
iate
s acc
ount
ed fo
r usi
ng th
e eq
uity
met
hod
--
-10
,533
--
--
-10
,533
-10
,533
Diff
eren
ce b
etw
een
cons
ider
atio
n pa
id a
nd c
arry
ing
amou
nt o
f sub
sidi
arie
s acq
uire
d-
--
17,8
44-
(3,6
91)
(3,6
91)
--
14,1
5320
,433
34,5
86
Net
pro
fit fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
016
--
--
-5,
666,
862
5,66
6,86
2-
-5,
666,
862
22,0
925,
688,
954
Oth
er c
ompr
ehen
sive
inco
me
for y
ear e
nded
Dec
embe
r 31,
201
6, n
et o
f inc
ome
tax
--
--
-(2
4,28
3)(2
4,28
3)(4
69,4
92)
44,1
64(4
49,6
11)
(15,
486)
(465
,097
)
Tota
l com
preh
ensi
ve in
com
e fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
016
--
--
-5,
642,
579
5,64
2,57
9(4
69,4
92)
44,1
645,
217,
251
6,60
65,
223,
857
BA
LAN
CE
AT
DEC
EMBE
R 3
1, 2
016
$6,
330,
741
$10
0$
6,33
0,84
1$
6,05
8,88
4$
4,47
3,27
6$
8,43
5,78
5$
12,9
09,0
61$
(197
,633
)$
112,
429
$25
,213
,582
$17
3,31
5$
25,3
86,8
97
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
con
solid
ated
fina
ncia
l sta
tem
ents
.
(With
Del
oitte
& T
ouch
e au
dit r
epor
t dat
ed M
arch
6, 2
017)
26
ADVANTECH CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $ 7,097,365 $ 6,289,535Adjustments for:
Depreciation expenses 582,040 568,241Amortization expenses 238,048 97,953Amortization expenses for prepayments of lease obligations 6,606 2,577Impairment loss recognized (reversal of impairment loss) on trade
receivables (24,032) 23,360Net loss (gain) on financial assets or liabilities at fair value through
profit or loss (107,658) 46,611Compensation cost of employee share options 338,194 261,877Finance costs 11,556 10,041Interest income (15,989) (40,613)Dividend income (132,472) (139,725)Share of profit of associates (65,562) (110,226)Loss (gain) on disposal of property, plant and equipment (289,633) 5,410Loss (gain) on disposal of investments 4,873 (202,458)
Changes in operating assets and liabilitiesFinancial assets held for trading 174,898 (59,944)Notes receivable 5,641 (20,861)Trade receivables (738,014) (495,148)Trade receivables from related parties 12,807 (21,375)Other receivables 31,402 (1,724)Inventories (446,618) (87,310)Other current assets (8,478) 57,051Other financial assets - 18,650Trade payables 1,569,097 59,874Net defined benefit liabilities (2,427) (1,191)Other payables 600,572 147,567Short-term warranty provisions 21,476 4,292Other current liabilities 112,933 47,395Other noncurrent liabilities (17,857) 36,812
Cash generated from operations 8,958,768 6,496,671Interest received 15,989 38,076Dividends received 132,472 139,725Interest paid (6,285) (1,467)Income tax paid (1,086,369) (850,763)
Net cash generated from operating activities 8,014,575 5,822,242
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of available-for-sale financial assets (6,491,968) (9,713,717)Proceeds from sale of available-for-sale financial assets 5,364,552 11,766,699Acquisition of investments with no active market (6,945) 1,805Acquisition of investments accounted for using the equity method (135,000) -
(Continued)
27
ADVANTECH CO., LTD. AND SUBSIDIARIES
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
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 6, 2017) (Concluded)
28
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and the Shareholders Advantech Co., Ltd.
Opinion
We have audited the accompanying financial statements of Advantech Co., Ltd. (the “Company”), which comprise the balance sheets as of December 31, 2016 and 2015, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters on the financial statements for the year ended December 31, 2016 were as follows:
Investments accounted for using the equity method
The Company and its subsidiaries acquired 100% share of B+B SmartWorx, Inc. (B+B) for NT$3,296,048 thousand in January 4, 2016 and recognized the acquisition as investment accounted for using the equity method.
29
The evaluation on fair value of the assets, liabilities, and amount of goodwill as of the date of acquisition was based on the specialists’ Purchase Price Allocation Report that involved several financial assumptions and inputs. The judgment of related accounting estimates will affect the presentation of accounts on the financial statements. After considering that the acquisition was a significant event and was transacted during the period of financial statements with a material impact on the financial statements, accuracy of merger transaction of B+B conducted by the Company was deemed to be a key audit matter.
Our key audit procedures performed in respect of the assets and liabilities as of the date of acquisition included the following:
1. Tested the acquisition balance sheet prepared by the management and checked the record bymatching against the fair value of the assets and liabilities as of the date of acquisition.
2. Recalculated the value of goodwill recognized in the acquisition balance sheet.
Impairment assessment of investments accounted for using the equity method
The excess of cost of acquisition of investments accounted for using the equity method over the fair value of investees’ identifiable assets and liability as of the dates of acquisition should be recognized as goodwill. If there is any indication that goodwill is impaired, the management should assess if the carrying amount of goodwill is impaired. We have expressed our concerns on the related risks of impairment assessment on goodwill arising from acquisition of B+B since the impairment assessment of goodwill is based on the management’s significant judgment that involved assumptions of the future profitability and costs of equity and debts; the impairment of goodwill is hence recognized as a critical accounting estimate in Note 5 to the financial statements.
Our key audit procedures performed in respect of the above area included the following:
When evaluating the impairment assessment, we tested the management’s assumptions and inputs used for testing the impairment for goodwill, including cash flow projections and discount rates.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including supervisors, are responsible for overseeing the Company’s financial reporting process.
30
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company's internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditors’ report to the related disclosures in the financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditors’ report. However, futureevents or conditions may cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements, includingthe disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of entitiesor business activities within the Company to express an opinion on the financial statements.We are responsible for the direction, supervision and performance of the audit. We remainsolely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
31
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Meng-Chieh Chiu and Chin-Hsiang Chen.
Deloitte & Touche Taipei, Taiwan Republic of China
March 6, 2017
Notice to Readers
The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.
32
ADVANTECH CO., LTD.
BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)
2016 2015ASSETS Amount % Amount %
CURRENT ASSETSCash and cash equivalents (Notes 4 and 6) $ 2,008,247 6 $ 815,293 3Financial assets at fair value through profit or loss - current (Notes 4, 7 and 25) 34,348 - 7,391 -Available-for-sale financial assets - current (Notes 4, 8 and 25) 700,269 2 - -Notes receivable (Notes 4, 9 and 26) 67,223 - 55,480 -Trade receivables (Notes 4 and 9) 1,543,604 5 1,135,240 4Trade receivables from related parties (Notes 4 and 26) 3,908,448 11 3,977,999 13Other receivables 105,929 - 113,056 -Other receivables from related parties (Note 26) 19,002 - 15,596 -Inventories (Notes 4 and 10) 1,935,873 6 1,673,156 5Other current assets 38,361 - 60,318 -
Total current assets 10,361,304 30 7,853,529 25
NONCURRENT ASSETSAvailable-for-sale financial assets - noncurrent (Notes 4, 8 and 25) 1,694,801 5 1,700,814 6Investments accounted for using the equity method (Notes 4 and 11) 15,208,839 44 13,138,225 42Property, plant and equipment (Notes 4 and 12) 6,938,084 20 6,278,109 20Goodwill (Notes 4 and 13) 111,599 - 111,599 -Other intangible assets (Note 4) 78,321 - 74,049 -Deferred tax assets (Notes 4 and 18) 136,130 1 114,710 1Prepayments for business facilities 22,676 - 15,489 -Prepayment for investments - - 1,968,044 6Other noncurrent assets 5,661 - 10,837 -
Total noncurrent assets 24,196,111 70 23,411,876 75
TOTAL $ 34,557,415 100 $ 31,265,405 100
LIABILITIES AND EQUITY
CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - current (Notes 4, 7 and 25) $ 8,845 - $ 6,352 -Trade payables 1,550,969 4 899,480 3Trade payables to related parties (Note 26) 2,610,642 8 2,687,130 9Other payables (Notes 14 and 17) 2,699,374 8 2,255,915 7Current tax liabilities (Notes 4 and 18) 1,036,650 3 853,769 3Short-term warranty provision (Note 4) 49,155 - 41,410 -Other current liabilities 153,992 - 72,312 -
Total current liabilities 8,109,627 23 6,816,368 22
NONCURRENT LIABILITIESDeferred tax liabilities (Notes 4 and 18) 988,099 3 927,732 3Net defined benefit liabilities (Notes 4, 15 and 17) 211,170 1 182,172 -Other noncurrent liabilities 34,937 - 31,632 -
Total noncurrent liabilities 1,234,206 4 1,141,536 3
Total liabilities 9,343,833 27 7,957,904 25
EQUITYShare capital
Ordinary shares 6,330,741 18 6,318,531 20Advance receipts for share capital 100 - - -
Total share capital 6,330,841 18 6,318,531 20Capital surplus 6,058,884 18 5,587,555 18Retained earnings
Legal reserve 4,473,276 13 3,962,842 13Unappropriated earnings 8,435,785 24 7,098,449 23
Total retained earnings 12,909,061 37 11,061,291 36Other equity
Exchange differences on translating foreign operations (197,633) - 271,859 1Unrealized gains (losses) on available-for-sale financial assets 112,429 - 68,265 -
Total other equity (85,204) - 340,124 1
Total equity 25,213,582 73 23,307,501 75
TOTAL $ 34,557,415 100 $ 31,265,405 100
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated March 6, 2017)
33
ADVANTECH CO., LTD.
STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2016 2015Amount % Amount %
OPERATING REVENUE (Notes 4 and 26)Sales $ 30,173,747 99 $ 28,673,906 99Other operating revenue 327,352 1 321,746 1
Total operating revenue 30,501,099 100 28,995,652 100
OPERATING COSTS (Notes 10, 17 and 26) 21,604,247 70 20,758,574 72
GROSS PROFIT 8,896,852 30 8,237,078 28
UNREALIZED LOSS ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES (Note 4) (264,679) (1) (330,254) (1)
REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES (Note 4) 330,254 1 240,811 1
REALIZED GROSS PROFIT 8,962,427 30 8,147,635 28
OPERATING EXPENSES (Notes 17 and 26)Selling and marketing expenses 659,619 2 704,299 3General and administrative expenses 884,172 3 693,290 2Research and development expenses 2,641,219 9 2,568,723 9
Total operating expenses 4,185,010 14 3,966,312 14
OPERATING PROFIT 4,777,417 16 4,181,323 14
NONOPERATING INCOMEShare of the profit of subsidiaries and associates
accounted for using the equity method (Notes 4 and 11) 1,581,818 5 1,344,991 5
Interest income (Note 4) 539 - 1,665 -Gains (losses) on disposal of property, plant and
equipment (Note 4) 146,954 1 (161) -Gains on disposal of investments (Notes 4 and 16) 1,431 - 198,848 1Foreign exchange losses, net (Notes 4, 17 and 28) (140,689) - (88,859) -Gains on financial instruments at fair value through
profit or loss (Note 4) 121,348 - 83,798 -Dividend income (Note 4) 98,800 - 105,445 -Other income (Notes 8 and 26) 101,777 - 112,567 -Finance costs (Note 17) (4,163) - - -
(Continued)
34
ADVANTECH CO., LTD.
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 %
Losses on financial instruments at fair value through profit or loss (Note 4) $ (41,381) - $ (67,063) -
Other losses (155) - (53) -
Total nonoperating income 1,866,279 6 1,691,178 6
PROFIT BEFORE INCOME TAX 6,643,696 22 5,872,501 20
INCOME TAX EXPENSE (Notes 4 and 18) 976,834 3 768,155 2
NET PROFIT FOR THE YEAR 5,666,862 19 5,104,346 18
OTHER COMPREHENSIVE INCOMEItems that will not be reclassified subsequently to
profit or loss:Remeasurement of defined benefit plans (Note 15) (31,039) - (18,736) -Share of the other comprehensive loss of
subsidiaries and associates accounted for using the equity method (Note 11) 1,479 - (2,683) -
Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 18) 5,277 - 3,185 -
(24,283) - (18,234) -Items that may be reclassified subsequently to profit
or loss:Exchange differences on translating foreign
operations (Notes 4 and 16) (561,518) (2) (82,566) -Unrealized gains (losses) on available-for-sale
financial assets (Notes 4 and 16) (5,765) - (557,594) (2)Share of other comprehensive income (loss) of
subsidiaries and associates accounted for using the equity method (Notes 4, 11 and 16) 45,794 - 65,031 -
Income tax relating to item that may be reclassified subsequently to profit or loss (Notes 4, 16 and 18) 96,161 - 13,620 -
(425,328) (2) (561,509) (2)
Other comprehensive income (loss) for the year, net of income tax (449,611) (2) (579,743) (2)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 5,217,251 17 $ 4,524,603 16
(Continued)
35
ADVANTECH CO., LTD.
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 %
EARNINGS PER SHARE (Note 19)Basic $8.96 $8.08Diluted $8.90 $8.05
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated March 6, 2017) (Concluded)
36
AD
VA
NT
EC
H C
O.,
LT
D.
STA
TE
ME
NT
S O
F C
HA
NG
ES
IN E
QU
ITY
FO
R T
HE
YE
AR
S E
ND
ED
DE
CE
MB
ER
31,
201
6 A
ND
201
5 (I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs)
Oth
er E
quity
(Not
es 4
and
16)
Exc
hang
e D
iffer
ence
s on
Unr
ealiz
ed G
ain
Issu
ed C
apita
l (N
otes
16
and
20)
Cap
ital S
urpl
us
Ret
aine
d E
arni
ngs (
Not
es 4
,16
and
17)
Tra
nsla
ting
(Los
s) o
n A
dvan
ce R
ecei
pts
(Not
es 4
, 16
Una
ppro
pria
ted
Fore
ign
Ava
ilabl
e-fo
r-sa
le
Shar
e C
apita
lfo
r Sh
are
Cap
ital
Tot
alan
d 20
)L
egal
Res
erve
Ear
ning
sT
otal
Ope
ratio
nsFi
nanc
ial A
sset
sT
otal
Equ
ity
BA
LAN
CE
AT
JAN
UA
RY
1, 2
015
$6,
301,
031
$11
,060
$6,
312,
091
$5,
306,
958
$3,
472,
064
$6,
353,
273
$9,
825,
337
$33
8,35
6$
563,
277
$22
,346
,019
App
ropr
iatio
n of
the
2014
ear
rings
Lega
l res
erve
--
--
490,
778
(490
,778
)-
--
-C
ash
divi
dend
s dis
tribu
ted
by th
e C
ompa
ny-
--
--
(3,7
87,2
55)
(3,7
87,2
55)
--
(3,7
87,2
55)
Issu
e of
ord
inar
y sh
ares
und
er e
mpl
oyee
shar
e op
tions
17,5
00(1
1,06
0)6,
440
24,4
38-
--
--
30,8
78
Com
pens
atio
n co
st re
cogn
ized
for e
mpl
oyee
shar
e op
tions
--
-26
1,87
7-
--
--
261,
877
Cha
nge
in c
apita
l sur
plus
from
inve
stm
ents
in a
ssoc
iate
s acc
ount
ed fo
r usi
ng
equi
ty m
etho
d-
--
2,17
2-
--
--
2,17
2
Diff
eren
ce b
etw
een
cons
ider
atio
ns a
nd c
arry
ing
amou
nts o
f sub
sidi
arie
s acq
uire
d or
disp
osed
of
--
-(1
1,45
7)-
(62,
903)
(62,
903)
--
(74,
360)
Cha
nges
in p
erce
ntag
e of
ow
ners
hip
inte
rest
in su
bsid
iarie
s-
--
3,56
7-
--
--
3,56
7
Net
pro
fit fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
015
--
--
-5,
104,
346
5,10
4,34
6-
-5,
104,
346
Oth
er c
ompr
ehen
sive
inco
me
for t
he y
ear e
nded
Dec
embe
r 31,
201
5, n
et o
f in
com
e ta
x-
--
--
(18,
234)
(18,
234)
(66,
497)
(495
,012
)(5
79,7
43)
Tota
l com
preh
ensi
ve in
com
e fo
rthe
yea
r end
ed D
ecem
ber 3
1, 2
015
--
--
-5,
086,
112
5,08
6,11
2(6
6,49
7)(4
95,0
12)
4,52
4,60
3
BA
LAN
CE
AT
DEC
EMB
ER 3
1, 2
015
6,31
8,53
1-
6,31
8,53
15,
587,
555
3,96
2,84
27,
098,
449
11,0
61,2
9127
1,85
968
,265
23,3
07,5
01
App
ropr
iatio
n of
the
2015
ear
rings
Lega
l res
erve
--
--
510,
434
(510
,434
)-
--
-C
ash
divi
dend
s dis
tribu
ted
by th
e C
ompa
ny-
--
--
(3,7
91,1
18)
(3,7
91,1
18)
--
(3,7
91,1
18)
Issu
e of
ord
inar
y sh
ares
und
er e
mpl
oyee
shar
e op
tions
12,2
1010
012
,310
104,
758
--
--
-11
7,06
8
Com
pens
atio
n co
st re
cogn
ized
for e
mpl
oyee
shar
e op
tions
--
-33
8,19
4-
--
--
338,
194
Cha
nge
in c
apita
l sur
plus
from
inve
stm
ents
in a
ssoc
iate
s acc
ount
ed fo
r usi
ng
equi
ty m
etho
d-
--
10,5
33-
--
--
10,5
33
Diff
eren
ce b
etw
een
cons
ider
atio
ns a
nd c
arry
ing
amou
nts o
f sub
sidi
arie
s acq
uire
d or
disp
osed
of
--
-17
,844
-(3
,691
)(3
,691
)-
-14
,153
Net
pro
fit fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
016
--
--
-5,
666,
862
5,66
6,86
2-
-5,
666,
862
Oth
er c
ompr
ehen
sive
inco
me
for t
he y
ear e
nded
Dec
embe
r 31,
201
6, n
et o
f in
com
e ta
x-
--
--
(24,
283)
(24,
283)
(469
,492
)44
,164
(449
,611
)
Tota
l com
preh
ensi
ve in
com
e fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
016
--
--
-5,
642,
579
5,64
2,57
9(4
69,4
92)
44,1
645,
217,
251
BA
LAN
CE
AT
DEC
EMB
ER 3
1, 2
016
$6,
330,
741
$10
0$
6,33
0,84
1$
6,05
8,88
4$
4,47
3,27
6$
8,43
5,78
5$
12,9
09,0
61$
(197
,633
)$
112,
429
$25
,213
,582
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
(With
Del
oitte
& T
ouch
e au
dit r
epor
t dat
ed M
arch
6, 2
017)
37
ADVANTECH CO., LTD.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $ 6,643,696 $ 5,872,501Adjustments for:
Depreciation expenses 239,135 242,916Amortization expenses 78,294 74,874Impairment loss recognized (reversal of impairment loss) of trade
receivables 96 (2,203)Net gain on financial assets or liabilities at fair value through profit
or loss (79,967) (16,735)Finance costs 4,163 -Interest income (539) (1,665)Dividend income (98,800) (105,445)Compensation cost of employee share options 338,194 261,877Share of profit of subsidiaries and associates accounted for using the
equity method (1,581,818) (1,344,991)Loss (gain) on disposal of property, plant and equipment (146,954) 161Gain on disposal of investments (1,431) (198,848)Realized loss (gain) on the transactions with subsidiaries and
associates (65,575) 89,443Changes in operating assets and liabilities
Financial assets held for trading 55,503 21,877Notes receivable (11,743) (10,161)Trade receivables (408,460) (139,295)Trade receivables to related parties 69,551 36,412Other receivables 7,127 (26,992)Other receivables to related parties (3,406) 45Inventories (262,717) (268,954)Other current assets 21,957 (8,670)Other financial assets - 18,650Trade payables 651,489 121,548Trade payables to related parties (76,488) 253,194Other payables 357,649 185,158Short-term warranty provision 7,745 5,291Net defined benefit liabilities (2,041) (813)Other current liabilities 81,680 11,088Other noncurrent liabilities 3,305 (1,975)
Cash generated from operations 5,819,645 5,068,288Interest received 539 1,665Dividend received 98,800 105,445Interest paid (4,163) -Income tax paid (653,568) (542,066)
Net cash generated from operating activities 5,261,253 4,633,332(Continued)
38
ADVANTECH CO., LTD.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)
2016 2015
CASH FLOWS FROM INVESTING ACTIVITIESPurchase of available-for-sale financial assets (4,128,000) (3,710,080)Proceeds from sale of available-for-sale financial assets 3,429,410 5,754,213Acquisition of investments accounted for using equity method (293,281) (688,577)Proceeds from disposal of investments accounted for using the equity
method 336,958 -Prepayment for investments - (1,968,044)Proceeds of the capital reduction of investments accounted for using
the equity method 232,330 42,927Payments for property, plant and equipment (930,598) (1,181,375)Proceeds from disposal of property, plant and equipment 239,507 294Decrease in refundable deposits 5,176 187Payments for intangible assets (76,875) (62,714)Proceeds from disposal of intangible assets 58 31Decrease in prepayments for equipment 11,809 14,609Dividends received from subsidiaries and associates 779,257 687,589
Net cash used in investing activities (394,249) (1,110,940)
CASH FLOWS FROM FINANCING ACTIVITIESIncrease in guarantee deposits received - (119)Cash dividends paid (3,791,118) (3,787,255)Exercise of employee share options 117,068 30,878
Net cash used in financing activities (3,674,050) (3,756,496)
NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS 1,192,954 (234,104)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 815,293 1,049,397
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,008,247 $ 815,293
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated March 6, 2017) (Concluded)
39
<Attachment IV > Advantech Co., Ltd.
2016 Profit Distribution Table
Item Total
Unappropriated retained earnings - beginning 2,796,896,578
Less: Long-term equity investments (3,691,230)
Less: Actuarial loss recognized in retained earnings (24,282,918)
Add: Net income 5,666,862,329
Less: 10% legal reserve appropriated (566,686,233)
Less: Special reserve appropriated (85,203,650)
Current earnings available for distribution 7,783,894,876
Distributions:
Common stock cash dividend ( Dividends Per Share $6.3) (3,988,366,830)
Share dividends ( Dividends Per Share $1 ) (633,074,100)
Unappropriated retained earnings - ending 3,162,453,946
Chairman: K.C. Liu President: Chaney Ho Chief Financial officer: Rorie Kang
40
< A
ttach
men
t V
>
Adv
ante
ch C
o., L
td.
Cor
pora
te C
harte
r (A
rticl
es o
f Inc
orpo
ratio
n) A
rticl
e Am
endm
ents
Tab
leN
o.
Aft
er a
men
dm
ent
Bef
ore
amen
dm
ent
Rem
ark
A
rticl
e 13
Th
e co
mpa
ny h
as s
even
~ n
ine
dire
ctor
s.Nom
inat
ed fo
r a
term
of
thre
e ye
ars
and
they
are
ele
cted
fro
m t
he
capa
ble
cand
idat
es i
n th
e sh
areh
olde
rs’
mee
ting;
als
o,
they
can
be
re-e
lect
ed.
Ther
e m
ust
be a
t le
ast
two
inde
pend
ent d
irect
ors (
not l
ess t
han
one
fifth
of t
he to
tal
num
ber
of d
irect
ors)
out
of
the
num
ber
of d
irect
ors
refe
rred
to
abov
e. T
he i
ndep
ende
nt d
irect
ors
are
to b
e el
ecte
d fr
om
the
cand
idat
es
in
the
shar
ehol
ders
’ m
eetin
g.
The
prof
essi
onal
qu
alifi
catio
ns
of
the
inde
pend
ent
dire
ctor
s, sh
areh
oldi
ngs,
limita
tion
of
part-
time
job,
the
nom
inat
ion
and
appo
intm
ent m
etho
d,
and
othe
r m
atte
rs
to
be
com
plie
d w
ith
mus
t be
pr
oces
sed
acco
rdin
g to
the
rel
evan
t pr
ovis
ions
of
the
com
pete
nt a
utho
ritie
s.
The
com
pany
ha
s se
ven
~ ni
ne
dire
ctor
s an
d th
ree
supe
rvis
ors
who
are
nom
inat
ed f
or a
term
of
thre
e ye
ars
and
elec
ted
from
th
e ca
pabl
e ca
ndid
ates
in
th
e sh
areh
olde
rs’ m
eetin
g; a
lso,
they
can
be
re-e
lect
ed. T
here
m
ust b
e at
leas
t tw
o in
depe
nden
t dire
ctor
s (n
ot le
ss th
an
one
fifth
of
the
tota
l nu
mbe
r of
dire
ctor
s) o
ut o
f th
e nu
mbe
r of
dire
ctor
s re
ferr
ed t
o ab
ove.
The
ind
epen
dent
di
rect
ors
are
to b
e el
ecte
d fr
om t
he c
andi
date
s in
the
sh
areh
olde
rs’
mee
ting.
The
pro
fess
iona
l qu
alifi
catio
ns o
f th
e in
depe
nden
t di
rect
ors,
shar
ehol
ding
s, lim
itatio
n of
pa
rt-tim
e jo
b, t
he n
omin
atio
n an
d ap
poin
tmen
t m
etho
d,
and
othe
r m
atte
rs to
be
com
plie
d w
ith m
ust b
e pr
oces
sed
acco
rdin
g to
the
rel
evan
t pr
ovis
ions
of
the
com
pete
nt
auth
oriti
es.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
13.2
The
exer
cise
of p
ower
by
the
audi
t com
mitt
ee is
as
follo
ws:
1.
Rev
iew
ing
the
oper
atio
ns a
nd fi
nanc
ial c
ondi
tion
ofth
e C
ompa
ny.
2.A
uditi
ng th
e ac
coun
ting
book
s and
doc
umen
ts o
f the
Com
pany
. 3.
Oth
er r
espo
nsib
ilitie
s as
sign
ed i
n ac
cord
ance
with
the
law
and
regu
latio
ns.
The
exer
cise
of p
ower
by
the
supe
rvis
ors i
s as f
ollo
ws:
1.
Rev
iew
ing
the
oper
atio
ns a
nd fi
nanc
ial c
ondi
tion
of th
eC
ompa
ny.
2.A
uditi
ng th
e ac
coun
ting
book
s and
doc
umen
ts o
f the
Com
pany
. 3.
Oth
er r
espo
nsib
ilitie
s as
sign
ed i
n ac
cord
ance
with
the
law
and
regu
latio
ns.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
13.3
The
tota
l sha
res o
f the
Com
pany
hel
d by
all
dire
ctor
s to
be p
roce
ssed
in a
ccor
danc
e w
ith th
e “R
ules
and
Rev
iew
Pr
oced
ures
for D
irect
or a
nd S
uper
viso
r Sha
re
Ow
ners
hip
Rat
ios a
t Pub
lic C
ompa
nies
” pu
blis
hed
by
the
com
pete
nt a
utho
ritie
s.
The
tota
l sha
res o
f the
Com
pany
hel
d by
all
dire
ctor
s and
su
perv
isor
s are
to b
e pr
oces
sed
in a
ccor
danc
e w
ith th
e “R
ules
and
Rev
iew
Pro
cedu
res f
or D
irect
or a
nd
Supe
rvis
or S
hare
Ow
ners
hip
Rat
ios a
t Pub
lic C
ompa
nies
” pu
blis
hed
by th
e co
mpe
tent
aut
horit
ies.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
13.4
The
Com
pany
may
pur
chas
e lia
bilit
y in
sura
nce
for
dire
ctor
s thr
ough
out t
he te
nure
bas
ed o
n th
eir s
cope
of
resp
onsi
bilit
y.
The
Com
pany
may
pur
chas
e lia
bilit
y in
sura
nce
for
dire
ctor
s and
supe
rvis
ors t
hrou
ghou
t the
tenu
re b
ased
on
thei
r sco
pe o
f res
pons
ibili
ty.
Sep
up th
e Aud
it C
omm
ittee
.
41
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
Arti
cle
13.5
The
boar
d of
dire
ctor
s is
aut
horiz
ed t
o de
liber
ate
and
dete
rmin
e th
e re
mun
erat
ion
of a
ll di
rect
ors
acco
rdin
g to
th
eir p
artic
ipat
ion
in a
nd c
ontri
butio
n to
the
Com
pany
’s
busi
ness
ope
ratio
n an
d by
refe
rrin
g to
the
rem
uner
atio
n st
anda
rd o
f the
dom
estic
indu
stry
.
The
boar
d of
dire
ctor
s is
aut
horiz
ed t
o de
liber
ate
and
dete
rmin
e th
e re
mun
erat
ion
of
all
dire
ctor
s an
d su
perv
isor
s ac
cord
ing
to
thei
r pa
rtici
patio
n in
an
d co
ntrib
utio
n to
the
Com
pany
’s b
usin
ess
oper
atio
n an
d by
re
ferr
ing
to t
he r
emun
erat
ion
stan
dard
of
the
dom
estic
in
dust
ry.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
13.6
The
Com
pany
ha
s an
A
udit
Com
mitt
ee
setu
p in
ac
cord
ance
with
Arti
cle
14.4
of t
he S
ecur
ities
Exc
hang
e A
ct,
whi
ch
is
orga
nize
d by
al
l th
e in
depe
nden
t di
rect
ors.
The
exer
cise
of
po
wer
by
th
e A
udit
Com
mitt
ee a
nd it
s m
embe
rs a
nd th
e re
late
d m
atte
rs a
re
to b
e pr
oces
sed
in a
ccor
danc
e w
ith th
e pr
ovis
ions
of t
he
com
pete
nt a
utho
ritie
s.
The
Com
pany
ha
s an
A
udit
Com
mitt
ee
setu
p in
ac
cord
ance
with
Arti
cle
14.4
of
the
Secu
ritie
s Ex
chan
ge
Act
, whi
ch is
org
aniz
ed b
y al
l the
inde
pend
ent d
irect
ors.
The
exer
cise
of
pow
er b
y th
e A
udit
Com
mitt
ee a
nd i
ts
mem
bers
and
the
rel
ated
mat
ters
are
to
be p
roce
ssed
in
acco
rdan
ce
with
th
e pr
ovis
ions
of
th
e co
mpe
tent
au
thor
ities
. Su
perv
isor
s w
ill b
e di
scha
rged
on
the
date
th
e A
udit
Com
mitt
ee e
stab
lishe
d, w
hich
will
be
in e
ffect
on
the
expi
ry d
ate
of th
e te
rm o
f offi
ce in
201
7.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
14.1
The
Com
pany
may
at
any
time
in c
ase
of e
mer
genc
y co
nven
e a
boar
d m
eetin
g an
d w
ith
the
dire
ctor
s
info
rmed
in w
ritin
g or
by
E-m
ail o
r fax
.
The
Com
pany
may
at
any
time
in c
ase
of e
mer
genc
y co
nven
e a
boar
d m
eetin
g an
d w
ith t
he d
irect
ors
and
supe
rvis
ors i
nfor
med
in w
ritin
g or
by
E-m
ail o
r fax
.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
18
The
Com
pany
’s b
oard
of
dire
ctor
s sh
all
at t
he e
nd o
f ea
ch f
isca
l ye
ar h
ave
the
follo
win
g co
mpo
sed
(1)
Bus
ines
s R
epor
t (2
) Fi
nanc
ial
Rep
orts
(3
) Pr
ofit
Dis
tribu
tion
Prop
osal
s fo
r ac
know
ledg
emen
t in
th
e sh
areh
olde
rs’ m
eetin
g.
The
Com
pany
’s b
oard
of
dire
ctor
s sh
all
at t
he e
nd o
f ea
ch
fisca
l ye
ar
have
th
e fo
llow
ing
com
pose
d (1
) B
usin
ess
Rep
ort
(2)
Fina
ncia
l R
epor
ts
(3)
Prof
it D
istri
butio
n Pr
opos
als
for t
he a
udit
of th
e su
perv
isor
s 30
da
ys
prio
r to
th
e sh
areh
olde
rs’
mee
ting
and
for
ackn
owle
dgem
ent i
n th
e sh
areh
olde
rs’ m
eetin
g.
Sep
up th
e Aud
it C
omm
ittee
.
Arti
cle
22
The
Cor
pora
te C
harte
r (A
rticl
e of
Inc
orpo
ratio
n) w
as
esta
blis
hed
on S
epte
mbe
r 25
, 19
81 (
the
first
tim
e ~
Twen
tieth
are
om
itted
). Th
e 21
st a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
, 200
3.
The
22nd
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
7, 2
003.
Th
e 23
rd a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
4, 2
005.
Th
e 24
th a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on N
ovem
ber 1
8, 2
005.
The
Cor
pora
te C
harte
r (A
rticl
e of
Inc
orpo
ratio
n) w
as
esta
blis
hed
on S
epte
mbe
r 25
, 19
81 (
the
first
tim
e ~
Twen
tieth
are
om
itted
). Th
e 21
st a
men
dmen
t of t
he C
orpo
rate
Cha
rter (
Arti
cle
of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
, 200
3.
The
22nd
am
endm
ent
of t
he C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
May
27,
200
3.
The
23rd
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
24,
200
5.
The
24th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
Nov
embe
r 18,
200
5.
Upd
ate
the
date
of
the
amen
dmen
t
42
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
The
25th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
June
16,
200
6.
The
26th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
June
15,
200
7.
The
27th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
June
12,
200
8.
The
28th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
May
15,
200
9.
The
29th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
May
18,
201
0.
The
30th
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
May
25,
201
1.
The
31st
am
endm
ent o
f th
e C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
June
13,
201
2.
The
32nd
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on Ju
ne 1
8, 2
014.
Th
e 33
rd a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
8, 2
015.
Th
e 34
rd a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
5, 2
016.
Th
e 35
rd a
men
dmen
t of
the
Cor
pora
te C
harte
r (A
rticl
e of
Inco
rpor
atio
n) w
as m
ade
on M
ay 2
6, 2
017.
The
25th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
June
16,
200
6.
The
26th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
June
15,
200
7.
The
27th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
June
12,
200
8.
The
28th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
15,
200
9.
The
29th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
18,
201
0.
The
30th
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
25,
201
1.
The
31st
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
June
13,
201
2.
The
32nd
am
endm
ent
of t
he C
orpo
rate
Cha
rter
(Arti
cle
of In
corp
orat
ion)
was
mad
e on
June
18,
201
4.
The
33rd
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
28,
201
5.
The
34rd
am
endm
ent o
f the
Cor
pora
te C
harte
r (A
rticl
e of
In
corp
orat
ion)
was
mad
e on
May
25,
201
6.
43
< A
ttach
men
t V
I >
Adv
ante
ch C
o., L
td.
Proc
edur
es fo
r the
Acq
uisi
tion
or D
ispo
sal o
f Ass
ets
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
Arti
cle
3 Th
e te
rm “
asse
ts”
as u
sed
in t
hese
Pro
cedu
res
incl
udes
th
e fo
llow
ing:
1.
Inve
stm
ents
in
stoc
ks,
gove
rnm
ent
bond
s, co
rpor
ate
bond
s, fin
anci
al b
onds
, sec
uriti
es r
epre
sent
ing
inte
rest
in
a fu
nd, d
epos
itary
rece
ipts
, cal
l (pu
t) w
arra
nts,
bene
ficia
l in
tere
st se
curit
ies,
and
asse
t-bac
ked
secu
ritie
s. 2.
Rea
l pr
oper
ty (
incl
udin
g la
nd,
hous
es a
nd b
uild
ings
,in
vest
men
t pro
perty
, rig
hts
to u
se la
nd, a
nd c
onst
ruct
ion
ente
rpris
e in
vent
ory)
and
equ
ipm
ent.
3.M
embe
rshi
ps.
4.Pa
tent
s, co
pyrig
hts,
trade
mar
ks,
fran
chis
e rig
hts,
and
othe
r int
angi
ble
asse
ts.
5.C
laim
s of
fina
ncia
l ins
titut
ions
(inc
ludi
ng r
ecei
vabl
es,
bills
pu
rcha
sed
and
disc
ount
ed,
loan
s, an
d ov
erdu
e re
ceiv
able
s).
6.D
eriv
ativ
es.
7.A
sset
s ac
quire
d or
dis
pose
d of
in
conn
ectio
n w
ithm
erge
rs, d
emer
gers
, acq
uisi
tions
, or t
rans
fer o
f sha
res
in
acco
rdan
ce w
ith la
w
8.O
ther
maj
or a
sset
s.
The
term
“as
sets
” as
use
d in
thes
e Pr
oced
ures
incl
udes
the
follo
win
g:
1.In
vest
men
ts i
n st
ocks
, go
vern
men
t bo
nds,
corp
orat
e bo
nds,
finan
cial
bon
ds, s
ecur
ities
repr
esen
ting
inte
rest
in a
fu
nd,
depo
sita
ry r
ecei
pts,
call
(put
) w
arra
nts,
bene
ficia
l in
tere
st se
curit
ies,
and
asse
t-bac
ked
secu
ritie
s. 2.
Rea
l pr
oper
ty (
incl
udin
g la
nd,
hous
es a
nd b
uild
ings
,in
vest
men
t pr
oper
ty,
right
s to
use
lan
d, a
nd c
onst
ruct
ion
ente
rpris
e in
vent
ory)
and
equ
ipm
ent.
3.M
embe
rshi
ps.
4.Pa
tent
s, co
pyrig
hts,
trade
mar
ks,
fran
chis
e rig
hts,
and
othe
r int
angi
ble
asse
ts.
5.D
eriv
ativ
es.
6.A
sset
s ac
quire
d or
dis
pose
d of
in
conn
ectio
n w
ithm
erge
rs,
dem
erge
rs,
acqu
isiti
ons,
or t
rans
fer
of s
hare
s in
ac
cord
ance
with
law
7.
Oth
er m
ajor
ass
ets.
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
Arti
cle
6 A
fter
thes
e Pr
oced
ures
hav
e be
en a
ppro
ved
by m
ore
than
hal
f of
all
Aud
it C
omm
ittee
mem
bers
and
the
B
oard
of
Dire
ctor
s, th
ey s
hall
be s
ubm
itted
to
the
shar
ehol
ders
' m
eetin
g fo
r ap
prov
al;
the
sam
e ap
plie
s w
hen
thes
e Pr
oced
ures
ar
e am
ende
d.
Whe
n th
ese
Proc
edur
es a
re r
epor
ted
to t
he B
oard
of
Dire
ctor
s fo
r di
scus
sion
, th
e B
oard
of
Dire
ctor
s sh
all
take
int
o fu
ll co
nsid
erat
ion
each
inde
pend
ent d
irect
or's
opin
ions
. If a
n in
depe
nden
t dire
ctor
obj
ects
to o
r exp
ress
es re
serv
atio
ns
abou
t any
mat
ter,
it sh
all b
e re
cord
ed in
the
min
utes
of
Thes
e Pr
oced
ures
are
est
ablis
hed
in a
ccor
danc
e w
ith t
he
Reg
ulat
ions
Gov
erni
ng t
he A
cqui
sitio
n an
d D
ispo
sal
of
Ass
ets
by P
ublic
Com
pani
es p
rom
ulga
ted
by t
he F
SC.
Afte
r th
ese
Proc
edur
es h
ave
been
app
rove
d by
the
Boa
rd
of D
irect
ors,
they
sha
ll be
sub
mitt
ed t
o ea
ch s
uper
viso
r, an
d th
en to
a s
hare
hold
ers'
mee
ting
for a
ppro
val;
the
sam
e ap
plie
s w
hen
the
proc
edur
es a
re a
men
ded.
If a
ny d
irect
or
expr
esse
s di
ssen
t an
d it
is c
onta
ined
in
the
min
utes
or
a w
ritte
n st
atem
ent,
the
com
pany
sha
ll su
bmit
the
dire
ctor
's di
ssen
ting
opin
ion
to e
ach
supe
rvis
or.
Acc
ordi
ng to
the
actu
al p
ract
ice
44
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
the
boar
d of
dire
ctor
s m
eetin
g. W
hen
thes
e Pr
oced
ures
ar
e ad
opte
d or
am
ende
d, th
ey s
hall
be a
ppro
ved
by m
ore
than
ha
lf of
al
l A
udit
Com
mitt
ee
mem
bers
an
d su
bmitt
ed to
the
Boa
rd o
f Dire
ctor
s for
a re
solu
tion.
If
app
rova
l of
mor
e th
an h
alf
of a
ll A
udit
Com
mitt
ee
mem
bers
as
requ
ired
in th
e pr
eced
ing
para
grap
h is
not
ob
tain
ed,
thes
e Pr
oced
ures
may
be
impl
emen
ted
if ap
prov
ed b
y m
ore
than
two-
third
s of
all
dire
ctor
s, an
d th
e re
solu
tion
of th
e A
udit
Com
mitt
ee s
hall
be re
cord
ed
in t
he m
inut
es o
f th
e bo
ard
mee
ting.
The
ter
ms
“all
Aud
it C
omm
ittee
mem
bers
” an
d “a
ll di
rect
ors”
sha
ll be
co
unte
d as
the
act
ual
num
ber
of p
erso
ns c
urre
ntly
ho
ldin
g th
ose
posi
tions
.
Whe
n th
ese
Proc
edur
es a
re s
ubm
itted
to
the
Boa
rd o
f D
irect
ors
for
disc
ussi
on
purs
uant
to
th
e pr
eced
ing
para
grap
h, t
he B
oard
of
Dire
ctor
s sh
all
take
int
o fu
ll co
nsid
erat
ion
each
ind
epen
dent
dire
ctor
's op
inio
ns. I
f an
in
depe
nden
t di
rect
or o
bjec
ts t
o or
exp
ress
es r
eser
vatio
ns
abou
t any
mat
ter,
it sh
all b
e re
cord
ed in
the
min
utes
of t
he
boar
d m
eetin
g.
Arti
cle
8 Th
e C
ompa
ny’s
acq
uisi
tion
or d
ispo
sal o
f ass
ets
shal
l be
appr
oved
by
th
e B
oard
of
D
irect
ors
unde
r th
e C
ompa
ny’s
pro
cedu
res
or o
ther
law
s or
regu
latio
ns. I
f a
dire
ctor
exp
ress
es d
isse
nt a
nd i
t is
con
tain
ed i
n th
e m
inut
es o
r a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e di
rect
or's
diss
entin
g op
inio
n to
the
Aud
it C
omm
ittee
. W
hen
a tra
nsac
tion
invo
lvin
g th
e ac
quis
ition
or d
ispo
sal
of a
sset
s is
sub
mitt
ed t
o th
e B
oard
of
Dire
ctor
s fo
r di
scus
sion
pur
suan
t to
the
pre
cedi
ng p
arag
raph
, th
e B
oard
of D
irect
ors
shal
l tak
e in
to fu
ll co
nsid
erat
ion
each
in
depe
nden
t di
rect
or's
opin
ions
. If
an
in
depe
nden
t di
rect
or o
bjec
ts t
o or
exp
ress
es r
eser
vatio
ns a
bout
any
m
atte
r, it
shal
l be
reco
rded
in th
e m
inut
es o
f the
boa
rd o
f di
rect
ors m
eetin
g.
Maj
or
asse
ts
or
deriv
ativ
es
trans
actio
ns
shal
l be
ap
prov
ed b
y m
ore
than
hal
f of
all
Aud
it C
omm
ittee
m
embe
rs a
nd r
epor
ted
to t
he B
oard
of
Dire
ctor
s fo
r re
solu
tion.
If
app
rova
l of
mor
e th
an h
alf
of a
ll A
udit
Com
mitt
ee
mem
bers
is
not
obta
ined
, th
ese
proc
edur
es m
ay b
e im
plem
ente
d if
appr
oved
by
mor
e th
an tw
o-th
irds
of a
ll
The
Com
pany
's ac
quis
ition
or
disp
osal
of
asse
ts t
hat
is
subj
ect t
o th
e ap
prov
al o
f the
Boa
rd o
f Dire
ctor
s und
er th
e C
ompa
ny's
proc
edur
es o
r ot
her
law
s or
reg
ulat
ions
, if
a di
rect
or e
xpre
sses
dis
sent
and
it
is c
onta
ined
in
the
min
utes
or a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e di
rect
or's
diss
entin
g op
inio
n to
eac
h su
perv
isor
. W
hen
a tra
nsac
tion
invo
lvin
g th
e ac
quis
ition
or
disp
osal
of
ass
ets
is s
ubm
itted
to
the
Boa
rd o
f D
irect
ors
for
disc
ussi
on p
ursu
ant t
o th
e pr
eced
ing
para
grap
h, th
e B
oard
of
D
irect
ors
shal
l ta
ke
into
fu
ll co
nsid
erat
ion
each
in
depe
nden
t dire
ctor
's op
inio
ns. I
f an
inde
pend
ent d
irect
or
obje
cts
to o
r ex
pres
ses
rese
rvat
ions
abo
ut a
ny m
atte
r, it
shal
l be
reco
rded
in th
e m
inut
es o
f th
e bo
ard
of d
irect
ors
mee
ting.
Acc
ordi
ng to
the
actu
al p
ract
ice
45
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
dire
ctor
s, an
d th
e re
solu
tion
of t
he A
udit
Com
mitt
ee
shal
l be
rec
orde
d in
the
min
utes
of
the
boar
d m
eetin
g.
The
term
s “a
ll A
udit
Com
mitt
ee m
embe
rs”
and
“all
dire
ctor
s” s
hall
be c
ount
ed a
s th
e ac
tual
num
ber
of
pers
ons c
urre
ntly
hol
ding
thos
e po
sitio
ns.
Arti
cle
9 In
acq
uirin
g or
dis
posi
ng o
f re
al p
rope
rty o
r eq
uipm
ent
whe
re
the
trans
actio
n am
ount
re
ache
s 20
%
of
the
Com
pany
’s p
aid-
in c
apita
l or
NT$
300
mill
ion
or m
ore,
th
e C
ompa
ny,
unle
ss t
rans
actin
g w
ith a
gov
ernm
ent
agen
cy,
enga
ging
ot
hers
to
bu
ild
on
its
own
land
, en
gagi
ng o
ther
s to
bui
ld o
n re
nted
land
, or
acqu
iring
or
disp
osin
g of
equ
ipm
ent f
or b
usin
ess
use,
sha
ll ob
tain
an
appr
aisa
l re
port
prio
r to
the
dat
e of
occ
urre
nce
of t
he
even
t fr
om a
pro
fess
iona
l ap
prai
ser
and
shal
l fu
rther
co
mpl
y w
ith th
e fo
llow
ing
prov
isio
ns:
1.W
here
due
to s
peci
al c
ircum
stan
ces
it is
nec
essa
ry to
give
a li
mite
d pr
ice,
spe
cifie
d pr
ice,
or s
peci
al p
rice
asa
refe
renc
e ba
sis
for
the
trans
actio
n pr
ice,
th
etra
nsac
tion
shal
l be
subm
itted
for
appr
oval
in a
dvan
ceby
the
Boa
rd o
f D
irect
ors,
and
the
sam
e pr
oced
ure
shal
l be
follo
wed
for
any
fut
ure
chan
ges
to th
e te
rms
and
cond
ition
s of t
he tr
ansa
ctio
n.2.
Whe
re th
e tra
nsac
tion
amou
nt is
NT$
1 bi
llion
or m
ore,
appr
aisa
ls f
rom
tw
o or
mor
e pr
ofes
sion
al a
ppra
iser
ssh
all b
e ob
tain
ed.
3.W
here
any
one
of t
he fo
llow
ing
circ
umst
ance
s ap
plie
sw
ith r
espe
ct t
o th
e pr
ofes
sion
al a
ppra
iser
's ap
prai
sal
resu
lts, u
nles
s al
l the
app
rais
al re
sults
for t
he a
sset
s to
be a
cqui
red
are
high
er th
an th
e tra
nsac
tion
amou
nt, o
ral
l the
app
rais
al re
sults
for t
he a
sset
s to
be
disp
osed
of
are
low
er t
han
the
trans
actio
n am
ount
, a
certi
fied
publ
ic a
ccou
ntan
t sh
all
be e
ngag
ed t
o pe
rfor
m t
heap
prai
sal
in
acco
rdan
ce
with
th
e pr
ovis
ions
of
Stat
emen
t of
Aud
iting
Sta
ndar
ds N
o. 2
0 an
d re
nder
asp
ecifi
c op
inio
n re
gard
ing
the
reas
on
for
the
Proc
edur
es fo
r Acq
uisi
tion
or D
ispo
sal o
f Rea
l Pro
perty
or
Equi
pmen
t
1.Ev
alua
tion
and
Ope
ratin
g Pr
oced
ures
The
trans
actio
n pr
oces
ses
of
real
pr
oper
ty
and
equi
pmen
t sha
ll be
han
dled
in a
ccor
danc
e w
ith th
e op
erat
ing
proc
edur
es f
or f
ixed
ass
et c
ircul
atio
n in
th
e C
ompa
ny’s
inte
rnal
con
trol s
yste
m.
2.Pr
oced
ures
fo
r D
eter
min
ing
Trad
ing
Term
s an
dC
ondi
tions
and
Aut
horiz
atio
n Li
mit
(1) W
hen
acqu
iring
or d
ispo
sing
of r
eal p
rope
rty, t
heC
ompa
ny s
hall
dete
rmin
e th
e tra
ding
ter
ms
and
cond
ition
s an
d tra
ding
pr
ices
ba
sed
on
the
curr
ent
valu
e, a
sses
sed
valu
e, a
nd r
eal
tradi
ng
pric
e of
ne
arby
re
al
prop
erty
an
d ha
ve
the
anal
ysis
re
port
subm
itted
to
th
e B
oard
of
D
irect
ors.
If th
e am
ount
of t
he tr
ansa
ctio
n is
less
th
an N
T$30
0 m
illio
n, th
is s
hall
be a
ppro
ved
by
the
Cha
irman
of
the
Boa
rd a
nd r
epor
ted
to t
he
late
st b
oard
mee
ting
afte
rwar
d; if
the
amou
nt o
f th
e tra
nsac
tion
is m
ore
than
NT$
300
mill
ion,
this
sh
all b
e ap
prov
ed b
y th
e B
oard
of D
irect
ors.
(2
) The
acq
uisi
tion
or d
ispo
sal o
f equ
ipm
ent s
hall
be
perf
orm
ed
thro
ugh
enqu
iry,
com
paris
on,
barg
aini
ng,
or b
iddi
ng.
If t
he a
mou
nt o
f th
e tra
nsac
tion
is
less
th
an
NT$
300
mill
ion
(incl
usiv
e), t
his s
hall
be a
ppro
ved
purs
uant
to th
e au
thor
izat
ion
limit;
if
the
amou
nt
of
the
trans
actio
n is
mor
e th
an N
T$30
0 m
illio
n, t
his
shal
l be
appr
oved
by
the
Pres
iden
t and
the
Boa
rd
of D
irect
ors.
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
46
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
disc
repa
ncy
and
the
appr
opria
tene
ss o
f th
e tra
nsac
tion
pric
e:
(1)
The
disc
repa
ncy
betw
een
the
appr
aisa
l re
sult
and
the
trans
actio
n am
ount
is
20 p
erce
nt o
r m
ore
of
the
trans
actio
n am
ount
. (2
) Th
e di
scre
panc
y be
twee
n th
e ap
prai
sal
resu
lts o
f tw
o or
mor
e pr
ofes
sion
al a
ppra
iser
s is
10
perc
ent
or m
ore
of th
e tra
nsac
tion
amou
nt.
4.N
o m
ore
than
3 m
onth
s m
ay e
laps
e be
twee
n th
e da
teof
the
appr
aisa
l rep
ort i
ssue
d by
a p
rofe
ssio
nal a
ppra
iser
an
d th
e co
ntra
ct e
xecu
tion
date
; pr
ovid
ed,
whe
re t
he
publ
icly
ann
ounc
ed c
urre
nt v
alue
for
the
sam
e pe
riod
is
used
and
not
mor
e th
an 6
mon
ths
have
ela
psed
, an
op
inio
n m
ay s
till b
e is
sued
by
the
orig
inal
pro
fess
iona
l ap
prai
ser.
3.U
nits
Res
pons
ible
for I
mpl
emen
tatio
nA
fter
the
acqu
isiti
on o
r di
spos
al o
f re
al p
rope
rty o
r eq
uipm
ent
is a
ppro
ved
base
d on
the
aut
horiz
atio
n lim
it st
ipul
ated
in
th
e pr
eced
ing
para
grap
h,
the
depa
rtmen
t usi
ng su
ch re
al p
rope
rty o
r equ
ipm
ent a
nd
Adm
inis
tratio
n D
epar
tmen
t is
re
spon
sibl
e fo
r im
plem
enta
tion.
4.
App
rais
al R
epor
t on
Rea
l Pr
oper
ty o
r O
ther
Fix
edA
sset
s In
acqu
iring
or
di
spos
ing
of
real
pr
oper
ty
or
equi
pmen
t w
here
the
tra
nsac
tion
amou
nt r
each
es
NT$
300
mill
ion
or m
ore,
the
Com
pany
, un
less
tra
nsac
ting
with
a g
over
nmen
t ag
ency
, en
gagi
ng
othe
rs to
bui
ld o
n its
ow
n la
nd, e
ngag
ing
othe
rs to
bu
ild o
n re
nted
lan
d, o
r ac
quiri
ng o
r di
spos
ing
of
equi
pmen
t for
bus
ines
s use
, sha
ll ob
tain
an
appr
aisa
l re
port
prio
r to
the
dat
e of
occ
urre
nce
of t
he e
vent
fr
om
a pr
ofes
sion
al
appr
aise
r an
d sh
all
furth
er
com
ply
with
the
follo
win
g pr
ovis
ions
: (1
) W
here
du
e to
sp
ecia
l ci
rcum
stan
ces
it is
ne
cess
ary
to g
ive
a lim
ited
pric
e, s
peci
fied
pric
e,
or s
peci
al p
rice
as a
ref
eren
ce b
asis
for
the
tra
nsac
tion
pric
e,
the
trans
actio
n sh
all
be
subm
itted
for
app
rova
l in
adva
nce
by th
e B
oard
of
Dire
ctor
s, an
d th
e sa
me
proc
edur
e sh
all
be
follo
wed
for a
ny fu
ture
cha
nges
to th
e te
rms
and
cond
ition
s of t
he tr
ansa
ctio
n.
(2) W
here
the
trans
actio
n am
ount
is N
T$1
billi
on o
r m
ore,
app
rais
als
from
tw
o or
mor
e pr
ofes
sion
al
appr
aise
rs sh
all b
e ob
tain
ed.
(3)
Whe
re a
ny o
ne o
f th
e fo
llow
ing
circ
umst
ance
s ap
plie
s w
ith
resp
ect
to
the
prof
essi
onal
ap
prai
ser's
ap
prai
sal
resu
lts,
unle
ss
all
the
appr
aisa
l res
ults
for t
he a
sset
s to
be
acqu
ired
are
high
er t
han
the
trans
actio
n am
ount
, or
all
the
47
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
appr
aisa
l res
ults
for
the
asse
ts to
be
disp
osed
of
are
low
er th
an th
e tra
nsac
tion
amou
nt, a
cer
tifie
d pu
blic
acc
ount
ant
shal
l be
eng
aged
to
perf
orm
th
e ap
prai
sal
in a
ccor
danc
e w
ith t
he p
rovi
sion
s of
St
atem
ent
of
Aud
iting
St
anda
rds
No.
20
pu
blis
hed
by th
e R
OC
Acc
ount
ing
Res
earc
h an
d D
evel
opm
ent
Foun
datio
n (A
RD
F) a
nd r
ende
r a
spec
ific
opin
ion
rega
rdin
g th
e re
ason
for
the
di
scre
panc
y an
d th
e ap
prop
riate
ness
of
th
e tra
nsac
tion
pric
e:
A.
The
disc
repa
ncy
betw
een
the
appr
aisa
l re
sult
and
the
trans
actio
n am
ount
is
20
perc
ent
or
mor
e of
th
e tra
nsac
tion
amou
nt.
B.
The
disc
repa
ncy
betw
een
the
appr
aisa
l re
sults
of
tw
o or
m
ore
prof
essi
onal
ap
prai
sers
is
10 p
erce
nt o
r m
ore
of t
he
trans
actio
n am
ount
. (4
) N
o m
ore
than
3 m
onth
s m
ay e
laps
e be
twee
n th
eda
te
of
the
appr
aisa
l re
port
issu
ed
by
apr
ofes
sion
al a
ppra
iser
and
the
cont
ract
exe
cutio
nda
te;
prov
ided
, w
here
the
pub
licly
ann
ounc
edcu
rren
t val
ue fo
r the
sam
e pe
riod
is u
sed
and
not
mor
e th
an 6
mon
ths
have
ela
psed
, an
opi
nion
may
stil
l be
iss
ued
by t
he o
rigin
al p
rofe
ssio
nal
appr
aise
r. (5
) W
here
the
Com
pany
acq
uire
s or
dis
pose
s of
asse
ts
thro
ugh
cour
t au
ctio
n pr
oced
ures
, th
eev
iden
tiary
doc
umen
tatio
n is
sued
by
the
cour
tm
ay b
e su
bstit
uted
for
the
app
rais
al r
epor
t or
CPA
opi
nion
. A
rticl
e 11
W
here
th
e C
ompa
ny
acqu
ires
or
disp
oses
of
m
embe
rshi
ps o
r in
tang
ible
ass
ets
and
the
trans
actio
n am
ount
rea
ches
20%
of
the
Com
pany
’s p
aid-
in c
apita
l or
NT$
300
mill
ion
or m
ore,
exc
ept i
n tra
nsac
tions
with
Proc
edur
es fo
r Acq
uisi
tion
or D
ispo
sal o
f Mem
bers
hips
or
Inta
ngib
le A
sset
s 1.
Eva
luat
ion
and
Ope
ratin
g Pr
oced
ures
The
trans
actio
n pr
oces
ses
of
mem
bers
hips
or
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
48
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
a go
vern
men
t ag
ency
, th
e C
ompa
ny s
hall
enga
ge a
ce
rtifie
d pu
blic
ac
coun
tant
pr
ior
to
the
date
of
oc
curr
ence
of
the
even
t to
ren
der
an o
pini
on o
n th
e re
ason
able
ness
of
the
trans
actio
n pr
ice;
the
CPA
sha
ll co
mpl
y w
ith t
he p
rovi
sion
s of
Sta
tem
ent
of A
uditi
ng
Stan
dard
s No.
20.
inta
ngib
le a
sset
s sh
all
be h
andl
ed i
n ac
cord
ance
w
ith
the
oper
atin
g pr
oced
ures
fo
r fix
ed
asse
t ci
rcul
atio
n in
th
e C
ompa
ny’s
in
tern
al
cont
rol
syst
em.
2.Pr
oced
ures
fo
r D
eter
min
ing
Trad
ing
Term
s an
dC
ondi
tions
and
Aut
horiz
atio
n Li
mit
(1)
The
tradi
ng t
erm
s an
d co
nditi
ons
and
pric
es o
f ac
quis
ition
or
disp
osal
of
mem
bers
hips
sha
ll be
de
term
ined
by
the
Com
pany
bas
ed o
n th
e m
arke
t fa
ir pr
ice,
with
the
ana
lysi
s re
port
subm
itted
to
the
Pres
iden
t fo
r ap
prov
al. T
he a
mou
nt o
f ea
ch
trans
actio
n le
ss
than
1%
of
th
e C
ompa
ny’s
pa
id-in
ca
pita
l or
N
T$30
0 m
illio
n sh
all
be
repo
rted
to t
he B
oard
of
Dire
ctor
s fo
r ap
prov
al
and
the
soon
est
boar
d m
eetin
g fo
r fu
ture
re
fere
nce;
th
e am
ount
of
ea
ch
trans
actio
n ex
ceed
ing
NT$
300
mill
ion
shal
l be
rep
orte
d to
th
e B
oard
of D
irect
ors f
or a
ppro
val.
(2) T
he tr
adin
g te
rms
and
cond
ition
s an
d pr
ices
of
acqu
isiti
on o
r di
spos
al o
f in
tang
ible
ass
ets
shal
l be
det
erm
ined
by
the
Com
pany
bas
ed o
n th
eap
prai
sal
repo
rt or
mar
ket
fair
pric
e, w
ith t
he
anal
ysis
rep
ort
subm
itted
to
the
Pres
iden
t fo
r ap
prov
al.
The
amou
nt o
f ea
ch t
rans
actio
n le
ss
than
10%
of
the
Com
pany
’s p
aid-
in c
apita
l or
N
T$30
0 m
illio
n sh
all
be
repo
rted
to
the
Cha
irman
of
the
Boa
rd f
or a
ppro
val
and
the
soon
est
boar
d m
eetin
g fo
r fu
ture
ref
eren
ce;
the
amou
nt o
f ea
ch t
rans
actio
n ex
ceed
ing
NT$
300
mill
ion
shal
l be
re
porte
d to
th
e B
oard
of
D
irect
ors f
or a
ppro
val.
3.U
nits
Res
pons
ible
for I
mpl
emen
tatio
nA
fter t
he a
cqui
sitio
n or
dis
posa
l of
mem
bers
hips
or
inta
ngib
le
asse
ts
is
appr
oved
ba
sed
on
the
auth
oriz
atio
n lim
it st
ipul
ated
in
th
e pr
eced
ing
49
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
para
grap
h, th
e de
partm
ent u
sing
suc
h m
embe
rshi
ps
or i
ntan
gibl
e as
sets
and
Fin
ance
Dep
artm
ent
or
Adm
inis
tratio
n D
epar
tmen
t ar
e re
spon
sibl
e fo
r im
plem
enta
tion.
4.
App
rais
al R
epor
t on
Mem
bers
hips
or I
ntan
gibl
e A
sset
sW
here
th
e C
ompa
ny
acqu
ires
or
disp
oses
of
m
embe
rshi
ps
or
inta
ngib
le
asse
ts
and
the
trans
actio
n am
ount
reac
hes
NT$
30 m
illio
n or
mor
e,
exce
pt i
n tra
nsac
tions
with
a g
over
nmen
t ag
ency
, th
e C
ompa
ny
shal
l en
gage
a
certi
fied
publ
ic
acco
unta
nt p
rior
to t
he d
ate
of o
ccur
renc
e of
the
ev
ent t
o re
nder
an
opin
ion
on th
e re
ason
able
ness
of
the
trans
actio
n pr
ice;
the
CPA
sha
ll co
mpl
y w
ith
the
prov
isio
ns o
f St
atem
ent
of A
uditi
ng S
tand
ards
N
o. 2
0 pu
blis
hed
by th
e A
RD
F.
Arti
cle
14
Whe
n th
e C
ompa
ny in
tend
s to
acq
uire
or d
ispo
se o
f rea
l pr
oper
ty f
rom
or
to a
rel
ated
par
ty,
rega
rdle
ss o
f th
e am
ount
, or
whe
n it
inte
nds
to a
cqui
re o
r di
spos
e of
as
sets
oth
er th
an re
al p
rope
rty fr
om o
r to
a re
late
d pa
rty
at t
he a
mou
nt r
each
ing
20%
of
the
Com
pany
’s p
aid-
in
capi
tal,
10%
of i
ts to
tal a
sset
s or N
T$30
0 m
illio
n, e
xcep
t in
tra
ding
of
go
vern
men
t bo
nds
or
bond
s un
der
repu
rcha
se a
nd r
esal
e ag
reem
ents
, or
sub
scrip
tion
or
repu
rcha
se o
f do
mes
tic m
oney
mar
ket
fund
s is
sued
by
secu
ritie
s in
vest
men
t tru
st e
nter
pris
es,
the
Com
pany
m
ay n
ot p
roce
ed t
o en
ter
into
a t
rans
actio
n co
ntra
ct o
r m
ake
a pa
ymen
t un
til t
he f
ollo
win
g m
atte
rs h
ave
been
ap
prov
ed b
y m
ore
than
hal
f of
all
Aud
it C
omm
ittee
m
embe
rs a
nd th
e B
oard
of D
irect
ors:
1.
The
purp
ose,
nec
essi
ty a
nd a
ntic
ipat
ed b
enef
it of
the
acqu
isiti
on o
r dis
posa
l of a
sset
s.2.
The
reas
on fo
r cho
osin
g th
e re
late
d pa
rty a
s a
tradi
ngco
unte
rpar
ty.
3.W
ith re
spec
t to
the
acqu
isiti
on o
f rea
l pro
perty
from
are
late
d pa
rty,
info
rmat
ion
rega
rdin
g ap
prai
sal
of t
he
Whe
n th
e C
ompa
ny in
tend
s to
acq
uire
or
disp
ose
of r
eal
prop
erty
from
or t
o a
rela
ted
party
and
whe
n it
inte
nds
to
acqu
ire o
r di
spos
e of
ass
ets
othe
r th
an r
eal p
rope
rty f
rom
or
to a
rela
ted
party
, reg
ardl
ess
of th
e am
ount
and
exc
ept
in tr
adin
g of
gov
ernm
ent b
onds
or b
onds
und
er re
purc
hase
an
d re
sale
agr
eem
ents
, or
sub
scrip
tion
or r
edem
ptio
n of
do
mes
tic m
oney
mar
ket
fund
s, th
e C
ompa
ny m
ay n
ot
proc
eed
to e
nter
int
o a
trans
actio
n co
ntra
ct o
r m
ake
a pa
ymen
t un
til t
he f
ollo
win
g m
atte
rs h
ave
been
app
rove
d by
th
e B
oard
of
D
irect
ors
and
reco
gniz
ed
by
the
supe
rvis
ors:
1.
The
purp
ose,
nec
essi
ty a
nd a
ntic
ipat
ed b
enef
it of
the
acqu
isiti
on o
r dis
posa
l of a
sset
s.2.
The
reas
on f
or c
hoos
ing
the
rela
ted
party
as
a tra
ding
coun
terp
arty
.3.
With
res
pect
to th
e ac
quis
ition
of
real
pro
perty
fro
m a
rela
ted
party
, in
form
atio
n re
gard
ing
appr
aisa
l of
the
reas
onab
lene
ss o
f th
e pr
elim
inar
y tra
nsac
tion
term
s in
acco
rdan
ce w
ith A
rticl
e 15
and
Arti
cle
16.
4.Th
e da
te a
nd p
rice
at w
hich
the
rela
ted
party
orig
inal
ly
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
50
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
reas
onab
lene
ss o
f the
pre
limin
ary
trans
actio
n te
rms
in
acco
rdan
ce w
ith A
rticl
e 15
and
Arti
cle
16.
4.Th
e da
te
and
pric
e at
w
hich
th
e re
late
d pa
rtyor
igin
ally
acq
uire
d th
e re
al p
rope
rty,
the
orig
inal
tra
ding
cou
nter
party
, an
d th
at t
radi
ng c
ount
erpa
rty's
rela
tions
hip
to th
e co
mpa
ny a
nd th
e re
late
d pa
rty.
5.M
onth
ly c
ash
flow
fore
cast
s fo
r the
yea
r com
men
cing
from
the
antic
ipat
ed m
onth
of s
igni
ng o
f the
con
tract
,an
d ev
alua
tion
of th
e ne
cess
ity o
f the
tran
sact
ion,
and
reas
onab
lene
ss o
f the
fund
s util
izat
ion.
6.A
n ap
prai
sal r
epor
t fro
m a
pro
fess
iona
l app
rais
er o
r aC
PA's
opin
ion
obta
ined
in
co
mpl
ianc
e w
ith
the
prec
edin
g ar
ticle
.7.
Res
trict
ive
cove
nant
s an
d ot
her i
mpo
rtant
stip
ulat
ions
asso
ciat
ed w
ith th
e tra
nsac
tion.
The
calc
ulat
ion
of th
e tra
nsac
tion
amou
nts
refe
rred
to in
th
e pr
eced
ing
para
grap
h sh
all
be m
ade
in a
ccor
danc
e w
ith A
rticl
e 30
her
ein,
and
“w
ithin
the
prec
edin
g ye
ar”
as u
sed
here
in r
efer
s to
the
yea
r pr
eced
ing
the
date
of
occu
rren
ce o
f th
e cu
rren
t tra
nsac
tion.
Ite
ms
that
hav
e be
en a
nnou
nced
in
acco
rdan
ce w
ith t
hese
Pro
cedu
res
need
not
be
coun
ted
tow
ard
the
trans
actio
n am
ount
. W
ith
resp
ect
to
the
acqu
isiti
on
or
disp
osal
of
bu
sine
ss-u
se e
quip
men
t be
twee
n th
e C
ompa
ny a
nd i
ts
pare
nt c
ompa
ny o
r sub
sidi
arie
s, th
e C
ompa
ny’s
Boa
rd o
f D
irect
ors
may
pu
rsua
nt
to
Arti
cle
9 de
lega
te
the
Cha
irman
of t
he B
oard
to d
ecid
e su
ch m
atte
rs w
hen
the
trans
actio
n is
with
in a
cer
tain
am
ount
and
hav
e th
e de
cisi
ons
subs
eque
ntly
sub
mitt
ed to
and
rat
ified
by
the
next
boa
rd o
f dire
ctor
s mee
ting.
W
hen
a m
atte
r is
subm
itted
to th
e B
oard
of D
irect
ors
for
disc
ussi
on p
ursu
ant
to t
he p
rece
ding
par
agra
ph,
the
Boa
rd o
f Dire
ctor
s sh
all t
ake
into
full
cons
ider
atio
n ea
ch
inde
pend
ent
dire
ctor
's op
inio
ns.
If
an
inde
pend
ent
dire
ctor
obj
ects
to
or e
xpre
sses
res
erva
tions
abo
ut a
ny
acqu
ired
the
real
pr
oper
ty,
the
orig
inal
tra
ding
co
unte
rpar
ty,
and
that
tra
ding
co
unte
rpar
ty's
rela
tions
hip
to th
e co
mpa
ny a
nd th
e re
late
d pa
rty.
5.M
onth
ly c
ash
flow
for
ecas
ts f
or th
e ye
ar c
omm
enci
ngfr
om t
he a
ntic
ipat
ed m
onth
of
sign
ing
of t
he c
ontra
ct,
and
eval
uatio
n of
the
nece
ssity
of
the
trans
actio
n, a
ndre
ason
able
ness
of t
he fu
nds u
tiliz
atio
n.6.
An
appr
aisa
l rep
ort f
rom
a p
rofe
ssio
nal a
ppra
iser
or
aC
PA's
opin
ion
obta
ined
in
co
mpl
ianc
e w
ith
the
prec
edin
g ar
ticle
.7.
Res
trict
ive
cove
nant
s an
d ot
her
impo
rtant
stip
ulat
ions
asso
ciat
ed w
ith th
e tra
nsac
tion.
The
calc
ulat
ion
of th
e tra
nsac
tion
amou
nts
refe
rred
to in
th
e pr
eced
ing
para
grap
h sh
all b
e m
ade
in a
ccor
danc
e w
ith
Para
grap
h 2
of
Arti
cle
27
here
in,
and
“with
in
the
prec
edin
g ye
ar”
as u
sed
here
in re
fers
to th
e ye
ar p
rece
ding
th
e da
te o
f oc
curr
ence
of
the
curr
ent
trans
actio
n. I
tem
s th
at h
ave
been
app
rove
d by
the
Boa
rd o
f D
irect
ors
and
reco
gniz
ed b
y th
e su
perv
isor
s ne
ed n
ot b
e co
unte
d to
war
d th
e tra
nsac
tion
amou
nt.
With
resp
ect t
o th
e ac
quis
ition
or d
ispo
sal o
f bus
ines
s-us
e eq
uipm
ent b
etw
een
the
Com
pany
and
its
subs
idia
ries,
the
Com
pany
's B
oard
of D
irect
ors
may
pur
suan
t to
Para
grap
h 2
of A
rticl
e 9
dele
gate
the
Cha
irman
of
the
Boa
rd t
o de
cide
suc
h m
atte
rs w
hen
the
trans
actio
n is
with
in a
ce
rtain
am
ount
an
d ha
ve
the
deci
sion
s su
bseq
uent
ly
subm
itted
to
and
ratif
ied
by t
he n
ext
boar
d of
dire
ctor
s m
eetin
g.
Whe
n a
mat
ter i
s su
bmitt
ed to
the
Boa
rd o
f Dire
ctor
s fo
r di
scus
sion
pu
rsua
nt
to
the
prec
edin
g pa
ragr
aph,
th
e B
oard
of D
irect
ors
shal
l tak
e in
to fu
ll co
nsid
erat
ion
each
in
depe
nden
t di
rect
or's
opin
ions
. If
an
in
depe
nden
t di
rect
or o
bjec
ts t
o or
exp
ress
es r
eser
vatio
ns a
bout
any
m
atte
r, it
shal
l be
reco
rded
in th
e m
inut
es o
f the
boa
rd o
f di
rect
ors m
eetin
g.
51
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
mat
ter,
it sh
all b
e re
cord
ed in
the
min
utes
of t
he b
oard
of
dire
ctor
s mee
ting.
If
app
rova
l of
mor
e th
an h
alf
of a
ll A
udit
Com
mitt
ee
mem
bers
as
requ
ired
in th
e pr
eced
ing
para
grap
h is
not
ob
tain
ed,
thes
e pr
oced
ures
may
be
impl
emen
ted
if ap
prov
ed b
y m
ore
than
two-
third
s of
all
dire
ctor
s, an
d th
e re
solu
tion
of th
e A
udit
Com
mitt
ee s
hall
be re
cord
ed
in t
he m
inut
es o
f th
e bo
ard
mee
ting.
The
ter
ms
“all
Aud
it C
omm
ittee
mem
bers
” an
d “a
ll di
rect
ors”
sha
ll be
co
unte
d as
the
act
ual
num
ber
of p
erso
ns c
urre
ntly
ho
ldin
g th
ose
posi
tions
. A
rticl
e 17
W
here
the
Com
pany
acq
uire
s re
al p
rope
rty f
rom
a
rela
ted
party
and
the
res
ults
of
appr
aisa
ls c
ondu
cted
in
acco
rdan
ce w
ith A
rticl
e 15
and
Arti
cle
16 a
re u
nifo
rmly
lo
wer
than
the
trans
actio
n pr
ice,
the
follo
win
g st
eps s
hall
be ta
ken:
1.
A sp
ecia
l res
erve
shal
l be
set a
side
in a
ccor
danc
e w
ithPa
ragr
aph
1,
Arti
cle
41
of
the
Secu
ritie
s an
dEx
chan
ge A
ct a
gain
st th
e di
ffer
ence
bet
wee
n th
e re
alpr
oper
ty tr
ansa
ctio
n pr
ice
and
the
appr
aise
d co
st, a
ndm
ay n
ot b
e di
strib
uted
or
used
for
cap
ital i
ncre
ase
oris
suan
ce o
f bo
nus
shar
es.
Whe
re a
pub
lic c
ompa
nyus
es t
he e
quity
met
hod
to a
ccou
nt f
or it
s in
vest
men
tin
ano
ther
com
pany
, the
n th
e sp
ecia
l res
erve
cal
led
for
unde
r Pa
ragr
aph
1, A
rticl
e 41
of
the
Secu
ritie
s an
dEx
chan
ge
Act
sh
all
be
set
asid
e pr
o ra
ta
in
apr
opor
tion
cons
iste
nt
with
th
e sh
are
of
publ
icco
mpa
ny's
equi
ty st
ake
in th
e ot
her c
ompa
ny.
2.Th
e A
udit
Com
mitt
ee s
hall
com
ply
with
Arti
cle
218
of th
e C
ompa
ny A
ct.
3.A
ctio
ns
take
n pu
rsua
nt
to
subp
arag
raph
1
and
subp
arag
raph
2 s
hall
be r
epor
ted
to a
sha
reho
lder
s m
eetin
g, a
nd t
he d
etai
ls o
f th
e tra
nsac
tion
shal
l be
di
sclo
sed
in t
he a
nnua
l re
port
and
any
inve
stm
ent
pros
pect
us.
Whe
re th
e C
ompa
ny a
cqui
res
real
pro
perty
from
a re
late
d pa
rty
and
the
resu
lts
of
appr
aisa
ls
cond
ucte
d in
ac
cord
ance
with
Arti
cle
15 a
nd A
rticl
e 16
are
uni
form
ly
low
er th
an th
e tra
nsac
tion
pric
e, th
e fo
llow
ing
step
s sh
all
be ta
ken:
1.
A s
peci
al r
eser
ve s
hall
be s
et a
side
in a
ccor
danc
e w
ithPa
ragr
aph
1, A
rticl
e 41
of t
he S
ecur
ities
and
Exc
hang
eA
ct a
gain
st t
he d
iffer
ence
bet
wee
n th
e re
al p
rope
rtytra
nsac
tion
pric
e an
d th
e ap
prai
sed
cost
, and
may
not
be
dist
ribut
ed o
r us
ed f
or c
apita
l in
crea
se o
r is
suan
ce o
fbo
nus
shar
es. W
here
a p
ublic
com
pany
use
s th
e eq
uity
met
hod
to
acco
unt
for
its
inve
stm
ent
in
anot
her
com
pany
, th
en t
he s
peci
al r
eser
ve c
alle
d fo
r un
der
Para
grap
h 1,
Arti
cle
41 o
f the
Sec
uriti
es a
nd E
xcha
nge
Act
sha
ll be
set
asi
de p
ro ra
ta in
a p
ropo
rtion
con
sist
ent
with
the
shar
e of
pub
lic c
ompa
ny's
equi
ty s
take
in th
eot
her c
ompa
ny.
2.Su
perv
isor
s sh
all
com
ply
with
Arti
cle
218
of t
heC
ompa
ny A
ct.
3.A
ctio
ns
take
n pu
rsua
nt
to
subp
arag
raph
1
and
subp
arag
raph
2 s
hall
be r
epor
ted
to a
sha
reho
lder
s m
eetin
g, a
nd t
he d
etai
ls o
f th
e tra
nsac
tion
shal
l be
di
sclo
sed
in t
he a
nnua
l re
port
and
any
inve
stm
ent
pros
pect
us.
Acc
ordi
ng to
the
actu
al p
ract
ice
52
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
The
Com
pany
that
has
set
asi
de a
spe
cial
res
erve
und
er
the
prec
edin
g pa
ragr
aph
may
not
util
ize
the
spec
ial
rese
rve
until
it
has
reco
gniz
ed a
los
s on
dec
line
in
mar
ket v
alue
of t
he a
sset
s it
purc
hase
d at
a p
rem
ium
, or
they
hav
e be
en d
ispo
sed
of, o
r ad
equa
te c
ompe
nsat
ion
has
been
mad
e, o
r the
sta
tus
quo
ante
has
bee
n re
stor
ed,
or t
here
is
othe
r ev
iden
ce c
onfir
min
g th
at t
here
was
no
thin
g un
reas
onab
le a
bout
the
trans
actio
n, a
nd th
e FS
C
has g
iven
its c
onse
nt.
Whe
n th
e C
ompa
ny o
btai
ns re
al p
rope
rty fr
om a
rela
ted
party
, it
shal
l al
so c
ompl
y w
ith t
he p
rece
ding
tw
o pa
ragr
aphs
if th
ere
is o
ther
evi
denc
e in
dica
ting
that
the
acqu
isiti
on w
as n
ot a
n ar
m’s
leng
th tr
ansa
ctio
n.
The
Com
pany
tha
t ha
s se
t as
ide
a sp
ecia
l re
serv
e un
der
the
prec
edin
g pa
ragr
aph
may
no
t ut
ilize
th
e sp
ecia
l re
serv
e un
til it
has
reco
gniz
ed a
loss
on
decl
ine
in m
arke
t va
lue
of th
e as
sets
it p
urch
ased
at a
pre
miu
m, o
r the
y ha
ve
been
dis
pose
d of
, or
ade
quat
e co
mpe
nsat
ion
has
been
m
ade,
or t
he s
tatu
s qu
o an
te h
as b
een
rest
ored
, or t
here
is
othe
r ev
iden
ce
conf
irmin
g th
at
ther
e w
as
noth
ing
unre
ason
able
abo
ut th
e tra
nsac
tion,
and
the
FSC
has
giv
en
its c
onse
nt.
Whe
n th
e C
ompa
ny o
btai
ns r
eal
prop
erty
fro
m a
rel
ated
pa
rty,
it sh
all
also
co
mpl
y w
ith
the
prec
edin
g tw
o pa
ragr
aphs
if
ther
e is
oth
er e
vide
nce
indi
catin
g th
at t
he
acqu
isiti
on w
as n
ot a
n ar
m’s
leng
th tr
ansa
ctio
n.
Arti
cle
21
The
Com
pany
eng
agin
g in
der
ivat
ives
tra
ding
sha
ll es
tabl
ish
a lo
g bo
ok i
n w
hich
det
ails
of
the
type
s an
d am
ount
s of
der
ivat
ives
tra
ding
eng
aged
in,
Boa
rd o
f D
irect
ors’
app
rova
l dat
es, a
nd th
e m
atte
rs re
quire
d to
be
care
fully
eva
luat
ed u
nder
Sub
para
grap
h 4
of A
rticl
e 19
an
d Su
bpar
agra
ph 2
of P
arag
raph
1 a
nd S
ubpa
ragr
aph
1 of
Par
agra
ph 2
of A
rticl
e 20
shal
l be
reco
rded
in d
etai
l in
the
log
book
. A
pu
blic
co
mpa
ny's
inte
rnal
au
dit
pers
onne
l sh
all
perio
dica
lly m
ake
a de
term
inat
ion
of t
he s
uita
bilit
y of
in
tern
al c
ontro
ls o
n de
rivat
ives
and
con
duct
a m
onth
ly
audi
t of h
ow fa
ithfu
lly d
eriv
ativ
es tr
adin
g by
the
tradi
ng
depa
rtmen
t ad
here
s to
the
pro
cedu
res
for
enga
ging
in
deriv
ativ
es t
radi
ng, a
nd p
repa
re a
n au
dit
repo
rt. I
f an
y m
ater
ial
viol
atio
n is
dis
cove
red,
the
Aud
it C
omm
ittee
sh
all b
e no
tifie
d in
writ
ing.
The
Com
pany
en
gagi
ng
in
deriv
ativ
es
tradi
ng
shal
l es
tabl
ish
a lo
g bo
ok i
n w
hich
det
ails
of
the
type
s an
d am
ount
s of
der
ivat
ives
tra
ding
eng
aged
in,
Boa
rd o
f D
irect
ors’
app
rova
l dat
es, a
nd th
e m
atte
rs r
equi
red
to b
e ca
refu
lly e
valu
ated
und
er S
ubpa
ragr
aph
4 of
Arti
cle
19
and
Subp
arag
raph
2 o
f Par
agra
ph 1
and
Sub
para
grap
h 1
of
Para
grap
h 2
of A
rticl
e 20
sha
ll be
reco
rded
in d
etai
l in
the
log
book
. A
pu
blic
co
mpa
ny's
inte
rnal
au
dit
pers
onne
l sh
all
perio
dica
lly m
ake
a de
term
inat
ion
of t
he s
uita
bilit
y of
in
tern
al c
ontro
ls o
n de
rivat
ives
and
con
duct
a m
onth
ly
audi
t of
how
fai
thfu
lly d
eriv
ativ
es tr
adin
g by
the
tradi
ng
depa
rtmen
t ad
here
s to
the
pro
cedu
res
for
enga
ging
in
deriv
ativ
es t
radi
ng,
and
prep
are
an a
udit
repo
rt. I
f an
y m
ater
ial
viol
atio
n is
dis
cove
red,
all
supe
rvis
ors
shal
l be
no
tifie
d in
writ
ing.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
22
The
Com
pany
th
at
cond
ucts
a
mer
ger,
dem
erge
r, ac
quis
ition
, or t
rans
fer o
f sha
res,
prio
r to
conv
enin
g th
e bo
ard
of d
irect
ors t
o re
solv
e on
the
mat
ter,
shal
l eng
age
a C
PA,
atto
rney
, or
sec
uriti
es u
nder
writ
er t
o gi
ve a
n op
inio
n on
the
rea
sona
blen
ess
of t
he s
hare
exc
hang
e ra
tio, a
cqui
sitio
n pr
ice,
or
dist
ribut
ion
of c
ash
or o
ther
The
Com
pany
th
at
cond
ucts
a
mer
ger,
dem
erge
r, ac
quis
ition
, or
trans
fer
of s
hare
s, pr
ior
to c
onve
ning
the
boar
d of
dire
ctor
s to
reso
lve
on th
e m
atte
r, sh
all e
ngag
e a
CPA
, at
torn
ey,
or s
ecur
ities
und
erw
riter
to
give
an
opin
ion
on t
he r
easo
nabl
enes
s of
the
sha
re e
xcha
nge
ratio
, ac
quis
ition
pric
e, o
r di
strib
utio
n of
cas
h or
oth
er
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
53
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
prop
erty
to s
hare
hold
ers,
and
subm
it it
to th
e B
oard
of
Dire
ctor
s fo
r de
liber
atio
n an
d pa
ssag
e. H
owev
er,
an
opin
ion
rend
ered
by
an e
xper
t on
the
reas
onab
lene
ss o
f a
mer
ger
with
sub
sidi
arie
s w
hose
100
% o
f sh
ares
is
sued
or
tota
l cap
ital a
re d
irect
ly o
r ind
irect
ly h
eld
by
the
Com
pany
or
a m
erge
r be
twee
n su
bsid
iarie
s w
hose
10
0% o
f sh
ares
iss
ued
or t
otal
cap
ital
are
dire
ctly
or
indi
rect
ly h
eld
by th
e C
ompa
ny m
ay b
e ex
empt
ed.
prop
erty
to
shar
ehol
ders
, and
sub
mit
it to
the
Boa
rd o
f D
irect
ors f
or d
elib
erat
ion
and
pass
age.
Arti
cle
30
Proc
edur
es fo
r Pub
lic D
iscl
osur
e of
Info
rmat
ion
Und
er a
ny o
f the
follo
win
g ci
rcum
stan
ces,
the
Com
pany
ac
quiri
ng o
r dis
posi
ng o
f ass
ets
shal
l pub
licly
ann
ounc
e an
d re
port
the
rele
vant
in
form
atio
n on
th
e FS
C's
desi
gnat
ed
web
site
in
th
e ap
prop
riate
fo
rmat
as
pr
escr
ibed
by
regu
latio
ns w
ithin
2 d
ays
com
men
cing
im
med
iate
ly fr
om th
e da
te o
f occ
urre
nce
of th
e ev
ent:
1.A
cqui
sitio
n or
dis
posa
l of
real
pro
perty
fro
m o
r to
are
late
d pa
rty, r
egar
dles
s of
the
amou
nt, o
r acq
uisi
tion
or d
ispo
sal o
f as
sets
oth
er th
an r
eal p
rope
rty f
rom
or
to
a re
late
d pa
rty
whe
re
the
trans
actio
n am
ount
reac
hes
20 p
erce
nt o
r m
ore
of p
aid-
in c
apita
l, 10
perc
ent
or m
ore
of t
he c
ompa
ny's
tota
l as
sets
, or
NT$
300
mill
ion
or m
ore;
pro
vide
d, t
his
shal
l no
tap
ply
to tr
adin
g of
gov
ernm
ent b
onds
or b
onds
und
erre
purc
hase
and
res
ale
agre
emen
ts, o
r su
bscr
iptio
n or
repu
rcha
se o
f dom
estic
mon
ey m
arke
t fun
ds is
sued
by
secu
ritie
s inv
estm
ent t
rust
ent
erpr
ises
.2.
Mer
ger,
dem
erge
r, ac
quis
ition
, or t
rans
fer o
f sha
res.
3.Lo
sses
from
der
ivat
ives
trad
ing
reac
hing
the
limits
on
aggr
egat
e lo
sses
or
loss
es o
n in
divi
dual
con
tract
s se
tou
t in
the
proc
edur
es a
dopt
ed b
y th
e C
ompa
ny.
4.W
here
the
typ
e of
ass
et a
cqui
red
or d
ispo
sed
iseq
uipm
ent
for
busi
ness
use
, the
tra
ding
cou
nter
party
is
not
a r
elat
ed p
arty
, an
d th
e tra
nsac
tion
amou
nt
mee
ts o
ne o
f the
follo
win
g re
quire
men
ts:
(1) T
he p
aid-
in c
apita
l is
less
than
NT$
10 b
illio
n an
d
Proc
edur
es fo
r Pub
lic D
iscl
osur
e of
Info
rmat
ion
Und
er a
ny o
f th
e fo
llow
ing
circ
umst
ance
s, th
e C
ompa
ny
acqu
iring
or
disp
osin
g of
ass
ets
shal
l pu
blic
ly a
nnou
nce
and
repo
rt th
e re
leva
nt
info
rmat
ion
on
the
FSC
's de
sign
ated
web
site
in th
e ap
prop
riate
form
at a
s pr
escr
ibed
by
reg
ulat
ions
with
in 2
day
s co
mm
enci
ng i
mm
edia
tely
fr
om th
e da
te o
f occ
urre
nce
of th
e ev
ent:
1.A
cqui
sitio
n or
dis
posa
l of
rea
l pr
oper
ty f
rom
or
to a
rela
ted
party
, or
acqu
isiti
on o
r di
spos
al o
f as
sets
oth
erth
an r
eal p
rope
rty f
rom
or
to a
rel
ated
par
ty w
here
the
trans
actio
n am
ount
rea
ches
20
perc
ent
or m
ore
ofpa
id-in
cap
ital,
10 p
erce
nt o
r m
ore
of t
he c
ompa
ny's
tota
l ass
ets,
or N
T$30
0 m
illio
n or
mor
e; p
rovi
ded,
this
shal
l not
app
ly to
trad
ing
of g
over
nmen
t bon
ds o
r bon
dsun
der r
epur
chas
e an
d re
sale
agr
eem
ents
, or s
ubsc
riptio
nor
rede
mpt
ion
of d
omes
tic m
oney
mar
ket f
unds
.2.
Mer
ger,
dem
erge
r, ac
quis
ition
, or t
rans
fer o
f sha
res.
3.Lo
sses
fro
m d
eriv
ativ
es tr
adin
g re
achi
ng th
e lim
its o
nag
greg
ate
loss
es o
r lo
sses
on
indi
vidu
al c
ontra
cts
set
out i
n th
e pr
oced
ures
ado
pted
by
the
Com
pany
.4.
Whe
re a
n as
set
trans
actio
n ot
her
than
any
of
thos
ere
ferr
ed t
o in
the
pre
cedi
ng t
hree
sub
para
grap
hs,
a di
spos
al o
f re
ceiv
able
s by
a f
inan
cial
inst
itutio
n, o
r an
in
vest
men
t in
the
mai
nlan
d C
hina
are
a re
ache
s 20
pe
rcen
t or
mor
e of
pai
d-in
cap
ital o
r N
T$30
0 m
illio
n;
prov
ided
, th
is
shal
l no
t ap
ply
to
the
follo
win
g ci
rcum
stan
ces:
Acc
ordi
ng to
the
gove
rnin
g la
w a
nd
regu
latio
ns
54
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
the
trans
actio
n am
ount
is m
ore
than
NT$
500
mill
ion.
(2
) The
pai
d-in
cap
ital i
s mor
e th
an N
T$10
bill
ion
and
the
trans
actio
n am
ount
is m
ore
than
NT$
1 bi
llion
. 5.
Whe
re l
and
is a
cqui
red
unde
r an
arr
ange
men
t on
enga
ging
oth
ers
to b
uild
on
the
Com
pany
's ow
n la
nd,
enga
ging
ot
hers
to
bu
ild
on
rent
ed
land
, jo
int
cons
truct
ion
and
allo
catio
n of
hou
sing
uni
ts,
join
t co
nstru
ctio
n an
d al
loca
tion
of o
wne
rshi
p pe
rcen
tage
s, or
join
t con
stru
ctio
n an
d se
para
te sa
le, a
nd th
e am
ount
th
e C
ompa
ny e
xpec
ts t
o in
vest
in
the
trans
actio
n is
le
ss th
an N
T$50
0 m
illio
n.
6.W
here
an
asse
t tra
nsac
tion
othe
r th
an a
ny o
f th
ose
refe
rred
to
in t
he p
rece
ding
fiv
e su
bpar
agra
phs,
adi
spos
al o
f rec
eiva
bles
by
a fin
anci
al in
stitu
tion,
or a
nin
vest
men
t in
the
mai
nlan
d C
hina
are
a re
ache
s 20
perc
ent o
r mor
e of
pai
d-in
cap
ital o
r NT$
300
mill
ion;
prov
ided
, th
is
shal
l no
t ap
ply
to
the
follo
win
gci
rcum
stan
ces:
(1) T
radi
ng o
f gov
ernm
ent b
onds
. (2
) Se
curit
ies
tradi
ng b
y in
vest
men
t pr
ofes
sion
als
on
fore
ign
or
dom
estic
se
curit
ies
exch
ange
s or
over
-the-
coun
ter
mar
kets
, or
su
bscr
iptio
n of
co
rpor
ate
bond
s an
d ge
nera
l fin
anci
al b
onds
not
in
volv
ing
no e
quity
in
the
dom
estic
prim
ary
mar
ket
or s
ecur
ities
by
a se
curit
ies
firm
due
to
busi
ness
ne
eds
or a
sec
uriti
es f
irm r
ecom
men
ded
for
liste
d co
mpa
nies
at
th
e em
ergi
ng
stoc
k m
arke
t in
ac
cord
ance
with
the
regu
latio
ns o
f Tai
pei E
xcha
nge.
(3) T
radi
ng o
f bon
ds u
nder
repu
rcha
se/re
sale
agr
eem
ents
, or
sub
scrip
tion
or r
epur
chas
e of
dom
estic
mon
ey
mar
ket
fund
s is
sued
by
secu
ritie
s in
vest
men
t tru
st
ente
rpris
es.
The
amou
nt o
f tra
nsac
tions
abo
ve s
hall
be c
alcu
late
d as
fo
llow
s an
d “W
ithin
the
pre
cedi
ng y
ear”
as
used
in
the
prec
edin
g pa
ragr
aph
refe
rs to
the
year
pre
cedi
ng th
e da
te (1
) Tra
ding
of g
over
nmen
t bon
ds.
(2)
Secu
ritie
s tra
ding
by
in
vest
men
t pr
ofes
sion
als
on
fore
ign
or
dom
estic
se
curit
ies
exch
ange
s or
over
-the-
coun
ter
mar
kets
, or
subs
crip
tion
of s
ecur
ities
by
a s
ecur
ities
firm
, eith
er in
the
prim
ary
mar
ket o
r in
acco
rdan
ce w
ith re
leva
nt re
gula
tions
. (3
) Tr
adin
g of
bon
ds u
nder
rep
urch
ase/
resa
le a
gree
men
ts,
or s
ubsc
riptio
n or
red
empt
ion
of d
omes
tic m
oney
m
arke
t fun
ds.
(4)
Whe
re t
he t
ype
of a
sset
acq
uire
d or
dis
pose
d is
eq
uipm
ent/m
achi
nery
for
bus
ines
s us
e, t
he t
radi
ng
coun
terp
arty
is n
ot a
rel
ated
par
ty, a
nd th
e tra
nsac
tion
amou
nt is
less
than
NT$
500
mill
ion.
(5
) W
here
lan
d is
acq
uire
d un
der
an a
rran
gem
ent
on
enga
ging
oth
ers
to b
uild
on
the
Com
pany
's ow
n la
nd,
enga
ging
ot
hers
to
bu
ild
on
rent
ed
land
, jo
int
cons
truct
ion
and
allo
catio
n of
hou
sing
uni
ts,
join
t co
nstru
ctio
n an
d al
loca
tion
of o
wne
rshi
p pe
rcen
tage
s, or
join
t con
stru
ctio
n an
d se
para
te s
ale,
and
the
amou
nt
the
Com
pany
exp
ects
to in
vest
in th
e tra
nsac
tion
is le
ss
than
NT$
500
mill
ion.
Th
e am
ount
of
trans
actio
ns a
bove
sha
ll be
cal
cula
ted
as
follo
ws
and
“With
in t
he p
rece
ding
yea
r” a
s us
ed i
n th
e pr
eced
ing
para
grap
h re
fers
to th
e ye
ar p
rece
ding
the
date
of
oc
curr
ence
of
th
e cu
rren
t tra
nsac
tion.
Ite
ms
duly
an
noun
ced
in a
ccor
danc
e w
ith th
e re
gula
tions
nee
d no
t be
coun
ted
tow
ard
the
trans
actio
n am
ount
.
1.Th
e am
ount
of a
ny in
divi
dual
tran
sact
ion.
2.Th
e cu
mul
ativ
e tra
nsac
tion
amou
nt o
f ac
quis
ition
s an
ddi
spos
als
of th
e sa
me
type
of
unde
rlyin
g as
set w
ith th
esa
me
tradi
ng c
ount
erpa
rty w
ithin
the
prec
edin
g ye
ar.
3.Th
e cu
mul
ativ
e tra
nsac
tion
amou
nt o
f re
al p
rope
rtyac
quis
ition
s an
d di
spos
als
(cum
ulat
ive
acqu
isiti
ons
and
disp
osal
s, re
spec
tivel
y) w
ithin
the
sam
e de
velo
pmen
t pr
ojec
t with
in th
e pr
eced
ing
year
.
55
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
of o
ccur
renc
e of
the
cur
rent
tra
nsac
tion.
Ite
ms
duly
an
noun
ced
in a
ccor
danc
e w
ith t
he r
egul
atio
ns n
eed
not
be c
ount
ed to
war
d th
e tra
nsac
tion
amou
nt.
1.
The
amou
nt o
f any
indi
vidu
al tr
ansa
ctio
n.2.
The
cum
ulat
ive
trans
actio
n am
ount
of a
cqui
sitio
ns a
nddi
spos
als
of th
e sa
me
type
of u
nder
lyin
g as
set w
ith th
esa
me
tradi
ng c
ount
erpa
rty w
ithin
the
prec
edin
g ye
ar.
3.Th
e cu
mul
ativ
e tra
nsac
tion
amou
nt o
f re
al p
rope
rty
acqu
isiti
ons a
nd d
ispo
sals
(cum
ulat
ive
acqu
isiti
ons a
nddi
spos
als,
resp
ectiv
ely)
with
in t
he s
ame
deve
lopm
ent
proj
ect w
ithin
the
prec
edin
g ye
ar.
4.Th
e cu
mul
ativ
e tra
nsac
tion
amou
nt o
f acq
uisi
tions
and
disp
osal
s (c
umul
ativ
e ac
quis
ition
s an
d di
spos
als,
resp
ectiv
ely)
of t
he s
ame
secu
rity
with
in th
e pr
eced
ing
year
.“W
ithin
the
pre
cedi
ng y
ear”
as
used
in
the
prec
edin
g pa
ragr
aph
refe
rs t
o th
e ye
ar p
rece
ding
the
dat
e of
oc
curr
ence
of
th
e cu
rren
t tra
nsac
tion.
Ite
ms
duly
an
noun
ced
in a
ccor
danc
e w
ith th
ese
Proc
edur
es n
eed
not
be c
ount
ed to
war
d th
e tra
nsac
tion
amou
nt.
The
Com
pany
sha
ll co
mpi
le m
onth
ly r
epor
ts o
n th
e st
atus
of d
eriv
ativ
es tr
adin
g en
gage
d in
up
to th
e en
d of
th
e pr
eced
ing
mon
th b
y its
elf
and
any
subs
idia
ries
that
ar
e no
t do
mes
tic
publ
ic
com
pani
es
and
ente
r th
e in
form
atio
n in
the
pres
crib
ed fo
rmat
into
the
info
rmat
ion
repo
rting
web
site
des
igna
ted
by th
e FS
C b
y th
e 10
th d
ay
of e
ach
mon
th.
Whe
n th
e C
ompa
ny a
t the
tim
e of
pub
lic a
nnou
ncem
ent
mak
es a
n er
ror
or o
mis
sion
in
an i
tem
req
uire
d by
re
gula
tions
to b
e pu
blic
ly a
nnou
nced
and
so
is r
equi
red
to c
orre
ct i
t, al
l th
e ite
ms
shal
l be
aga
in p
ublic
ly
anno
unce
d an
d re
porte
d in
the
ir en
tiret
y w
ithin
2 d
ays
com
men
cing
im
med
iate
ly f
rom
the
dat
e of
kno
win
g of
th
e er
ror o
r om
issi
on.
The
Com
pany
acq
uirin
g or
disp
osin
g of
ass
ets s
hall
keep
4.Th
e cu
mul
ativ
e tra
nsac
tion
amou
nt o
f ac
quis
ition
s an
ddi
spos
als
(cum
ulat
ive
acqu
isiti
ons
and
disp
osal
s,re
spec
tivel
y) o
f th
e sa
me
secu
rity
with
in th
e pr
eced
ing
year
.“W
ithin
the
pre
cedi
ng y
ear”
as
used
in
the
prec
edin
g pa
ragr
aph
refe
rs
to
the
year
pr
eced
ing
the
date
of
oc
curr
ence
of
th
e cu
rren
t tra
nsac
tion.
Ite
ms
duly
an
noun
ced
in a
ccor
danc
e w
ith th
ese
Proc
edur
es n
eed
not
be c
ount
ed to
war
d th
e tra
nsac
tion
amou
nt.
The
Com
pany
sha
ll co
mpi
le m
onth
ly re
ports
on
the
stat
us
of d
eriv
ativ
es t
radi
ng e
ngag
ed i
n up
to
the
end
of t
he
prec
edin
g m
onth
by
itsel
f and
any
subs
idia
ries t
hat a
re n
ot
dom
estic
pub
lic c
ompa
nies
and
ent
er t
he i
nfor
mat
ion
in
the
pres
crib
ed
form
at
into
th
e in
form
atio
n re
porti
ng
web
site
des
igna
ted
by t
he F
SC b
y th
e 10
th d
ay o
f ea
ch
mon
th.
Whe
n th
e C
ompa
ny a
t th
e tim
e of
pub
lic a
nnou
ncem
ent
mak
es a
n er
ror
or o
mis
sion
in
an i
tem
req
uire
d by
re
gula
tions
to b
e pu
blic
ly a
nnou
nced
and
so
is re
quire
d to
co
rrec
t it,
all t
he it
ems
shal
l be
agai
n pu
blic
ly a
nnou
nced
an
d re
porte
d in
thei
r ent
irety
.
56
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
all
rele
vant
co
ntra
cts,
mee
ting
min
utes
, lo
g bo
oks,
appr
aisa
l re
ports
an
d C
PA,
atto
rney
, an
d se
curit
ies
unde
rwrit
er
opin
ions
at
th
e co
mpa
ny
head
quar
ters
, w
here
the
y sh
all
be r
etai
ned
for
5 ye
ars
exce
pt w
here
an
othe
r act
pro
vide
s oth
erw
ise.
A
rticl
e 30
Th
ese
Proc
edur
es w
ere
esta
blis
hed
on M
ay 3
, 199
7.Th
e 1st
am
endm
ent w
as m
ade
on N
ovem
ber 2
9, 1
999.
Th
e 2nd
am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 3rd
am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
4th a
men
dmen
t was
mad
e on
May
27,
200
4.
The
5th a
men
dmen
t was
mad
e on
June
16,
200
6.
The
6th a
men
dmen
t was
mad
e on
June
15,
200
7.
The
7th a
men
dmen
t was
mad
e on
June
13,
201
2.
The
8th a
men
dmen
t was
mad
e on
June
18,
201
4.
The
9th a
men
dmen
t was
mad
e on
May
26,
201
7.
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1st
am
endm
ent w
as m
ade
on N
ovem
ber 2
9, 1
999.
Th
e 2nd
am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 3rd
am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
4th a
men
dmen
t was
mad
e on
May
27,
200
4.
The
5th a
men
dmen
t was
mad
e on
June
16,
200
6.
The
6th a
men
dmen
t was
mad
e on
June
15,
200
7.
The
7th a
men
dmen
t was
mad
e on
June
13,
201
2.
The
8th a
men
dmen
t was
mad
e on
June
18,
201
4.
Upd
ate
the
date
of
the
amen
dmen
t
57
< A
ttach
men
t V
II>
Adv
ante
ch C
o., L
td.
Proc
edur
es fo
r Len
ding
Fun
ds to
Oth
er P
artie
s N
o.
Aft
er a
men
dm
ent
Bef
ore
amen
dm
ent
Rem
ark
A
rticl
e 3
Lend
ing
Cou
nter
parts
Le
ndin
g co
unte
rpar
ts i
n ne
ed o
f sh
ort-t
erm
fin
anci
ng
shal
l be
limite
d to
a s
ubsi
diar
y in
whi
ch th
e C
ompa
ny
hold
s 50%
of t
he v
otin
g sh
ares
or c
ompa
nies
with
the
de
fact
o co
ntro
l ha
ving
the
nee
d of
sho
rt-te
rm f
inan
cing
du
e to
bus
ines
s nee
ds.
The
phra
se “
shor
t-ter
m”
men
tione
d ab
ove
shal
l m
ean
with
in o
ne y
ear o
r a b
usin
ess c
ycle
(whi
chev
er is
long
er).
Fore
ign
com
pani
es, o
f w
hich
the
Com
pany
dire
ctly
or
indi
rect
ly h
olds
100
% o
f the
vot
ing
shar
es, i
f eng
aged
in
the
lend
ing
busi
ness
, w
ill
be
exem
pt
from
th
e re
stric
tions
refe
rred
to in
the
first
par
agra
ph o
f Arti
cle
4.
Lend
ing
Cou
nter
parts
C
ompa
nies
or f
irms i
n ne
ed o
f sho
rt-te
rm fi
nanc
ing.
Le
ndin
g co
unte
rpar
ts i
n ne
ed o
f sh
ort-t
erm
fin
anci
ng
shal
l be
lim
ited
to a
sub
sidi
ary
in w
hich
the
Com
pany
ho
lds
50%
of t
he v
otin
g sh
ares
or c
ompa
nies
with
the
de
fact
o co
ntro
l hav
ing
the
need
of s
hort-
term
fina
ncin
g du
e to
bus
ines
s nee
ds.
The
phra
se “
shor
t-ter
m”
men
tione
d ab
ove
shal
l m
ean
with
in o
ne y
ear o
r a b
usin
ess c
ycle
(whi
chev
er is
long
er).
Fore
ign
com
pani
es,
of w
hich
the
Com
pany
dire
ctly
or
indi
rect
ly h
olds
100
% o
f the
vot
ing
shar
es, i
f eng
aged
in
the
lend
ing
busi
ness
, will
be
exem
pt fr
om th
e re
stric
tions
re
ferr
ed to
in th
e fir
st p
arag
raph
of A
rticl
e 4.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
4 Le
ndin
g A
mou
nt a
nd F
inan
cing
Lim
it Th
e to
tal a
mou
nt le
nt to
oth
ers (
loan
able
fund
s) sh
all n
ot
exce
ed 2
0% o
f th
e ne
t val
ue o
f th
e C
ompa
ny. T
he to
tal
lend
ing
amou
nt o
f an
ind
ivid
ual
borr
ower
sha
ll no
t ex
ceed
50%
of t
he to
tal a
mou
nt o
f loa
nabl
e fu
nds.
Lend
ing
Am
ount
and
Fin
anci
ng L
imit
1. T
he t
otal
am
ount
len
t to
oth
ers
(loan
able
fun
ds)
shal
lno
t exc
eed
20%
of t
he n
et v
alue
of t
he C
ompa
ny. T
he
tota
l le
ndin
g am
ount
of
an i
ndiv
idua
l bo
rrow
er s
hall
not e
xcee
d 50
% o
f the
tota
l am
ount
of l
oana
ble
fund
s. 2.
In t
he c
ase
of l
endi
ng f
unds
to
com
pani
es o
r fir
ms
who
hav
e a
busi
ness
rel
atio
nshi
p w
ith t
he C
ompa
ny,
the
tota
l le
ndin
g am
ount
of
an i
ndiv
idua
l bo
rrow
ersh
all n
ot e
xcee
d 50
% o
f th
e to
tal a
mou
nt o
f lo
anab
lefu
nds
or th
e to
tal a
mou
nt o
f th
e bu
sine
ss tr
ansa
ctio
nsbe
twee
n th
e C
ompa
ny a
nd th
e bo
rrow
er, w
hich
ever
islo
wer
, an
d th
e m
axim
um a
mou
nt s
tipul
ated
in
the
prec
edin
g pa
ragr
aph.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
8 Pr
oced
ures
for F
und
Lend
ing
and
Det
aile
d R
evie
w
1.A
pplic
atio
n:A
. W
hen
appl
ying
for
a l
oan
with
the
Com
pany
, a
borr
ower
sh
all
subm
it th
e ap
plic
atio
n fo
rm
or
an
offic
ial l
ette
r sp
ecify
ing
the
amou
nt, t
erm
and
pur
pose
Proc
edur
es fo
r Fun
d Le
ndin
g an
d D
etai
led
Rev
iew
1.
App
licat
ion:
A.
Whe
n ap
plyi
ng f
or a
loa
n w
ith t
he C
ompa
ny,
a bo
rrow
er s
hall
subm
it th
e ap
plic
atio
n fo
rm o
r an
offi
cial
le
tter
spec
ifyin
g th
e am
ount
, te
rm a
nd p
urpo
se o
f th
e
Acc
ordi
ng to
the
actu
al p
ract
ice
58
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
of th
e lo
an to
the
Com
pany
’s F
inan
ce D
epar
tmen
t.
B.
Whe
re a
loa
n is
giv
en d
ue t
o ne
eds
aris
ing
from
bu
sine
ss
deal
ings
, th
e fin
ance
un
it sh
all
eval
uate
w
heth
er th
e am
ount
of
the
loan
is c
omm
ensu
rate
with
th
e am
ount
of t
rans
actio
ns a
nd in
com
plia
nce
with
thes
e O
pera
tiona
l Pro
cedu
res.
C
. W
here
a b
orro
wer
in
need
of
shor
t-ter
m f
inan
cing
ap
plie
s fo
r a
loan
, th
e C
ompa
ny s
hall
eval
uate
the
ne
cess
ity o
f fin
anci
ng a
nd i
nves
tigat
e th
e bo
rrow
er’s
cr
edit
stat
us.
D
. Th
e lo
an,
afte
r be
ing
verif
ied
to b
e fe
asib
le u
pon
anal
ysis
, sh
all
be s
ubm
itted
to
the
Cha
irman
of
the
Boa
rd a
nd th
e bo
ard
mee
ting
for a
ppro
val.
2.
Cre
dit I
nves
tigat
ion
and
Ris
k A
sses
smen
tA
. For
a fi
rst-t
ime
borr
ower
, the
bor
row
er s
hall
prov
ide
basi
c in
form
atio
n an
d fin
anci
al in
form
atio
n to
faci
litat
e th
e cr
edit
inve
stig
atio
n.
B. F
or a
sub
sequ
ent
borr
ower
, the
cre
dit
inve
stig
atio
n sh
all b
e ca
rrie
d ou
t whe
n th
e bo
rrow
er a
pplie
s fo
r th
e re
new
al. I
n ca
se o
f a
maj
or o
r ur
gent
eve
nt, t
he c
redi
t in
vest
igat
ion
shal
l be
carr
ied
out a
t any
tim
e de
pend
ing
on th
e ac
tual
nee
ds.
C. I
f the
bor
row
er is
in g
ood
finan
cial
con
ditio
n an
d ha
s ha
d th
e an
nual
fin
anci
al s
tate
men
ts a
udite
d by
CPA
s, th
e in
vest
igat
ion
repo
rt m
ade
for
less
tha
n a
year
and
th
e au
dito
rs’ r
epor
t may
be
adop
ted
as th
e re
fere
nce.
D
. W
hen
carr
ying
out
the
cre
dit
inve
stig
atio
n, t
he
Com
pany
sha
ll m
ake
a de
taile
d as
sess
men
t of
the
im
pact
of
th
e lo
an
on
the
Com
pany
’s
busi
ness
op
erat
ions
, fin
anci
al
cond
ition
s, an
d sh
areh
olde
rs’
equi
ty.
3.C
ontra
ct S
igni
ng a
nd Id
entit
y Ve
rific
atio
nA
. The
per
son
in c
harg
e of
lend
ing
fund
s sha
ll fil
l in
the
loan
con
tract
bas
ed o
n th
e ap
prov
ed c
ondi
tions
to
proc
eed
with
the
cont
ract
sign
ing.
loan
to th
e C
ompa
ny’s
Fin
ance
Dep
artm
ent.
B
. W
here
a l
oan
is g
iven
due
to
need
s ar
isin
g fr
om
busi
ness
dea
lings
, the
fina
nce
unit
shal
l eva
luat
e w
heth
er
the
amou
nt o
f the
loan
is c
omm
ensu
rate
with
the
amou
nt
of tr
ansa
ctio
ns a
nd in
com
plia
nce
with
thes
e O
pera
tiona
l Pr
oced
ures
.
C.
Whe
re a
bor
row
er i
n ne
ed o
f sh
ort-t
erm
fin
anci
ng
appl
ies
for
a lo
an,
the
Com
pany
sha
ll ev
alua
te t
he
nece
ssity
of
finan
cing
and
inv
estig
ate
the
borr
ower
’s
cred
it st
atus
.
D.
The
loan
, af
ter
bein
g ve
rifie
d to
be
feas
ible
upo
n an
alys
is, s
hall
be s
ubm
itted
to th
e C
hairm
an o
f the
Boa
rd
and
the
boar
d m
eetin
g fo
r app
rova
l.
2.C
redi
t Inv
estig
atio
n an
d R
isk
Ass
essm
ent
A. F
or a
firs
t-tim
e bo
rrow
er, t
he b
orro
wer
sha
ll pr
ovid
e ba
sic
info
rmat
ion
and
finan
cial
inf
orm
atio
n to
fac
ilita
te
the
cred
it in
vest
igat
ion.
B
. Fo
r a
subs
eque
nt b
orro
wer
, th
e cr
edit
inve
stig
atio
n sh
all
be c
arrie
d ou
t w
hen
the
borr
ower
app
lies
for
the
rene
wal
. In
cas
e of
a m
ajor
or
urge
nt e
vent
, th
e cr
edit
inve
stig
atio
n sh
all b
e ca
rrie
d ou
t at a
ny ti
me
depe
ndin
g on
the
actu
al n
eeds
.
C
. If t
he b
orro
wer
is in
goo
d fin
anci
al c
ondi
tion
and
has
had
the
annu
al fi
nanc
ial s
tate
men
ts a
udite
d by
CPA
s, th
e in
vest
igat
ion
repo
rt m
ade
for
less
tha
n a
year
and
the
au
dito
rs’ r
epor
t may
be
adop
ted
as th
e re
fere
nce.
D
. W
hen
carr
ying
ou
t th
e cr
edit
inve
stig
atio
n,
the
Com
pany
sha
ll m
ake
a de
taile
d as
sess
men
t of t
he im
pact
of
th
e lo
an
on
the
Com
pany
’s
busi
ness
op
erat
ions
, fin
anci
al c
ondi
tions
, and
shar
ehol
ders
’ equ
ity.
3.C
ontra
ct S
igni
ng a
nd Id
entit
y Ve
rific
atio
nA
. The
per
son
in c
harg
e of
lend
ing
fund
s sh
all f
ill in
the
loan
co
ntra
ct
base
d on
th
e ap
prov
ed
cond
ition
s to
pr
ocee
d w
ith th
e co
ntra
ct si
gnin
g.
B.
Afte
r th
e bo
rrow
er a
nd t
he j
oint
gua
rant
or s
ign
the
59
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
B. A
fter
the
borr
ower
and
the
join
t gua
rant
or s
ign
the
loan
con
tract
, th
e pe
rson
in
char
ge s
hall
perf
orm
the
pr
oced
ures
for v
erify
ing
thei
r ide
ntiti
es.
4.
App
rais
al o
f Col
late
ral V
alue
and
Set
ting
of R
ight
sW
hen
appl
ying
for
a l
oan,
a b
orro
wer
, af
ter
bein
g ve
rifie
d to
pro
vide
col
late
ral,
shal
l pro
vide
a p
ledg
e on
eq
uiva
lent
rea
l pro
perty
or
secu
ritie
s or
the
prom
isso
ry
note
, whi
ch m
atur
es o
n th
e ex
pect
ed d
ate
of re
paym
ent
and
is si
gned
by
the
join
t gua
rant
or, f
or th
e C
ompa
ny a
s se
curit
y. W
hen
the
join
t gu
aran
tor
is a
com
pany
or
a fir
m, t
he C
ompa
ny s
hall
exam
ine
whe
ther
its
artic
les
of
inco
rpor
atio
n an
d m
inut
es o
f th
e bo
ard
mee
ting
perm
it th
e gu
aran
tee.
5.
Insu
ranc
eEx
cept
fo
r la
nd
and
secu
ritie
s, fir
e in
sura
nce
and
rela
ted
insu
ranc
e sh
all
be
purc
hase
d fo
r ot
her
colla
tera
ls a
t the
am
ount
not
less
than
the
colla
tera
l in
pled
ge.
The
Com
pany
sh
all
be
spec
ified
as
th
e be
nefic
iary
in th
e in
sura
nce
polic
y. T
he n
ame,
qua
ntity
, pl
ace
of
stor
age,
an
d in
sura
nce
cond
ition
s an
d en
dors
emen
ts o
f th
e su
bjec
t sp
ecifi
ed i
n th
e in
sura
nce
polic
y sh
all
be c
onsi
sten
t w
ith t
he l
oan
cond
ition
s ap
prov
ed b
y th
e C
ompa
ny.
Th
e pe
rson
in
char
ge s
hall
notif
y th
e bo
rrow
er o
f a
rene
wal
bef
ore
the
term
of t
he in
sura
nce
expi
res.
6.A
ppro
pria
tion
The
loan
will
be
appr
opria
ted
afte
r a b
orro
wer
sig
n th
e co
ntra
ct, s
ubm
it th
e pr
omis
sory
not
e, s
et th
e m
ortg
age,
an
d pu
rcha
se th
e in
sura
nce.
7.
Acc
ount
Kee
ping
Whe
n th
e C
ompa
ny
com
plet
es
the
proc
edur
es
for
lend
ing
each
fun
d, F
inan
ce D
epar
tmen
t sh
all
mak
e an
en
try fo
r col
late
ral o
r cre
dit g
uara
ntee
obt
aine
d.
8.Th
e C
ompa
ny s
hall
esta
blis
h a
log
book
for
its
loan
activ
ities
and
reco
rd in
det
ail t
he fo
llow
ing
info
rmat
ion
loan
con
tract
, th
e pe
rson
in
char
ge s
hall
perf
orm
the
pr
oced
ures
for v
erify
ing
thei
r ide
ntiti
es.
4.
App
rais
al o
f Col
late
ral V
alue
and
Set
ting
of R
ight
sW
hen
appl
ying
fo
r a
loan
, a
borr
ower
, af
ter
bein
g ve
rifie
d to
pro
vide
col
late
ral,
shal
l pr
ovid
e a
pled
ge o
n eq
uiva
lent
rea
l pr
oper
ty o
r se
curit
ies
or t
he p
rom
isso
ry
note
, whi
ch m
atur
es o
n th
e ex
pect
ed d
ate
of r
epay
men
t an
d is
sig
ned
by th
e jo
int g
uara
ntor
, for
the
Com
pany
as
secu
rity.
Whe
n th
e jo
int
guar
anto
r is
a c
ompa
ny o
r a
firm
, the
Com
pany
sha
ll ex
amin
e w
heth
er it
s ar
ticle
s of
in
corp
orat
ion
and
min
utes
of
the
boar
d m
eetin
g pe
rmit
the
guar
ante
e.
5.In
sura
nce
Exce
pt f
or la
nd a
nd s
ecur
ities
, fire
insu
ranc
e an
d re
late
d in
sura
nce
shal
l be
pur
chas
ed f
or o
ther
col
late
rals
at
the
amou
nt
not
less
th
an
the
colla
tera
l in
pl
edge
. Th
e C
ompa
ny s
hall
be s
peci
fied
as t
he b
enef
icia
ry i
n th
e in
sura
nce
polic
y. T
he n
ame,
qua
ntity
, pl
ace
of s
tora
ge,
and
insu
ranc
e co
nditi
ons a
nd e
ndor
sem
ents
of t
he su
bjec
t sp
ecifi
ed in
the
insu
ranc
e po
licy
shal
l be
cons
iste
nt w
ith
the
loan
con
ditio
ns a
ppro
ved
by th
e C
ompa
ny.
Th
e pe
rson
in
char
ge s
hall
notif
y th
e bo
rrow
er o
f a
rene
wal
bef
ore
the
term
of t
he in
sura
nce
expi
res.
6.A
ppro
pria
tion
The
loan
will
be
appr
opria
ted
afte
r a
borr
ower
sig
n th
e co
ntra
ct,
subm
it th
e pr
omis
sory
not
e, s
et t
he m
ortg
age,
an
d pu
rcha
se th
e in
sura
nce.
7.
Acc
ount
Kee
ping
Whe
n th
e C
ompa
ny c
ompl
etes
the
proc
edur
es fo
r len
ding
ea
ch f
und,
Fin
ance
Dep
artm
ent
shal
l m
ake
an e
ntry
for
co
llate
ral o
r cre
dit g
uara
ntee
obt
aine
d.
8.Th
e C
ompa
ny s
hall
esta
blis
h a
log
book
for
its
loa
nac
tiviti
es a
nd r
ecor
d in
det
ail
the
follo
win
g in
form
atio
n fo
r fut
ure
refe
renc
e: th
e en
tity
to w
hich
the
loan
is g
iven
, th
e am
ount
, th
e da
te
of
pass
age
by
the
Boa
rd
of
60
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
for
futu
re r
efer
ence
: th
e en
tity
to w
hich
the
loa
n is
gi
ven,
the
amou
nt, t
he d
ate
of p
assa
ge b
y th
e B
oard
of
Dire
ctor
s, th
e da
te th
e lo
an is
app
ropr
iate
d, a
nd m
atte
rs
to b
e ev
alua
ted
in a
ccor
danc
e w
ith A
rticl
e 7.
9.
If,
due
to c
hang
es o
f ci
rcum
stan
ces,
the
party
to
who
m th
e C
ompa
ny g
ives
a lo
an n
o lo
nger
sat
isfie
s th
e cr
iteria
set f
orth
her
ein,
or t
he b
alan
ce o
f a lo
an e
xcee
ds
the
limits
, a
corr
ectiv
e pl
an s
hall
be p
rovi
ded
to t
he
Aud
it C
omm
ittee
and
the
prop
osed
cor
rect
ions
sha
ll be
im
plem
ente
d w
ithin
the
perio
d sp
ecifi
ed in
the
plan
.
Dire
ctor
s, th
e da
te th
e lo
an is
app
ropr
iate
d, a
nd m
atte
rs
to b
e ev
alua
ted
in a
ccor
danc
e w
ith A
rticl
e 7.
9.
If, d
ue to
cha
nges
of c
ircum
stan
ces,
the
party
to w
hom
the
Com
pany
giv
es a
loan
no
long
er s
atis
fies
the
crite
ria
set
forth
her
ein,
or
the
bala
nce
of a
loa
n ex
ceed
s th
e lim
its,
a co
rrec
tive
plan
sh
all
be
prov
ided
to
al
l su
perv
isor
s an
d th
e pr
opos
ed
corr
ectio
ns
shal
l be
im
plem
ente
d w
ithin
the
perio
d sp
ecifi
ed in
the
plan
.
Arti
cle
13
Impl
emen
tatio
n an
d A
men
dmen
t Th
ese
Ope
ratio
nal P
roce
dure
s sh
all b
e ap
prov
ed b
y th
e B
oard
of D
irect
ors a
nd th
en se
nt to
the
Aud
it C
omm
ittee
an
d pr
opos
ed a
t the
sha
reho
lder
s’ m
eetin
g fo
r ap
prov
al.
If a
ny d
irect
or e
xpre
sses
obj
ectio
n on
the
reco
rd o
r in
a
writ
ten
stat
emen
t, th
e C
ompa
ny
shal
l su
bmit
the
obje
ctio
n to
the
Aud
it C
omm
ittee
and
the
shar
ehol
ders
’ m
eetin
g fo
r dis
cuss
ion
any
amen
dmen
t her
eto
is s
ubje
ct
to th
e sa
me
proc
edur
es.
If t
he C
ompa
ny h
as e
stab
lishe
d in
depe
nden
t di
rect
ors,
whe
n su
bmitt
ing
thes
e O
pera
tiona
l Pr
oced
ures
to
the
Boa
rd
of
Dire
ctor
s fo
r di
scus
sion
pu
rsua
nt
to
the
prec
edin
g pa
ragr
aph,
it
shal
l co
nsid
er t
he d
isse
ntin
g op
inio
ns fr
om a
ll in
depe
nden
t dire
ctor
s fu
lly a
nd li
st th
e co
nsen
ting
and
obje
ctin
g op
inio
ns a
nd t
heir
reas
ons
in
the
mee
ting
min
utes
of t
he B
oard
of D
irect
ors.
Impl
emen
tatio
n an
d A
men
dmen
t Th
ese
Ope
ratio
nal
Proc
edur
es s
hall
be a
ppro
ved
by t
he
Boa
rd o
f D
irect
ors
and
then
sen
t to
all
supe
rvis
ors
and
prop
osed
at t
he s
hare
hold
ers’
mee
ting
for a
ppro
val.
If a
ny
dire
ctor
exp
ress
es o
bjec
tion
on th
e re
cord
or
in a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e ob
ject
ion
to th
e su
perv
isor
s an
d th
e sh
areh
olde
rs’
mee
ting
for
disc
ussi
on
any
amen
dmen
t her
eto
is su
bjec
t to
the
sam
e pr
oced
ures
. If
the
Com
pany
has
est
ablis
hed
inde
pend
ent
dire
ctor
s, w
hen
subm
ittin
g th
ese
Ope
ratio
nal
Proc
edur
es t
o th
e B
oard
of
D
irect
ors
for
disc
ussi
on
purs
uant
to
th
e pr
eced
ing
para
grap
h,
it sh
all
cons
ider
th
e di
ssen
ting
opin
ions
fro
m a
ll in
depe
nden
t dire
ctor
s fu
lly a
nd li
st th
e co
nsen
ting
and
obje
ctin
g op
inio
ns a
nd th
eir r
easo
ns in
the
mee
ting
min
utes
of t
he B
oard
of D
irect
ors.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
14
Proc
edur
es fo
r Man
agin
g Fu
nds L
ent t
o Su
bsid
iarie
s:
1.Fo
r a su
bsid
iary
in w
hich
the
Com
pany
dire
ctly
or
indi
rect
ly h
olds
mor
e th
an 5
0% o
f the
vot
ing
shar
es a
nd
whi
ch is
not
a p
ublic
com
pany
of t
he R
epub
lic o
f Chi
na,
thes
e O
pera
tiona
l Pro
cedu
res s
hall
be fo
llow
ed. T
he n
et
valu
e sh
all b
e ca
lcul
ated
bas
ed o
n th
e C
ompa
ny’s
net
va
lue.
The
Com
pany
shal
l sub
mit
the
prev
ious
mon
th's
bala
nce
of it
s loa
ned
fund
s to
Fina
nce
Dep
artm
ent b
y th
e 5t
h da
y of
eac
h m
onth
.
Proc
edur
es fo
r Man
agin
g Fu
nds L
ent t
o Su
bsid
iarie
s:
For a
subs
idia
ry in
whi
ch th
e C
ompa
ny d
irect
ly o
r in
dire
ctly
hol
ds m
ore
than
50%
of t
he v
otin
g sh
ares
and
w
hich
is n
ot a
pub
lic c
ompa
ny o
f the
Rep
ublic
of C
hina
, th
ese
Ope
ratio
nal P
roce
dure
s sha
ll be
follo
wed
. The
net
va
lue
shal
l be
calc
ulat
ed b
ased
on
the
Com
pany
’s n
et
valu
e. T
he C
ompa
ny sh
all s
ubm
it th
e pr
evio
us m
onth
's ba
lanc
e of
its l
oane
d fu
nds t
o Fi
nanc
e D
epar
tmen
t by
the
5th
day
of e
ach
mon
th.
Acc
ordi
ng to
the
actu
al p
ract
ice
61
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
2.In
tern
al a
udito
rs o
f the
Com
pany
shal
l per
form
the
audi
t on
the
lend
ing
of fu
nds o
f the
subs
idia
ries b
ased
on
the
annu
al a
udit
plan
. In
the
case
that
a m
ater
ial
viol
atio
n is
foun
d, in
tern
al a
udito
rs sh
all c
ontin
uous
ly
follo
w u
p th
e im
prov
emen
ts a
nd su
bmit
the
follo
w-u
p re
port
to th
e B
oard
of D
irect
ors a
nd th
e A
udit
Com
mitt
ee.
Inte
rnal
aud
itors
of t
he C
ompa
ny sh
all p
erfo
rm th
e au
dit
on th
e le
ndin
g of
fund
s of t
he su
bsid
iarie
s bas
ed o
n th
e an
nual
aud
it pl
an. I
n th
e ca
se th
at a
mat
eria
l vio
latio
n is
fo
und,
inte
rnal
aud
itors
shal
l con
tinuo
usly
follo
w u
p th
e im
prov
emen
ts a
nd su
bmit
the
follo
w-u
p re
port
to th
e B
oard
of D
irect
ors a
nd a
ll su
perv
isor
s.
Arti
cle
15
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 2n
d am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
3rd
amen
dmen
t was
mad
e on
May
15,
200
9.
The
4th
amen
dmen
t was
mad
e on
May
18,
201
0.
The
5th
amen
dmen
t was
mad
e on
June
13,
201
3.
The
6th
amen
dmen
t was
mad
e on
May
26,
201
7.
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 2n
d am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
3rd
amen
dmen
t was
mad
e on
May
15,
200
9.
The
4th
amen
dmen
t was
mad
e on
May
18,
201
0.
The
5th
amen
dmen
t was
mad
e on
June
13,
201
3.
Upd
ate
the
date
of
the
amen
dmen
t
62
< A
ttach
men
t V
III>
Adv
ante
ch C
o., L
td.
Proc
edur
es fo
r End
orse
men
t & G
uara
ntee
N
o.
Aft
er a
men
dm
ent
Bef
ore
amen
dm
ent
Rem
ark
A
rticl
e 5.
1Le
vel o
f Aut
horiz
atio
n En
dors
emen
ts a
nd/o
r gua
rant
ees
mad
e by
the
Com
pany
sh
all
be c
ondu
cted
afte
r re
ceiv
ing
appr
oval
fro
m t
he
Cha
irman
and
the
Boa
rd o
f Dire
ctor
s. A
pre
dete
rmin
ed
limit
(5%
of
th
e C
ompa
ny’s
ne
t va
lue)
m
ay
be
dele
gate
d to
the
Cha
irman
by
the
Boa
rd o
f Dire
ctor
s to
fa
cilit
ate
exec
utio
n an
d su
ch
endo
rsem
ent
and/
or
guar
ante
e sh
all b
e re
porte
d to
the
mos
t upc
omin
g bo
ard
mee
ting
for
ratif
icat
ion
and
to
the
shar
ehol
ders
’ m
eetin
g fo
r fut
ure
refe
renc
e.
In
case
th
e ab
ove
limits
ha
ve
to
be
exce
eded
to
ac
com
mod
ate
busi
ness
nee
ds, a
ppro
val b
y a
reso
lutio
n of
the
Boa
rd o
f D
irect
ors
shal
l be
obt
aine
d an
d ov
er
half
of
all
the
dire
ctor
s sh
all
join
tly
endo
rse
the
pote
ntia
l los
s th
at m
ay b
e br
ough
t abo
ut b
y ex
ceed
ing
the
limits
. The
Boa
rd o
f Dire
ctor
s sha
ll al
so re
vise
thes
e pr
oced
ures
and
hav
e th
em r
atifi
ed a
t the
sha
reho
lder
s’ m
eetin
g. If
the
revi
sed
proc
edur
es a
re n
ot ra
tifie
d at
the
shar
ehol
ders
’ m
eetin
g, t
he B
oard
of
Dire
ctor
s sh
all
furn
ish
a pl
an c
onta
inin
g a
timet
able
to
with
draw
the
ex
cess
por
tion.
If
, due
to c
hang
es o
f circ
umst
ance
s, th
e pa
rty to
who
m
the
Com
pany
pr
ovid
es
an
endo
rsem
ent
and/
or
guar
ante
e no
lo
nger
sa
tisfie
s th
e cr
iteria
se
t fo
rth
here
in, o
r th
e am
ount
of
endo
rsem
ent a
nd/o
r gu
aran
tee
exce
eds t
he li
mits
, a c
orre
ctiv
e pl
an sh
all b
e pr
ovid
ed to
th
e A
udit
Com
mitt
ee a
nd th
e pr
opos
ed c
orre
ctio
ns s
hall
be im
plem
ente
d w
ithin
the
perio
d sp
ecifi
ed in
the
plan
.
Leve
l of A
utho
rizat
ion
Endo
rsem
ents
and
/or
guar
ante
es m
ade
by t
he C
ompa
ny
shal
l be
con
duct
ed a
fter
rece
ivin
g ap
prov
al f
rom
the
C
hairm
an a
nd t
he B
oard
of
Dire
ctor
s. A
pre
dete
rmin
ed
limit
(5%
of t
he C
ompa
ny’s
net
val
ue) m
ay b
e de
lega
ted
to t
he C
hairm
an b
y th
e B
oard
of
Dire
ctor
s to
fac
ilita
te
exec
utio
n an
d su
ch e
ndor
sem
ent
and/
or g
uara
ntee
sha
ll be
rep
orte
d to
the
mos
t up
com
ing
boar
d m
eetin
g fo
r ra
tific
atio
n an
d to
the
sha
reho
lder
s’ m
eetin
g fo
r fu
ture
re
fere
nce.
In
ca
se
the
abov
e lim
its
have
to
be
ex
ceed
ed
to
acco
mm
odat
e bu
sine
ss n
eeds
, app
rova
l by
a re
solu
tion
of
the
Boa
rd o
f Dire
ctor
s sh
all b
e ob
tain
ed a
nd o
ver h
alf o
f al
l th
e di
rect
ors
shal
l jo
intly
end
orse
the
pot
entia
l lo
ss
that
may
be
brou
ght a
bout
by
exce
edin
g th
e lim
its. T
he
Boa
rd o
f Dire
ctor
s sh
all a
lso
revi
se th
ese
proc
edur
es a
nd
have
the
m r
atifi
ed a
t th
e sh
areh
olde
rs’
mee
ting.
If
the
revi
sed
proc
edur
es a
re n
ot r
atifi
ed a
t th
e sh
areh
olde
rs’
mee
ting,
the
Boa
rd o
f D
irect
ors
shal
l fu
rnis
h a
plan
co
ntai
ning
a ti
met
able
to w
ithdr
aw th
e ex
cess
por
tion.
If
, due
to c
hang
es o
f circ
umst
ance
s, th
e pa
rty to
who
m th
e C
ompa
ny p
rovi
des
an e
ndor
sem
ent
and/
or g
uara
ntee
no
long
er s
atis
fies
the
crite
ria s
et fo
rth h
erei
n, o
r the
am
ount
of
end
orse
men
t an
d/or
gua
rant
ee e
xcee
ds t
he l
imits
, a
corr
ectiv
e pl
an sh
all b
e pr
ovid
ed to
all
supe
rvis
ors a
nd th
e pr
opos
ed c
orre
ctio
ns s
hall
be i
mpl
emen
ted
with
in t
he
perio
d sp
ecifi
ed in
the
plan
.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
11
Inte
rnal
aud
itors
of
the
Com
pany
sha
ll pe
rfor
m t
he
audi
t on
the
Com
pany
’s e
ndor
sem
ent a
nd/o
r gu
aran
tee
Inte
rnal
aud
itors
of
the
Com
pany
sha
ll pe
rfor
m th
e au
dit
on th
e C
ompa
ny’s
end
orse
men
t and
/or g
uara
ntee
pro
file
at
Acc
ordi
ng to
the
actu
al p
ract
ice
63
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
prof
ile a
t le
ast
once
per
qua
rter
and
prod
uce
writ
ten
audi
ting
repo
rts. I
n th
e ca
se th
at a
mat
eria
l vio
latio
n is
fo
und,
inte
rnal
aud
it sh
all i
mm
edia
tely
not
ify th
e A
udit
Com
mitt
ee in
writ
ing.
leas
t on
ce
per
quar
ter
and
prod
uce
writ
ten
audi
ting
repo
rts.
In t
he c
ase
that
a m
ater
ial
viol
atio
n is
fou
nd,
inte
rnal
aud
it sh
all i
mm
edia
tely
not
ify th
e su
perv
isor
s in
w
ritin
g.
Arti
cle
12
Thes
e Pr
oced
ures
sha
ll be
im
plem
ente
d up
on a
ppro
val
of th
e B
oard
of
Dire
ctor
s, th
e A
udit
Com
mitt
ee a
nd th
e sh
areh
olde
rs’
mee
ting.
If
an
y di
rect
or
expr
esse
s ob
ject
ion
on t
he r
ecor
d or
in
a w
ritte
n st
atem
ent,
the
Com
pany
sh
all
subm
it th
e ob
ject
ion
to
the
Aud
it C
omm
ittee
and
the
shar
ehol
ders
’ mee
ting
for d
iscu
ssio
n.
Any
am
endm
ent h
eret
o is
subj
ect t
o th
e sa
me
proc
edur
esIf
the
Com
pany
has
est
ablis
hed
inde
pend
ent
dire
ctor
s, w
hen
subm
ittin
g th
ese
Proc
edur
es t
o th
e B
oard
of
Dire
ctor
s fo
r di
scus
sion
pu
rsua
nt
to
the
prec
edin
g pa
ragr
aph,
it sh
all c
onsi
der t
he d
isse
ntin
g op
inio
ns fr
om
all
inde
pend
ent
dire
ctor
s fu
lly a
nd l
ist
the
cons
entin
g an
d ob
ject
ing
opin
ions
and
thei
r rea
sons
in th
e m
eetin
g m
inut
es o
f the
Boa
rd o
f Dire
ctor
s.
Thes
e Pr
oced
ures
sha
ll be
impl
emen
ted
upon
app
rova
l of
the
Boa
rd
of
Dire
ctor
s, al
l su
perv
isor
s an
d th
e sh
areh
olde
rs’ m
eetin
g. If
any
dire
ctor
exp
ress
es o
bjec
tion
on th
e re
cord
or i
n a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e ob
ject
ion
to
the
supe
rvis
ors
and
the
shar
ehol
ders
’ m
eetin
g fo
r di
scus
sion
. A
ny a
men
dmen
t he
reto
is su
bjec
t to
the
sam
e pr
oced
ures
. If
the
Com
pany
has
est
ablis
hed
inde
pend
ent d
irect
ors,
whe
n su
bmitt
ing
thes
e Pr
oced
ures
to th
e B
oard
of
Dire
ctor
s for
dis
cuss
ion
purs
uant
to th
e pr
eced
ing
para
grap
h, it
shal
l con
side
r the
dis
sent
ing
opin
ions
from
al
l ind
epen
dent
dire
ctor
s ful
ly a
nd li
st th
e co
nsen
ting
and
obje
ctin
g op
inio
ns a
nd th
eir r
easo
ns in
the
mee
ting
min
utes
of t
he B
oard
of D
irect
ors.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
13
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
2nd
amen
dmen
t was
mad
e on
June
16,
200
6.
The
3rd
amen
dmen
t was
mad
e on
May
15,
200
9.
The
4th
amen
dmen
t was
mad
e on
May
18,
201
0.
The
5th
amen
dmen
t was
mad
e on
May
26,
201
7.
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
2nd
amen
dmen
t was
mad
e on
June
16,
200
6.
The
3rd
amen
dmen
t was
mad
e on
May
15,
200
9.
The
4th
amen
dmen
t was
mad
e on
May
18,
201
0.
Upd
ate
the
date
of
the
amen
dmen
t
64
< A
ttach
men
t IX
>A
dvan
tech
Co.
, Ltd
. Pr
oced
ures
for F
inan
cial
Der
ivat
ives
Tra
nsac
tions
N
o.
Aft
er a
men
dm
ent
Bef
ore
amen
dm
ent
Rem
ark
A
rticl
e 8
Impl
emen
tatio
n an
d A
men
dmen
t Th
ese
Proc
edur
e sh
all
be
subm
itted
to
th
e A
udit
Com
mitt
ee a
nd th
e sh
areh
olde
rs’
mee
ting
for
appr
oval
af
ter t
he re
solu
tion
of th
e B
oard
of D
irect
ors;
the
sam
e pr
oced
ure
shal
l ap
ply
with
any
am
endm
ent.
If a
ny
dire
ctor
exp
ress
es d
isse
nt a
nd i
t is
con
tain
ed i
n th
e m
inut
es o
r a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e di
rect
or's
diss
entin
g op
inio
n to
the
Aud
it C
omm
ittee
. Whe
re th
e po
sitio
n of
inde
pend
ent d
irect
or
has
been
cr
eate
d by
th
e C
ompa
ny,
the
Boa
rd
of
Dire
ctor
s sh
all
take
in
to
full
cons
ider
atio
n ea
ch
inde
pend
ent
dire
ctor
's op
inio
ns.
If
an
inde
pend
ent
dire
ctor
obj
ects
to o
r ex
pres
ses
rese
rvat
ions
abo
ut a
ny
mat
ter,
it sh
all b
e re
cord
ed in
the
min
utes
of
the
boar
d m
eetin
g.
Impl
emen
tatio
n an
d A
men
dmen
t Th
ese
Proc
edur
e sh
all b
e su
bmitt
ed to
eac
h su
perv
isor
and
th
e sh
areh
olde
rs’ m
eetin
g fo
r app
rova
l afte
r the
reso
lutio
n of
the
Boa
rd o
f Dire
ctor
s; th
e sa
me
proc
edur
e sh
all a
pply
w
ith a
ny a
men
dmen
t. If
any
dire
ctor
exp
ress
es d
isse
nt a
nd
it is
con
tain
ed i
n th
e m
inut
es o
r a
writ
ten
stat
emen
t, th
e C
ompa
ny s
hall
subm
it th
e di
rect
or's
diss
entin
g op
inio
n to
ea
ch
supe
rvis
or.
Whe
re
the
posi
tion
of
inde
pend
ent
dire
ctor
has
bee
n cr
eate
d by
the
Com
pany
, the
Boa
rd o
f D
irect
ors
shal
l ta
ke
into
fu
ll co
nsid
erat
ion
each
in
depe
nden
t dire
ctor
's op
inio
ns. I
f an
inde
pend
ent d
irect
or
obje
cts
to o
r ex
pres
ses
rese
rvat
ions
abo
ut a
ny m
atte
r, it
shal
l be
reco
rded
in th
e m
inut
es o
f the
boa
rd m
eetin
g.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
9 Th
ese
Proc
edur
es w
ere
esta
blis
hed
on M
ay 3
, 199
7.
The
1st a
men
dmen
t was
mad
e on
Apr
il 18
, 199
8.
The
2nd
amen
dmen
t was
mad
e on
May
2, 2
003.
Th
e 3r
d am
endm
ent w
as m
ade
on M
ay 2
4, 2
005.
Th
e 4t
h am
endm
ent w
as m
ade
on M
ay 1
8, 2
010
The
5th
amen
dmen
t was
mad
e on
June
18,
201
4.
The
6th
amen
dmen
t was
mad
e on
May
26,
201
7.
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on A
pril
18, 1
998.
Th
e 2n
d am
endm
ent w
as m
ade
on M
ay 2
, 200
3.
The
3rd
amen
dmen
t was
mad
e on
May
24,
200
5.
The
4th
amen
dmen
t was
mad
e on
May
18,
201
0 Th
e 5t
h am
endm
ent w
as m
ade
on Ju
ne 1
8, 2
014.
Upd
ate
the
date
of
the
amen
dmen
t
65
< A
ttach
men
t X
>A
dvan
tech
Co.
, Ltd
. R
ules
and
Pro
cedu
re fo
r Sha
reho
lder
s’ M
eetin
gs
No.
A
fter
am
end
men
t B
efor
e am
end
men
t R
emar
k
Arti
cle
14.1
The
elec
tion
of d
irect
ors,
if an
y, i
n th
e sh
areh
olde
rs’
mee
ting
shou
ld b
e ha
ndle
d in
acc
orda
nce
with
the
re
leva
nt n
orm
s of
the
Com
pany
and
the
ele
ctio
n re
sult
shou
ld
be
anno
unce
d im
med
iate
ly
in
the
mee
ting,
in
clud
ing
the
nam
e of
th
e el
ecte
d di
rect
ors
and
supe
rvis
ors a
nd th
e re
spec
tive
num
ber o
f vot
ing
right
s. Th
e ba
llots
cas
ted
in th
e el
ectio
n re
ferr
ed to
abo
ve s
hall
be
seal
ed
and
sign
ed
by
the
ballo
t in
spec
tors
fo
r sa
feke
epin
g fo
r at
leas
t one
yea
r; ho
wev
er, t
hey
shou
ld
be r
eser
ved
until
the
end
of th
e le
gal p
roce
edin
g th
at is
fil
ed b
y th
e sh
areh
olde
rs in
acc
orda
nce
with
Arti
cle
189
of th
e C
ompa
ny L
aw.
The
elec
tion
of d
irect
ors
and
supe
rvis
ors,
if an
y, i
n th
e sh
areh
olde
rs’
mee
ting
shou
ld b
e ha
ndle
d in
acc
orda
nce
with
the
rele
vant
nor
ms
of th
e C
ompa
ny a
nd th
e el
ectio
n re
sult
shou
ld b
e an
noun
ced
imm
edia
tely
in
the
mee
ting,
in
clud
ing
the
nam
e of
th
e el
ecte
d di
rect
ors
and
supe
rvis
ors a
nd th
e re
spec
tive
num
ber o
f vot
ing
right
s. Th
e ba
llots
cas
ted
in th
e el
ectio
n re
ferr
ed to
abo
ve s
hall
be
seal
ed
and
sign
ed
by
the
ballo
t in
spec
tors
fo
r sa
feke
epin
g fo
r at l
east
one
yea
r; ho
wev
er, t
hey
shou
ld b
e re
serv
ed u
ntil
the
end
of th
e le
gal p
roce
edin
g th
at is
file
d by
the
shar
ehol
ders
in a
ccor
danc
e w
ith A
rticl
e 18
9 of
the
Com
pany
Law
.
Acc
ordi
ng to
the
actu
al p
ract
ice
Arti
cle
19
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on A
pril
24, 1
999.
Th
e 2n
d am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 3r
d am
endm
ent w
as m
ade
on Ju
ne 1
6, 2
006.
Th
e 4t
h am
endm
ent w
as m
ade
on M
ay 1
8, 2
010
The
5th
amen
dmen
t was
mad
e on
June
13,
201
2.
The
6th
amen
dmen
t was
mad
e on
May
26,
201
7.
Thes
e Pr
oced
ures
wer
e es
tabl
ishe
d on
May
3, 1
997.
Th
e 1s
t am
endm
ent w
as m
ade
on A
pril
24, 1
999.
Th
e 2n
d am
endm
ent w
as m
ade
on M
ay 3
0, 2
002.
Th
e 3r
d am
endm
ent w
as m
ade
on Ju
ne 1
6, 2
006.
Th
e 4t
h am
endm
ent w
as m
ade
on M
ay 1
8, 2
010
The
5th
amen
dmen
t was
mad
e on
June
13,
201
2.
Upd
ate
the
date
of
the
amen
dmen
t
66
III. Appendices< Appendix I >
Corporate Charter (Articles of Incorporation) (Before Amendment)
C h a p t e r 1 General Rules A r t i c l e 1 : The Company was organized in accordance with the provisions of the Company
Law and was known as “Advantech Co., Ltd.” A r t i c l e 2 : The Company’s business operation is as follows:
1. CC01060 Wire communications machinery and equipment manufacturing2. CC01070 Wireless communications machinery and equipment manufacturing3. CC01080 Electronic Components Manufacturing4. CC01110 Computer and peripheral equipment manufacturing5. CE01010 General equipment manufacturing6. E605010 Computer equipment installation industry7. EZ05010 Instrument and meters installation engineering8. I301010 IT software services industry9. I301020 Data processing services10. I301030 Electronic information supply services11. CC01101 RF controlled telecommunications equipment manufacturing12. F401021 RF controlled telecommunications equipment importing13. IG03010 Energy and Technical Services14. CC01030 Electrical appliances and audio-video electronic productsmanufacturing 15. F113020 Electrical appliances wholesale16. F213010 Electrical appliances retail17. ZZ99999 In addition to the licensed businesses, may conduct other businessesthat are not prohibited or restricted.
A r t i c l e 2 . 1 : The Company for business needs may conduct the making of endorsement and guarantee.
A r t i c l e 3 : The Company’s headquarters is in Taipei and may setup offshore branches with the resolution of the board of directors.
A r t i c l e 4 : The Company may have announcements made in accordance with Article 28 of the Company Law.
C h a p t e r 1 Shares A r t i c l e 5 : The Company’s total capital amounted to NT$8 billion with 800 million shares
authorized at NT$10 par. The board of directors is authorized to have stock shares issue separately. For the total capital referred to above, NT$500 million is reserved for exercising stock option with warrant or bonds with attached warrants. The Company has stock shares transferred to employees at a price below the average repurchase price; also, the transaction prior to the transfer of shares should be presented in the most recent shareholders’ meeting that is attended by the shareholders with a majority shareholding and approved by the attending shareholders with two thirds of the shareholding.
A r t i c l e 5 . 1 : When the Company issuing employee warrants at a price below the Company’s common stock closing price on the issuing date, the transaction of share issuance should be presented in the shareholders’ meeting that is attended by the shareholders with a majority shareholding and approved by the attending shareholders with two thirds of the shareholding.
A r t i c l e 6 : Deleted A r t i c l e 6 . 1 : The Company may be requested by Taiwan Depository and Clearing Corp. to
issue large denomination stocks.
68
A r t i c l e 7 : The Company’s stock shares are ordered with the signature or seal of three or more directors affixed and numbered; also, are issued after proper certification. The Company is exempted from having the stock shares printed out after issuance; however, the Company should contact the securities depository and clearing institution for registration.
A r t i c l e 8 : The registration for any change made to the Shareholder Registry should be ceased 60 days prior to the general shareholders’ meeting, 30 days prior to the extraordinary shareholders’ meeting, or 5 days prior to the Company’s deciding to distribute dividends and bonuses or other benefits.
C h a p t e r 3 Shareholders’ meeting A r t i c l e 9 : Shareholders’ meeting includes general shareholders’ meeting and extraordinary
shareholders’ meeting. General shareholders’ meeting is held annually and it is convened by the board of directors lawfully six months after the fiscal year. Extraordinary shareholders’ meeting is convened when it is necessary.
A r t i c l e 1 0 : Shareholders who are unable to attend the shareholders’ meeting in person may have a representative appointed to attend the meeting by issuing the proxy that is printed by the Company with the scope of authorization specified and then signed or sealed. The proxy referred to above is regulated in accordance with the “Regulations for the Use of Proxies for Shareholders’ Meeting of Public Companies.”
A r t i c l e 1 1 : It is one voting right per share for the shareholders of the Company, except for those subject to restrictions or those who have no voting right according to the Company Law.
A r t i c l e 1 2 : The resolution reached in the shareholders’ meeting, unless otherwise provided by law, can be enforced after being presented in the shareholders’ meeting that is attended by a majority of shareholders in person or by proxy and approved by the attending shareholders with a majority shareholding.
C h a p t e r 4 Directors and supervisors A r t i c l e 1 3 : The company has seven ~ nine directors and three supervisors nominated for a
term of three years and they are elected from the capable candidates in the shareholders’ meeting; also, they can be re-elected. There must be at least two independent directors (not less than one fifth of the total number of directors) out of the number of directors referred to above. The independent directors are to be elected from the candidates in the shareholders’ meeting. The professional qualifications of the independent directors, shareholdings, limitation of part-time job, the nomination and appointment method, and other matters to be complied with must be processed according to the relevant provisions of the competent authorities.
Ar t i c l e 13 .1 : The exercise of power by the board of directors is as follows: 1. The elaboration of the Corporate Charter2. The elaboration of the Company’s business plan3. The elaboration of the Company’s profit distribution4. The elaboration of the Company’s capital increase and decrease5. The review and approval of the Company’s budget and the preparation of theCompany’s final account 6. The elaboration of the acquisition and disposal of fixed assets by the Companyand the investment in other businesses 7. The powers endowed in accordance with the law and regulations and in theshareholders’ meeting
Ar t i c l e 13 .2 : The exercise of power by the supervisors is as follows: 1. Reviewing the operations and financial condition of the Company2. Auditing the accounting books and documents of the Company3. Other responsibilities assigned in accordance with the law and regulations
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Art ic l e 13 .3 : The total shares of the Company held by all directors and supervisors are to be processed in accordance with the “Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies” published by the competent authorities.
Ar t i c l e 13 .4 : The Company may purchase liability insurance for directors and supervisors throughout the tenure based on their scope of responsibility.
Ar t i c l e 13 .5
Ar t i c l e 13 .6
: The board of directors is authorized to deliberate and determine the remuneration of all directors and supervisors according to their participation in and contribution to the Company’s business operation and by referring to the remuneration standard of the domestic industry. The Company has an Audit Committee setup in accordance with Article 14.4 of the Securities Exchange Act, which is organized by all the independent directors. The exercise of power by the Audit Committee and its members and the related matters are to be processed in accordance with the provisions of the competent authorities. Supervisors will be discharged on the date the Audit Committee established, which will be in effect on the expiry date of the term of office in 2017.
A r t i c l e 1 4 : The Board of Directors is formed by the directors. The Chairman is elected by a majority of the attending directors at the board meeting that is attended by two thirds of the directors.
Ar t i c l e 14 .1 The Company may at any time in case of emergency convene a board meeting and with the directors and supervisors informed in writing or by E-mail or fax.
A r t i c l e 1 5 : When the Chairman is unable to exercise powers due to a leave or for other reasons, the matter regarding the deputy of the Chairman should be handled in accordance with Article 208 of the Company Law.
Ar t i c l e 15 .1 : The resolutions of the board of directors, unless otherwise provided by the Company Law and the Corporate Charter, shall be exercised with the consent of a majority of the attending directors at the board meeting that is attended by a majority of the directors. Directors should attend board meetings in person. The director who is unable to attend board meetings in person may authorize another director in writing to attend the board meetings; however, a proxy should be issued each time with the scope of authorization detailed to have one and only deputy delegated.
A r t i c l e 1 6 : Deleted
C h a p t e r 5 Managers A r t i c l e 1 7 : The Company may have several managers appointed; also, the appointment,
dismissal, and remuneration should be processed in accordance with Article 29 of the Company Law.
C h a p t e r 6 Accountant A r t i c l e 1 8 : The Company’s board of directors shall at the end of each fiscal year have the
following composed (1) Business Report (2) Financial Reports (3) Profit Distribution Proposals for the audit of the supervisors 30 days prior to the shareholders’ meeting and for acknowledgement in the shareholders’ meeting.
A r t i c l e 1 9 : Deleted Ar t i c l e 19 .1 : The Company engages in high-tech computer and Internet-related industries and
is in the growth stage of the business life cycle. In response to the overall business environment and industry growth characteristics and the pursuit of the Company’s sustainable development, the long-term interests of shareholders, the stable operating performance goal, and the stable growth of earnings per share in accordance with the Company’s future capital expenditure budget and fund needs, the Company’s stock dividend distribution is limited to 75% of the total dividend planned for distribution.
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A r t i c l e 2 0 : The company’s annual profits, if any, should be with 1~20% appropriated as bonus to employees; also, it is to be resolved in the board meeting with stock dividend or cash distributed to employees, including employees of the subsidiaries that meet certain conditions. The Company’s Board of Directors may determine to appropriate an amount less than 1% of the profits referred to above as remuneration to directors and supervisors. The proposed bonus to employees and remuneration to directors and supervisors should be presented in the shareholders’ meeting for a resolution. If the company is with accumulated losses, an amount for making up the losses should be reserved in advance before appropriating bonus to employees and remuneration to directors and supervisors according to the ratio referred to above.
Ar t i c l e 20 .1 : The Company’s reinvestment may exceed 40% of the paid-in capital and with the board of directors authorized to execute it.
Ar t i c l e 20 .2 The company’s annual earnings, if any, are subject to paying taxes, making up losses, appropriating 10% legal reserve thereafter or it can be exempted if the legal reserve amount is equivalent to the company’s paid-in capital amount. The remaining balance thereafter should be applied to have the special reserve appropriated or reversed lawfully. The board of directors should present a proposal for the distribution of the remaining amount, if any, plus the accumulated unappropriated earnings as shareholders’ dividend and bonus in the shareholders’ meeting.
C h a p t e r 7 Annexes A r t i c l e 2 1 : The matters that are not addressed in the Corporate Charter should be processed
in accordance with the Company Law and the related regulations. A r t i c l e 2 2 The Corporate Charter (Article of Incorporation) was established on September
25, 1981 (the first time ~ Twentieth are omitted). The 21st amendment of the Corporate Charter (Article of Incorporation) was made on May 2, 2003. The 22nd amendment of the Corporate Charter (Article of Incorporation) was made on May 27, 2003. The 23rd amendment of the Corporate Charter (Article of Incorporation) was made on May 24, 2005. The 24th amendment of the Corporate Charter (Article of Incorporation) was made on November 18, 2005. The 25th amendment of the Corporate Charter (Article of Incorporation) was made on June 16, 2006. The 26th amendment of the Corporate Charter (Article of Incorporation) was made on June 15, 2007. The 27th amendment of the Corporate Charter (Article of Incorporation) was made on June 12, 2008. The 28th amendment of the Corporate Charter (Article of Incorporation) was made on May 15, 2009. The 29th amendment of the Corporate Charter (Article of Incorporation) was made on May 18, 2010. The 30th amendment of the Corporate Charter (Article of Incorporation) was made on May 25, 2011. The 31st amendment of the Corporate Charter (Article of Incorporation) was made on June 13, 2012 The 32nd amendment of the Corporate Charter (Article of Incorporation) was made on June 18, 2014. The 33rd amendment of the Corporate Charter (Article of Incorporation) was made on May 28, 2015. The 34rd amendment of the Corporate Charter (Article of Incorporation) was made on May 25, 2016.
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<Appendix II> Advantech Co., Ltd.
Procedures for the Acquisition or Disposal of Assets (before Amendment)
C h a p t e r I A r t i c l e 1
:
General Principles The Company’s Procedures for the Acquisition and Disposal of Assets (these Procedures) are established in accordance with the provisions of Article 36-1 of the Securities and Exchange Act and the regulations of Financial Supervisory Commission (the FSC).
A r t i c l e 2 : The Company shall handle the acquisition or disposal of assets in compliance with these Procedures; provided, where another law or regulation provides otherwise, such provisions shall govern.
A r t i c l e 3 : The term “assets” as used in these Procedures includes the following: 1. Investments in stocks, government bonds, corporate bonds, financial bonds,
securities representing interest in a fund, depositary receipts, call (put)warrants, beneficial interest securities, and asset-backed securities.
2. Real property (including land, houses and buildings, investment property,rights to use land, and construction enterprise inventory) and equipment.
3. Memberships.4. Patents, copyrights, trademarks, franchise rights, and other intangible assets.5. Derivatives.6. Assets acquired or disposed of in connection with mergers, demergers,
acquisitions, or transfer of shares in accordance with law 7. Other major assets.
A r t i c l e 4 : Terms used in these Procedures are defined as follows: 1. Derivatives: Forward contracts, options contracts, futures contracts,
leverage contracts, and swap contracts, and compound contractscombining the above products, whose value is derived from assets,interest rates, foreign exchange rates, indexes or other interests. The term“forward contracts” does not include insurance contracts, performancecontracts, after-sales service contracts, long-term leasing contracts, orlong-term purchase (sales) agreements.
2. Assets acquired or disposed through mergers, demergers, acquisitions, ortransfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as the consideration therefor (hereinafter “transfer of shares”) under Article 156, paragraph 8 of the Company Act.
3. Related party or subsidiary: As defined in the Regulations Governing thePreparation of Financial Reports by Securities Issuers.
4. Professional appraiser: Refers to a real property appraiser or other personduly authorized by law to engage in the value appraisal of real property or other fixed assets.
5. Date of occurrence: Refers to the date of contract signing, date of payment,date of consignment trade, date of transfer, dates of boards of directors resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt of approval by the competent authority shall apply.
6. Mainland China area investment: Refers to investments in the mainland
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China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.
A r t i c l e 5
C h a p t e r I I S e c t i o n 1
: Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or underwriter's opinions shall not be a related party of any party to the transaction. Disposition Procedures Establishment of Disposition Procedures
A r t i c l e 6 : These Procedures are established in accordance with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies promulgated by the FSC. After these Procedures have been approved by the Board of Directors, they shall be submitted to each supervisor, and then to a shareholders' meeting for approval; the same applies when the procedures are amended. If any director expresses dissent and it is contained in the minutes or a written statement, the company shall submit the director's dissenting opinion to each supervisor. When these Procedures are submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.
A r t i c l e 7 : The Limit of Investment in Non-business Real Property and Securities The limit of the above assets acquired by the Company and its subsidiaries is set up respectively as follows: 1. The total amount of non-business real property and short-term securities
purchased by the Company shall be no more than 30% of the Company’sshareholders’ equity and the investment of short-term securities shall be nomore than 10% of the Company’s shareholders’ equity.
2. The total amount of non-business real property and short-term securitiespurchased by each subsidiary of the Company and the respective investmentof short-term securities shall be no more than each subsidiary’s shareholders’equity.
3. The total amount of long-term securities invested by the Company shall beno more than its capital and the investment in a single company (actualinvested funds) shall be no more than 40% of the Company’s capital.
4. The total amount of long-term securities invested by each subsidiary of theCompany and the respective investment in a single company (actual investedfunds) shall be no more than its capital.
A r t i c l e 8
S e c t i o n 2
: With respect to the Company's acquisition or disposal of assets that is subject to the approval of the Board of Directors under the Company's procedures or other laws or regulations, if a director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. When a transaction involving the acquisition or disposal of assets is submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting. Acquisition or Disposal of Assets
A r t i c l e 9 : Procedures for Acquisition or Disposal of Real Property or Equipment 2. Evaluation and Operating Procedures
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The transaction processes of real property and equipment shall be handled in accordance with the operating procedures for fixed asset circulation in the Company’s internal control system.
2. Procedures for Determining Trading Terms and Conditions andAuthorization Limit
(1) When acquiring or disposing of real property, the Company shall determine the trading terms and conditions and trading prices based on the current value, assessed value, and real trading price of nearby real property and have the analysis report submitted to the Board of Directors. If the amount of the transaction is less than NT$300 million, this shall be approved by the Chairman of the Board and reported to the latest board meeting afterward; if the amount of the transaction is more than NT$300 million, this shall be approved by the Board of Directors.
(2) The acquisition or disposal of equipment shall be performed through enquiry, comparison, bargaining, or bidding. If the amount of the transaction is less than NT$300 million (inclusive), this shall be approved pursuant to the authorization limit; if the amount of the transaction is more than NT$300 million, this shall be approved by the President and the Board of Directors.
3. Units Responsible for ImplementationAfter the acquisition or disposal of real property or equipment is approvedbased on the authorization limit stipulated in the preceding paragraph, thedepartment using such real property or equipment and AdministrationDepartment is responsible for implementation.
4. Appraisal Report on Real Property or Other Fixed AssetsIn acquiring or disposing of real property or equipment where the transactionamount reaches NT$300 million or more, the Company, unless transactingwith a government agency, engaging others to build on its own land,engaging others to build on rented land, or acquiring or disposing ofequipment for business use, shall obtain an appraisal report prior to the dateof occurrence of the event from a professional appraiser and shall furthercomply with the following provisions:(1) Where due to special circumstances it is necessary to give a limited price,
specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the Board of Directors, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.
(2) Where the transaction amount is NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.
(3) Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (ARDF) and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price: A. The discrepancy between the appraisal result and the transaction
amount is 20 percent or more of the transaction amount. B. The discrepancy between the appraisal results of two or more
professional appraisers is 10 percent or more of the transaction amount.
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(4) No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.
(5) Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.
A r t i c l e 1 0 : Procedures for Acquisition or Disposal of Securities 1. Evaluation and Operating Procedures
The transaction processes of securities shall be handled in accordance withthe operating procedures for investment circulation in the Company’s internalcontrol system.
2.Procedures for Determining Trading Terms and Conditions and Authorization Limit
(1) The trading terms and conditions and authorization limit of securities traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) shall be determined by the responsible unit based on the market condition and the Company’s authorization limit and handled by the related unit supervisors. The amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.
(2) The trading terms and conditions and authorization limit of securities not traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) shall be determined by the Company by obtaining financial statements of the issuing company for the most recent period, certified or reviewed by a certified public accountant, for reference in appraising the trading price and taking into account the net value per share, profitability, and trend of future development and handled by the related unit supervisors. The amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.
(3) The acquisition of money market funds with fixed income shall be approved by the authorized financial officer.
3. Units Responsible for ImplementationAfter the investment in securities is approved based on the authorization limitof the Company, the finance unit is responsible for implementation.
4. Expert OpinionThe Company acquiring or disposing of securities shall, prior to the date ofoccurrence of the event, obtain financial statements of the issuing companyfor the most recent period, certified or reviewed by a certified publicaccountant, for reference in appraising the transaction price, and if the dollaramount of the transaction is 20 percent of the Company’s paid-in capital orNT$300 million or more, the Company shall additionally engage a certifiedpublic accountant prior to the date of occurrence of the event to provide anopinion regarding the reasonableness of the transaction price. If the CPAneeds to use the report of an expert as evidence, the CPA shall do so inaccordance with the provisions of Statement of Auditing Standards No. 20published by the ARDF. This requirement does not apply, however, topublicly quoted prices of securities that have an active market, or whereotherwise provided by regulations of the FSC.(1) Securities acquired through cash contribution in an incorporation by
promotion or by public offering. (2) Securities issued at face value by an issuing company carrying out a
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cash capital increase in accordance with relevant laws and regulations, with this Corporation as a sponsor of the issue.
(3) Securities issued by an investee company wholly invested by this Corporation that is carrying out a cash capital increase, with this Corporation as a sponsor of the issue.
(4) Securities listed and traded on the Taiwan Stock Exchange (TWSE) or on the GreTai Securities Market (GTSM) and emerging stocks.
(5) Government bonds or bonds in repurchase or reverse purchase agreements.
(6) Domestic funds or overseas funds. (7)TWSE or GTSM listed securities acquired or disposed of in accordance
with the TWSE or GTSM rules governing the purchase of listed securities by reverse auction or rules governing the auction of listed securities.
(8) Securities acquired through this Corporation’s sponsorship of a cash capital increase by a public company, when the securities acquired are not privately placed.
(9) Subscription to fund shares before the establishment of a fund in accordance with Article 11, paragraph 1 of the Securities Investment Trust and Consulting Act and the Financial Supervisory Commission’s 1 November 2004 Order No. Financial-Supervisory-Securities-IV-0930005249.
(10) Subscription or redemption of domestic private placement funds, provided that the trust agreement for the fund specifies an investment strategy in which, aside from securities margin transactions and open positions held in securities-related products, the investment scope of the remaining portion is the same as that of a publicly offered fund.
Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.
A r t i c l e 1 1 : Procedures for Acquisition or Disposal of Memberships or Intangible Assets 2. Evaluation and Operating Procedures
The transaction processes of memberships or intangible assets shall behandled in accordance with the operating procedures for fixed assetcirculation in the Company’s internal control system.
2. Procedures for Determining Trading Terms and Conditions andAuthorization Limit (1) The trading terms and conditions and prices of acquisition or disposal of
memberships shall be determined by the Company based on the market fair price, with the analysis report submitted to the President for approval. The amount of each transaction less than 1% of the Company’s paid-in capital or NT$300 million shall be reported to the Board of Directors for approval and the soonest board meeting for future reference; the amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.
(2) The trading terms and conditions and prices of acquisition or disposal of intangible assets shall be determined by the Company based on theappraisal report or market fair price, with the analysis report submitted to the President for approval. The amount of each transaction less than 10% of the Company’s paid-in capital or NT$300 million shall be reported to the Chairman of the Board for approval and the soonest board meeting for future reference; the amount of each transaction exceeding NT$300 million shall be reported to the Board of Directors for approval.
3. Units Responsible for Implementation
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After the acquisition or disposal of memberships or intangible assets is approved based on the authorization limit stipulated in the preceding paragraph, the department using such memberships or intangible assets and Finance Department or Administration Department are responsible for implementation.
4. Appraisal Report on Memberships or Intangible AssetsWhere the Company acquires or disposes of memberships or intangible assets and the transaction amount reaches NT$30 million or more, except in transactions with a government agency, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF.
Ar t i c l e 1 1 .1 : The calculation of the transaction amounts referred to in the preceding three articles shall be done in accordance with Paragraph 2 of Article 30, herein, and “within the preceding year” as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.
A r t i c l e 1 2
S e c t i o n 3
: Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion. Related Party Transactions
A r t i c l e 1 3 : When the Company engages in any acquisition or disposal of assets from or to a related party, in addition to ensuring that the necessary resolutions are adopted and the reasonableness of the transaction terms is appraised, if the transaction amount reaches 10 percent or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with the provisions of Article 11.1. The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article 11.1 herein. When judging whether a trading counterparty is a related party, in addition to legal formalities, the substance of the relationship shall also be considered.
A r t i c l e 1 4 : When the Company intends to acquire or dispose of real property from or to a related party and when it intends to acquire or dispose of assets other than real property from or to a related party, regardless of the amount and except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Board of Directors and recognized by the supervisors: 1. The purpose, necessity and anticipated benefit of the acquisition or disposal
of assets.2. The reason for choosing the related party as a trading counterparty.3. With respect to the acquisition of real property from a related party,
information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 15 and Article 16.
4. The date and price at which the related party originally acquired the realproperty, the original trading counterparty, and that trading counterparty'srelationship to the company and the related party.
5. Monthly cash flow forecasts for the year commencing from the anticipatedmonth of signing of the contract, and evaluation of the necessity of thetransaction, and reasonableness of the funds utilization.
6. An appraisal report from a professional appraiser or a CPA's opinion
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obtained in compliance with the preceding article. 7. Restrictive covenants and other important stipulations associated with the
transaction.The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Paragraph 2 of Article 27 herein, and “within the preceding year” as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the Board of Directors and recognized by the supervisors need not be counted toward the transaction amount. With respect to the acquisition or disposal of business-use equipment between the Company and its subsidiaries, the Company's Board of Directors may pursuant to Paragraph 2 of Article 9 delegate the Chairman of the Board to decide such matters when the transaction is within a certain amount and have the decisions subsequently submitted to and ratified by the next board of directors meeting. When a matter is submitted to the Board of Directors for discussion pursuant to the preceding paragraph, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board of directors meeting.
A r t i c l e 1 5 : The Company that acquires real property from a related party shall evaluate the reasonableness of the transaction costs by the following means: 1. Based upon the related party's transaction price plus necessary interest on
funding and the costs to be duly borne by the buyer. “Necessary interest onfunding” is imputed as the weighted average interest rate on borrowing in theyear the Company purchases the property; provided, it may not be higherthan the maximum non-financial industry lending rate announced by theMinistry of Finance.
2. Total loan value appraisal from a financial institution where the related partyhas previously created a mortgage on the property as security for a loan;provided, the actual cumulative amount loaned by the financial institutionshall have been 70 percent or more of the financial institution's appraisedloan value of the property and the period of the loan shall have been 1 year ormore. However, this shall not apply where the financial institution is a relatedparty of one of the trading counterparties.
Where land and structures thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding paragraph. The Company that acquires real property from a related party and appraises the cost of the real property in accordance with Paragraph 1 and Paragraph 2 shall also engage a CPA to check the appraisal and render a specific opinion. Where the Company acquires real property from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 14 and the preceding three paragraphs do not apply: 1. The related party acquired the real property through inheritance or as a gift.2. More than 5 years will have elapsed from the time the related party signed
the contract to obtain the real property to the signing date for the currenttransaction.
3. The real property is acquired through signing of a joint development contractwith the related party, or through engaging a related party to build realproperty, either on the company's own land or on rented land.
A r t i c l e 1 6 : When the results of the Company's appraisal conducted in accordance with Paragraph 1 and Paragraph 2 of the preceding article are uniformly lower than
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the transaction price, the matter shall be handled in compliance with Article 17. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply: 1. Where the related party acquired undeveloped land or leased land for
development, it may submit proof of compliance with one of the following conditions:
(1) Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The "Reasonable construction profit" shall be deemed the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.
(2) Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.
(3) Completed leasing transactions by unrelated parties for other floors of the same property from within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance with standard property leasing market practices.
2. Where the Company acquiring real property from a related party providesevidence that the terms of the transaction are similar to the terms oftransactions completed for the acquisition of neighboring or closely valuedparcels of land of a similar size by unrelated parties within the precedingyear.
Completed transactions for neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.
A r t i c l e 1 7 : Where the Company acquires real property from a related party and the results of appraisals conducted in accordance with Article 15 and Article 16 are uniformly lower than the transaction price, the following steps shall be taken: 1. A special reserve shall be set aside in accordance with Paragraph 1, Article
41 of the Securities and Exchange Act against the difference between thereal property transaction price and the appraised cost, and may not bedistributed or used for capital increase or issuance of bonus shares. Where apublic company uses the equity method to account for its investment inanother company, then the special reserve called for under Paragraph 1,Article 41 of the Securities and Exchange Act shall be set aside pro rata in aproportion consistent with the share of public company's equity stake in theother company.
2. Supervisors shall comply with Article 218 of the Company Act.3. Actions taken pursuant to subparagraph 1 and subparagraph 2 shall be
reported to a shareholders meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.
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S e c t i o n I V
The Company that has set aside a special reserve under the preceding paragraph may not utilize the special reserve until it has recognized a loss on decline in market value of the assets it purchased at a premium, or they have been disposed of, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the FSC has given its consent. When the Company obtains real property from a related party, it shall also comply with the preceding two paragraphs if there is other evidence indicating that the acquisition was not an arm’s length transaction. Engaging in Derivatives Trading
A r t i c l e 1 8 : The Company engaging in derivatives trading shall pay strict attention to control of the following important risk management and auditing matters, and incorporate them into their Procedures: 1. Trading Principles and Policies: Shall include the types of derivatives that
may be traded, operating or hedging strategies, segregation of duties,essentials of performance evaluation, total amount of derivatives contractsthat may be traded, and the maximum loss limit on total trading and forindividual contracts.
2. Risk management measures.3. Internal audit system.4. Regular evaluation methods and the handling of irregular circumstances.
A r t i c l e 1 9 : The company engaging in derivatives trading shall adopt the following risk management measures: 1. Risk management shall address credit, market, liquidity, cash flow,
operational, and legal risks. 2. The personnel that deal with the transaction of derivatives, make
confirmation of these transactions and make settlements of these transactions shall not be the same.
3. The evaluation, supervision and control of risk-related matters also shall bereported by persons from a different department to the Board of Directors orto the high-level managers who are not responsible for setting policies fortransactions or position
4. The position held in the trading of derivatives shall be evaluated at leastonce a week, but the hedging transaction made for business purposes shallbe evaluated at least twice a month, and the evaluation reports shall be givento high-level managers authorized by the Board of Directors.
5. Other important risk management measures.A r t i c l e 2 0 : Where the Company engaging in derivatives trading, its Board of Directors
shall faithfully supervise and manage such trading in accordance with the following principles: 1. Designate senior management personnel to pay continuous attention to
monitoring and controlling derivatives trading risk. 2. Periodically evaluate whether derivatives trading performance is consistent
with established operational strategy and whether the risk undertaken iswithin the Company's permitted scope of tolerance.
Senior management personnel authorized by the Board of Directors shall manage derivatives trading in accordance with the following principles: 1. Periodically evaluate the risk management measures currently employed are
appropriate and are faithfully conducted in accordance with these Proceduresand the Procedures for Engaging in Derivatives Transactions formulated bythe Company.
2. When irregular circumstances are found in the course of supervising tradingand profit-loss circumstances, appropriate measures shall be adopted and areport immediately made to the Board of Directors; where the company has
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independent directors, an independent director shall be present at the meeting and express an opinion.
The Company shall report to the soonest board meeting after it authorizes the relevant personnel to handle derivatives trading in accordance with its Procedures for Engaging in Derivatives Transactions.
A r t i c l e 2 1 : The Company engaging in derivatives trading shall establish a log book in which details of the types and amounts of derivatives trading engaged in, Board of Directors’ approval dates, and the matters required to be carefully evaluated under Subparagraph 4 of Article 19 and Subparagraph 2 of Paragraph 1 and Subparagraph 1 of Paragraph 2 of Article 20 shall be recorded in detail in the log book. A public company's internal audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, all supervisors shall be notified in writing.
S e c t i o n V A r t i c l e 2 2
:
Mergers and Consolidations, Splits, Acquisitions, and Assignment of Shares The Company that conducts a merger, demerger, acquisition, or transfer of shares, prior to convening the board of directors to resolve on the matter, shall engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the Board of Directors for deliberation and passage.
A r t i c l e 2 3 : The Company participating in a merger, demerger, acquisition, or transfer of shares shall prepare a public report to shareholders detailing important contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders meeting and include it along with the expert opinion referred to in the first paragraph of the preceding article when sending shareholders notification of the shareholders’ meeting for reference in deciding whether to approve the merger, demerger, or acquisition. Provided, where a provision of another act exempts the Company from convening a shareholders meeting to approve the merger, demerger, or acquisition, this restriction shall not apply. Where the shareholders meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders meeting, the companies participating in the merger, demerger or acquisition shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders meeting.
A r t i c l e 2 4 : A company participating in a merger, demerger, or acquisition shall convene a board meeting and shareholders’ meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. A company participating in a transfer of shares shall call a board meeting on the day of the transaction, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent. When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for 5 years for reference: 1. Basic identification data for personnel: Including the occupational titles,
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names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or transfer of another company's shares prior to disclosure of the information.
2. Dates of material events: Including the signing of any letter of intent ormemorandum of understanding, the hiring of a financial or legal advisor, theexecution of a contract, and the convening of a board of directors meeting.
3. Important documents and minutes: Including merger, demerger, acquisition,and share transfer plans, any letter of intent or memorandum ofunderstanding, material contracts, and minutes of board of directorsmeetings.
When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall, within 2 days commencing immediately from the date of passage of a resolution by the board of directors, report (in the prescribed format and via the Internet-based information system) the information set out in subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation. Where any of the companies participating in a merger, demerger, acquisition, or transfer of another company's shares is neither listed on an exchange nor has its shares traded on an OTC market, the company(s) so listed or traded shall sign an agreement with such company whereby the latter is required to abide by the provisions of paragraphs 3 and 4.
A r t i c l e 2 5 : Every person participating in or privy to the plan for merger, demerger, acquisition, or transfer of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, demerger, acquisition, or transfer of shares.
A r t i c l e 2 6 : The Company participating in a merger, demerger, acquisition, or transfer of shares may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or transfer of shares: 1. Cash capital increase, issuance of convertible corporate bonds, or the
issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.
2. An action, such as a disposal of major assets, which affects the company'sfinancial operations.
3. An event, such as a major disaster or major change in technology, whichaffects shareholder equity or share price.
4. An adjustment where any of the companies participating in the merger,demerger, acquisition, or transfer of shares from another company, buysback treasury stock.
5. An increase or decrease in the number of entities or companies participatingin the merger, demerger, acquisition, or transfer of shares.
6. Other terms/conditions that the contract stipulates may be altered and thathave been publicly disclosed.
A r t i c l e 2 7 : The contract for participation by the Company in a merger, demerger, acquisition, or of shares shall record the rights and obligations of the companies participating in the merger, demerger, acquisition, or transfer of shares, and shall also record the following:
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1. Handling of breach of contract.2. Principles for the handling of equity-type securities previously issued or
treasury stock previously bought back by any company that is extinguishedin a merger or that is demerged.
3. The amount of treasury stock participating companies are permitted underlaw to buy back after the record date of calculation of the share exchangeratio, and the principles for handling thereof.
4. The manner of handling changes in the number of participating entities orcompanies.
5. Preliminary progress schedule for plan execution, and anticipatedcompletion date.
6. Scheduled date for convening the legally mandated shareholders meeting ifthe plan exceeds the deadline without completion, and relevant procedures.
A r t i c l e 2 8 : After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders meeting to resolve on the matter anew.
A r t i c l e 2 9
C h a p t e r I I I
: Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the Company shall sign an agreement with the non-public company whereby the latter is required to abide by the provisions of Article 24, Article 25, and Article 28. Public Disclosure of Information
A r t i c l e 3 0 : Procedures for Public Disclosure of Information Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC's designated website in the appropriate format as prescribed by regulations within 2 days commencing immediately from the date of occurrence of the event: 1. Acquisition or disposal of real property from or to a related party, or
acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds.
2. Merger, demerger, acquisition, or transfer of shares.3. Losses from derivatives trading reaching the limits on aggregate losses or
losses on individual contracts set out in the procedures adopted by theCompany.
4.Where an asset transaction other than any of those referred to in thepreceding three subparagraphs, a disposal of receivables by a financialinstitution, or an investment in the mainland China area reaches 20 percentor more of paid-in capital or NT$300 million; provided, this shall not applyto the following circumstances:
(1) Trading of government bonds. (2) Securities trading by investment professionals on foreign or domestic
securities exchanges or over-the-counter markets, or subscription of securities by a securities firm, either in the primary market or in accordance
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A r t i c l e 3 1 :
with relevant regulations. (3) Trading of bonds under repurchase/resale agreements, or subscription or
redemption of domestic money market funds. (4) Where the type of asset acquired or disposed is equipment/machinery for
business use, the trading counterparty is not a related party, and the transaction amount is less than NT$500 million.
(5) Where land is acquired under an arrangement on engaging others to build on the Company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the Company expects to invest in the transaction is less than NT$500 million.
The amount of transactions above shall be calculated as follows and “Within the preceding year” as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with the regulations need not be counted toward the transaction amount. 1. The amount of any individual transaction.2. The cumulative transaction amount of acquisitions and disposals of the same
type of underlying asset with the same trading counterparty within thepreceding year.
3. The cumulative transaction amount of real property acquisitions anddisposals (cumulative acquisitions and disposals, respectively) within the same development project within the preceding year.
4. The cumulative transaction amount of acquisitions and disposals (cumulativeacquisitions and disposals, respectively) of the same security within thepreceding year.
“Within the preceding year” as used in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Procedures need not be counted toward the transaction amount. The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month. When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety. The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the company headquarters, where they shall be retained for 5 years except where another act provides otherwise. Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the information reporting website designated by the FSC within 2 days commencing immediately from the date of occurrence of the event: 1. Change, termination, or rescission of a contract signed in regard to the
original transaction.2. The merger, demerger, acquisition, or transfer of shares is not completed by
the scheduled date set forth in the contract.3. Change to the originally publicly announced and reported information.
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A r t i c l e 3 2 : Subsidiaries of the Company shall comply with the following regulations: 1. A subsidiary of the Company shall acquire or dispose of assets in accordance
with these Procedures.2. Information required to be publicly announced and reported in accordance
with the provisions of these Procedures on acquisitions and disposals ofassets by a subsidiary of the Company that is not itself a public company inTaiwan shall be reported by the Company.
3. The paid-in capital or total assets of the Company shall be the standard fordetermining whether or not a subsidiary referred to in the precedingparagraph requiring a public announcement and regulatory filing in the eventthe type of transaction specified therein reaches 20 percent of paid-in capitalor 10 percent of the total assets.
A r t i c l e 3 3 : These Procedures were established on May 3, 1997.The 1st amendment was made on November 29, 1999. The 2nd amendment was made on May 30, 2002. The 3rd amendment was made on May 2, 2003. The 4th amendment was made on May 27, 2004. The 5th amendment was made on June 16, 2006. The 6th amendment was made on June 15, 2007. The 7th amendment was made on June 13, 2012. The 8th amendment was made on June 18, 2014.
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< Appendix III >
Advantech Co., Ltd. Procedures for Lending Funds to Other Parties
(before Amendment) A r t i c l e 1 : Purpose
These Operational Procedures are established by the Company to regulate the lending of funds to others for the purpose of maintaining the Company’s interests. Matters not specified in these Procedures shall be handled in accordance with related laws and regulations.
A r t i c l e 2 : Scope of Application The lending activities of the Company shall be in accordance with these Operational Procedures. The subsidiaries and parent company referred to in these Operational Procedures shall be recognized according to the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The Company’s financial statements are prepared based on International Financial Reporting Standards. The net value referred in these Operational Procedure shall refer to the owners’ equity on the parent company’s balance sheet of the Company’s financial statements.
A r t i c l e 3 : Lending Counterparts Companies or firms in need of short-term financing. Lending counterparts in need of short-term financing shall be limited to a subsidiary in which the Company holds 50% of the voting shares or companies with the de facto control having the need of short-term financing due to business needs. The phrase “short-term” mentioned above shall mean within one year or a business cycle (whichever is longer). Foreign companies, of which the Company directly or indirectly holds 100% of the voting shares, if engaged in the lending business, will be exempt from the restrictions referred to in the first paragraph of Article 4.
A r t i c l e 4 : Lending Amount and Financing Limit 3. The total amount lent to others (loanable funds) shall not exceed 20% of the net
value of the Company. The total lending amount of an individual borrower shall not exceed 50% of the total amount of loanable funds.
4. In the case of lending funds to companies or firms who have a businessrelationship with the Company, the total lending amount of an individualborrower shall not exceed 50% of the total amount of loanable funds or thetotal amount of the business transactions between the Company and theborrower, whichever is lower, and the maximum amount stipulated in thepreceding paragraph.
A r t i c l e 5 : Unit in Charge Unless otherwise specified, the finance unit shall be in charge of lending funds to others.
A r t i c l e 6 : Term of Loan The term of the loan shall be limited to one year; however, due to the actual needs, the term of the loan may be extended once prior to expiration with the approval of the Board of Directors. Loans between the Company and its parent company shall be approved by the Board of Directors and authorization may also be given to the Chairman of the Board, within a certain capital limit for a specific borrowing counterparty and
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within a period not to exceed one year, to give loans in installments or to make a revolving credit line available for the counterparty to draw down. If the Company has established independent directors, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.
A r t i c l e 7 : Methods of Interest Calculation 1. Daily accrual: The amount of interest is calculated by the sum of the daily loan
balance (total cumulative amount) multiplied by the annual interest rate and divided by 365. The annual interest rate shall not be less than Bank of Taiwan’s base rate on short-term loan +1% or the Company’s cost of funds at that time.
2. Unless otherwise stipulated, the interest on loan shall be deduced from theappropriation of the loan.
A r t i c l e 8 : Procedures for Fund Lending and Detailed Review1. Application:
A. When applying for a loan with the Company, a borrower shall submit theapplication form or an official letter specifying the amount, term and purpose of the loan to the Company’s Finance Department.
B. Where a loan is given due to needs arising from business dealings, the finance unit shall evaluate whether the amount of the loan is commensurate with the amount of transactions and in compliance with these Operational Procedures.
C. Where a borrower in need of short-term financing applies for a loan, the Company shall evaluate the necessity of financing and investigate the borrower’s credit status.
D. The loan, after being verified to be feasible upon analysis, shall be submitted to the Chairman of the Board and the board meeting for approval.
2. Credit Investigation and Risk AssessmentA. For a first-time borrower, the borrower shall provide basic information and
financial information to facilitate the credit investigation. B. For a subsequent borrower, the credit investigation shall be carried out when
the borrower applies for the renewal. In case of a major or urgent event, the credit investigation shall be carried out at any time depending on the actual needs.
C. If the borrower is in good financial condition and has had the annual financial statements audited by CPAs, the investigation report made for less than a year and the auditors’ report may be adopted as the reference.
D. When carrying out the credit investigation, the Company shall make a detailed assessment of the impact of the loan on the Company’s business operations, financial conditions, and shareholders’ equity.
3. Contract Signing and Identity VerificationA. The person in charge of lending funds shall fill in the loan contract based on
the approved conditions to proceed with the contract signing. B. After the borrower and the joint guarantor sign the loan contract, the person
in charge shall perform the procedures for verifying their identities. 4. Appraisal of Collateral Value and Setting of Rights
When applying for a loan, a borrower, after being verified to provide collateral,shall provide a pledge on equivalent real property or securities or thepromissory note, which matures on the expected date of repayment and issigned by the joint guarantor, for the Company as security. When the jointguarantor is a company or a firm, the Company shall examine whether itsarticles of incorporation and minutes of the board meeting permit the guarantee.
5. InsuranceExcept for land and securities, fire insurance and related insurance shall be
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purchased for other collaterals at the amount not less than the collateral in pledge. The Company shall be specified as the beneficiary in the insurance policy. The name, quantity, place of storage, and insurance conditions and endorsements of the subject specified in the insurance policy shall be consistent with the loan conditions approved by the Company. The person in charge shall notify the borrower of a renewal before the term of the insurance expires.
6. AppropriationThe loan will be appropriated after a borrower sign the contract, submit thepromissory note, set the mortgage, and purchase the insurance.
7. Account KeepingWhen the Company completes the procedures for lending each fund, FinanceDepartment shall make an entry for collateral or credit guarantee obtained.
8. The Company shall establish a log book for its loan activities and record indetail the following information for future reference: the entity to which theloan is given, the amount, the date of passage by the Board of Directors, thedate the loan is appropriated, and matters to be evaluated in accordance withArticle 7.
9. If, due to changes of circumstances, the party to whom the Company gives aloan no longer satisfies the criteria set forth herein, or the balance of a loanexceeds the limits, a corrective plan shall be provided to all supervisors and theproposed corrections shall be implemented within the period specified in theplan.
A r t i c l e 9 : Control Actions upon the Loans Upon the release of the funds, the Company shall pay attention to the borrower’s and guarantor’s financial, business and credit status, etc. In cases involving collateral, the Company shall pay attention to its guarantee value and any change thereto. In case of a major change, the Chairman of the Board shall be notified immediately and appropriate measures shall be taken based on the instructions.
A r t i c l e 1 0 : Cancellation of Mortgage When a borrower applies for the cancellation of mortgage, the Company shall ascertain whether the loan and interest have been paid back in full. The cancellation of mortgage may be handled after the borrower has paid back the loan and interest in full.
A r t i c l e 1 1 : Procedures for Disposing of Overdue Debts A borrower shall pay back the loan and interest within the time limit. Unless the borrower has put forward a proposal to extend the term of the loan for less than a year with the approval of the Board of Directors, if the borrower fails to pay back the loan and interest within the time limit as scheduled, the Company may dispose of the collateral or lodge a claim with the guarantor in accordance with the law. The above proposal to extend the term of the loan can only be made once.
A r t i c l e 1 2 : Procedures for Announcement and Report 1.The Company shall announce and report the balance of loaned funds by theCompany and its subsidiaries in the preceding month in Market Observation Post System, before the 10th day of the month. If the loan meets any of the following circumstances stipulated in the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, it shall be reported in Market Observation Post System within two days upon occurrence of the fact, the date of occurrence to be counted as the first day:
(1) The balance of the loaned funds by the Company and its subsidiaries exceeds 20% of the net value of the Company, as specified in its latest financial statement.
(2) The balance of funds lent to any single entity by the Company and its
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subsidiaries exceeds 10% of the net worth of the Company, as specified in its latest financial statement.
(3) The increase of new loans by the Company or its subsidiaries reaches NTD10 million or more, or is more than 2% of the net worth of the Company, as specified in its latest financial statement. “Date of occurrence” in these Operational Procedures means the date of contract signing, date of payment, dates of boards of directors resolutions, or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier.
2.The Company shall announce and report on behalf of any of its subsidiaries thatare not a domestic public company any matters that such subsidiary is required to announce and report pursuant to the 3rd subparagraph in the preceding paragraph.
3. The Company shall evaluate the status of loans of funds, and shall set asidesufficient allowance for bad debts. It shall also adequately disclose relevantinformation in its financial reports and provide the certifying CPAs withrelevant materials for the performance of necessary audit procedures.
Ar t i c l e 1 2 .1 Penalty for Violation of These Procedures by Managers and Persons-in-charge In accordance with the Company’s personnel management regulations and employee handbook, managers and persons-in-charge who violate these Operational Procedures shall be punished based on the severity of violation.
A r t i c l e 1 3 Implementation and Amendment These Operational Procedures shall be approved by the Board of Directors and then sent to all supervisors and proposed at the shareholders’ meeting for approval. If any director expresses objection on the record or in a written statement, the Company shall submit the objection to the supervisors and the shareholders’ meeting for discussion any amendment hereto is subject to the same procedures. If the Company has established independent directors, when submitting these Operational Procedures to the Board of Directors for discussion pursuant to the preceding paragraph, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.
A r t i c l e 1 4 Procedures for Managing Funds Lent to Subsidiaries: 1. For a subsidiary in which the Company directly or indirectly holds more than
50% of the voting shares and which is not a public company of the Republic of China, these Operational Procedures shall be followed. The net value shall be calculated based on the Company’s net value. The Company shall submit the previous month's balance of its loaned funds to Finance Department by the 5th day of each month.
2. Internal auditors of the Company shall perform the audit on the lending of fundsof the subsidiaries based on the annual audit plan. In the case that a material violation is found, internal auditors shall continuously follow up the improvements and submit the follow-up report to the Board of Directors and all supervisors.
A r t i c l e 1 5 These Procedures were established on May 3, 1997. The 1st amendment was made on May 30, 2002. The 2nd amendment was made on May 2, 2003. The 3rd amendment was made on May 15, 2009. The 4th amendment was made on May 18, 2010. The 5th amendment was made on June 13, 2013.
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< Appendix IV > Advantech Co., Ltd.
Procedures for Endorsement & Guarantee (before Amendment)
A r t i c l e 1 : Purpose These Procedures are established to maintain the sound operation and interests of the Company and to reduce its operational risks.
A r t i c l e 2 : The Company shall comply with these Procedures in addition to its Articles of Incorporation when engaging in endorsements and guarantees. Matters not specified in these Procedures shall be handled in accordance with related laws and regulations. The subsidiaries and parent company referred in these Procedures shall be recognized according to the Statement of Financial Accounting Standards (SFAS) No. 5 and No. 7 published by Accounting Research and Development Foundation.
A r t i c l e 3 : Object of the Endorsement and/or Guarantee The parties to whom the Company may provide endorsement and/or guarantee include the following: 1. A company which has a business relationship with the Company.2. A company in which the Company directly or indirectly holds more than 50%of the voting shares. 3. A company which directly or indirectly holds more than 50% of theCompany’s voting shares. The Company may provide endorsement and/or guarantee to a company in which the Company directly or indirectly holds 100% of the voting shares. The term “voting shares which are directly or indirectly held” mentioned in the subparagraph 2 and 3 of the preceding paragraph refers to the combination of a company’s voting shares which are directly held by the Company’s and those which are held by another company in which the Company holds more than 50% of the voting shares. The term “another company” mentioned above includes the company itself and another company in which the company directly or indirectly holds more than 50% of the voting shares, and so on.
A r t i c l e 4 : The words “endorsements” and/or “guarantees” used herein are defined as: 1. Financing endorsement and/or guarantee
A. Endorsement and/or guarantee of customers’ notes for cash financing witha discount.
B. Endorsement and/or guarantee of the notes issued by the Company to nonfinancial institutions and entities for the Company’s own financing needs.
C. Endorsement and/or guarantee of another company for its financing needs. 2. Endorsement and/or guarantee of customs duties due for the Company or
other companies.3. Other endorsements/guarantees which are not included under thesubparagraphs 1 and 2 of this article.
Any creation by the Company of a pledge or mortgage on its chattel or real property as security for the loans of another company shall also comply with these Procedures.
A r t i c l e 5 : Limits on Endorsements and Guarantees 1. The total amount of the endorsements/guarantees provided by the Company toothers shall not exceed 30% of the Company’s net value, but the amount of endorsement/guarantee provided by the Company to any single entity shall not exceed 10% of the Company’s net value. The total amount of the endorsement/guarantee provided by the Company and
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its subsidiaries shall not exceed 30% of the Company’s net value, and the amount of endorsement/guarantee provided by the Company to any single entity shall not exceed 10% of the Company’s net value. 2. The total amount of the endorsement/guarantee made due to needs arisingfrom business dealings shall not exceed the total amount of transactions (purchase or sales, whichever is higher) with the Company in the last year and the maximum amount stipulated in the preceding paragraph. 3. The Company may, based on its actual needs, request the guaranteed companyto create a pledge on its chattel or real property as security.
A r t i c l e 5 . 1 : Level of Authorization Endorsements and/or guarantees made by the Company shall be conducted after receiving approval from the Chairman and the Board of Directors. A predetermined limit (5% of the Company’s net value) may be delegated to the Chairman by the Board of Directors to facilitate execution and such endorsement and/or guarantee shall be reported to the most upcoming board meeting for ratification and to the shareholders’ meeting for future reference. In case the above limits have to be exceeded to accommodate business needs, approval by a resolution of the Board of Directors shall be obtained and over half of all the directors shall jointly endorse the potential loss that may be brought about by exceeding the limits. The Board of Directors shall also revise these procedures and have them ratified at the shareholders’ meeting. If the revised procedures are not ratified at the shareholders’ meeting, the Board of Directors shall furnish a plan containing a timetable to withdraw the excess portion. If, due to changes of circumstances, the party to whom the Company provides an endorsement and/or guarantee no longer satisfies the criteria set forth herein, or the amount of endorsement and/or guarantee exceeds the limits, a corrective plan shall be provided to all supervisors and the proposed corrections shall be implemented within the period specified in the plan.
A r t i c l e 6 : Operating Procedures for Endorsements and Guarantees Detailed Review Procedures: 1. When the guaranteed company requests endorsement, the application unit ofthe Company shall fill in the Guarantee (Cancellation) Application Form specifying the reason and purpose of endorsement and attach notes and the guaranteed company’s financial information for approval. 2. The finance unit shall examine:
A. Whether the reason for endorsement is reasonable enough. B. Whether it is necessary to measure the amount of endorsement based on
the financial status of the guaranteed company. C. Whether the accumulated amount is within the limit. D. The status of credit and the impact on the Company’s business
operations, financial conditions, and shareholders’ equity. E. Whether the amount of endorsement and/or guarantee made due to needs
arising from business relationship is commensurate with the amount of transactions in an analysis report.
F. Whether collateral must be obtained and appraisal of the value thereof. 3. The Company shall assess and recognize contingent losses brought about byendorsements and/or guarantees, and shall adequately disclose relevant information in its financial reports and provide the certifying CPAs with relevant materials for the performance of necessary audit procedures and reporting. 4. If the party to whom the Company provides an endorsement and/or guaranteeis a subsidiary whose net value is below 50% of its paid-up capital, follow-up management shall be continuously implemented by the Company.
A r t i c l e 7 : Approval and Cancellation of Endorsed Nots:
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1. Endorsed notes may be returned to the guaranteed company after thefollowing procedures are complete:
A. Stamp the official seal. B. Copy the both sides of the endorsed notes and retain it for future reference. C. Record the endorsed notes in the Endorsement and Cancellation Registry to
manage the amount of endorsement. 2. If the endorsed nots are required to be cancelled due to debts or renewal, theapplication unit shall fill in the Guarantee (Cancellation) Application Form and submit the form and the original endorsed notes to the finance unit for cancellation. 3. The finance unit shall record the cancelled endorsed notes in theEndorsement and Cancellation Registry to reduce the accumulated amount of endorsement.
A r t i c l e 8 : Use of Official Seal and Security Procedures: The Company shall apply for registration with the Ministry of Economic Affairs for its official seal and for a special-purpose seal for endorsements and/or guarantees. The official seal shall be kept by the Company’s designated personnel. These Procedures and the Regulations Governing Seals must be followed for sealing and note issuance purposes. The Company’s designated personnel in charge of keeping the official seal shall be approved by the Board of Directors. The same procedure shall apply with any change. When providing an endorsement/guarantee to a foreign company, the endorsement/guarantee letter shall be executed and signed by the person designated by the Board of Directors.
A r t i c l e 8 . 1 : Procedures for Managing Endorsements/Guarantees Provided for Subsidiaries: 1. For a subsidiary in which the Company directly or indirectly holds more than
50% of the voting shares and which is not a public company of the Republic of China, these Procedures shall be followed. The net value shall be calculated based on the Company’s net value. The Company shall submit the previous month's balance of endorsements/guarantees of itself and its subsidiaries to Finance Department by the 5th day of each month.
2. Internal auditors of the Company shall perform the audit on endorsementand/or guarantee profile of the subsidiaries based on the annual audit plan. In the case that a material violation is found, internal auditors shall continuously follow up the improvements and submit the follow-up report to the Chairman of the Board.
A r t i c l e 9 : The finance unit shall establish a log book for its endorsement/guarantee activities and record in detail the following information for future reference: the entity for which the endorsement/guarantee is made, the amount, the content of the endorsement/guarantee, the date of passage by the Board of Directors or of authorization by the Chairman of the Board, the date the endorsement/guarantee is made, the content of the collateral and the appraisal of the value, and conditions and the date of cancellation of the endorsement/guarantee.
A r t i c l e 9 . 1 : Deadline and Standards for Announcement and Report: The Company shall announce and report the balance of endorsements and/or guarantees made by itself and its subsidiaries for the previous month in Market Observation Post System by the 10th day of each month. If the balance of endorsements and/or guarantees meets one of the following levels, the Company shall announce and report such event in Market Observation Post System within two days of the occurrence, the date of occurrence to be counted as the first day: 1. The aggregate balance of endorsements and/or guarantees by the Company
and its subsidiaries reaches 50% or more of the Company’s net value as
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stated in the latest financial statement. 2. The balance of endorsements and/or guarantees by the Company and its
subsidiaries for a single enterprise reaches 20% or more of the Company’s net value as stated in the latest financial statement.
3. The balance of endorsements and/or guarantees by the Company and itssubsidiaries for an individual enterprise is more than NT$10 million or the aggregate amount of all endorsements and/or guarantees for long-term nature of 5 investments in, and balance of loans to, such enterprise reaches 30% of the Company’s net value as stated in its latest financial statement.
4. The amount of new endorsements and/or guarantees made by the Companyor its subsidiaries is more than NT$30 million or more than 5% of the Company’s net value as stated in its latest financial statement.
The Company shall announce and report on behalf of any of its subsidiaries that are not a domestic public company any matters that such subsidiary is required to announce and report in Market Observation Post System pursuant to the subparagraph 4 of the preceding paragraph.
A r t i c l e 1 0 : The Company shall assess and recognize contingent losses brought about by endorsements and/or guarantees, and shall adequately disclose relevant information in its financial reports and provide the certifying CPAs with relevant materials for the performance of necessary audit procedures and reporting.
A r t i c l e 1 1 : Internal auditors of the Company shall perform the audit on the Company’s endorsement and/or guarantee profile at least once per quarter and produce written auditing reports. In the case that a material violation is found, internal audit shall immediately notify the supervisors in writing.
Ar t i c l e 1 1 .1 : Penalty for Violation of These Procedures by Managers and ersons-in-charge: In accordance with the Company’s personnel management regulations and employee handbook, managers and persons-in-charge who violate these Procedures shall be punished based on the severity of violation.
A r t i c l e 1 2 : These Procedures shall be implemented upon approval of the Board of Directors, all supervisors and the shareholders’ meeting. If any director expresses objection on the record or in a written statement, the Company shall submit the objection to the supervisors and the shareholders’ meeting for discussion. Any amendment hereto is subject to the same procedures. If the Company has established independent directors, when submitting these Procedures to the Board of Directors for discussion pursuant to the preceding paragraph, it shall consider the dissenting opinions from all independent directors fully and list the consenting and objecting opinions and their reasons in the meeting minutes of the Board of Directors.
A r t i c l e 1 3 These Procedures were established on May 3, 1997. The 1st amendment was made on May 2, 2003. The 2nd amendment was made on June 16, 2006. The 3rd amendment was made on May 15, 2009. The 4th amendment was made on May 18, 2010.
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< Appendix V > Advantech Co., Ltd.
Procedures for Financial Derivatives Transactions (before Amendment)
A r t i c l e 1 : Purpose 1. These Procedures are enacted to establish the risk management system fderivatives transactions for the purpose of fulfilling information disclosure and protecting investors. 2. These Procedures are enacted in accordance with Article 36.1 of the Securities aExchange Act and the Regulations Governing the Acquisition and Disposal of Asseby Public Companies. Matters not specified in these Procedures shall be handled accordance with related laws and regulations.
A r t i c l e 2 : Trading Principles and Policies 1. Type of transactions: The type of derivatives transactions which the Companyengages in is limited to forward contracts and options. The term “forward contracts” does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) agreements. 2. Operational or hedging and strategies: The Company shall engage in derivativestransactions for the purpose of avoiding exchange risks arising from the operations, foreign currency assets and liabilities, and derivative financial transactions. 3. Division of responsibilities:
A. Finance Department: Finance Department is responsible to manage foreign exchange operations, collect market information, determine the market trend and risks, and get familiar with financial products and operational skills. In addition, Finance Department shall manage the position in foreign exchange and avoid foreign exchange risks based on the Company’s policies and authorization.
B. Accounting Department: Accounting Department is responsible to control the Company’s overall position in foreign exchange and settle realized and unrealized exchange gains and losses on a regular basis in order to facilitate the hedging operations engaged by Finance Department. In addition, Accounting Department shall keep account based on settlement vouchers and transaction-related documents.
C.Audit Department: Audit Department is responsible to make a determination of the suitability of internal controls on derivatives, conduct the audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, analyze the trading cycle, and prepare an audit report. If any material violation is discovered, the Board of Directors shall be notified.
4. Performance Evaluation: The Company shall record the detail of derivativesoperations (including amount, exchange rate, bank, and due date) in thetransaction list on a daily basis to control the profit and loss; in addition, theCompany shall settle the exchange gains and losses on a monthly, quarterly,semi-yearly, and yearly basis.
5. Total amount of contracts and the upper limit of loss for all and individualcontracts:
Hedging Operation The total amount of contracts which the Company may engage in is limited to 75% of the balance of cash, accounts receivable and accounts payable in foreign currency plus the net position in foreign currency for the next six months. The upper limit of loss for all and individual contracts is 50% of the amount of contracts. Transactional Operation
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The Company does not engage in transactional operations. A r t i c l e 3 : Operational Procedures
1. Level of authorized amount: The level of the authorized amount is set up basedon changes in the Company’s revenue and accumulated net position:
Level Daily Amount of Transaction Authorized Amount of Internal Approval 1. Chairman US$20 million or more 2. President and CFO US$10 million or more US$20 million (inclusive) 3. Financial Officer US$10 million(inclusive) US$10 million (inclusive) 4. Financial Manager US$ 5 million (inclusive) -
2. Implemented by: The designated person of Finance Department.3. Operating procedures are described below:A. A trader of Finance Department shall place an order with a bank within the
authorized amount. If the value of a transaction exceeds the authorized amount stipulated in Article 3 of these Procedures, the trader shall obtain the prior written approval of decision-making supervisors.
B. After the transaction is confirmed, the trader shall fill in the Transaction Form based on the deal closed with the bank to ensure the validity of the transaction.
C. When the confirmation documents regarding foreign exchange transactions are to be sealed, the approved Instruction on Foreign Exchange Transactions shall be attached as well.
D. When an exchange gain or loss occurs in the settlement of the foreign exchange transaction, the person in charge of the settlement shall collect the payment based on the approved Instruction on Foreign Exchange Transactions, Foreign Exchange Transaction Form and Forward Foreign Exchange Settlement Form, which are used as the basis of account keeping.
E. Finance Department shall compile the Monthly Report on Foreign Exchange Transactions and submit it to Accounting Department to be used as the basis of accounting evaluation.
A r t i c l e 4 : Risk Management Measures 1. Credit risk management: Trading partners shall be limited to banks havingbusiness dealings with the Company. 2. Market risk management: Markets shall be limited to publicly traded foreignexchange markets and exclude futures markets. 3. Liquidity risk management: Products with high liquidity (that can square theposition in the market at any time) shall be selected to ensure the trading liquidity. Trading financial institutions must have the sufficient information to trade in any market at any time. 4. Cash flow risk management: The source of funds used in derivatives transactionsshall be limited to the Company’s own funds to ensure the stability of working capital. 5. Operational risk management:
A. The Company shall comply with its authorized amount and operating procedures, and have them reviewed in the internal audit to avoid operational risks.
B. The personnel that deal with the transaction of derivatives, make confirmation of these transactions and make settlements of these transactions shall not be the same.
C. The evaluation, supervision and control of risk-related matters also shall be reported by persons from a different department to the Board of Directors or to the high-level managers who are not responsible for setting policies for transactions or position.
D. The position held in the trading of derivatives shall be evaluated at least once a week, but the hedging transaction made for business purposes shall be
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evaluated at least twice a month, and the evaluation reports shall be given to high-level managers authorized by the Board of Directors.
6. Legal risk management: The Company shall have the documents to be signedwith financial institutions reviewed by the dedicated person in charge of foreign exchange and legal affairs or legal consultation prior to the official signing in order to avoid legal risks.
A r t i c l e 5 : Procedures for Handling Accounting The Company shall handle accounting in accordance with the financial and accounting reporting standards and related regulations stipulated by competent authorities.
A r t i c l e 6 : Method of Periodic Evaluation and Abnormality Handling 1. The position held in the trading of derivatives shall be evaluated at least twice amonth, and the evaluation reports shall be given to high-level managers authorized by the Board of Directors. 2. The Board of Directors shall designate senior management personnel toperiodically supervise and evaluate whether the trading performance is consistent with established trading procedures and whether the risk undertaken is within the Company’s permitted scope of tolerance. When irregular circumstances are found in the course of supervision and evaluation, appropriate measures shall be taken immediately and a report shall be made to the Board of Directors.
A r t i c l e 7 : Internal Audit System Internal auditors shall check the suitability of internal control of derivatives transactions periodically and inspect monthly the compliance of the trading departments with these Procedures and analyze the trading cycle in order to make the auditing report. The Company shall file the auditing report and the implementing status of annual auditing plans of internal audits to the Exchange Commission of the Ministry of Finance (SEC) before the end of February of next year and also shall report the improvement situation for any abnormal affairs to the SEC before the end of May of next year.
A r t i c l e 7 . 1 : Information Disclosure: The Company shall report the information on Market Observation Post System in accordance with the Regulations Governing the Acquisition and Disposal of Assets by Public Companies If a subsidiary of the Company, which is not itself a public company in Taiwan, has information required to be reported on Market Observation Post System in accordance with the regulations of the preceding paragraphs, such information shall be reported by the Company.
A r t i c l e 7 . 2 : Deleted. A r t i c l e 8 : Implementation and Amendment
These Procedure shall be submitted to each supervisor and the shareholders’ meeting for approval after the resolution of the Board of Directors; the same procedure shall apply with any amendment. If any director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created by the Company, the Board of Directors shall take into full consideration each independent director's opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.
A r t i c l e 9 : These Procedures were established on May 3, 1997. The 1st amendment was made on April 18, 1998. The 2nd amendment was made on May 2, 2003. The 3rd amendment was made on May 24, 2005. The 4th amendment was made on May 18, 2010 The 5th amendment was made on June 18, 2014.
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< Appendix VI > Advantech Co., Ltd.
Rules and Procedure for Shareholders’ Meetings (before Amendment)
A r t i c l e 1 : The process of the Company shareholders’ meeting is subject to the “Rules of Procedure for Shareholders’ Meetings.”
A r t i c l e 2 : The Company shall include the information of shareholders reporting time, reporting place, and others on the written notice. The shareholder’s reporting to meeting referred to above should be processed at least thirty minutes before the meeting in session; there should be clearly marked signs at the reporting place with sufficient and competent staff at the place to assist. The shareholders or theshareholders’ commissioned representatives (hereinafter referred to as “the Shareholders”) shall attend the meeting with the attendance certificate, attendance cards, or other identification documents presented; the proxies shall attend the meeting with the identity documents presented for verification. The shareholders or theshareholders’ commissioned representatives while attending the meeting should sign on the attendance registry or submit the attendance card instead; also, the number of attending shares is calculated in accordance with the number of shares documented on the attendance card.
A r t i c l e 2 . 1 : The attendance and resolution in the shareholders’ meeting shall be based on the shares.
A r t i c l e 2 . 2 : The Company may assign the commissioned lawyer, accountant, or the relevant personnel to attend the shareholders’ meeting.
A r t i c l e 2 . 3 : Shareholders’ meeting will be held at the Company’s premise or a suitable location for the convenience of the shareholders. The starting time of the shareholders’ meeting should not be before 9:00am or after 3:00pm.
A r t i c l e 2 . 4 : The Company should have the proceeding of the shareholders’ meeting from the shareholder’s reporting to meeting, meeting in session, to votes counting recorded in audio or video uninterruptedly. The audio-visual materials referred to above shall be kept for at least one year; however, they should be reserved until the end of the legal proceeding that is filed by the shareholders in accordance with Article 189 of the Company Law.
A r t i c l e 3 : The Chairman is to announce the meeting in session when the attending shareholders are with a majority shareholding. If the attending shareholders are without the statutory shareholding at the meeting time, the Chairman may announce to have the meeting postponed. If the attending shareholders are without the statutory shareholding but with one thirds of the total number of shares issued after two postpones (30 minutes per postpone), it can be processed in accordance with Article 175 of the Company Law and a pseudo resolution can be reached with the consent of a majority votes. For the proceeding referred to above, if the attending shareholders qualify the statutory shareholding, the Chairman may announce the meeting in session at any time and has the pseudo resolution submitted in the shareholders’ meeting for ratification.
A r t i c l e 4 : The shareholders’ meeting should be conducted in accordance with the procedures prescribed in the agenda and no change can be made without a resolution reached in the shareholders’ meeting. The agenda is drafted up in accordance with the following provisions: 1. General shareholders’ meeting: The agenda is to be drafted up by the Board of
97
Directors. 2. Extraordinary shareholders’ meeting: The agenda is to be drafted up by theauthorized convening department. The Chairman may not announce to have the meeting adjourned before the proposals (including motions) in the two agenda referred to above resolved. Once the meeting is adjourned, shareholders may not elect another Chairman to continue the meeting at the current meeting place or another location.
A r t i c l e 5 : The Chairman may announce to have a recess during the meeting in session. A r t i c l e 6 : The attending shareholders who wish to speak at the meeting must first fill out the
speech note with the gist, shareholders account number, and name detailed to the Chairman in advance and the Chairman shall prioritize the speaking order. Attending shareholders who have submitted a speech note but failed to give a speech at the meeting is deemed as a non-speaker. If the speech made by the shareholder differs from the contents of the speech note submitted, the speech shall prevail. The attending shareholders may not interrupt the speaking shareholder without the consent of the Chairman and the speaking shareholder. The Chairman must have the interfering shareholder restrained from interrupting the speaking shareholder’s speech.
A r t i c l e 7 : The motions should be discussed in accordance with the prioritized agenda. For any violation against the planned procedures or agenda, the Chairman may immediately stop the speaking shareholder and announce ending the discussion in due course or ceasing the discussion when it is necessary.
A r t i c l e 8 : The shareholder is to have the proposal explained in five minutes and the Chairman or the personnel designated by the Chairman are to answer the questions of the shareholders. The inquiry or reply of the shareholder is limited to three minutes unless it is otherwise permitted by the Chairman.
A r t i c l e 9 : Deleted A r t i c l e 1 0 : Each shareholder may not speak more than twice on the same proposal and five
minutes each time. For any violation against the planned procedures or agenda referred to above, the Chairman may immediately stop the speaking shareholder.
Article 10.1 : The legal person attending the shareholders’ meeting by proxy may have only one representative designated to attend the meeting. For the two or more representatives designated by the legal person shareholder to attend the meeting, only one of them may speak on the same proposal.
A r t i c l e 1 1 : The proposal that is announced by the Chairman ceased for discussion should be put to vote for a resolution. The voting right of each shareholder is calculated in accordance with the Corporate Charter.
A r t i c l e 1 2 : The vote on the motion, unless otherwise provided by the Company Law, is approved by the attending shareholders with a majority shareholding. If there is no objection raised when the Chairman consulted the attending shareholders, it is deemed as approved and the effect is same as voting.
Article 12.1 : The Chairman is to have the amendment or substitute of a motion consolidated and prioritized its voting order. When one of the motions is passed, the other motions shall be deemed as vetoed without the need of further voting.
Article 12.2 The Chairman is to have ballot inspectors and tellers designated for the vote on motions. Ballot inspectors must be a shareholder of the Company. The results of the vote should be announced in the meeting and recorded.
A r t i c l e 1 3 : For the shareholders attending the shareholders’ meeting by proxy, except for the agencies for trust businesses or stock services approved by the securities authorities, when one person delegated by more than two shareholders at the same time, the voting rights by proxy shall not exceed 3% of the total number of voting rights issued; also, the number of voting right exceeding the threshold will not be accounted for.
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A r t i c l e 1 4
Article 14.1
: The shareholders who may have a conflict of interest regarding a motion to be resolved in the shareholders’ meeting may not vote on the said motion and may not exercise voting right on behalf of other shareholders by proxy. The election of directors and supervisors, if any, in the shareholders’ meeting should be handled in accordance with the relevant norms of the Company and the election result should be announced immediately in the meeting, including the name of the elected directors and supervisors and the respective number of voting rights. The ballots casted in the election referred to above shall be sealed and signed by the ballot inspectors for safekeeping for at least one year; however, they should be reserved until the end of the legal proceeding that is filed by the shareholders in accordance with Article 189 of the Company Law.
A r t i c l e 1 5 : The meeting in session should be suspended in case of air raid drill and the meeting should be resumed in one hour after the evacuation alert is lifted.
Article 15.1 : The Chairman may direct pickets (or security guards) to assist maintaining the order at the meeting place. The pickets (or security guards) who are at the meeting place to assist maintaining order should wear the “picket” armband.
A r t i c l e 1 6 : The resolutions reached in the shareholders’ meeting should be documented in the minutes of meeting for the signature or seal of the Chairman; also the minutes of meeting should be distributed to all shareholders within twenty days after the meeting. The Company’s minutes of meeting can be distributed to shareholders by an announcement after the public offering of the Company’s shares. The preparation and distribution of the minutes of meeting referred to above can be completed in an electronic form.
A r t i c l e 1 7 : The matters that are not addressed in the “Rules of Procedure for Shareholders’ Meetings” should be processed in accordance with the Company Law and the related regulations.
A r t i c l e 1 8 : The “Rules of Procedure for Shareholders’ Meetings” is in effect after it is passed in the shareholders’ meeting, same for the amendments made.
A r t i c l e 1 9 : The “Rules of Procedure for Shareholders’ Meetings” was established on May 3, 1997. The 1st amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on April 24, 1999. The 2nd amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on May 30, 2002. The 3rd amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 16, 2006. The 4th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on May 18, 2010. The 5th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 13, 2012. The 6th amendment of the “Rules of Procedure for Shareholders’ Meetings” was made on June 13, 2013.
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< Appendix VII > Advantech Co., Ltd.
Rules for the Election of Directors A r t i c l e 1 : The Company’s directors are elected in accordance with the “Rules for the Election
of Directors.” A r t i c l e 2 : The Company’s election of directors should be handled in accordance with the
cumulative suffrage system. The voter’s name can be replaced with the attendance card number printed on the ballot. Ballots are printed by the board of directors and are enclosed in the agenda for distributing to shareholders in accordance with their ID number and name. The vote of suffrage for each shareholder is noted on the ballot. For the Company’s election of directors, each stock share contains the suffrage equivalent to the number of directors to be elected, which can be casted to one or more than one candidate.
A r t i c l e 3 : The Company’s directors are elected as independent directors and non-independent directors in that order in accordance with the number of chairs designated in the Corporate Charter (Articles of Incorporation) and the electoral votes from top down. If there are two or more candidates received the same votes of suffrage resulting more candidates elected than the chairs designated, the candidates who received the same votes of suffrage are to take a draw for a solution; also, the Chairman is to take a draw on behalf of the absentees.
A r t i c l e 4 : Ballots are printed by the board of directors. The ballots in addition with the corporate seal affixed should be prepared with the voter’s ID number and the votes of suffrage noted on the ballots.
A r t i c l e 5 : The Chairman is to have several ballot inspectors and tellers designated at the beginning of the election to perform the relevant job duties. Ballot inspectors must be a shareholder of the Company.
A r t i c l e 6 : Ballot boxes should be prepared for the election of directors; also, the ballot boxes are to be opened by the ballot inspectors after voting. Votes casted for the election of independent directors and non-independent directors are counted and elected separately.
A r t i c l e 7 : The missions of the ballot inspectors are as followings: 1.Inspect the ballot boxes openly before the voting process started.2.Maintain order and observe whether there is any negligence or violation committed.3.Examine the votes of suffrage at the end of the voting.4.Check whether there is any invalid ballot.5.Ballot inspectors are to record the votes received by each candidate.
A r t i c l e 8 : Voters include natural persons, legal persons, and their representatives. The account number and name of the candidate must be noted in each ballot. If the candidate is a government agency or legal person, the candidate column on the ballot must be detailed with the name of the government agency or legal person. If there is more than one representative appointed, the name of all the representatives must be listed separately. Please state the ID Card number and name of the candidate who is not a shareholder on the ballot before casting it in the ballot box.
A r t i c l e 9 : Ballots are invalid in any of the following circumstances: 1.Votes that are not in compliance with the “Rules for the Election of Directors and
Supervisors.” 2.The number of elected candidates exceeds the number of chairs designated.3.The total votes casted by the voters exceed the valid votes held.4.The shareholder’s account number and name of the candidate who is a shareholderdiffers from the Shareholder Registry, or, the name and ID Card number of the candidate who is not a shareholder is found with nonconformity.
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5.Unidentifiable ballot due to illegible or incomplete corrections6.The name of the candidate is same as other shareholder but failed to state thecandidate’s shareholder account number or ID Card number for identification. 7.Ballot contains not only the candidate’s name, shareholder account number or IDCard number and the votes of suffrage, but also other unauthorized information. 8. Blank ballots that are casted in the ballot box9. Ballots that are not casted in the designated voting zone
A r t i c l e 1 0 : Ballot inspectors are to verify the validity of any ballot in question. Invalid ballots should be affixed with a “void” mark and a signature or seal at the end of counting votes. Ballot inspectors are to check the sum of the valid and invalid ballots upon the completion of voting and then document the valid votes and suffrage in the form and then the Chairman is to announce the name of the elected candidates publicly.
A r t i c l e 1 1 : The Company is to issue a certificate of election to each elected director . A r t i c l e 1 2 : The matters that are not addressed in the “Rules for the Election of Directors and
Supervisors” should be processed in accordance with the Company Law, Corporate Charter, and the related regulations.
A r t i c l e 1 3 : The “Rules for the Election of Directors and Supervisors” is in effect after it is passed in the shareholders’ meeting, same for the amendments made.
A r t i c l e 1 4 : The “Rules for the Election of Directors and Supervisors” was established on May 3, 1997 with the 1st amendment made on April 24, 1999, the 2nd amendment made on May 30, 2002, and the 3rd amendment made on June 15, 2007. The 4th amendment of the Rules for the Election of Directors and Supervisors was made on May 28, 2015.
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< Appendix VIII >
Current Shareholding of Directors and Supervisors
1. The total shares of the Company held by all directors and supervisors are to be processed in
accordance with the “Rules and Review Procedures for Director and Supervisor Share Ownership
Ratios at Public Companies:”
(1) As of March 28, 2017 (final day for stock transfer), the Company had issued 633,254,100
shares of stock. The board of directors should hold 4% of the stock shares issued by law, that
was, 25,330,164 shares. All supervisors should hold 0.4% of the stock shares issued by law,
that was, 2,533,016 shares.
(2) The Company has two independent directors elected. The board of directors other than
independent directors and supervisors should hold 80% of the stock shares calculated in the
preceding paragraph; therefore, the Company’s board of directors should hold 20,264,131
shares and supervisors should hold 2,026,413 shares.
2. As of March 28, 2017 (final day for stock transfer), the shareholding of the Company’s directors andsupervisors on the shareholders’ registry was as follows:
Title Name Representative
Shareholding on the shareholder’s registry
Shares % Ratio (%)
Chairman K.C. Liu 23,292,484 3.68%
Director Advantech Foundation. Donald Chang 18,244,889 2.88%
Director Ted Hsu 0 0
Independent Director Jeff Chen 0 0
Independent Director Joseph Yu 249 0
Total 41,537,622 6.56%
Supervisor AIDC Investment Corp. Gary Tseng 74,636,266 11.79%
Supervisor Thomas Chen 543,963 0.09%
Supervisor James Wu 0 0
Total 75,180,229 11.88%
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< Appendix IX >
Impact of Stock Dividend Issuance on the Company ’s Business Performance and Earnings per Share
Year Item
2016
Beginning paid-in Capital (NT$) 6,330,741
Dividend Distrbution
Cash dividend per share (NT$) 6.30Stock dividend per share for capital increase from retained earnings (Share)
0.1
Stock dividend per share for capital increase from capital reserve (Share)
-
Business Performance Variation
Operating Profit
N/A
Year-on-year increase / decrease (%) of operating profit
Net profit after Year-on-year increase / decrease (%) of net profit after tax Earnings per share
Year-on-year increase / decrease (%) of earnings per share
Average return over investment (annualized)
Pro forma earnings per share and its P/E ratio
If cash dividend is distributed instead of capital increase
Pro forma earnings per share (NTD)
N/A
Pro forma average return over investment (annualized)
If no capital increase from capital reserve
Pro forma earnings per share (NTD) Pro forma average return over investment (annualized)
If no capital reserve and cash dividend is distributed instead of capital increase from retained earnings
Pro forma earnings per share (NTD) Pro forma average return over investment (annualized)
N/A
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