Advantech Co., Ltd. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013 and Independent Auditors’ Report

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(1)Advantech Co., Ltd. and Subsidiaries. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013 and Independent Auditors’ Report.

(2) DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES. The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2014 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Accounting Standard 27 “Consolidated and Separate Financial Statements.” Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies.. Hence, we have not prepared a separate set of consolidated financial. statements of affiliates.. Very truly yours, ADVANTECH CO., LTD.. K. C. Liu Chairman March 31, 2015. -1-. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. By.

(3) INDEPENDENT AUDITORS’ REPORT. The Board of Directors and the Shareholders Advantech Co., Ltd.. However, as stated in Note 4 to the consolidated financial statements, we did not audit the consolidated financial statements as of and for the years ended December 31, 2014 and 2013 of some subsidiaries. The consolidated financial statements of these subsidiaries were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the subsidiaries’ amounts included herein, is based solely on the reports of other auditors. Total assets of these subsidiaries were 4.77% (NT$1,505,128 thousand) and 8.07% (NT$2,221,698 thousand) of the consolidated assets as of December 31, 2014 and 2013, respectively. Operating revenues of these subsidiaries were 8.67% (NT$3,099,173 thousand) and 9.13% (NT$2,799,185 thousand) of the consolidated operating revenues for 2014 and 2013, respectively. Also, as stated in Note 12 to the consolidated financial statements, we did not audit the financial statements as of and for the years ended December 31, 2014 and 2013 of some companies in which the Company had investments accounted for using the equity method. The consolidated financial statements of these investees were audited by other auditors, whose reports have been furnished to us, and our opinion, in so far as it relates to the investees’ amounts included herein, is based solely on the reports of the other auditors. Investments accounted for using the equity method were 1.42% (NT$447,663 thousand) and 1.46% (NT$402,433 thousand) of the consolidated assets as of and for the years ended December 31, 2014 and 2013. Also, the equity in the investees’ net gains was 1.66% (NT$100,264 thousand) and 1.43% (NT$73,680 thousand) of the consolidated pretax profits in 2014 and 2013, respectively. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.. -2-. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. We have audited the accompanying consolidated balance sheets of Advantech Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits..

(4) In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2014 and 2013, and the results of its financial performance and its consolidated cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission (FSC) of the Republic of China. We have also audited the financial statements of the parent company, Advantech Co., Ltd., as of and for the years ended December 31, 2014 and 2013 and have expressed a modified unqualified opinion on those financial statements.. 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.. -3-. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. March 31, 2015.

(5) ADVANTECH CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars). 2014 Amount. ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4, 7 and 30) Available-for-sale financial assets - current (Notes 4, 8 and 30) Debt investments with no active market - current (Notes 4 and 9) Notes receivable (Notes 4, 10 and 31) Trade receivables (Notes 4 and 10) Trade receivables from related parties (Notes 4 and 31) Other receivables Inventories (Notes 4 and 11) Other current financial assets (Note 32) Other current assets (Note 15). $. 2013 Amount. %. 2,832,358 2,723 2,112,427 568,803 749,529 4,602,480 6,579 24,736 4,030,657 109,310 372,028. 10 8 2 3 17 15 1. 57. 15,411,630. 56. 2,428,569 447,663 8,876,606 1,168,727 286,312 161,268 45,511 96,516 42,616. 8 1 28 4 1 1 -. 1,864,424 402,433 7,941,679 1,265,658 326,617 144,047 25,299 94,416 59,881. 7 1 29 5 1 1 -. 13,553,788. 43. 12,124,454. 44. $. 31,543,820. 100. $. 27,536,084. 100. $. 3,080 8,698 3,396,887 3,248,268 787,404 141,354 268,208. 11 10 3 1. $. 123,144 23,722 3,003,543 2,909,390 695,945 122,437 18,348 308,795. 11 11 3 1. 7,853,899. 25. 7,205,324. 26. 897,940 43,028 160,383 50,506. 3 1 -. 623,598 102,519 156,864 27,589. 2 1 -. Total noncurrent liabilities. 1,151,857. 4. 910,570. 3. Total liabilities. 9,005,756. 29. 8,115,894. 29. 6,301,031 11,060 6,312,091 5,306,958. 20 20 17. 5,669,249 24,751 5,694,000 4,995,635. 21 21 18. 3,472,064 6,358,318 9,830,382. 11 20 31. 3,061,424 5,452,733 8,514,157. 11 20 31. 338,356 563,277 901,633. 1 2 3. 22,351,064. 71. 19,258,299. 70. 187,000. -. 161,891. 1. 22,538,064. 71. 19,420,190. 71. 31,543,820. 100. 27,536,084. 100. Total current assets NONCURRENT ASSETS Available-for-sale financial assets - noncurrent, net of current portion (Notes 4, 8 and 30) Investments accounted for using the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 32) Goodwill (Notes 4 and 14) Other intangible assets Deferred tax assets (Notes 4 and 22) Prepayments for business facilities Long-term prepayments for lease (Notes 4 and 15) Other noncurrent assets (Note 28) Total noncurrent assets TOTAL. 3,122,007 165,402 3,431,359 5,487 949,861 4,960,373 5,400 36,550 4,781,550 18,650 513,393. 10 11 3 16 15 2. 17,990,032. $. %. CURRENT LIABILITIES Short-term borrowings (Notes 16 and 30) Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 30) Trade payables (Note 31) Other payables (Note 18) Current tax liabilities (Notes 4 and 22) Short-term warranty provision (Note 4) Current portion of long-term borrowings and bonds payable (Notes 4, 17 and 30) Other current liabilities Total current liabilities NONCURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 22) Long-term accounts payable Accrued pension liabilities (Notes 4 and 19) Other noncurrent liabilities. EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital Ordinary shares Advance receipts for share capital Total share capital Capital surplus Retained earnings Legal reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translation of foreign financial statements Unrealized gains (losses) on available-for-sale financial assets Total other equity Total equity attributable to owners of the Company NONCONTROLLING INTERESTS Total equity $. TOTAL The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 31, 2015). -4-. 130,041 (75,534) 54,507. $. -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. LIABILITIES AND EQUITY.

(6) ADVANTECH CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share). OPERATING REVENUE (Notes 4 and 31) Sales Other operating revenue. 2013 Amount. %. %. $ 34,662,269 1,069,430. 97 3. $ 29,828,793 831,241. 97 3. 35,731,699. 100. 30,660,034. 100. OPERATING COSTS (Notes 11, 21, and 31). 21,339,035. 60. 18,074,403. 59. GROSS PROFIT. 14,392,664. 40. 12,585,631. 41. 3,533,354 2,115,599 3,235,226. 10 6 9. 3,084,308 2,072,236 2,760,937. 10 7 9. 8,884,179. 25. 7,917,481. 26. 5,508,485. 15. 4,668,150. 15. 100,264 54,355. 1 -. 73,680 30,422. -. 56,473 27,143 78,206. -. 41,816 56,542 144,682. 1. 85,664 130,737 91,185 (14,420). 1 -. 34,883 120,141 101,690 (11,402). 1 -. (49,171) (13,815). -. (76,812) (15,246). -. Total nonoperating income. 546,621. 2. 500,396. 2. PROFIT BEFORE INCOME TAX. 6,055,106. 17. 5,168,546. 17. INCOME TAX EXPENSE (Notes 4 and 22). 1,123,096. 3. 1,041,337. 4. NET PROFIT FOR THE YEAR. 4,932,010. 14. Total operating revenue. OPERATING EXPENSES (Notes 21 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING PROFIT NONOPERATING INCOME Share of the profit of associates accounted for using the equity method (Notes 4 and 12) Interest income Gains on disposal of property, plant and equipment (Note 4) Gains on disposal of investments (Note 4) Foreign exchange gains, net (Notes 4 and 21) Gains on financial instruments at fair value through profit or loss (Note 4) Dividend income Other income (Notes 8 and 31) Finance costs (Note 21) Losses on financial instruments at fair value through profit or loss (Note 4) Other losses. -5-. 4,127,209 13 (Continued). WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 2014 Amount.

(7) ADVANTECH CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share). OTHER COMPREHENSIVE INCOME (LOSS) Exchange differences on translating foreign operations (Notes 4 and 20) Unrealized gains (losses) on available-for-sale financial assets (Notes 4 and 20) Actuarial losses on defined benefit plans Share of the other comprehensive income of associates accounted for using the equity method (Notes 4 and 20) Income tax relating to the components of other comprehensive income (Notes 4, 20 and 22). $. NET PROFIT ATTRIBUTABLE TO: Owners of the Company Noncontrolling interests. TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Noncontrolling interests. %. 243,904. -. 638,811 (5,723). 2 -. $. %. 282,941. 1. (244,478) (10,829). (1) -. 4,711. -. 3,883. -. (41,695). -. (46,247). -. 840,008. 2. (14,730). -. $. 5,772,018. 16. $. 4,112,479. 13. $. 4,907,782 24,228. 14 -. $. 4,106,397 20,812. 13 -. $. 4,932,010. 14. $. 4,127,209. 13. $. 5,750,571 21,447. 16 -. $. 4,087,236 25,243. 13 -. $. 5,772,018. 16. $. 4,112,479. 13. Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR. 2013 Amount. EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 23) Basic Diluted. $7.80 $7.77. $6.59 $6.55. The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 31, 2015). -6-. (Concluded). WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 2014 Amount.

(8) ADVANTECH CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars). Equity Attributable to Owners of the Company. Total. $. 5,639,971. 5,639,971. Appropriation of the 2012 earrings Legal reserve Special reserve Cash dividends on distributed by the Company. $. -. $. Capital Surplus (Notes 4 and 20) $. 4,701,785. Legal Reserve $. 2,715,185. Retained Earnings (Notes 4, 20 and 27) Unappropriated Special Reserve Earnings $. 545,303. $. -. -. -. -. 346,239 -. 15,590. 15,910. 31,500. 123,274. -. -. -. Compensation cost recognized for employee share options. -. -. -. 19,913. -. -. Change in capital surplus from investments in associates accounted for using the equity method. -. -. -. 1,560. -. -. Difference between consideration and carrying amount of subsidiaries acquired. -. -. -. -. -. -. Changes in percentage of ownership interest in subsidiaries. -. -. -. 2,552. -. -. -. Increase in noncontrolling interest. -. -. -. -. -. -. 13,688. 8,841. 22,529. 146,551. -. Net profit for the year ended December 31, 2013. -. -. -. -. Other comprehensive income (loss) for the year ended December 31, 2013, net of income tax. -. -. -. Total comprehensive income for the year ended December 31, 2013. -. -. 5,669,249. Appropriation of the 2013 earrings Legal reserve Cash dividends on distributed by the Company Stock dividends on distributed by the Company. 569,400. Issue of ordinary shares for employee share options. 51,410. Issue of ordinary shares for employee share options. Conversion of convertible bonds. BALANCE AT DECEMBER 31, 2013. Total $. (346,239 ) 545,303 (2,763,586 ). 7,213,023. $. (2,763,586 ). (104,345 ). $. 168,944. Noncontrolling Interests (Notes 4, 20 and 27). Total $ 17,619,378. $. -. -. -. 154,774. -. 154,774. -. -. -. -. 19,913. -. 19,913. -. -. -. -. 1,560. -. 1,560. -. -. (32,608 ). -. -. -. 2,552. -. 2,552. -. -. -. -. -. 44,487. 44,487. -. -. -. -. -. 169,080. -. 169,080. -. -. 4,106,397. 4,106,397. -. -. 4,106,397. 20,812. 4,127,209. -. -. -. -. -. -. -. 4,097,328. 24,751. 5,694,000. 4,995,635. 3,061,424. -. -. 569,400. -. 410,640 -. -. 46,560. 167,525. -. -. -. (32,608 ). (9,069 ). (9,069 ). -. $ 17,727,269. -. (32,608 ). (2,763,586 ). 107,891. Total Equity. -. (4,850 ). (545,303 ) -. 3,952,535. Other Equity (Notes 4 and 20) Exchange Unrealized Gain Differences on (Loss) on Translating Available-for-sale Foreign Operations Financial Assets. (15,730 ). (19,161 ). 4,431. (2,763,586 ). (48,338 ). 234,386. (244,478 ). 4,097,328. 234,386. (244,478 ). 4,087,236. 25,243. 4,112,479. 5,452,733. 8,514,157. 130,041. (75,534 ). 19,258,299. 161,891. 19,420,190. (410,640 ) (3,017,820 ) (569,400 ). (3,017,820 ) (569,400 ). (3,017,820 ) -. -. (14,730 ). -. -. (3,017,820 ) -. -. -. -. 214,085. -. 214,085. Compensation cost recognized for employee share options. -. -. -. 111,393. -. -. -. -. -. -. 111,393. -. 111,393. Change in capital surplus from investments in associates accounted for using the equity method. -. -. -. 8,966. -. -. -. -. -. -. 8,966. -. 8,966. Difference between consideration and carrying amount of subsidiaries acquired. -. -. -. 11,457. -. -. -. -. -. -. 11,457. 3,662. 15,119. Changes in percentage of ownership interest in subsidiaries. -. -. -. (1,873 ). -. -. -. -. -. -. (1,873 ). -. (1,873 ). 2,131. 13,855. -. -. -. -. -. -. 15,986. -. 15,986. 4,907,782. 4,907,782. -. -. 4,907,782. 24,228. 4,932,010. 208,315. 638,811. 842,789. 208,315. 638,811. 5,750,571. 563,277. $ 22,351,064. Conversion of convertible bonds. 10,972. (8,841 ). Net profit for the year ended December 31, 2014. -. -. -. -. -. -. Other comprehensive income (loss) for the year ended December 31, 2014, net of income tax. -. -. -. -. -. -. Total comprehensive income for the year ended December 31, 2014. -. -. -. -. -. -. BALANCE AT DECEMBER 31, 2014. $. 6,301,031. $. 11,060. $. 6,312,091. $. 5,306,958. $. 3,472,064. The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 31, 2015). -7-. $. -. (4,337 ). (4,337 ). 4,903,445 $. 6,358,318. 4,903,445 $. 9,830,382. $. 338,356. $. (2,781 ). $. 840,008. 21,447. 5,772,018. 187,000. $ 22,538,064. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. BALANCE AT JANUARY 1, 2013. Issued Capital (Notes 20 and 24) Advance Receipt for Ordinary Share Share Capital Capital'.

(9) ADVANTECH CO., LTD. AND SUBSIDIARIES. CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Amortization expenses of prepayments of lease obligation Net loss (gain) on financial assets or liabilities at fair value through profit or loss Recognition of trade receivable provisions Compensation cost of employee share options Finance costs Interest income Dividend income Share of profit of associates accounted for using the equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Loss on disposal of subsidiaries Loss on bond redemption Changes in operating assets and liabilities Increase in financial assets held for trading Increase in notes receivable Increase in trade receivables (Increase) decrease in trade receivables due from related parties (Increase) decrease in other receivables (Increase) decrease in inventories Increase in other current assets Increase in trade payables Decrease in accrued pension liabilities Increase in other payables Decrease in other current liabilities Increase in other noncurrent liabilities Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Increase in prepayments for business facilities Acquisition of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Acquisition of investments with no active market. -8-. 2014. 2013. $ 6,055,106. $ 5,168,546. 504,211 90,709 2,519. 372,641 108,780 2,467. (36,493) 9,991 111,393 14,420 (54,355) (130,737) (100,264) (56,473) (27,143) 17. 41,929 36,125 19,913 11,402 (30,422) (120,141) (73,680) (41,816) (60,914) 4,372 -. (141,210) (200,332) (366,727) 1,179 (383) (750,893) (50,705) 393,344 (1,946) 317,124 (40,587) 21,402 5,563,167 31,578 130,737 (5,233) (809,008). (13,671) (132,104) (742,707) (3,202) 71,142 83,196 (144,231) 467,719 (4,612) 665,863 (167,849) 5,518,746 24,233 120,141 (11,101) (694,857). 4,911,241. 4,957,162. (20,212) (5,847,515) 5,213,858 (643). (53,161) (4,998,636) 4,633,818 (145,375) (Continued). WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars).

(10) ADVANTECH CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars). Acquisition of investments accounted for using the equity method Proceeds from disposal of investments accounted for using the equity method Net cash flow from the acquisition of subsidiaries Dividends received from associates Net cash flow from proceeds of the disposal of subsidiaries Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment (Increase) decrease in refundable deposits Acquisition of intangible assets Increase (decrease) in long-term accounts payables. $. (18,095). 2013 $. -. 1,407 (31,033) 54,774 (1,213,769) 151,867 17,265 (48,841) (6,709). 83,225 (816,729) 42,777 11,654 (1,580,672) 116,164 (18,292) (78,158) 102,519. (1,747,646). (2,700,866). CASH FLOWS FROM FINANCING ACTIVITIES Repayments of bonds Decrease in short-term loans Cash dividends paid Exercise of employee share options Repayments of long-term borrowings Increase (decrease) in guarantee deposits received Increase (decrease) in noncontrolling interests. (2,400) (120,064) (3,017,820) 214,085 1,515 15,119. (28,308) (2,763,586) 154,774 (202,932) (723) (48,338). Net cash used in financing activities. (2,909,565). (2,889,113). Net cash used in investing activities. EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR. 35,619. 193,132. 289,649. (439,685). 2,832,358. 3,272,043. $ 3,122,007. $ 2,832,358. The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 31, 2015). -9-. (Concluded). WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 2014.

(11) ADVANTECH CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise). 1. GENERAL INFORMATION Advantech Co., Ltd. (the “Company”) is a listed company established in September 1981. It manufactures and sells embedded computing boards, industrial automation products, applied computers and industrial computers. The Company’s shares have been listed on the Taiwan Stock Exchange since December 1999. To improve the entire operating efficiency of Advantech Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), the Company’s board of directors resolved on June 30, 2009 to have a short-form merger with Advantech Investment and Management Service (AIMS). The effective merger date was July 30, 2009. As the survivor entity, the Company assumed all assets and liabilities of AIMS. On June 26, 2014, the Company’s board of directors resolved to have a whale-minnow merger with Netstar Technology Co., Ltd. (Netstar), an indirect 95.51%-owned subsidiary through a wholly-owned subsidiary, Advantech Corporate Investment. The effective merger date was July 27, 2014. As the survivor entity, the Company assumed all assets and liabilities of Netstar. The functional currency of the Company is the New Taiwan dollar.. 2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by the board of directors and authorized for issue on March 31, 2015.. a. The amendment the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission (FSC) not yet effective Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC on April 3, 2014, stipulated that the Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015. New, Amended and Revised Standards and Interpretations (the “New IFRSs”) Improvements to IFRSs (2009) - amendment to IAS 39 Amendment to IAS 39 “Embedded Derivatives”. - 10 -. Effective Date Announced by IASB (Note) January 1, 2009 and January 1, 2010, as appropriate Effective for annual periods ended on or after June 30, 2009 (Continued). WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS.

(12) New, Amended and Revised Standards and Interpretations (the “New IFRSs”) Improvements to IFRSs (2010) Annual Improvements to IFRSs 2009-2011 Cycle Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” IFRS 10 “Consolidated Financial Statements” IFRS 11 “Joint Arrangements” IFRS 12 “Disclosure of Interests in Other Entities” Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities” IFRS 13 “Fair Value Measurement” Amendment to IAS 1 “Presentation of Other Comprehensive Income” Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets” IAS 19 (Revised 2011) “Employee Benefits” IAS 27 (Revised 2011) “Separate Financial Statements” IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”. Effective Date Announced by IASB (Note) July 1, 2010 and January 1, 2011, as appropriate January 1, 2013 July 1, 2010 July 1, 2011 January 1, 2013 January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013. January 1, 2014 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013. Note:. Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.. Except for the following, whenever applied, the initial application of the above 2013 IFRSs version and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group’s accounting policies: 1) IFRS 10 “Consolidated Financial Statements” IFRS 10 replaces IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation - Special Purpose Entities”. The Group considers whether it has control over other entities for consolidation. The Group has control over an investee if and only if it has i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee and iii) the ability to use its power over the investee to affect the amount of its returns. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee.. - 11 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. (Concluded).

(13) 2) IFRS 12 “Disclosure of Interests in Other Entities” IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards. 3) Revision to IAS 28 “Investments in Associates and Joint Ventures” Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method. 4) IFRS 13 “Fair Value Measurement” IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope. The fair value measurements under IFRS 13 will be applied prospectively from January 1, 2015. 5) Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”. The Group will retrospectively apply the above amendments, starting from the year 2015. Items not expected to be reclassified to profit or loss are the remeasurements of the defined benefit plans. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gains (loss) on available-for-sale financial assets, cash flow hedges, and share of the other comprehensive income (except the remeasurements of the defined benefit plans) of associates accounted for using the equity method. However, the application of the above amendments will not result in any impact on the net profit for the year, other comprehensive income for the year (net of income tax), and total comprehensive income for the year. 6) Revision to IAS 19 “Employee Benefits” Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under current IAS 19 and accelerate the recognition of past service costs. Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures. On initial application of the revised IAS 19 in 2015, the changes in cumulative employee benefit costs as of December 31, 2013 resulting from the retrospective application are adjusted to retained - 12 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. The amendment to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements..

(14) earnings. In addition, in preparing the consolidated financial statements for the year ended December 31, 2015, the Group would elect not to present 2014 comparative information about the sensitivity of the defined benefit obligation. The application of revised IAS 19, which requires the immediate recognition of past service costs, would result in an increase of $5,046 thousand in defined benefit liabilities and a decrease of $5,046 thousand in retained earnings as of and for the year ended December 31, 2014. In addition, the use of the net interest method is expected to cause an increase of $161 thousand in pension costs and a decrease of $161 thousand in actuarial loss on defined benefit plans for 2014. 7) Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities” The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements.. 8) Annual Improvements to IFRSs:. 2009-2011 Cycle. Several standards including IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IAS 1 “Presentation of Financial Statements”, IAS 16 “Property, Plant and Equipment”, and IAS 32 “Financial Instruments: Presentation”. The amendments to IAS 1 clarify that an entity is required to present a balance sheet as at the beginning of the preceding period when a) it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassifies items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the balance sheet at the beginning of the preceding period. The amendments also clarify that related notes are not required to accompany the balance sheet at the beginning of the preceding period.. b. New IFRSs in issue but not yet endorsed by FSC The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates. Effective Date Announced by IASB (Note 1). New IFRSs Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Annual Improvements to IFRSs 2012-2014 Cycle IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”. July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 4) January 1, 2018 January 1, 2018 January 1, 2016 (Note 3) (Continued). - 13 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. The initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version in 2015 is expected to have material effect on the consolidated balance sheet as of January 1, 2014. In preparing the consolidated financial statements for the year ended December 31, 2015, the Group would present the consolidated balance sheet as of January 1, 2014 in accordance of the above amendments to IAS 1 and disclose related information in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, but not required to make disclosures about the line items of the balance sheet as of January 1, 2014..

(15) Effective Date Announced by IASB (Note 1). New IFRSs Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” IFRS 14 “Regulatory Deferral Accounts” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 1 “Disclosure Initiative” Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” IFRIC 21 “Levies”. January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014 (Concluded). Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014. Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, 2016.. The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following: 1) IFRS 9 “Financial Instruments” Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for - 14 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016..

(16) impairment continuously with impairment loss recognized in profit or loss, if any. revenue is recognized in profit or loss by using the effective interest method;. Interest. b) For debt instruments, if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. The Company held financial assets measured at fair value, with changes in fair value recognized in profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. The impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.. 2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets” In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique. 3) Annual Improvements to IFRSs:. 2010-2012 Cycle. Several standards including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement. The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Group or another entity in the same group or the market price of the equity instruments of the Group or - 15 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss..

(17) another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Group, but also of other entities outside the Group. IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss. The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker. IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial. IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required. 4) Annual Improvements to IFRSs:. 2011-2013 Cycle. Several standards including IFRS 3, IFRS 13 and IAS 40 “Investment Property” were amended in this annual improvement.. IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination. 5) Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization” The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity. The amended IAS 16 “Property, Plant and Equipment” requires that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement.. - 16 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32..

(18) The amended IAS 38 “Intangible Assets” requires that there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances: a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the effective date. 6) IFRS 15 “Revenue from Contracts with Customers” IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations from January 1, 2017. When applying IFRS 15, an entity shall recognize revenue by applying the following steps:     . Identify the contract with the customer; Identify the performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the performance obligations in the contracts; and Recognize revenue when the entity satisfies a performance obligation.. When IFRS 15 is effective, an entity may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.. The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full. Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. 8) Annual Improvements to IFRSs:. 2012-2014 Cycle. Several standards including IFRS 7 were amended in this annual improvement.. - 17 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 7) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”.

(19) The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset. 9) Amendment to IAS 1 “Disclosure Initiative” The amendment clarifies that the consolidated financial statements should be prepared for the purpose of disclosing material information. To improve the understandability of its consolidated financial statements, the Group should disaggregate the disclosure of material items into their different natures or functions, and disaggregate material information from immaterial information. The amendment further clarifies that the Group should consider the understandability and comparability of its consolidated financial statements to determine a systematic order in presenting its footnotes. Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Statement of compliance The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed by the FSC. b. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets. c. Classification of current and non-current assets and liabilities. 1) Assets held primarily for the purpose of trading; 2) Assets expected to be realized within twelve months after the reporting period; and 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Current liabilities include: 1) Liabilities held primarily for the purpose of trading; 2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and. - 18 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Current assets include:.

(20) 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Assets and liabilities that are not classified as current are classified as non-current. d. Basis of consolidation 1) Principles for preparing consolidated financial statements The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries, including special purpose entities). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Attribution of total comprehensive income to noncontrolling interests Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance. Changes in the Group’s ownership interests in existing subsidiaries. 2) Subsidiaries included in consolidated financial statements The subsidiaries included in the consolidated statements are listed below. Refer to Table 9 for intercompany relationships and percentages of ownership as of December 31, 2014.. Investor The Company. Investee AAC (BVI) ATC Advansus Corp. Advantech Corporate Investment AEUH ASG AAU AJP AMY AKR ABR ACA. Main Business Investment and management service Sale of industrial automation products Production and sale of industrial automation products Investment holding company Investment and management service Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Production and sale of portable industrial automation products. % of Ownership December 31 2014 2013 100.00 100.00 100.00. 100.00 100.00 100.00. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 80.00 100.00. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 63.28 100.00. Remark. g) g) g) g) f)、g). (Continued). - 19 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company..

(21) Investor. Investee. Main Business. AIN AdvanPOS ALTC. Advantech Corporate Investment. AMX Netstar AiST (formerly named Broadwin Technology Inc.) Cermate. ATC ATC (HK). ATC (HK) AKMC. AAC (BVI). ANA. ANA AAC (HK). ACN AEUH AEU. AAC (HK) ABR AMX ACN AiSC AXA Hangzhou Advantofine Automation Co., Ltd. AEU APL A-DLoG. GPEG ASG Cermate Land Mark. ATH AID Land Mark Cermate (Shanghai) Cermate (Shenzhen). AdvanPOS Bright Mind Ltd. ALTC Better Auto Famous Now Limited. Bright Mind Ltd. AdvanPOS Better Auto Famous Now Limited Dongguan Pou Yuen Digital Technology Co., Ltd.. Sale of industrial automation products Production and sale of POS system Production and sale of machine control solution Sale of industrial automation products Production and sale of industrial automation products Design, develop and sale of intelligent service Manufacturing of electronic parts, computer, and peripheral devices Investment and management service Production and sale of components of industrial automation products Sale and fabrication of industrial automation products Investment and management service Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Development and production of software products Processing and sale of industrial automation products Sale of industrial automation products Sale of industrial automation products Design, R&D and sale of industrial automation vehicles and related products Design, R&D and sale of gambling computer products Production of computers Sale of industrial automation products General investment Sale of industrial electronic equipments Production of LCD touch panel, USB cable, and industrial computer General investment Production and sale of POS system General investment General investment Production and sale of industrial automation products. % of Ownership December 31 2014 2013. Remark. 99.99 69.47 89.93. 99.99 64.47 100.00. a) b)、h) c). 100.00 -. 95.49. 100.00. 100.00. 55.00. 55.00. 100.00 100.00. 100.00 100.00. 100.00. 100.00. 100.00 100.00 100.00 100.00. 100.00 16.72 100.00 100.00 100.00 100.00. 60.00. 60.00. 100.00 100.00 100.00. 100.00 100.00 100.00. g) g). -. 100.00. d)、h). 51.00 100.00 100.00 100.00. 51.00 100.00 100.00 100.00. 90.00. 90.00. 100.00 100.00 100.00 100.00 100.00. 100.00 100.00 100.00 100.00 100.00. a), f) e). f) f). (Concluded). Remark (b): In the third quarter of 2013, the Company acquired 70.19% equity in AdvanPOS, which was recognized as a consolidated entity as of December 31, 2013. AdvanPOS issued ordinary shares for the exercise of employee share options, decreasing the Company’s holding interest by 0.63% and 5.72% in 2014 and 2013, respectively. In the fourth quarter of 2014, the Company subscribed for an additional 1,127 thousand shares of AdvanPOS. These transactions reduced its interest from 70.19 % to 69.47%. Remark (c): In the third quarter of 2013, the Company acquired 99.97% equity of ALTC and later bought the rest of this subsidiary’s shares, resulting in the subsidiary’s becoming wholly owned by the Company. Thus, ALTC was recognized as a consolidated entity as of December 31, 2013. In the first quarter of 2014, the Company sold 10.27% of its holding of ALTC shares to ALTC’s employees; in the second and third quarters of 2014, the Company bought 0.14% and 0.06%, respectively, of ALTC’s outstanding shares. These transactions reduced its continuing interest from 100% to 89.93%.. - 20 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Remark (a): Not significant subsidiaries and their financial statements had not been audited. The management of the Company believe that there would not be material impacts had the financial statements of these subsidiaries been audited..

(22) Remark (d): In the fourth quarter of 2013, the Company had acquired 100% equity of GPEG, which was recognized as a consolidated entity as of December 31, 2013. In the fourth quarter of 2014, GPEG merged with AEU, with AEU as the survivor entity. Remark (e): In the third quarter of 2013, the Company had a whale-minnow merge with Netstar, with the Company as the survivor entity. Remark (f): As a result of an investment restructuring in 2014, ABR and AMX became the Company’s direct subsidiaries at equity interests of 80% and 100%, respectively. Remark (g): The financial statements of these subsidiaries as of and for the years ended December 31, 2014 and 2013 had not been audited by the Company’s independent auditors but by other auditors. Remark (h): The financial statements of these subsidiaries as of and for the year ended December 31, 2013 had not been audited by the Company’s independent auditors but by other auditors. e. Business combinations Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as incurred. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise. Nonmonetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.. - 21 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. f. Foreign currencies.

(23) For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries and associates in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income. On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in other comprehensive income. g. Inventories Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. h. Investment in associates. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of equity of associates. When the Group subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Group’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group - 22 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture..

(24) discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date on which it ceases to have significant influence. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent of interests in the associate that are not related to the Group. i.. Property, plant, and equipment Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.. Freehold land is not depreciated. Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. j.. Goodwill Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. - 23 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use..

(25) A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal. k. Intangible assets 1) Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Group expects to dispose of the intangible asset before the end of its economic life. 2) Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment loss.. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized. l.. Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.. - 24 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. 3) Derecognition of intangible assets.

(26) When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. m. Financial instruments Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. 1) Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. a) Measurement category Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables. i. Financial assets at fair value through profit or loss Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.. ii. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.. - 25 -. WorldReginfo - c484779d-e3eb-4966-9c03-dde0408acd41. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset..