Advantech - Interim / Quarterly Report 2018

Advantech Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Six Months Ended June 30, 2018 and 2017 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

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

Introduction

We have reviewed the accompanying consolidated financial statements of Advantech Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) as of June 30, 2018 and 2017 and the consolidated statements of comprehensive income, changes in equity and cash flows for the six-month periods then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. 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 Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

Except as explained in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As disclosed in Note 15 to the consolidated financial statements, the financial statements of some non-significant subsidiaries included in the consolidated financial statements referred to in the first paragraph were not reviewed. As of June 30, 2018 and 2017, the combined total assets of these non-significant subsidiaries were NT$6,362,974 thousand and NT$6,947,566 thousand, respectively, representing 14.03% and 17.14%, respectively, of the consolidated total assets, and the combined total liabilities of these subsidiaries were NT$985,034 thousand NT$2,098,207 thousand, respectively, representing 5.22% and 13.12%, respectively, of the consolidated total liabilities; for the three-month periods and six-month periods ended June 30, 2018 and 2017, the amounts of combined comprehensive income of these subsidiaries were NT$5,943 thousand, NT$403,152 thousand, NT$307,321 thousand and NT$620,025 thousand, respectively, representing 0.37%, 20.41%, 9.84% and 21.54%, respectively, of the consolidated total comprehensive income. Also, as stated in Note 16 to the consolidated financial statements, the investments accounted for using the equity method were NT$2,108,693 thousand and NT$784,370 thousand as of June 30, 2018 and 2017. The equities in earnings of the associates were a profit of NT$26,349 thousand, NT$190,922 thousand, NT$47,856 thousand and NT$190,313 thousand of the Company’s consolidated net income in the three months and six months ended June 30, 2018 and 2017, respectively, and these investment amounts as well as additional disclosures in Note 34

“Information on Investees” were based on the investees’ unreviewed financial statements for the same reporting periods as those of the Company.

Qualified Conclusion

Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the non-significant subsidiaries as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not give a true and fair view of the consolidated financial position of the Group as of June 30, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the six-month periods then ended June 30, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting”.

The engagement partners on the reviews resulting in this independent auditors’ review report are Meng-Chieh Chiu and Jr-Shian Ke.

Deloitte & Touche Taipei, Taiwan Republic of China

July 27, 2018

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 review such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ review 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’ review report and consolidated financial statements shall prevail.

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Notes 7 and 30) Available-for-sale financial assets - current (Notes 10 and 30) Financial assets at amortized cost - current (Notes 9 and 32) Debt investments with no active market - current (Notes 12 and 32) Notes receivable (Note 13) Trade receivables (Note 13) Trade receivables from related parties (Note 31) Other receivables Other receivables from related parties (Note 31) Inventories (Note 14) Other current assets (Note 19) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Notes 10 and 30) Financial asset at fair value through other comprehensive income - non-current (Notes 8 and 30) Financial assets measured at cost - non-current (Note 11 and 30) Investments accounted for using the equity method (Note 16) Property, plant and equipment (Notes 17 and 32) Goodwill (Note 18) Other intangible assets Deferred tax assets (Notes 4 and 25) Prepayments for business facilities Long-term prepayments for leases (Note 19) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 20 and 32) Financial liabilities at fair value through profit or loss - current (Notes 7 and 30) Notes payable and trade payables (Note 31) Dividends payable Other payables (Notes 21 and 31) Current tax liabilities (Notes 4 and 25) Short-term warranty provisions Current portion of long-term borrowings (Notes 20 and 32) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 20 and 32) Deferred tax liabilities (Notes 4 and 25) Net defined benefit liabilities (Notes 4 and 22) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 23) Share capital Ordinary shares Advance receipts for share capital Share dividends to be distributed Total share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translation of foreign financial statements Unrealized gain on available-for-sale financial assets Unrealized gain on financial assets at fair value through other comprehensive income Total other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		June 30, 2018 (Reviewed) Amount % $ 5,294,861 12 5,163,405 11 - - 37,808 - - - 1,263,877 3 7,056,104 16 37,865 - 38,283 - 143,482 - 7,173,586 16 574,617 1 26,783,888 59 - - 1,753,637 4 - - 2,108,693 5 9,859,110 22 2,828,725 6 1,112,065 2 419,556 1 124,484 - 310,175 1 44,956 - 18,561,401 41 $ 45,345,289 100 $ 8,100 - 4,637 - 6,251,295 14 4,600,414 10 3,576,341 8 1,461,693 3 188,171 - 16,808 - 746,079 2 16,853,538 37 80,924 - 1,554,127 4 236,053 1 145,478 - 2,016,582 5 18,870,120 42 6,974,575 15 870 - - - 6,975,445 15 6,760,672 15 5,655,613 12 369,655 1 6,705,513 15 12,730,781 28 (360,128) (1) - - 178,175 1 (181,953) - 26,284,945 58 190,224 - 26,475,169 58 $ 45,345,289 100		December 31, 2017 (Audited) Amount % $ 5,204,219 13 3,098,846 8 229,381 1 - - 38,908 - 1,255,781 3 6,596,030 16 14,067 - 75,298 - - - 6,242,251 15 445,791 1 23,200,572 57 1,430,854 4 - - 78,518 - 1,349,735 3 9,967,332 24 2,727,549 7 1,124,407 3 398,441 1 68,440 - 312,708 1 45,213 - 17,503,197 43 $ 40,703,769 100 $ 8,400 - 6,226 - 5,280,728 13 - - 3,624,710 9 1,269,165 3 180,975 - - - 676,457 2 11,046,661 27 113,717 - 1,399,013 4 237,225 1 146,713 - 1,896,668 5 12,943,329 32 6,970,325 17 2,500 - - - 6,972,825 17 6,554,842 16 5,039,962 13 85,204 - 9,297,896 23 14,423,062 36 (463,479) (1) 93,824 - - - (369,655) (1) 27,581,074 68 179,366 - 27,760,440 68 $ 40,703,769 100		June 30, 2017 (Reviewed)
						Amount % $ 3,368,968 8 116,405 - 5,445,872 14 - - 46,453 - 1,113,715 3 6,528,787 16 12,908 - 11,783 - 74,964 - 5,969,434 15 545,990 1 23,235,279 57 1,540,240 4 - - 67,290 - 784,370 2 9,997,910 25 2,852,088 7 1,224,467 3 432,719 1 50,802 - 311,648 1 36,639 - 17,298,173 43 $ 40,533,452 100 $ 373,140 1 37,246 - 4,194,414 10 3,988,367 10 3,363,786 8 1,376,655 3 174,877 1 13,057 - 641,549 2 14,163,091 35 109,656 - 1,372,380 3 211,359 1 139,013 - 1,832,408 4 15,995,499 39 6,333,041 16 - - 633,074 1 6,966,115 17 6,301,882 15 5,039,962 13 85,204 - 6,091,129 15 11,216,295 28 (501,626) (1) 373,276 1 - - (128,350) - 24,355,942 60 182,011 1 24,537,953 61 $ 40,533,452 100

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

(With Deloitte & Touche review report dated July 27, 2018)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

OPERATING REVENUE (Notes 4 and 31) Sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 14, 24 and 31) GROSS PROFIT OPERATING EXPENSES (Notes 24 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 (Note 16) Interest income Gain (loss) on disposal of property, plant and equipment Gain on disposal of investments Foreign exchange gains (losses), net (Notes 24 and 33) Gain (loss) on financial instruments at fair value through profit or loss (Note 7) Dividends income Other income Finance costs (Note 24) Loss on financial instruments at fair value through profit or loss (Note 7) Other losses Total nonoperating income PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 25) NET PROFIT FOR THE PERIOD		For the Three Months Ended June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2018		2017		2018		2017
		Amount % $ 12,342,455 98 302,989 2 12,645,444 100 7,852,972 62 4,792,472 38 1,188,770 10 623,911 5 1,038,340 8 2,851,021 23 1,941,451 15 26,349 - 14,082 - (1,126 ) - 2,225 - 45,671 1 (31,307 ) - 853 - 37,199 - (1,265 ) - (4,949 ) - (653) - 87,079 1 2,028,530 16 (433,891) (3) 1,594,639 13		Amount % $ 11,131,558 98 274,550 2 11,406,108 100 7,005,398 62 4,400,710 38 1,093,114 10 607,425 5 947,038 8 2,647,577 23 1,753,133 15 190,922 2 4,435 - 66,578 1 27,157 - 107,552 1 20,403 - 633 - 21,324 - (4,154 ) - (47,908 ) - (498) - 386,444 4 2,139,577 19 (417,005) (4) 1,722,572 15		Amount % $ 23,400,552 98 600,087 2 24,000,639 100 14,869,936 62 9,130,703 38 2,365,446 10 1,218,111 5 1,963,102 8 5,546,659 23 3,584,044 15 47,856 - 18,617 - (4,163 ) - 2,618 - 42,915 - 60,957 1 853 - 52,762 - (2,487 ) - (32,316 ) - (1,634) - 185,978 1 3,770,022 16 (807,445) (4) 2,962,577 12		Amount % $ 20,956,220 98 456,127 2 21,412,347 100 12,960,299 61 8,452,048 39 2,154,582 10 1,208,211 6 1,832,823 8 5,195,616 24 3,256,432 15 190,313 1 8,309 - 65,816 - 123,479 1 (94,892 ) - 107,410 - 1,383 - 45,047 - (6,871 ) - (49,115 ) - (8,815) - 382,064 2 3,638,496 17 (710,411) (4) 2,928,085 13 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Share of the other comprehensive income of associates accounted for using the equity method (Notes 16 and 23) Unrealized gains (losses) on investments in equity instruments as at fair value through other comprehensive income (Note 23) Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 25) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations (Note 23) Unrealized gains (losses) on available-for-sale financial assets (Note 23) Share of the other comprehensive income of associates accounted for using the equity method (Notes 16 and 23) Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 23 and 25) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests		For the Three Months Ended June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2018		2017		2018		2017
		Amount % $ 1,861 - (115,314 ) (1 ) 2,127 - (111,326) (1) 110,949 1 - - 3,757 - (5,874) - 108,832 1 (2,494) - $ 1,592,145 13 $ 1,584,195 13 10,444 - $ 1,594,639 13 $ 1,562,767 13 29,378 - $ 1,592,145 13		Amount % $ - - - - - - - - 184,926 1 97,446 1 2,401 - (32,264) - 252,509 2 252,509 2 $ 1,975,081 17 $ 1,723,635 15 (1,063) - $ 1,722,572 15 $ 1,978,606 17 (3,525) - $ 1,975,081 17		Amount % $ 1,861 - 46,203 - 2,127 - 50,191 - 114,027 1 - - 2,094 - (4,898) - 111,223 1 161,414 1 $ 3,123,991 13 $ 2,946,865 12 15,712 - $ 2,962,577 12 $ 3,100,407 13 23,584 - $ 3,123,991 13		Amount % $ - - - - - - - - (366,205 ) (2 ) 260,847 1 (5,969 ) - 62,264 1 (49,063) - (49,063) - $ 2,879,022 13 $ 2,928,675 14 (590) - $ 2,928,085 14 $ 2,885,529 13 (6,507) - $ 2,879,022 13 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

EARNINGS PER SHARE (Note 26) Basic Diluted	For the Three Months Ended June 30	For the Three Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
	2018	2017	2018	2017
	Amount % $ 2.27 $ 2.25	Amount % $ 2.47 $ 2.46	Amount % $ 4.23 $ 4.18	Amount % $ 4.20 $ 4.18

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

(With Deloitte & Touche review report dated July 27, 2018)

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

				Equity Attributable to Owners of the Company
	Issued Capital (Notes 23 and 27)		Total Capital Surplus (Notes 23 and 27) $ 6,330,841 $ 6,058,884 - - - - - - 633,074 - 2,200 18,722 - 222,518 - 1,758 - - - - - - - - $ 6,966,115 $ 6,301,882 $ 6,972,825 $ 6,554,842 - - 6,972,825 6,554,842 - - - - - - 2,620 19,440 - 182,766 - 2,091 - 2,290 - (757 ) - - - - - - - - $ 6,975,445 $ 6,760,672	Retained Earnings (Note 23)	Total $ 12,909,061 - - (3,988,367 ) (633,074 ) - - - - 2,928,675 - 2,928,675 $ 11,216,295 $ 14,423,062 (34,002) 14,389,060 - - (4,600,414 ) - - - - - 2,946,865 2,247 2,949,112 (6,977) $ 12,730,781	Oth	er Equity (Note 23) Unrealized Gain or Loss on Financial Assets at Fair Value Unrealized Gain through Other Available-for-sale Financial Assets Comprehensive Income $ 112,429 $ - - - - - - - - - - - - - - - - - - - 260,847 - 260,847 - $ 373,276 $ - $ 93,824 $ - (93,824) 123,254 - 123,254 - - - - - - - - - - - - - - - - - - - 47,944 - 47,944 - 6,977 $ - $ 178,175
						Exchange Differences on Translating Foreign Operations on $ (197,633 ) - - - - - - - - - (303,993) (303,993) $ (501,626) $ (463,479 ) - (463,479 ) - - - - - - - - - 103,351 103,351 - $ (360,128)
Share Capital A for $ 6,330,741 - - - - 2,300 - - - - - - $ 6,333,041 $ 6,970,325 - 6,970,325 - - - 4,250 - - - - - - - - $ 6,974,575	dvance Receipts Ordinary Shares Sh $ 100 - - - - (100 ) - - - - - - $ - $ 2,500 - 2,500 - - - (1,630 ) - - - - - - - - $ 870	are Dividends to Be Distributed $ - - - - 633,074 - - - - - - - $ 633,074 $ - - - - - - - - - - - - - - - $ -		Legal Reserve Special Reserve Unappropriated Earnings $ 4,473,276 $ - $ 8,435,785 566,686 - (566,686 ) - 85,204 (85,204 ) - - (3,988,367 ) - - (633,074 ) - - - - - - - - - - - - - - 2,928,675 - - - - - 2,928,675 $ 5,039,962 $ 85,204 $ 6,091,129 $ 5,039,962 $ 85,204 $ 9,297,896 - - (34,002) 5,039,962 85,204 9,263,894 615,651 - (615,651 ) - 284,451 (284,451 ) - - (4,600,414 ) - - - - - - - - - - - - - - - - - 2,946,865 - - 2,247 - - 2,949,112 - - (6,977) $ 5,655,613 $ 369,655 $ 6,705,513

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

(With Deloitte & Touche review report dated July 27, 2018)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Amortization expenses for prepayments of lease obligations Expected credit impairment loss Impairment loss reversed on trade receivables Net gain on financial assets or liabilities at fair value through profit or loss Compensation costs of employee share options Finance costs Interest income Dividend income Share of profit of associates accounted for using the equity method Loss (gain) on disposal of property, plant and equipment Gain on disposal of investments Changes in operating assets and liabilities Financial assets held for trading Notes receivable Trade receivables Trade receivables from related parties Other receivables Inventories Other current assets Notes payable and trade payables Net defined benefit liabilities Other payables Short-term warranty provisions Other current liabilities Other non-current liabilities Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 3,770,022 287,503 76,610 4,500 24,907 - (28,641) 182,766 2,487 (18,617) (853) (47,856) 4,163 (2,618) (2,095,078) (8,096) (468,187) (23,798) 37,015 (926,698) (128,211) 950,749 (1,172) (49,081) 7,196 68,749 (1,235) 1,616,526 18,617 853 (2,259) (513,021) 1,120,716	2017 $ 3,638,496 295,442 102,892 4,335 - (9,023) (58,295) 222,518 6,871 (8,309) (1,383) (190,313) (65,816) (123,479) 81,933 (148,634) (113,671) 1,049 1,992 (341,741) (53,483) (815,715) (1,001) (635,531) 7,755 (19,325) (1,886) 1,775,678 8,309 1,383 (5,704) (476,341) 1,303,325

(Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets amortizes at cost Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Proceeds from sale of debt investments with no active market Purchase of financial assets measured at cost Acquisition of associates Net cash flow on the acquisition of subsidiaries Dividends received from associates Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in refundable deposits Payments for intangible assets Decrease in prepayments for business facilities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term loans Repayments of long-term borrowings Decrease in guarantee deposits received Exercise of employee share options Decrease in non-controlling interests Net cash used in financing 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 PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ (40) - - - - (760,352) (60,322) - (288,274) 53,908 611 (47,911) 17,378 (1,085,002) - (12,365) - 22,060 (18,450) (8,755) 63,683 90,642 5,204,219 $ 5,294,861	2017 $ - (3,867,233) 1,934,569 17,920 (67,290) (75,000) (118,847) 62 (144,246) 78,813 15,432 (55,146) 10,489 (2,270,477) (91,260) (9,676) (499) 20,922 - (80,513) (220,944) (1,268,609) 4,637,577 $ 3,368,968

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

(With Deloitte & Touche review report dated July 27, 2018)

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

Advantech Co., Ltd. (the “Company”) is a listed company that was established in September 1981. It manufactures and sells embedded computing boards, industrial automation products and applied 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 surviving 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 indirectly 95.51%-owned subsidiary through a wholly-owned subsidiary, Advantech Corporate Investment. The effective merger date was July 27, 2014. As the surviving 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 Company’s board of directors on July 27, 2018.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by FSC.

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) Annual Improvements to IFRSs 2014-2016 Cycle

Several standards, including IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures,” were amended in this annual improvement.

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The amendments to IAS 28 clarify that when the Group (a non-investment entity) applies the equity method to account for its investment in an associate that is an investment entity, the Group may elect to retain the fair value of the investment interests in subsidiaries of the investment entity associate. The election should be made separately for each investment entity associate, at the later of the date that (a) the investment entity associate is initially recognized, (b) the associate becomes an investment entity, or (c) the investment entity associate first becomes a parent.

2) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information related to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as at January 1, 2018.

Financial Assets Cash and cash equivalents Derivatives Mutual funds Equity securities Time deposits with original maturity of more than 3 months Notes receivable, trade receivables and other receivables	Measurement Category IAS 39 IFRS 9 Loans and receivables Amortized cost Held‑for‑trading Mandatorily at fair value through profit or loss (i.e. FVTPL) Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Available‑for‑sale Mandatorily at FVTPL Available‑for‑sale FVTOCI - equity instruments Financial assets measured at cost FVTOCI - equity instruments Loans and receivables Amortized cost Loans and receivables Amortized cost	Carrying Amount IAS 39 IFRS 9 Remark $ 5,204,219 $ 5,204,219 - 5,084 5,084 - 2,794,858 2,794,858 - 101,325 101,325 - 197,579 197,579 a) 229,381 229,381 a) 1,430,854 1,430,854 a) 78,518 78,518 a) 38,908 38,908 b) 7,941,176 7,941,176 c)

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Financial Assets IAS 39 Carrying Amount as of January 1, 2018 FVTPL $ 3,098,846 Add: Reclassification from available-for-sale (IAS 39) required reclassification Fair value option elected at January 1, 2018 - Less: Reclassification to FVTOCI - equity instruments (IFRS 9) - 3,098,846 FVTOCI Equity instruments - Add: Reclassification from FVTPL (IAS 39) (including fair value option revoked) - Add: Reclassification from available-for-sale (IAS 39) - Add: Financial assets measured at cost (IAS 39) - - Amortized cost Add: Reclassification from loans and receivables (IAS 39) - $ 3,098,846 Financial Assets a Investments accounted for using the equity method	Reclassifications Remeasure- ments IFRS 9 Carrying Amount as of January 1, 2018 $ 229,381 $ - (197,579) - 31,802 - $ 3,130,648 197,579 - 1,430,854 - 78,518 - 1,706,951 - 1,706,951 13,184,303 - 13,184,303 $ 14,923,056 $ - $ 18,021,902 IAS 39 Carrying Amount s of January 1, 2018 Adjustments Arising from Initial Application IFRS 9 Carrying Amount as of January 1, 2018 $ 1,349,735 $ (4,572) $ 1,345,163	Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ 87,115 $ (87,115 ) a) (128,168 ) 128,168 a) - - b), c) $ (41,053) $ 41,053 Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ 7,051 $ (11,623) d)

a) The Group elected to classify all of its investments in equity securities previously classified as available-for-sale and at FVTPL under IAS 39 as at FVTPL and FVTOCI under IFRS 9. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets was reclassified to retained earnings and to other equity - unrealized gain (loss) on financial assets at FVTOCI in the amount of $41,053 thousand.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value.

b) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9 because, on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.
c) Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9.
d) As a result of retrospective application of IFRS 9 by associates, there was a decrease in investments accounted for using the equity method of $4,572 thousand, a decrease in other equity - unrealized gain (loss) on financial assets at FVTOCI of $11,623 thousand and an increase in retained earnings of $7,051 thousand on January 1, 2018.
3) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Please refer to Note 4 for related accounting policies.

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In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output).

The Group provides service-type warranties in addition to assurance that its products comply with agreed-upon specifications. IFRS 15 requires such service to be considered as a performance obligation. Transaction prices allocated to service-type warranties are recognized as revenue, and the related costs are recognized when such warranty services are performed.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables and deferred revenue was recognized when revenue was recognized for the contract under IAS 18.

The Group elected to retrospectively apply IFRS 15 to contracts that were not complete on of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

For all contract modifications that occurred on or before December 31, 2017, the Group did not apply the requirements in IFRS 15 individually to each of the modifications, and the group identified the performance obligations and determined and allocated transaction prices in a manner that reflected the aggregate effect of all modifications that occurred on or before December 31, 2017. This reduced the complexity and cost of retrospective application, and resulted in financial information that closely aligns with the financial information that would be available under IFRS 15 without the expedient.

4) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

In determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendments also stipulate that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

In assessing a deferred tax asset, the Group currently assumed that it will recover the asset at its carrying amount when estimating probable future taxable profit; The Group applied the above amendments retrospectively in 2018.

5) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

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The Group applied IFRIC 22 prospectively to all assets, expenses and income recognized on or after January 1, 2018 within the scope of the interpretation.

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC) and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations (the“New IFRSs”) Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 January 1, 2019

New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

IFRS 16 “Leases”

Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”

Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”

IFRIC 23 “Uncertainty Over Income Tax Treatments”

Effective Date
Announced by IASB (Note 1)

January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

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 FSC permits the election for early adoption of the amendments starting from 2018.
Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply IFRS 16 only to contracts entered into (or changed) on or after January 1, 2019 in order to determine whether those contracts are, or contain, a lease. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

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The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

The Group expects to apply the following practical expedients:

a) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
b) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
c) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.

d) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

2) IFRIC 23 “Uncertainty over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Group concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Group should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances change.

Upon initial application of IFRIC 23, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019.

3) Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”

The amendments clarified that IFRS 9 shall be applied to account for other financial instruments in an associate to which the equity method is not applied. These included long-term interests that, in substance, form part of the entity’s net investment in an associate.

For long-term interests that, in substance, form part of the Group’s net investment in an associate and are governed by IFRS 9, the Group shall, based on the facts and circumstances that exist on January 1, 2019, perform an assessment of the classification under IFRS 9 applied retrospectively.

Upon initial application of the above amendments, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019.

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4) Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

IFRS 9 stipulated that if a contractual term of a financial asset permits the issuer (i.e. the debtor) to prepay a debt instrument or permits the holder (i.e. the creditor) to put a debt instrument back to the issuer before maturity and the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination, the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. The amendments further explained that reasonable compensation may be paid or received by either of the parties, i.e. a party may receive reasonable compensation when it chooses to terminate the contract early.

Upon initial application of the above amendments, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019 or restate prior periods if, and only if, it is possible without the use of hindsight.

5) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Group will apply the amendment prospectively.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group continue assessing other possible impacts that the application of the aforementioned amendments and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Group’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts”	Effective Date Announced by IASB (Note)
	To be determined by IASB January 1, 2021

Note: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulate that, when the Group sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate, the gain or loss resulting from the transaction is recognized in full. Also, when the Group 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.

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Conversely, when the Group sells or contributes assets that do not constitute a business to an associate, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate, i.e. the Group’s share of the gain or loss is eliminated. Also, when the Group loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate, i.e. the Group’s share of the gain or loss is eliminated.

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

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.

c. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). 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 dates of acquisitions up to the effective dates of disposals, 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. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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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.

Before 2018, the fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition of available-for-sale financial assets or financial assets at fair value through profit or loss or, when applicable, the cost on initial recognition of an investment in an associate. From 2018, the fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition of financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss or, when applicable, the cost on initial recognition of an investment in an associate.

See Note 15 and Table 7 for the detailed information of subsidiaries (including the percentage of ownership and main businesses).

d. Other significant accounting policies

Except for the related accounting policies of financial instruments and revenue recognition and the following, for the summary of other significant accounting policies, please refer to the consolidated financial statements for the year ended December 31, 2017.

1) 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 any 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 Group 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.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.

The 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, with the resulting impairment loss recognized in profit or loss.

Before the Group recognizes an impairment loss from assets related to contract costs, any impairment loss on inventories, property, plant and equipment and intangible assets related to the contract applicable under IFRS 15 shall be recognized in accordance with applicable standards. Then, impairment loss from the assets related to the contract costs is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that the Group expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services and which have not been recognized as expenses. The assets related to the contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit.

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When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset, cash-generating unit or assets related to contract costs 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, cash-generating unit or assets related to contract costs in prior years. A reversal of an impairment loss is recognized in profit or loss.

2) 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 an acquisition or issuance 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.

a) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

i. Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

i) Financial assets at FVTPL

Financial assets are classified as at FVTPL when a financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured 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 dividends or interest earned on the financial assets. Fair value is determined in the manner described in Note 30.

ii) Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
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Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents and trade receivables at amortized cost, are measured at amortized cost, which equals the gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for:

Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset; and
Financial assets that have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

iii) Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, they will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

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 such financial assets are either held for trading or designated as at fair value through profit or loss.

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 dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 30.

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Investments in equity instruments under financial assets at fair value through profit or loss that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in 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 amounts 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 such investments are disposed of or are 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.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

iii) Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalents and debt investments with no active market) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

ii. Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables as well as contract assets.

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The Group always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables and lease receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amounts through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the respective financial asset.

2017

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial assets, that the estimated future cash flows of the investment have been affected.

For financial assets at amortized cost, such as trade receivables, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For any available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties.

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When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables and other receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

iii. Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. From 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

b) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

23 -

c) Financial liabilities

i. Subsequent measurement

Except the following situation, all financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liabilities are either held for trading or is designated as at fair value through profit or loss. Fair value is determined in the manner described in Note 30.

ii. Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

d) Derivative financial instruments

The Group enters into foreign exchange forward contracts to manage its exposure to interest rate and foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instruments is negative, the derivative is recognized as a financial liability.

3) Revenue recognition

Contracts applicable to IFRS 15

The Group identifies contracts with the customers, allocates transaction price to the performance obligations and recognizes revenue when the performance obligations are satisfied.

For contracts where the period between the date when the Group transfers a promised good or service to a customer and the date when the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

a) Revenue from sale of goods

Revenue from sale of goods comes from sales of embedded computing boards, industrial automation products and applied and industrial computers.

Sales of the above products are majorly recognized as revenue under contracts when the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and the price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

24 -

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

b) Revenue from rendering services

Revenue from rendering services comes from developing products and extended warranty services. Such revenue is recognized when services are provided.

Contracts prior to 2018 not retrospectively application of IFRS 15

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

a) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

i. The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
ii. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

iii. The amount of revenue can be measured reliably;

iv. It is probable that the economic benefits associated with the transaction will flow to the Group; and
v. The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of the materials’ ownership.

b) Rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.

c) Dividends and interest income

Dividends income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and that the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

25 -

4) Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

5) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings. The effects of the changes in the tax rate related to transactions recognized in profit or loss are included in the estimation of the average annual income tax rate, consequently spreading the effect throughout the interim periods.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

a. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value was based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

b. Significant influence over associates

As Note 16 Investments accounted for using the equity method describes that several companies are associates of the Group although the Group only holds less than 20% of the voting power in each of these companies and the Group has significant influence over these companies by virtue of the right to appoint and remove directors from the board of directors of these companies.

c. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

26 -

6. CASH AND CASH EQUIVALENTS

			December 31,	December 31,
	June 30, 2018			2017	June 30, 2017
Cash on hand	$	69,429	$	70,453	$	69,023
Checking accounts and demand deposits		4,900,957		4,942,396		2,958,925
Cash equivalents (time deposits with original
maturities less than 3 months)		324,475		191,370		341,020
	$	5,294,861	$	5,204,219	$	3,368,968

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

			December	December	31,
	June 30, 2018			2017		June	30, 2017
Financial assets at FVTPL-current
Financial assets held for trading
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	-	$	5,084		$	1,109
Non-derivative financial assets
Domestic quoted shares		-		289,570			115,296
Foreign quoted shares		-		9,334			-
Mutual funds		-		2,794,858			-
		-		3,098,846			116,405
Financial assets mandatorily at FVTPL
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts		10,992			-		-
Non-derivative financial assets
Domestic quoted shares		199,735			-		-
Foreign quoted shares		10,285			-		-
Mutual funds		4,942,393			-		-
		5,163,405			-		-
	$	5,163,405	$	3,098,846		$	116,405
Financial liabilities at FVTPL-current
Financial assets held for trading
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	-	$	6,226		$	37,246
Financial assets mandatorily at FVTPL
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts		4,637			-		-
	$	4,637	$	6,226		$	37,246

27 -

At the end of the reporting period, outstanding forward exchange contracts not under hedge accounting were as follows:

			Notional Amount
	Currency	Maturity Date	(In Thousands)
June 30, 2018
Sell	EUR/NTD	2018.07-2018.11	EUR12,500/NTD449,644
	EUR/USD	2018.07-2018.08	EUR500/USD633
	USD/NTD	2018.07-2018.08	USD4,133/NTD123,113
	JPY/NTD	2018.07-2018.11	JPY360,000/NTD98,047
	RMB/NTD	2018.07-2018.09	CNY57,000/NTD263,162
December 31, 2017
Sell	EUR/NTD	2018.01-2018.05	EUR14,000/NTD499,225
	EUR/USD	2018.01-2018.04	EUR1,500/USD1,805
	JPY/NTD	2018.01-2018.05	JPY500,000/NTD134,549
	RMB/NTD	2018.01-2018.03	RMB77,000/NTD346,212
June 30, 2017
Sell	EUR/NTD	2017.07-2017.12	EUR7,500/NTD250,197
	EUR/USD	2017.07-2017.11	EUR8,500/USD9,299
	USD/NTD	2017.07-2017.10	USD7,434/NTD224,564
	JPY/NTD	2017.07-2017.11	JPY470,000/NTD128,403
	RMB/NTD	2017.07-2017.09	RMB82,000/NTD357,157
	EUR/CZK	2017.07-2017.10	EUR330/CZK8,750

The Group entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign-currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and, therefore, were not accounted for using hedge accounting.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

Non-current

Investments in equity instruments at FVTOCI

June 30, 2018 $ 1,753,637

28 -

June 30, 2018

Investments in equity instruments at FVTOCI:

Non-current
Domestic investments
Listed shares and emerging market shares
Ordinary shares - ASUSTek Computer Inc.

Ordinary shares - Allied Circuit Co., Ltd.
Unlisted shares
Ordinary shares - BroadTec System Inc.
Ordinary shares - BiosenseTek Corp.
Ordinary shares - Juguar Technology
Ordinary shares - Taiwan DSC PV Ltd.

Foreign investments
Shanghai Shangchuang Xinwei Investment Management Co., Ltd.
JamaPro Co., Ltd.

$ 1,319,940
350,485
4,797
173
5,824

383

1,681,602
68,895

3,140

72,035
$ 1,753,637

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Notes 3, 10 and 11 for information related to their reclassification and comparative information for 2017.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	June 30, 2018
Current
Domestic investments
Time deposits with original maturity of more than 3 months	$ 37,808

The time deposits with original maturities of more than 3 months were classified as debt investments with no active market under IAS 39. Refer to Notes 3 and 12 for information related to their reclassification and comparative information for 2018.

For information on pledged debt investments with financial assets at amortized cost, refer to Note 32.

29 -

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

11.	December 31, 2017 June 30, 2017 Current Domestic investments Mutual funds $ - $ 4,832,726 Quoted shares 219,000 605,247 Foreign investments Quoted shares 10,381 7,899 $ 229,381 $ 5,445,872 Non-current Domestic investments Quoted shares $ 1,419,479 $ 1,530,865 Unlisted shares 11,375 9,375 $ 1,430,854 $ 1,540,240 FINANCIAL ASSETS MEASURED AT COST - 2017

	December 31,
	2017	June 30, 2017
Non-current
Private equity	$ 78,518	$ 67,290
Classification according to financial asset measurement categories
Available-for-sale financial assets	$ 78,518	$ 67,290

The Group measured the private equity with the costs at the end of the reporting period, because there was a significant range of reasonable estimates for fair values and the probability for each estimate cannot be assessed reasonably. Therefore, the management of the Group determined that the fair value of the private equity was not reliably measured.

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

				December 31,
				2017	June 30, 2017
Time deposits	with original maturities of more than	3	months	$ 38,908	$ 46,453

For information on pledged debt investments with no active market, refer to Note 32.

30 -

13. NOTES RECEIVABLE AND TRADE RECEIVABLES

		December 31,
	June 30, 2018	2017	June 30, 2017
Notes receivable - operating	$ 1,263,877	$ 1,255,781	$ 1,113,715
Trade receivables
Amortized cost
Gross carrying amount	$ 7,162,047	$ 6,686,485	$ 6,619,084
Less: Allowance for impairment loss	(105,943)	(90,455)	(90,297)
	$ 7,056,104	$ 6,596,030	$ 6,528,787

Trade Receivables

For the six months ended June 30, 2018

At amortized cost

The average credit period of the sales of goods was 30-90 days. No interest was charged on trade receivables. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of a lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtors and an analysis of the debtors’ current financial positions, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecasted direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery of the receivable, e.g. when the debtor has been placed under liquidation, or when the trade receivables are over 1 year past due, or whichever occurs earlier. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

31 -

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

June 30, 2018

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost	Not Past Due - $ 6,247,283 (3,663) $ 6,243,620	Less than 90 Days 90 to 180 Days 4% 28% $ 792,829 $ 43,450 (29,618) (12,188) $ 763,211 $ 31,262	180 to 360 Days Over 360 Days 61% 100% $ 46,069 $ 32,416 (28,058) (32,416) $ 18,011 $ -	Total - $ 7,162,047 (105,943) $ 7,056,104

The movements of the loss allowance of trade receivables is as follows:

	For the Six
	Months Ended
	June 30, 2018
Balance at January 1, 2018 - IAS 39	$ 90,455
Adjustment on initial application of IFRS 9	-
Balance at January 1, 2018 - IFRS 9	90,455
Add: Net remeasurement of loss allowance(a)	24,907
Less: Amounts written off (b)	(9,326)
Foreign exchange gains and losses	(93)
Balance at June 30, 2018	$ 105,943

a. The increase in loss allowance of $24,907 thousand resulted from origination of new trade receivables net of those settled of $475,562 thousand.
b. The Group wrote off trade receivables and related loss allowance of $9,326 thousand due to the fact that the customers ’ trade receivables have been aged more than 2 years and the legal attest letters were served without receivables collected.

For the six months ended June 30, 2017

The Group applied the same credit policy in 2018 and 2017. The Group recognized an allowance for impairment loss of 100% against all receivables over 1 year because historical experience was that receivables that are past due beyond 1 year were not recoverable. Allowance for impairment loss was recognized against trade receivables between 90 days and 1 year based on estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

For some trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

32 -

The aging of receivables was as follows:

	December 31,
	2017	June 30, 2017
Not overdue	$ 5,663,891	$ 5,800,725
Overdue
1 to 90 days	924,551	763,373
91 to 360 days	64,669	16,813
Over 360 days	33,374	38,173
	$ 6,686,485	$ 6,619,084

The above aging schedule was based on the number of past due days from the end of the credit term.

The aging of receivables that were past due date but not impaired was as follows:

	December 31,
	2017	June 30, 2017
1 to 30 days	$ 763,822	$ 642,052
31 to 60 days	117,935	79,947
61 to 90 days	42,794	41,374
	$ 924,551	$ 763,373

The above aging schedule was based on the number of past due days from the end of the credit term.

The movements of the allowance for doubtful trade receivables were as follows:

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2017
$ 13,686
$ 87,668

Add: Impairment losses recognized on
receivables
185
-
Less: Impairment losses reversed
-
(9,208)
Less: Amounts written off during the period as
uncollectible
-
(1,238)
Impairment losses recognized from business
combination
-
37
Foreign exchange translation gains and losses

-

(833)

Balance at June 30, 2017
$ 13,871
$ 76,426

Total
$ 101,354
185
(9,208)
(1,238)
37

(833)
$ 90,297

33 -

14. INVENTORIES

		December 31,
	June 30, 2018	2017	June 30, 2017
Raw materials	$ 3,734,627	$ 3,122,276	$ 2,384,298
Work in progress	1,499,466	1,235,097	1,220,343
Finished goods	1,148,048	1,335,817	1,737,770
Inventories in transit	791,445	549,061	627,023
	$ 7,173,586	$ 6,242,251	$ 5,969,434

The cost of inventories recognized as cost of goods sold for the three months and the six months ended June 30, 2018 and 2017 was $7,754,730 thousand, $6,908,303 thousand, $14,675,095 thousand and $12,810,758 thousand, respectively.

The costs of inventories were decreased by $646,851 thousand, $577,528 thousand and $629,954 thousand as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively, when stated at the lower of cost or net realizable value.

15. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements.

The entities included in the consolidated statements are listed below.

Investor
Investee
Nature of Activities

The Company
AAC (BVI)
Investment and management service
ATC
Sale of industrial automation products
Advanixs Corporation
Production and sale of industrial
automation products
Advantech Corporate
Investment
Investment holding company
AEUH
Investment and management services
ASG
Sale of industrial automation products
AAU
Sale of industrial automation products
AJP
Sale of industrial automation products
AMY
Sale of industrial automation products
AKR
Sale of industrial automation products
ABR
Sale of industrial automation products
AIN
Sale of industrial automation products
AdvanPOS
Production and sale of POS systems
LNC
Production and sale of machines with
computerized numerical controls
AMX
Sale of industrial automation products
Advantech Innovative
Design Co., Ltd.
Product design
BEMC
Sale of industrial network
communications systems
AiST
Design, develop and sale of intelligent
service
AKST
Production and sale of intelligent
medical displays
ATH
Production of computers
AVN
Sale of industrial automation products
AKR
AKST
Production and sale of intelligent
medical displays
Advantech Corporate
Investment
Cermate
Manufacturing of electronic parts,
computer, and peripheral devices
Huan Yan, Jhih-Lian Co.,
Ltd.
Service plan for combination of related
technologies of water treatment and
applications of Internet of Things
Yun Yan, Wu-Lian Co., Ltd. Industrial equipment Networking in
Greater China
ATC
ATC (HK)
Investment and management services
ATC (HK)
AKMC
Production and sale of components of
industrial automation products

Proportion of Ownership (%)
June 30, 2018
December 31,
2017
June 30, 2017 Remark
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
80.00
80.00
80.00
a
99.99
99.99
99.99
a
100.00
100.00
100.00
a
80.06
81.17
81.17
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
60.00
60.00
60.00
100.00
100.00
100.00
a
36.00
36.00
36.00
a, b
51.00
-
-
a, c
60.00
-
-
a, g
24.00
24.00
24.00
a, b
55.00
55.00
55.00
a
50.00
-
-
a, d
50.00
-
-
a, d
100.00
100.00
100.00
100.00
100.00
100.00

(Continued)

34 -

Investor
Investee
Nature of Activities

Advanixs Kun Shan Corp.
Production and sale of industrial
automation products
AAC (BVI)
ANA
Sale and fabrication of industrial
automation products
AAC (HK)
Investment and management service
SIoT (Cayman)
Design, development and sale of IoT
intelligent system service
ANA
BEMC
Sale of industrial network
communications
AAC (HK)
ACN
Sale of industrial automation products
AiSC
Production and sale of industrial
automation products
AXA
Development and production of
software products
SIoT (Cayman)
SIoT (China)
Technology development consulting
and services in the field of intelligent
technology
ACN
Hangzhou Advantofine
Automation Co., Ltd.
Processing and sale of industrial
automation products
AXA
Development and production of
software products
AEUH
AEU
Sale of industrial automation products
APL
Sale of industrial automation products
AEU
A-DLoG
Design, R&D and sale of industrial
automation vehicles and related
products
ASG
ATH
Production of computers
AID
Sale of industrial automation products
Cermate
Land Mark
General investment
Land Mark
Cermate (Shanghai)
Sale of industrial electronic equipment
Cermate (Shenzhen)
Production of LCD touch panel, USB
cable, and industrial computer
LNC
Better Auto
General investment
Better Auto
Famous Now Limited
General investment
Famous Now Limited
Advantech LNC Dong Guan
Co., Ltd.
Production and sale of industrial
automation products
BEMC
Avtek
General investment
Avtek
B+B
General investment
B+B
BBI
Sale of industrial network
communications systems
Quatech
Sale of industrial network
communications systems
IMC
Sale of industrial network
communications systems
BBI
B&B Electronics
Sale of industrial network
communications systems
B+B (CZ)
Manufacturing of cellular and
automation solutions
Conel Automation
Sale of industrial network
communications systems
B&B DMCC
Sale of industrial network
communications systems
B&B Electronics
B+B (CZ)
Manufacturing of cellular and
automation solutions
B+B (CZ)
Conel Automation
Sale of industrial network
communications systems

Proportion of Ownership (%)
June 30, 2018
December 31,
2017
June 30, 2017 Remark
-
100.00
100.00
i
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
-
a, h
40.00
40.00
40.00
100.00
100.00
100.00
100.00
100.00
100.00
a
-
100.00
100.00
a, e
99.00
-
-
a, h
-
100.00
100.00
f
100.00
-
-
a, e
100.00
100.00
100.00
100.00
100.00
100.00
a
100.00
100.00
100.00
a
49.00
51.00
51.00
a, c
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
90.00
90.00
90.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
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
100.00
100.00
100.00
100.00
100.00
99.99
99.99
99.99
1.00
1.00
1.00
100.00
100.00
100.00
0.01
0.01
0.01
99.00
99.00
99.00

(Concluded)

Remark a: Not significant subsidiaries and their financial statements had not been reviewed.

Remark b: In the first quarter of 2017, the Group acquired 60% of the equity of AKST with an acquisition of 24% and 36% of AKST’s equity by the Company and AKR, respectively.
Remark c: In the first quarter of 2018, the Group acquired 49% of the equity of ATH, which led the Group’s equity investment in ATH increase from 51% to 100%. After the Group increased capital and adjusted its investment structure in ATH, the Company and ASG held 51% and 49% of the equity of ATH, respectively.
Remark d: In the first quarter of 2018, Advantech Corporate Investment founded Huan Yan, Jhih-Lian Co., Ltd. and Yun Yan, Wu-Lian Co., Ltd. and acquired 50% of the equity in each of these subsidiaries.
Remark e: In the first quarter of 2018, the Group adjusted its investment structure and ACN directly held 100% of the equity of AXA.
35 -

Remark f: In the first quarter of 2018, Hangzhou Advantofine Automation Co., Ltd. was liquidated. Remark g: In the second quarter of 2018, the Group acquired 60% of the equity of AVN.

Remark h: In the second quarter of 2018, the Group founded SIoT (Cayman) and SIoT (China).
Remark i: In the second quarter of 2018, Advanixs Kun Shan Corp. were merged by AKMC. Advanixs Kun Shan Corp. ceased to exist and is currently carrying out liquidation procedures.

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

			December 31,	December 31,
	June 30, 2018			2017	June	30, 2017
Associates that are not individually material
Listed companies
Axiomtek Co., Ltd. (“Axiomtek”)	$	563,971	$	622,604	$	590,480
Winmate Inc. (“Winmate”)		523,160		544,960		-
AzureWare Technologies, Inc. (“AzureWare”)		538,289		-		-
Nippon RAD Inc. (Nippon RAD)		297,647		-		-
Unlisted companies
AIMobile Co., Ltd. (“AIMobile”)		77,878		84,140		92,935
Deneng Scientific Research Co., Ltd.
(“Deneng”)		14,438		15,457		15,854
Jan Hsiang Electronics Co., Ltd. (“Jan
Hsiang”)		10,742		10,447		10,101
CDIB Innovation Accelerator Co., Ltd.
(“CDIB”)		72,501		72,127		75,000
iLink Co., Ltd.		10,067		-		-
	$ 2,108,693		$	1,349,735	$	784,370

In the second and fourth quarters of 2017, the Group paid cash totaling $75,000 thousand and $540,000 thousand for 20% of the equity of CDIB Innovation Accelerator Co., Ltd. and 16.62% of the equity of Winmate, respectively. The Group had significant influence over CDIB Innovation Accelerator Co., Ltd. and Winmate.

In the first quarter of 2018, the Group subscribed for 18.42% of the equity of AzureWave Technologies, Inc. through a private placement with the approval of the board of directors. The Group has significant influence over AzureWave Technologies, Inc.

In the second quarter of 2018, the Group paid cash of $299,960 thousand for 19% equity of Nippon RAD. The Group had significant influence over Nippon RAD.

In the second quarter of 2018, the Group paid cash of $10,067 thousand for 25% equity of iLink Co., Ltd. The Group had significant influence over iLink Co., Ltd.

In response to the application of IFRS 9 in 2018, Winmate and Axiomtek applied retroactively on January 1, 2018 and the Group recognized related changes according to ratio of shareholding and thus increased its retained earnings by $7,051 thousand and decreased unrealized gain on financial assets at fair value through other comprehensive income by $11,623 thousand.

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Aggregate information of associates that are not individually material

The Group’s share of: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) for the period	For the Three Months Ended June 30 2018 2017 $ 26,349 $ 190,922 5,618 2,401 $ 31,967 $ 193,323	For the Three Months Ended June 30 2018 2017 $ 26,349 $ 190,922 5,618 2,401 $ 31,967 $ 193,323		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 26,349 5,618 $ 31,967		2018 $ 47,856 3,955 $ 51,811	2017 $ 190,313 (5,969) $ 184,344

Investments were accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on financial statements which have not been reviewed.

17. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Acquisition through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation expense Acquisition through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2017 Carrying amounts at June 30, 2017 Cost Balance at January 1, 2018 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation expenses Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2018 Carrying amounts at June 30, 2018	Freehold Land $ 2,948,580 - (5,702 ) 29,007 - (8,626) $ 2,963,259 $ - - - - - - $ - $ 2,963,259 $ 2,943,980 - - - - 4,407 $ 2,948,387 $ - - - - - - $ - $ 2,948,387	Buildings $ 7,080,989 90,798 (5,649 ) 44,460 (2,064 ) (84,072) $ 7,124,462 $ 1,228,673 (3,653 ) 95,435 741 3 (20,809) $ 1,300,390 $ 5,824,072 $ 7,274,546 11,739 (40,390 ) - - 20,627 $ 7,266,522 $ 1,414,696 (102 ) 100,558 - - 5,443 $ 1,520,595 $ 5,745,927	Equipment $ 1,631,738 25,323 (14,073 ) 24,903 17,144 (16,471) $ 1,668,564 $ 1,155,669 (13,616 ) 59,330 15,453 (2 ) (9,871) $ 1,206,963 $ 461,601 $ 1,634,925 40,503 (59,114 ) 57 8,638 2,088 $ 1,627,097 $ 1,186,494 (47,220 ) 53,973 5 (50,763 ) 1,109 $ 1,143,598 $ 483,499	Office Equipment $ 862,409 24,464 (46,895 ) 6,163 (9,801 ) (14,442) $ 821,898 $ 644,435 (46,105 ) 45,750 4,671 (6,747 ) (10,929) $ 631,075 $ 190,823 $ 830,623 28,472 (15,346 ) 524 (23,005 ) 3,399 $ 824,667 $ 651,244 (15,085 ) 38,315 151 (26,587 ) 3,985 $ 652,023 $ 172,644	Other Facilities $ 1,605,230 59,258 (20,551 ) 4,952 41,196 (27,234) $ 1,662,851 $ 1,053,622 (16,499 ) 94,927 3,948 (98 ) (15,522) $ 1,120,378 $ 542,473 $ 1,729,582 64,114 (33,055 ) 1,483 3,929 7,266 $ 1,773,319 $ 1,198,147 (27,434 ) 94,657 738 (2,203 ) 4,231 $ 1,268,136 $ 505,183	Construction in Progress $ 43,289 40,054 - - (67,769 ) 108 $ 15,682 $ - - - - - - $ - $ 15,682 $ 4,257 143,446 (7 ) - (143,357 ) (869) $ 3,470 $ - - - - - - $ - $ 3,470	Total $ 14,172,235 239,897 (92,870 ) 109,485 (21,294 ) (150,737) $ 14,256,716 $ 4,082,399 (79,873 ) 295,442 24,813 (6,844 ) (57,131) $ 4,258,806 $ 9,997,910 $ 14,417,913 288,274 (147,912 ) 2,064 (153,795 ) 36,918 $ 14,443,462 $ 4,450,581 (89,841 ) 287,503 894 (79,553 ) 14,768 $ 4,584,352 $ 9,859,110

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Except for depreciation recognized, the Group did not have significant addition, disposal, or impairment of property, plant and equipment during the six months ended June 30, 2018 and 2017. The above items of property, plant and equipment were depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 20-60 years Electronic equipment 5 years Engineering systems 5 years Equipment 2-8 years Office equipment 2-8 years Other facilities 2-10 years

Property, plant and equipment pledged as collateral for borrowings are set out in Note 32.

18. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 28) Adjustments for goodwill after acquisition (Note 28) Effect of foreign currency exchange differences Balance at June 30 Accumulated impairment losses Balance at January 1 Effect of foreign currency exchange differences Balance at June 30 Carry amount at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 2,828,958 65,207 - 32,348 $ 2,926,513 $ (101,409) 3,621 $ (97,788) $ 2,828,725	2017 $ 2,845,831 79,713 18,075 (91,531) $ 2,852,088 $ - - $ - $ 2,852,088

The Group acquired AKST in January 2017. In the second quarter of 2017, after obtaining the audited financial statements of AKST for the year ended December 31, 2016, the Group paid the remaining installment of US$600 thousand and adjusted the goodwill on the acquisition based on those audited financial statements. The actual sales growth post the business combination of AKST, a subsidiary of the Company, did not turn out as expected; AKST had continuous losses for the year ended December 31, 2017. An impairment loss for goodwill amounted to $97,788 thousand and was recognized for the year ended December 31, 2017.

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19. PREPAYMENTS FOR LEASES

			December 31,	December 31,
	June 30, 2018			2017	June 30, 2017
Current assets (included in other current assets)	$	8,908	$	8,854	$	8,701
Non-current assets		310,175		312,708		311,648
	$	319,083	$	321,562	$	320,349

Lease prepayments are for the Group’s land-use right in mainland China.

20. BORROWINGS

a. Short-term borrowings

			December 31,	December 31,
	June 30, 2018			2017	June 30, 2017
Secured borrowings
Bank loans	$	8,100	$	8,400	$	-
Unsecured borrowings
Line of credit borrowings		-		-		373,140
	$	8,100	$	8,400	$	373,140
The range of weighted average effective interest rates		on bank loans was		2.87%, 2.87%	and	1.74-2.87%
per annum as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively.
Long-term borrowings
			December 31,
	June 30, 2018			2017	June 30, 2017
Secured borrowings
Bank loans	$	38,788	$	50,258	$	34,200
Other borrowings		58,944		63,459		63,450
Unsecured borrowings
Line of credit borrowings		-		-		25,063
		97,732		113,717		122,713
Less: Current portions		(16,808)		-		(13,057)
Long-term borrowings	$	80,924	$	113,717	$	109,656

The range of weighted average effective interest rates on bank loans was 2.87%, 2.87% and 1.74-2.87% per annum as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively.

b. Long-term borrowings

The long-term borrowings are borrowings of the subsidiary AKST. The effective interest rate of line of credit and secured borrowings was 1.60%-2.75% per annum as of June 30, 2018, December 31, 2017 and June 30, 2017.

Other borrowings are loans from the government. The effective interest rate was 2.91%-3.16% per annum as of June 30, 2018, December 31, 2017 and June 30, 2017.

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With demand of borrowings, the Group pledged time deposits, freehold land and buildings and payment guarantee (refer to Note 32).

21. OTHER LIABILITIES

		December 31,
	June 30, 2018	2017	June 30, 2017
Other payables
Payables for salaries or bonuses	$ 2,186,409	$ 2,324,441	$ 2,095,393
Payables for employee benefits	188,042	180,617	171,641
Payables for royalties	177,226	118,347	177,732
Others (Note)	1,024,664	1,001,305	919,020
	$ 3,576,341	$ 3,624,710	$ 3,363,786

Note: Including marketing expenses, and freight expenses.

22. RETIREMENT BENEFIT PLANS

Employee benefit expenses in respect of the Group’s defined benefit retirement plans $2,825 thousand and $2,502 thousand for the six months ended June 30, 2018 and 2017, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2017 and 2016.

23. EQUITY

a. Share capital

Ordinary shares

		December 31,
	June 30, 2018	2017	June 30, 2017
Number of shares authorized (in thousands)	800,000	800,000	800,000
Shares authorized	$ 8,000,000	$ 8,000,000	$ 8,000,000
Number of shares issued and fully paid (in
thousands)	697,545	697,283	696,612
Shares issued	$ 6,975,445	$ 6,972,825	$ 6,966,115

Fully paid ordinary shares, which have a par value of NT$10, carry one vote per share and carry a right to dividends.

The changes in shares are due to employees’ exercise of their employee share options.

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b. Capital surplus

		December 31,
	June 30, 2018	2017	June 30, 2017
May be used to offset a deficit, distributed as
cash dividends, or transferred to share
capital (1)
Issuance of ordinary shares	$ 3,396,888	$ 3,396,888	$ 3,396,888
Conversion of bonds	931,849	931,849	931,849
The difference between consideration
received or paid and the carrying amount of
subsidiaries’ net assets during actual
disposal or acquisition	20,134	17,844	17,844
May be used to offset a deficit only
Changes in percentage of ownership interest
in subsidiaries (2)	4,246	5,003	4,246
Employee share options	1,323,645	1,241,557	1,129,710
Employees’ share compensation	78,614	78,614	78,614
Not note be used for any purpose
Share of changes in capital surplus of
associates	27,376	25,285	24,989
Employee share options	977,920	857,802	717,742
	$ 6,760,672	$ 6,554,842	$ 6,301,882

1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).
2) Such capital surplus arises from the effect of changes in ownership interests in a subsidiary resulting from equity transactions other than actual disposal or acquisition or from changes in capital surplus of subsidiaries accounted for by using the equity method.

c. Retained earnings and dividend policy

Under the dividends policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors after amendment, refer to employees’ compensation and remuneration of directors in Note 24, d.

The Company operates in an industry related to computers, and its business related to network servers is new but with significant potential for growth. Thus, in formulating its dividends policy, the Company takes into account the overall business and industry conditions and trends, its objective of enhancing the shareholders’ long-term interests, and the sustainability of the Company’s growth. The policy also requires that share dividends be less than 75% of total dividends to retain internally generated cash within the Company to finance future capital expenditures and working capital requirements.

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An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings, for 2017 and 2016 were approved in the shareholder’s meetings on May 24, 2018 and May 26, 2017, respectively, were as follows:

Legal reserve Special reserve Cash dividends Share dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 615,651 $ 566,686 284,451 85,204 4,600,414 3,988,367 - 633,074	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ - $ - - - 6.6 6.3 - 1.0

d. Special reserves

Balance at January 1 Appropriations in respect of Debits to other equity items Balance at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 85,204 284,451 $ 369,655	2017 $ - 85,204 $ 85,204

e. Other equity items
1) Exchange differences on translation of foreign financial statements

Balance at January 1 Effect of change in tax rate Recognized during the period Exchange differences arising on translating the financial statements of foreign entities Share of those of associates accounted for using the equity method Other comprehensive income recognized for the period Balance at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ (463,479) 16,752 84,924 1,675 103,351 $ (360,128)	2017 $ (197,633) - (299,039) (9,954) (303,993) $ (501,626)

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2) Unrealized gain or loss from available-for-sale financial assets

Balance at January 1, 2017 Recognized during the period Unrealized gain arising on revaluation of available-for-sale financial assets Reclassification adjustment Disposal of available-for-sale financial assets Other comprehensive income recognized for the period Balance at June 30, 2017	$ 112,429 384,326 (123,479) 260,847 $ 373,276

3) Unrealized gain or loss on Financial Assets at FVTOCI

For the Six Months Ended June 30, 2018 Balance at January 1 per IAS 39 $ - Adjustment on initial application of IFRS 9 123,254 Balance at January 1 per IFRS 9 123,254 Recognized during the period Unrealized gain - equity instruments 46,203 Share of those of associates accounted for using the equity method 1,741 47,944 Other comprehensive income recognized for the period 6,977 Balance at June 30 $ 178,175 Non-controlling interests For the Six Months Ended June 30 2018 2017 Balance at January 1 $ 179,366 $ 173,315 Share of profit (loss) for the period 15,712 (590) Other comprehensive income recognized for the period Exchange difference arising on translating the financial statements of foreign entities 7,872 (5,917) Acquisition of non-controlling interest in subsidiaries (Note 29) 1,876 - Disposal of non-controlling interests in subsidiaries (Note 29) (22,701) Non-controlling interests arising from acquisition of subsidiaries AKST (Note 28) - 15,203 Non-controlling interests arising from acquisition of subsidiaries AVN (Note 28) 7,257 - Equity instruments held by the employees of subsidiaries 842 - Balance at June 30 $ 190,224 $ 182,011	For the Six Months Ended June 30, 2018 Balance at January 1 per IAS 39 $ - Adjustment on initial application of IFRS 9 123,254 Balance at January 1 per IFRS 9 123,254 Recognized during the period Unrealized gain - equity instruments 46,203 Share of those of associates accounted for using the equity method 1,741 47,944 Other comprehensive income recognized for the period 6,977 Balance at June 30 $ 178,175 Non-controlling interests For the Six Months Ended June 30 2018 2017 Balance at January 1 $ 179,366 $ 173,315 Share of profit (loss) for the period 15,712 (590) Other comprehensive income recognized for the period Exchange difference arising on translating the financial statements of foreign entities 7,872 (5,917) Acquisition of non-controlling interest in subsidiaries (Note 29) 1,876 - Disposal of non-controlling interests in subsidiaries (Note 29) (22,701) Non-controlling interests arising from acquisition of subsidiaries AKST (Note 28) - 15,203 Non-controlling interests arising from acquisition of subsidiaries AVN (Note 28) 7,257 - Equity instruments held by the employees of subsidiaries 842 - Balance at June 30 $ 190,224 $ 182,011	For the Six Months Ended June 30, 2018 Balance at January 1 per IAS 39 $ - Adjustment on initial application of IFRS 9 123,254 Balance at January 1 per IFRS 9 123,254 Recognized during the period Unrealized gain - equity instruments 46,203 Share of those of associates accounted for using the equity method 1,741 47,944 Other comprehensive income recognized for the period 6,977 Balance at June 30 $ 178,175 Non-controlling interests For the Six Months Ended June 30 2018 2017 Balance at January 1 $ 179,366 $ 173,315 Share of profit (loss) for the period 15,712 (590) Other comprehensive income recognized for the period Exchange difference arising on translating the financial statements of foreign entities 7,872 (5,917) Acquisition of non-controlling interest in subsidiaries (Note 29) 1,876 - Disposal of non-controlling interests in subsidiaries (Note 29) (22,701) Non-controlling interests arising from acquisition of subsidiaries AKST (Note 28) - 15,203 Non-controlling interests arising from acquisition of subsidiaries AVN (Note 28) 7,257 - Equity instruments held by the employees of subsidiaries 842 - Balance at June 30 $ 190,224 $ 182,011	For the Six Months Ended June 30, 2018 Balance at January 1 per IAS 39 $ - Adjustment on initial application of IFRS 9 123,254 Balance at January 1 per IFRS 9 123,254 Recognized during the period Unrealized gain - equity instruments 46,203 Share of those of associates accounted for using the equity method 1,741 47,944 Other comprehensive income recognized for the period 6,977 Balance at June 30 $ 178,175 Non-controlling interests For the Six Months Ended June 30 2018 2017 Balance at January 1 $ 179,366 $ 173,315 Share of profit (loss) for the period 15,712 (590) Other comprehensive income recognized for the period Exchange difference arising on translating the financial statements of foreign entities 7,872 (5,917) Acquisition of non-controlling interest in subsidiaries (Note 29) 1,876 - Disposal of non-controlling interests in subsidiaries (Note 29) (22,701) Non-controlling interests arising from acquisition of subsidiaries AKST (Note 28) - 15,203 Non-controlling interests arising from acquisition of subsidiaries AVN (Note 28) 7,257 - Equity instruments held by the employees of subsidiaries 842 - Balance at June 30 $ 190,224 $ 182,011
		2018 $ 179,366 15,712 7,872 1,876 (22,701) - 7,257 842 $ 190,224	2017 $ 173,315 (590) (5,917) - 15,203 - - $ 182,011

f. Non-controlling interests
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24. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

For the Three Months Ended June 30 2018 2017 $ 307 $ 1,628 958 2,526 $ 1,265 $ 4,154 For the Three Months Ended June 30 2018 2017 $ 143,326 $ 145,800 34,111 51,629 $ 177,437 $ 197,429 $ 32,488 $ 36,780 110,838 109,020 $ 143,326 $ 145,800 $ 1,697 $ 1,254 10,027 37 14,746 42,136 7,641 8,202 $ 34,111 $ 51,629 For the Three Months Ended June 30 2018 2017 $ 2,181,795 $ 1,937,054 89,157 62,002 1,413 1,252 90,570 63,254		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 2017 $ 500 $ 4,189 1,987 2,682 $ 2,487 $ 6,871 For the Six Months Ended June 30
		2018 2017 $ 287,503 $ 295,442 76,610 102,892 $ 364,113 $ 398,334 $ 67,418 $ 73,751 220,085 221,691 $ 287,503 $ 295,492 $ 2,611 $ 2,498 26,918 67 31,787 84,498 15,294 15,829 $ 76,610 $ 102,892 For the Six Months Ended June 30
2018 $ 2,181,795 89,157 1,413 90,570	2018 $ 4,231,491 165,945 2,825 168,770		2017 $ 3,800,850 139,440 2,502 141,942 (Continued)

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Share-based payments Equity-settled Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended June 30 2018 2017 $ 83,747 $ 111,259 151,978 128,129 $ 2,508,090 $ 2,239,786 $ 537,490 $ 447,800 1,970,600 1,791,986 $ 2,508,090 $ 2,239,786		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 83,747 151,978 $ 2,508,090 $ 537,490 1,970,600 $ 2,508,090		2018 $ 182,766 297,609 $ 4,880,636 $ 1,030,208 3,850,428 $ 4,880,636	2017 $ 222,518 277,573 $ 4,442,883 $ 921,951 3,520,932 $ 4,442,883 (Concluded)

d. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation and remuneration of directors at the rates of no less than 5% and no higher than 1%, of net profit before income tax, employees’ compensation, and remuneration of directors. For the three months and six months ended June 30, 2018 and 2017, the employees’ compensation and the remuneration of directors and supervisors were as follows.

Employees’ compensation Remuneration of directors	For the Three Months Ended June 30 2018 2017 $ 68,250 $ 60,750 $ 2,650 $ 3,075	For the Three Months Ended June 30 2018 2017 $ 68,250 $ 60,750 $ 2,650 $ 3,075		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 68,250 $ 2,650		2018 $ 136,500 $ 5,300	2017 $ 121,500 $ 6,150

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

The appropriations of employees’ compensation and remuneration of directors for 2017 and 2016 having been resolved by the board of directors on March 2, 2018 and March 6, 2017, respectively, were as below:

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2017 Cash $ 273,000 10,600	2016
		Cash $ 243,000 12,300

There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2018 and 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

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e. Gains or losses on foreign currency exchange

Foreign exchange gains Foreign exchange losses	For the Three Months Ended June 30 2018 2017 $ 407,516 $ 259,268 (361,845) (151,716) $ 45,671 $ 107,552	For the Three Months Ended June 30 2018 2017 $ 407,516 $ 259,268 (361,845) (151,716) $ 45,671 $ 107,552		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 407,516 (361,845) $ 45,671		2018 $ 666,001 (623,086) $ 42,915	2017 $ 513,255 (608,147) $ (94,892)

25. INCOME TAXES

a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of current period Income tax on unappropriated earnings Adjustments for prior periods Deferred tax In respect of current period Change in tax rate Income tax expense recognized in loss	For the Three Months Ended June 30 2018 2017 $ 376,348 $ 371,824 31,746 36,556 (78,985) 329 56,449 8,296 48,333 - $ 433,891 $ 417,005	For the Three Months Ended June 30 2018 2017 $ 376,348 $ 371,824 31,746 36,556 (78,985) 329 56,449 8,296 48,333 - $ 433,891 $ 417,005		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 376,348 31,746 (78,985) 56,449 48,333 $ 433,891		2018 $ 738,604 31,746 (110,885) 61,090 86,890 $ 807,445	2017 $ 665,133 36,556 329 8,393 - $ 710,411

The Income Tax Act in the ROC was amended in 2018 and the corporate income tax rate was adjusted from 17% to 20% effective in 2018. The effect of the change in tax rate on deferred tax expense to be recognized in loss is $185,530 thousand, of which $98,640 thousand has not been recognized as of June 30, 2018. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

b. Income tax recognized in other comprehensive income

Deferred tax Change in tax rate In respect of current period Translation of foreign operations Income tax recognized in other comprehensive income	For the Three Months Ended June 30 2018 2017 $ (15,335) $ - 19,082 32,264 $ 3,747 $ 32,264	For the Three Months Ended June 30 2018 2017 $ (15,335) $ - 19,082 32,264 $ 3,747 $ 32,264		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ (15,335) 19,082 $ 3,747		2018 $ (18,879) 21,650 $ 2,771	2017 $ - (62,264) $ (62,264)

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c. Income tax assessments

The Company’s tax returns through 2014 have been assessed by the tax authorities.

26. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Three Months Ended June 30 2018 2017 $ 2.27 $ 2.47 $ 2.25 $ 2.46	For the Three Months Ended June 30 2018 2017 $ 2.27 $ 2.47 $ 2.25 $ 2.46	For the Six Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 2.27 $ 2.25		2018 $ 4.23 $ 4.18	2017 $ 4.20 $ 4.18

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Period

For the Three Months Ended June 30 For the Six Months Ended June 30 2018 2017 2018 2017 Earnings used in the computation of basic earnings per share $ 1,584,195 $ 1,723,635 $ 2,946,865 $ 2,928,675 Earnings used in the computation of diluted earnings per share $ 1,584,195 $ 1,723,635 $ 2,946,865 $ 2,928,675 Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares) For the Three Months Ended June 30 For the Six Months Ended June 30 2018 2017 2018 2017 Weighted average number of ordinary shares in computation of basic earnings per share 697,490 696,519 697,447 696,519 Effect of potentially dilutive ordinary shares: Employee share options 5,379 3,281 5,551 3,315 Employees’ compensation 340 478 1,536 828 Weighted average number of ordinary shares used in the computation of diluted earnings per share 703,209 700,278 704,534 700,662		For the Six Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
			2018 697,447 5,551 1,536 704,534	2017 696,519 3,315 828 700,662

If the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Group assumed the entire amount of the compensation or bonuses will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

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27. SHARE-BASED PAYMENT ARRANGEMENTS

Qualified employees of the Company and its subsidiaries were granted 6,500 options in 2016 and 5,000 options in 2014. Each option entitles the holder to subscribe for one thousand ordinary shares of the Company. The holders of these shares include employees whom meet certain criteria set by the Company, from both domestic and overseas subsidiaries in which the Company directly or indirectly invests over 50%. Options issued in 2016 and 2014 are both valid for six years. All are exercisable at certain percentages after the second anniversary year from the grant date. The exercise price of those granted in 2016 and 2014 was both NT$100 per share. For any subsequent changes in the Company’s capital surplus, the exercise price and the number of options will be adjusted accordingly.

Information on employee share options was as follows:

Balance at January 1 Options exercised Balance at June 30 Options exercisable, end of the period Weighted-average fair value of options granted (NT$)	For the Six Months Ended June 30	For the Six Months Ended June 30
	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 9,378 $ 95.15 (262) 84.20 9,116 - 2,616 84.20 $ -	2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 10,269 $ 100.00 (220) 95.10 10,049 - 3,549 95.10 $ -

The weighted-average share price at the date of exercise of share options for the six months ended June 30, 2018 and 2017 were from NT$204 to NT$226 and NT$240 to NT$266, respectively.

Information about outstanding options as of June 30, 2018 and 2017 was as follows:

Issuance in 2016 Issuance in 2014	For the Six Months Ended December 31	For the Six Months Ended December 31
	2018 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 88.5 3.95 84.2 2.13	2017
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 100.00 4.95 95.10 3.13

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Options granted were priced using the Black-Scholes model, and the inputs to the model were as follows:

	2016	2014
Grant-date share price (NT$)	$235	$239.5
Exercise price (NT$)	$100	$100
Expected volatility	31.42%-32.48%	28.28%-29.19%
Expected life (in years)	4-5.5	4-5.5
Expected dividends yield	0%	0%
Risk-free interest rate	0.52%-0.65%	1.07%-1.30%

Expected volatility was based on the historical share price volatility over the past 5 years.

Compensation cost recognized was $182,766 thousand and $222,518 thousand for the six months ended June 30, 2018 and 2017, respectively.

Qualified employees of LNC, a subsidiary of the Company, were granted 1,092 options in June 2017. Each option entitles the holder to subscribe for one thousand common shares of LNC. These option were valid for four years. All were exercisable at certain percentages after the first anniversary year from the grant date.

Information on employee share options was as follows:

Balance at January 1 Balance at June 30 Options exercisable, end of the period Weighted-average fair value of options granted (NT$)	For the Six Months Ended June 30, 2018
	Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 980 $ 20 980 20 - -

Information on outstanding options for the six months ended June 30, 2018 is as follows:

	2017
Exercise price (NT$)		$20
Weighted-average remaining contractual life (years)		3.17

Options granted by LNC were priced using the Black-Scholes model, and the inputs to the model were as follows:

	2017
Grant-date share price (NT$)	$16.11
Exercise price (NT$)	$20
Expected volatility	25.6-29.45%
Expected life (years)	2.5-4
Expected dividend yield	0%
Risk-free interest rate	0.64-0.74%

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28. BUSINESS COMBINATIONS

a. Subsidiaries acquired

			Proportion of
			Voting Equity
		Date of	Interests	Consideration
Subsidiary	Principal Activity	Acquisition	Acquired (%)	Transferred
Kostec Co., Ltd.	Production and sale of	January 20, 2017	60	$	120,592
(“AKST”)	intelligent medical
	display
Advantech Vietnam	Sales of industrial	June 6, 2018	60	$	76,092
Technology	automation products
Company Limited
(AVN)

The Group’s market strategy is to develop R&D technology of global medical displays. The Group acquired 60% of the share equity of Kostec Co., Ltd. (“AKST”) to expand its global intelligent medical market. The Group acquired 60% of the share of Advantech Vietnam Technology Company Limited (AVN) in order to expand industrial automation products sales in Vietnam market.

b. Consideration transferred

							AVN	AKST
Cash						$	76,092	$ 120,592
Contingent	consideration arrangement	(Notes	1	and	2)		-	30,420
						$	76,092	$ 151,012
						(US$ 2,551		(US$ 4,800
							thousand)	thousand)

1) The Group acquired 60% in AVN in the second quarter.
2) The Group acquired 60% equity in AKST with a partial payment of $102,517 thousand in the first quarter of the year ended December 31, 2017. Subsequently, after obtaining the audited financial statements of AKST for the year ended December 31, 2016, the Group made an additional payment of $18,075 thousand (US$600 thousand) for the full amount of the investment. In addition, the Group adjusted the goodwill based on the identifiable net assets and liabilities in AKST’s audited financial statements.
3) Under a contingent consideration arrangement, the Group is required to pay the seller an additional US$500 thousand in 2017 and 2018, respectively, if AKST’s revenue exceeds the agreed amount. Since the profits of AKST did not turn out as forecasted, the Group expects that there is no need to pay the contingent consideration.
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c. Assets acquired and liabilities assumed at the dates of acquisitions

Current assets Cash and cash equivalents Trade receivables Inventories Debt investments with no active market - current Other current assets Non-current assets Plant and equipment Intangible assets Deferred tax assets Other non-current assets Current liabilities Short-term borrowings Trade and other payables Current portion of long-term borrowings Other current liabilities Non-current liabilities Long-term borrowings Deferred tax liabilities	AVN $ 15,770 16,701 4,637 - 615 1,170 70 - 354 - (20,302) - (873) - - $ 18,142	AKST $ 1,745 20,426 30,457 54,324 2,877 84,672 9,921 4,207 926 (8,100) (26,748) (22,733) (1,646) (109,656) (2,665) $ 38,007

d. Non-controlling interests

The non-controlling interest (40% ownership interest in AVN and AKST) recognized at the acquisition date was measured by reference to the identifiable net assets of the non-controlling interest and amounted to $7,257 thousand and $15,203 thousand, respectively.

e. Goodwill recognized on acquisitions

Consideration transferred Less: Fair value of identifiable net assets acquired Goodwill recognized on acquisitions	AVN $ 76,092 (10,885) $ 65,207	AKST $ 120,592 (22,804) $ 97,788

The goodwill recognized in the acquisitions of ANV and AKST mainly represents the control premium included in the costs of the combinations. In addition, the consideration paid for the combination effectively included amounts attributed to the benefits of expected synergies, revenue growth, future market development and the assembled workforces of AVN and AKST. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

f. Net cash outflow on acquisitions of subsidiaries

Consideration paid in cash Less: Cash and cash equivalent balances acquired	AVN $ 76,092 (15,770) $ 60,322	AKST $ 120,592 (1,745) $ 118,847

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g. Impact of acquisitions on the results of the Group

The results of the acquirees since the acquisition dates included in the consolidated statements of comprehensive income were as follows:

Revenue Profit (Loss)		For the Six Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 AVN $ 21,019 $ 680		2017
				AKST $ 64,997 $ (31,391)

29. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

In the first quarter of 2018, the Group disposed 1.11% equity of LNC, which led the Group’s equity investment in the above subsidiary decreased from 81.17% to 80.06%.

In the first quarter of 2018, the Group acquired 49% of the equity of ATH, which led the Group’s equity investment in ATH increase from 51% to 100%.

The above transactions were accounted for as equity transactions, since the Group did not cease to have control over these subsidiaries.

Cash consideration received (paid) The proportionate share of the carrying amount of the net assets of the subsidiary transferred to (from) non-controlling interests Differences recognized from equity transactions Line items adjusted for equity transactions Capital surplus - difference between consideration received or paid and carrying amount of the subsidiaries’ net assets during actual disposal or acquisition		For the Six Months Ended June 30, 2018	For the Six Months Ended June 30, 2018	For the Six Months Ended June 30, 2018
		ATH $ (21,926) 22,701 $ 775 $ 775	LNC $ 3,391 (1,876) $ 1,515 $ 1,515	Total $ (18,535) 20,825 $ 2,290 $ 2,290

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30. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are measured at fair value on a recurring basis
1) Fair value hierarchy

June 30, 2018 Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other country Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Unlisted securities - ROC Unlisted shares in other country Financial liabilities at FVTPL Derivative financial liabilities December 31, 2017 Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Mutual funds Available-for-sale financial assets Equity securities Securities listed in ROC Unlisted securities - ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ - 199,735 10,285 4,942,393 $ 5,152,413 $ 1,670,425 - - $ 1,670,425 $ - Level 1 $ - 298,904 2,794,858 $ 3,093,762 $ 1,638,479 - 10,381 $ 1,648,860 $ -	Level 2 $ 10,992 - - - $ 10,992 $ - - - $ - $ 4,637 Level 2 $ 5,084 - - $ 5,084 $ - - - $ - $ 6,226	Level 3 $ - - - - $ - $ - 11,177 72,035 $ 83,212 $ - Level 3 $ - - - $ - $ - 11,375 - $ 11,375 $ -	Total $ 10,992 199,735 10,285 4,942,393 $ 5,163,405 $ 1,670,425 11,177 72,035 $ 1,753,637 $ 4,637 Total $ 5,084 298,904 2,794,858 $ 3,098,846 $ 1,638,479 11,375 10,381 $ 1,660,235 $ 6,226

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June 30, 2017

Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Equity securities Securities listed in ROC Unlisted securities - ROC Unlisted securities in other countries Mutual funds Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ - 115,296 $ 115,296 $ 2,136,112 - 7,899 4,832,726 $ 6,976,737 $ -	Level 2 $ 1,109 - $ 1,109 $ - - - - $ - $ 37,246	Level 3 $ - - $ - $ - 9,375 - - $ 9,375 $ -	Total $ 1,109 115,296 $ 116,405 $ 2,136,112 9,375 7,899 4,832,726 $ 6,986,112 $ 37,246

There were no transfers between Levels 1 and 2 in the current and prior periods.

2) Reconciliation of Level 3 fair value measurements of financial instruments

For the six months ended June 30, 2018

Financial assets Balance at January 1, 2018 Reclassification Recognized in other comprehensive income (included in unrealized loss on financial assets at FVTOCI) Balance at June 30, 2018	Financial Assets at Fair Value Through Other Comprehensive Income Equity Instruments $ - 89,893 (6,681) $ 83,212	Total $ - 89,893 (6,681) $ 83,212

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For the six months ended June 30, 2017

Financial assets Balance at January 1, 2017 Balance at June 30, 2017	Available-for- sale Financial Assets Equity Instruments $ 9,375 $ 9,375	Total $ 9,375
		$ 9,375

3) Valuation techniques and inputs applied for Level 2 fair value measurement

Derivatives held by the Group were foreign currency forward contracts, whose fair values were calculated using discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

4) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of unlisted equity securities - ROC were using income approach. In this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees.

b. Categories of financial instruments

			December	December	31,
	June 30, 2018			2017		June 30, 2017
Financial assets
Fair value through profit or loss (FVTPL)
Held for trading	$	-	$	303,988		$	116,405
Designated as at FVTPL		-		2,794,858			-
Mandatorily at FVTPL		5,163,405			-		-
Loans and receivables (Note 1)		-		13,184,303			11,157,578
Available-for-sale financial assets (Note 2)		-		1,738,753			7,053,402
Financial assets at amortized cost (Note 3)		13,872,280			-		-
Financial assets at FVTOCI
Equity instruments		1,753,637			-		-
Financial liabilities
Fair value through profit or loss (FVTPL)
Held for trading		-		6,226			37,246
Mandatorily at FVTPL		4,637			-		-
Financial assets at amortized cost (Note 4)		14,533,882		9,027,555			12,042,420

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market - current, notes receivable, trade receivables, trade receivables from related parties, other receivables, and other receivables from related parties.

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Note 2: The balances include the carrying amount of available-for-sale financial assets measured at cost.
Note 3: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, financial assets at amortized cost - current, notes receivable, trade receivables, trade receivables from related parties, other receivables, and other receivables from related parties.
Note 4: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable and trade payables, other payables, dividends payables, current portion of long-term borrowings and long-term borrowings.
c. Financial risk management objectives and policies

The Group’s major financial instruments included equity investments, trade receivables, trade payables, and borrowings. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, and liquidity risk.

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instrument, including derivative financial instruments, for speculative purposes.

The Corporate Treasury function reports quarterly to the board of directors on the Group’s current derivative instrument management.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk.

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Group undertook operating activities and investment of foreign operations denominated in foreign currencies, which exposed it to foreign currency risk. The Group manages the risk that fluctuations in foreign currency could have on foreign-currency denominated assets and future cash flow by entering into a variety of derivative financial instruments, which allow the Group to mitigate but not fully eliminate the effect.

The maturities of the Company’s forward contracts were less than six months. These forward exchange contracts did not meet the criteria for hedge accounting.

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The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) are set out in Note 33. As for the carrying amounts of derivatives exposing to foreign currency risk at the end of the reporting period, refer to Note 7.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar, Euro and Renminbi.

The following table details the Group’s sensitivity to a 5% increase in the New Taiwan dollars (i.e., the functional currency) against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign exchange forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 5% change in exchange rates. The range of the sensitivity analysis included cash and cash equivalents, trade receivables and trade payables. A positive number below indicates an increase in pre-tax profit associated with New Taiwan dollar weakening 5% against the relevant currency. For a 5% strengthening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit, and the balances below would be negative.

Profit or loss	U.S. Dollar Impact For the Six Months Ended June 30 2018 2017 $ 65,000 (Note 1) $ 44,648 (Note 1)	Euro Impact For the Six Months Ended June 30 2018 2017 $ 84,980 (Note 2) $ 20,519 (Note 2)	Renminbi Impact
			For the Six Months Ended June 30
			2018 2017 $ 65,050 (Note 3) $ 49,864 (Note 3)

Note 1: This was mainly attributable to the exposure outstanding on U.S. dollar-denominated cash, trade receivables, and trade payables, which were not hedged at the end of the reporting period.

Note 2: This was mainly attributable to the exposure outstanding on Euro-denominated cash, trade receivables, and trade payables, which were not hedged at the end of the reporting period.
Note 3: This was mainly attributable to the exposure outstanding on Renminbi-denominated cash, trade receivables and trade payables, which were not hedged at the end of the reporting period.
b) Interest rate risk

The Group’s floating-rate bank savings, fixed-term bank deposits and borrowings are exposed to risk of changes in interest rates. The Group does not operate hedging instruments for interest rates. The Group’s management monitors fluctuations in market interest rates regularly. If it is needed, the management might perform necessary procedures for significant interest rate risks to control the risks from fluctuations in market interest rates.

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The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

			December 31,	December 31,
	June 30, 2018			2017	June 30, 2017
Fair value interest rate risk
Financial assets	$	362,284	$	230,278	$	387,473
Financial liabilities		31,498		42,698		12,373
Cash flow interest rate risk
Financial assets		4,203,036		4,452,477		2,418,571
Financial liabilities		74,334		79,419		483,480

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50-basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher and all other variables were held constant, the Group’s pre-tax profit for the six months ended June 30, 2018 and 2017 would have increased by $10,322 thousand and $4,838 thousand, respectively. Had interest rates been 50 basis points lower, the effects on the Group’s pre-tax profit would have been of the same amounts but negative. The source of the negative effects would have been mainly the floating-interest rates on bank savings.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. The Group manages this exposure by maintaining a portfolio of investments with different risks. The Group’s equity price risk was mainly concentrated on equity instruments trading in the Taiwan Stock Exchange.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher, pre-tax profit for the six months ended June 30, 2018 would have increased by $2,100 thousand as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the six months ended June 30, 2018 would have increased by $17,536 thousand as a result of the changes in fair value of financial assets at FVTOCI. Had equity prices been 1% lower for the same period, the pre-tax profit and other comprehensive income would have decreased by the same respective amounts.

If equity prices had been 1% higher, pre-tax profits for the six months ended June 30, 2018 would have increased by $1,153 thousand as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the six months ended June 30, 2017 would have increased by $69,861 thousand as a result of the changes in fair value of available-for-sale investments. Had equity prices been 1% lower for the same period, the pre-tax profit and other comprehensive income would have decreased by the same respective amounts.

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The Group had the lower sensitivity toward equity prices mainly because it disposed the partial stocks in 2017.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation provided by the Group could arise from the carrying amount of the respective recognized financial assets, as stated in the balance sheets.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas and, thus, no concentration of credit risk was observed.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of June 30, 2018, December 31, 2017 and June 30, 2017, the Group had available unutilized short-term bank loan facilities set out in section (c) below.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

As of June 30, 2018, December 31, 2017 and June 30, 2017, the Group had available unutilized short-term, loan facilities set out in section (c) below.

a) Liquidity and interest risk rate tables for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on agreed repayment dates.

To the extent that interest flows are at floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

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June 30, 2018

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 10,231,249 Variable interest rate liabilities 179 Fixed interest rate liabilities 49 $ 10,231,477 December 31, 2017 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,683,438 Variable interest rate liabilities 192 Fixed interest rate liabilities 66 $ 6,683,696 June 30, 2017 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 5,514,253 Variable interest rate liabilities 778 Fixed interest rate liabilities 21 $ 5,515,052	1-3 Months $ 3,010,690 358 100 $ 3,011,148 1-3 Months $ 1,170,810 8,777 132 $ 1,179,719 1-3 Months $ 4,928,323 1,555 41 $ 4,929,919	Over 3 Months to 1 Year $ 1,186,111 9,709 17,540 $ 1,213,360 Over 3 Months to 1 Year $ 1,051,190 1,543 592 $ 1,053,325 Over 3 Months to 1 Year $ 1,103,991 376,905 186 $ 1,481,082	Over 1 Year $ - 79,627 14,582 $ 94,209 Over 1 Year- 5 Years $ - 86,001 43,280 $ 129,281 Over 1 Year $ - 126,632 12,807 $ 139,439

The amounts included above for variable interest rate instruments for non-derivative financial assets and liabilities were subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

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b) Liquidity and interest risk rate tables for derivative financial liabilities

The following tables detailed the Group’s liquidity analysis for its derivative financial instruments. The tables were based on the undiscounted contractual net cash inflows and outflows on derivative instruments that require gross settlement.

June 30, 2018

On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 362,426 Outflows 361,571 $ 855 December 31, 2017 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 264,246 Outflows 263,570 $ 676 June 30, 2017 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 471,229 Outflows 482,328 $ (11,099)	1-3 Months Over 3 Months to 1 Year $ 419,039 $ 171,768 413,457 171,850 $ 5,582 $ (82) 1-3 Months Over 3 Months to 1 Year $ 488,029 $ 281,423 489,905 281,365 $ (1,876) $ 58 1-3 Months Over 3 Months to 1 Year $ 495,844 $ 274,440 514,471 280,851 $ (18,627) $ (6,411)	Total $ 953,233 946,878 $ 6,355 Total $ 1,033,698 1,034,840 $ (1,142) Total $ 1,241,513 1,277,650 $ (36,137)

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c) Financing facilities

			December	December	31,
	June 30, 2018			2017		June 30, 2017
Unsecured bank overdraft facilities
reviewed annually and payable at
call:
Amount used	$	-	$		-	$	373,140
Amount unused		4,000,000		4,034,100			3,746,150
	$	4,000,000	$	4,034,100		$	4,119,290
Secured bank overdraft facilities:
Amount used	$	105,832	$	122,117		$	97,650

31. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Names and categories of related parties

Name Axiomtek Co., Ltd. AIMobile Co., Ltd. Deneng Scientific Research Co., Ltd. Jan Hsiang Electronics Co., Ltd. Winmate Inc. K&M Investment Co., Ltd. AIDC Investment Corp. Advantech Foundation Ke Chang Liu Li Ting Huang Oh Sung Kwon	Related Party Category
	Associate Associate Associate Associate Associate Other related party Other related party Other related party Other related party (chairman’s second immediate family) Other related party (spouse of chairman’s second immediate family) Other related party (key shareholder of subsidiary Kostec)

b. Sales of goods

Related Party Categories/Name Associates Purchases of goods Related Party Categories/Name Associates	For the Three Months Ended June 30 2018 2017 $ 36,550 $ 14,939 For the Three Months Ended June 30 2018 2017 $ 32,657 $ 15,262	For the Three Months Ended June 30 2018 2017 $ 36,550 $ 14,939 For the Three Months Ended June 30 2018 2017 $ 32,657 $ 15,262		For the Six Months Ended June 30	For the Six Months Ended June 30
				2018 2017 $ 57,447 $ 38,019 For the Six Months Ended June 30
		2018 $ 32,657		2018 $ 52,324	2017 $ 37,042

c. Purchases of goods
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d. Receivables from related parties (excluding loans to related parties)

	Related Party			December 31,	December 31,
Line Items	Categories/Name	June	30, 2018		2017	June	30, 2017
Trade receivables from	Associates	$	37,865	$	14,067	$	12,908
related parties

The outstanding trade receivables from related parties are unsecured. For the six months ended June 30, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

e. Other receivables from related parties

	Related Party		December	December	31,
Accounts	Categories/Name	June 30, 2018		2017		June	30, 2017
Other receivables from	Associates	$ 143,482	$		-	$	74,964
related parties

f. Payables to related parties (excluding loans from related parties)

	Related Party			December	December	31,
Line Items	Categories/Name	June	30, 2018		2017		June	30, 2017
Trade payables	Associates	$	39,236	$	19,499		$	6,983
Other payables	Other related parties	$	-	$		-	$	3,935

The outstanding trade payables to related parties are unsecured.

g. Disposal of property, plant and equipment

Proceeds Gain(Loss) on Disposal Related Party For the Three Months Ended June 30 For the Three Months Ended June 30 Categories/Name 2018 2017 2018 2017 Other related party $ - $ 74,397 $ - $ 66,531 Proceeds Gain (Loss) on Disposal Related Party For the Six Months Ended June 30 For the Six Months Ended June 30 Categories/Name 2018 2017 2018 2017 Other related party $ - $ 74,397 $ - $ 66,531 Loans from related parties Related Party Categories/Name June 30, 2018 December 31, 2018 June 30, 2017 Other related party (recorded under other payables) $ - $ - $ 2,700 The loans from the other related party were unsecured.	Gain(Loss) on Disposal	Gain(Loss) on Disposal
	For the Three Months Ended June 30
		2018 2017 $ - $ 66,531 Gain (Loss) on Disposal
		For the Six Months Ended June 30

h. Loans from related parties
63 -

i. Other transactions with related parties

Research and development expenses Associates	Operating Expenses	Operating Expenses	Operating Expenses	Operating Expenses	Operating Expenses
	For the Three Months Ended June 30 2018 2017 $ 684 $ 5,200			For the Six Months Ended June 30
		2018 $ 684		2018 $ 2,372	2017 $ 6,197

Research and development expenses formed between the Group and its associates were charged with agreed remuneration and payment terms on the contracts. For the rest of transactions with related parties, since normal payment terms with related parties were not stipulated, the payment terms were based on mutual agreement.

Rental income Other related parties Others Other related parties	Other Income	Other Income	Other Income	Other Income	Other Income
	For the Three Months Ended June 30 2018 2017 $ 15 $ 15 $ 675 $ 675			For the Six Months Ended June 30
		2018 $ 15 $ 675		2018 $ 30 $ 1,351	2017 $ 30 $ 1,351

Lease contracts formed between the Group and its associates were based on market rental prices and had normal payment terms. Revenue contracts for technical services formed between the Company and its associates were based on market prices and had payment terms on the contracts. For the rest of transactions with related parties, since normal payment terms with related parties were not stipulated, the payment terms were based on mutual agreement.

j. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Three Months Ended June 30 2018 2017 $ 11,793 $ 11,662 50 25 6,377 2,943 $ 18,220 $ 14,630	For the Three Months Ended June 30 2018 2017 $ 11,793 $ 11,662 50 25 6,377 2,943 $ 18,220 $ 14,630		For the Six Months Ended June 30	For the Six Months Ended June 30
		2018 $ 11,793 50 6,377 $ 18,220		2018 $ 23,587 100 13,764 $ 37,451	2017 $ 23,324 49 5,846 $ 29,219

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

64 -

32. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets of subsidiary AKST were provided as collateral for bank borrowings:

			December 31,	December 31,
	June	30, 2018		2017	June 30, 2017
Pledge deposits (recognized as financial assets
measured at cost)	$	28,912	$	29,982	$	34,290
Property, plant and equipment		67,068		69,552		67,068
	$	95,980	$	99,534	$	101,358

33. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

June 30, 2018

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 201,033 30.46 (USD:NTD) USD 23,169 6.6318 (USD:RMB) RMB 521,750 4.593 (RMB:NTD) EUR 43,666 35.40 (EUR:NTD) Financial liabilities Monetary items USD 142,170 30.46 (USD:NTD) USD 35,219 6.6318 (USD:RMB) RMB 287,149 4.593 (RMB:NTD) EUR 3,655 35.40 (EUR:NTD)	Carrying Amount $ 6,123,465 705,724 2,396,398 1,545,776 $ 10,771,363 $ 4,330,498 1,072,764 1,318,875 129,387 $ 6,851,524

65 -

December 31, 2017

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 204,045 29.760 (USD:NTD) RMB 370,046 4.5650 (RMB:NTD) EUR 32,336 35.570 (EUR:NTD) USD 18,340 6.5192 (USD:RMB) Financial liabilities Monetary items USD 120,900 29.760 (USD:NTD) RMB 190,006 4.5650 (RMB:NTD) USD 28,310 6.5192 (USD:RMB) June 30, 2017	Carrying Amount $ 6,072,379 1,689,260 1,150,192 545,801 $ 9,457,632 $ 3,597,984 867,377 842,512 $ 5,307,873

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 162,081 30.420 (USD:NTD) RMB 399,419 4.4860 (RMB:NTD) EUR 28,598 34.720 (EUR:NTD) USD 14,228 6.7811 (USD:RMB) Financial liabilities Monetary items USD 113,915 30.420 (USD:NTD) RMB 188,672 4.4860 (RMB:NTD) USD 26,806 6.7811 (USD:RMB)	Carrying Amount $ 4,930,504 1,791,794 992,923 432,814 $ 8,148,035 $ 3,465,294 846,383 815,438 $ 5,127,115

66 -

For the three months and six months ended June 30, 2018 and 2017, realized and unrealized net foreign exchange gains (losses) were $45,671 thousand and $107,552 thousand, $42,915 thousand and $(94,892) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

34. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and b. information on investees:
1) Financing provided to others. (Table 1)
2) Endorsement/guarantee provided. (Table 2)
3) Marketable securities held. (Table 3)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital. (Table 4)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in
- capital. (None)
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 5)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 6)
9) Transactions of financial instruments. (Notes 7 and 30)
10) Significant transactions between the Company and subsidiaries. (Table 10)
11) Name, locations, and other information of investees. (Table 7)
12) Organization chart. (Table 9)
c. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or losses, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 8)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses. (Tables 1, 5 and 6)
67 -

35. SEGMENT INFORMATION

Information reported to the chief operating decision maker (“CODM”) and for the assessment of segment performance, business analysis, and the resource deployment judgment. The Group’s segment information disclosed is as follows:

Industrial internet of thing services (IIoT): Focus on the market of industrial internet-of-things;
Embedded board and design-in services (EIoT): Provide services involving embedded boards, systems and peripheral hardware and software;
Allied design manufacture services (Allied DMS): Including Networks and Communications, data acquisition and control, and provide the customized collaboration designs and services;
Intelligent services (SIoT): Provide services involving digital logistic, digital healthcare and intelligent retail;
Global customer services (AGS & APS): Global repair, technical support and warranty services.

The CODM considers each service as separate operating segment. But for financial statements presentation purposes, these individual operating segments have been aggregated into a single operating segment, taking into account the following factors:

a. These operating segments have similar long-term gross profit margins; and
b. The nature of the products and production processes are similar.

Segment Revenue and Results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment:

For the six months ended June 30, 2018 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Central administration costs and directors’ salaries Other revenue Other income and expense Finance costs Share of profits of associates for using the equity method Profit before tax (continuing operations) For the six months ended June 30, 2017 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenues Segment income Central administration costs and directors’ salaries Other revenue Other income and expense Finance costs Share of profits of associates for using the equity method Profit before tax (continuing operations)	Industrial Interest of Thing Services (IIoT) $ 8,478,064 - $ 8,478,064 $ - - $ 1,927,614 $ 7,178,134 - $ 7,178,134 $ - - $ 1,573,535	Embedded Boards and Design-in Services (EIoT) $ 6,429,555 - $ 6,429,555 $ - - $ 1,047,648 $ 5,712,575 - $ 5,712,575 $ - - $ 955,434	Allied Design Manufacture Services (Allied DMS) $ 3,706,214 - $ 3,706,214 $ - - $ 526,674 $ 4,265,788 - $ 4,265,788 $ - - $ 681,445	Intelligent Services (SIoT) $ 2,155,581 - $ 2,155,581 $ - - $ 133,448 $ 1,519,394 - $ 1,519,394 $ - - $ (675)	Global Customer Services (AGS&APS) $ 3,135,943 - $ 3,135,943 $ - - $ 345,255 $ 2,679,431 - $ 2,679,431 $ - - $ 338,039	Others $ 95,282 - $ 95,282 $ - - $ 112 $ 57,025 - $ 57,025 $ - - $ (47)	Total $ 24,000,639 - 24,000,639 - 24,000,639 3,980,751 (396,707 ) 72,232 68,377 (2,487 ) 47,856 $ 3,770,022 $ 21,412,347 - 21,412,347 - 21,412,347 3,547,731 (291,299 ) 54,739 143,883 (6,871 ) 190,313 $ 3,638,496

68 -

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ and supervisor’s salaries, share of profits of associates, gain recognized on the disposal of interest in former associates, rental revenue, interest income, gain or loss on disposal of property, plant and equipment, gain or loss on disposal of financial instruments, exchange gain or loss, valuation gain or loss on financial instruments, finance costs and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

69 -

TABLE 1

ADVANTECH CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note A)	Lender	Borrower	Financial Statement Account	Related Parties	Credit Line (Note D)	Credit Line (Note D)	Actual Borrowing	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limits
					Highest Balance for the Period	Ending Balance	Ending Balance						Item	Value
1	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	$ 17,184 (CZK 12,000 thousand )	$ 16,440 (CZK 12,000 thousand )	$ 16,440 (CZK 12,000 thousand )	2	Short-term financing	$ -	Financing need	$ -	None	None	$ 25,623 (Note C)	$ 51,246 (Note C)
2	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	5,728 (CZK 4,000 thousand )	5,480 (CZK 4,000 thousand )	-	2	Short-term financing	-	Financing need	-	None	None	25,623 (Note C)	51,246 (Note C)
3	LNC	Advantech LNC Dong Guan	Trade receivables - related parties	Yes	30,000	30,000	16,332	-	Short-term financing	-	Financing need	-	None	None	32,500 (Note D)	130,000 (Note D)

Note A: Investee companies are numbered sequentially from 1.

Note B: The exchange rates as of June 30, 2018 were CZK1=NT$1.37.

Note C: The financing limit for each borrower and for the aggregate financing were 10% and 20%, respectively, of the B+B (CZ)’s net asset values.

Note D: The financing limit for each borrower and for the aggregate financing were 10% and 40%, respectively, of the LNC’s net asset values.

Note E: The maximum balance for the year and ending balance are approved by the board of directors of financiers.

Note F: All intercompany financing has been eliminated from consolidation.

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TABLE 2

ADVANTECH CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/ Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note A)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Maximum Collateral/ Guarantee Amounts Allowable (Note B)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
0	The Company	ANA B+B B+B (CZ) AKST AVN AKMC Advanixs Corp. Cermate AiST AdvanPOS	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495	$ 913,800 (US$ 30,000 thousand) 303,077 (US$ 9,950 thousand) 1,523 (US$ 50 thousand) 121,840 (US$ 4,000 thousand) 30,460 (US$ 1,000 thousand) 182,760 (US$ 6,000 thousand) 48,736 (US$ 1,600 thousand) 30,460 (US$ 1,000 thousand) 4,569 (US$ 150 thousand) 30,460 (US$ 1,000 thousand)	$ 913,800 (US$ 30,000 thousand) 303,077 (US$ 9,950 thousand) 1,523 (US$ 50 thousand) 121,840 (US$ 4,000 thousand) 30,460 (US$ 1,000 thousand) 182,760 (US$ 6,000 thousand) 48,736 (US$ 1,600 thousand) 30,460 (US$ 1,000 thousand) 4,569 (US$ 150 thousand) 30,460 (US$ 1,000 thousand)	$ - - - - - - - - - -	$ - - - - - - - - - -	3.48 1.15 0.01 0.46 0.12 0.70 0.19 0.12 0.02 0.12	$ 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485	Y Y Y Y Y Y Y Y Y Y	N N N N N N N N N N	N N N N N Y N N N N

(Continued)

71 -

No.	Endorser/ Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note A)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Maximum Collateral/ Guarantee Amounts Allowable (Note B)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
		A-DLoG ABR AAU AKR Shenzhen Cermate Technologies Inc.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,628,495 2,628,495 2,628,495 2,628,495 2,628,495	$ 36,240 (EUR 1,000 thousand) 45,690 (US$ 1,500 thousand) 6,092 (US$ 200 thousand) 1,523 (US$ 50 thousand) 16,573 (US$ 550 thousand)	$ 35,400 (EUR 1,000 thousand) 45,690 (US$ 1,500 thousand) 6,092 (US$ 200 thousand) 1,523 (US$ 50 thousand) 16,573 (US$ 550 thousand)	- - - - -	- - - - -	0.14 0.17 0.02 0.01 0.06	$ 7,885,485 7,885,485 7,885,485 7,885,485 7,885,485	Y Y Y Y Y	N N N N N	N N N N Y

Note A: The limit on endorsements or guarantees provided on behalf of the respective party is 10% of the Company’s net asset value.

Note B: The maximum collateral or guarantee amount allowable is 30% of the Company’s net asset value.

Note C: The exchange rates as of June 30, 2018 were US$1= NT$30.46 and EUR1= NT$35.40.

Note D: The latest net equity is from the financial statements for the six months ended June 30, 2018.

(Concluded)

72 -

TABLE 3

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities (Note E)	Relationship with the Holding Company	Financial Statement Account		June 30, 2018	June 30, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
The Company Advantech Corporate Investment Advanixs Corporate AiST	Share ASUSTek Computer Inc. Allied Circuit Co., Ltd. Fund Mega Diamond Money Market Capital Money Market FSITC Money Market Share HwaCom System Inc. Phison Electronics Corporation Contec Allied Circuit Co., Ltd. BroadTec System Inc. BiosenseTek Corp. Juguar Technology Taiwan DSC PV Ltd. Fund Mega Diamond Money Market Fund Jih Sun Money Market Mega Diamond Money Market Fund Jih Sun Money Market	- - - - - - - - - - - - - - - - -	Financial assets at fair value through other comprehensive income or loss - non-current `〃` Financial assets at fair value through profit or loss - current `〃` `〃` Financial assets at fair value through profit or loss - current `〃` `〃` Financial assets at fair value through other comprehensive income or loss - non-current `〃` `〃` `〃` `〃` Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current `〃` Financial assets at fair value through profit or loss - current	$ 4,739,461 1,200,000 171,461,298 67,803,297 5,296,441 1,337,000 750,000 15,500 2,501,000 182,700 37,500 500,000 160,000 34,768,280 1,212,495 9,604,919 1,243,566	$ 1,319,940 113,640 2,142,186 1,089,843 941,374 18,985 180,750 10,285 236,845 4,797 173 5,824 383 434,384 17,896 120,002 18,354	0.64 2.41 - - 1.29 0.38 0.23 5.03 7.50 1.79 16.67 3.20 - - - -	$ 1,319,940 113,640 2,142,186 1,089,843 941,374 18,985 180,750 10,285 236,845 4,797 173 5,824 383 434,384 17,896 120,002 18,354	Note 1 Note 1 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 Note 1 - - - - Note 2 Note 2 Note 2 Note 2
								(Continued)

73 -

Holding Company Name	Type and Name of Marketable Securities (Note E)	Relationship with the Holding Company	Financial Statement Account		June 30, 2018	June 30, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
AdvanPOS Advantech Innovative Design Co., Ltd. Cermate SIOT AiSC Huan Yan, Jhih-Lian Co., Ltd. Yun Yan, Wu-Lian Co., Ltd.	Fund Mega Diamond Money Market Fund Capital Money Market Fund Mega Diamond Money Market Fund FSITC Money Market Fund Shanghai Shangchuang Xinwei Investment Management Co., Ltd. Jama Pro Co., Ltd. Fund FSITC Money Market Fund FSITC Money Market	- - - - - - - -	Financial assets at fair value through profit or loss - current `〃` `〃` `〃` Financial assets at fair value through other comprehensive income or loss `〃` Financial assets at fair value through profit or loss - current `〃`	1,331,885 631,721 2,647,312 557,401 - 583,300 54,616 54,616	$ 16,640 10,154 33,075 99,071 68,895 3,140 9,707 9,707	- - - - 6.96 10.00 - -	$ 16,640 10,154 33,075 99,071 68,895 3,140 9,707 9,707	Note 2 Note 2 Note 2 Note 2 Note 3 Note 3 Note 2 Note 2

Note A: Market value was based on the closing price on June 30, 2018

Note B: Market value was based on the net asset values of the open-ended mutual funds on June 30, 2018.

Note C: The fair values are estimated from the latest net equity from the financial statements.

Note D: Securities comprise shares, beneficiary certificates, and securities derived from the shares and beneficiary certificates under IFRS 9 “Financial Instruments”.

(Concluded)

74 -

TABLE 4

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Shares	Amount (Cost)	Shares	Amount	Shares	Amount	Carrying Amount	Gain (Loss) on Disposal	Shares	Amount (Cost)
The Company Advantech Corporate Investment Advanixs Corporate	Fund Mega Diamond Money Market Capital Money Market FSITC Money Market Fund FSITC Money Market Share AzureWave Technologies, Inc. Fund Jih sun Money Market	Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Investments accounted for using the equity method Financial assets at fair value through profit or loss - current	- - - - - -	- - - - Associate -	28,879,553 - 1,578,638 2,926,124 5,492,000 40,686,999	$ 360,000 - 280,000 519,001 90,439 599,197	142,581,745 67,803,297 4,675,443 112,606 22,318,000 7,224,680	$ 1,780,000 1,089,000 830,000 20,000 454,190 106,501	- - 957,640 3,038,730 - 46,699,184	$ - - 170,000 539,603 - 689,000	$ - - 169,895 539,001 - 687,839	$ - - 105 602 - 1,161	171,461,298 67,803,297 5,296,441 - 27,810,000 1,212,495	$ 2,140,000 1,089,000 940,105 - 544,629 17,859

75 -

TABLE 5

ADVANTECH CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details		Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
The Company AKMC AAU AEU AJP ACN AKR ANA ASG Advanixs Corp. A-DLoG AKMC LNC	AAU AEU AJP ACN AKR ANA ASG Advanixs Corp. A-DLoG AKMC The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company ACN Advantech LNC Dong Duan Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Related enterprise Subsidiary	Sale Sale Sale Sale Sale Sale Sale Sale Sale Purchase Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale	$ (113,172) (2,545,776) (397,038) (3,673,030) (473,448) (4,554,937) (130,059) (441,739) (375,711) 6,152,522 (6,152,522) 113,172 2,545,776 397,038 3,673,030 473,448 4,554,937 130,059 441,739 375,711 (259,747) (142,854)	(0.64) (14.45) (2.25) (20.85) (2.69) (25.86) (0.74) (2.51) (2.13) 49.73 94.55 90.34 78.56 90.65 76.57 59.97 90.84 80.34 98.82 72.67 3.99 61.36	60-90 days 30 days after month-end 60-90 days 45 days after month-end 60 days after invoice date 45 days after month-end 60-90 days 60-90 days 30 days after invoice date Usual trade terms Usual trade terms 60-90 days 30 days after month-end 60-90 days 45 days after month-end 60 days after invoice date 45 days after month-end 60-90 days 60-90 days 30 days after invoice date Usual trade terms Usual trade terms	Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price Contract price	No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties	$ 37,328 1,645,391 113,961 1,537,404 105,444 1,583,644 55,849 184,385 301,188 (1,968,478) 1,968,478 (37,328) (1,645,391) (113,961) (1,537,404) (105,444) (1,583,644) (55,849) (185,885) (301,188) 70,083 216,377	0.45 19.95 1.38 18.64 1.28 19.20 0.68 2.24 3.65 30.81 95.42 92.73 82.41 87.03 82.46 55.53 91.00 76.30 99.25 100.00 3.40 88.68	Note A

(Continued)

76 -

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details		Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
B+B (CZ) ACN Advantech LNC Dong Duan Co., Ltd. AEU	AEU AKMC LNC B+B (CZ)	Related enterprise Related enterprise Parent company Related enterprise	Sale Purchase Purchase Purchase	$ (114,872) 259,747 142,854 114,872	56.51 5.41 69.09 4.29	Usual trade terms Usual trade terms Usual trade terms Usual trade terms	Contract price Contract price Contract price Contract price	No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties No significant difference in terms for related parties	$ 39,493 (70,083) (216,377) (39,493)	100.00 3.76 91.81 2.30

Note A: Unrealized gain for the period was $11,529 thousand.

Note B: All intercompany gains and losses from investment have been eliminated from consolidation.

(Concluded)

77 -

TABLE 6

ADVANTECH CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance (Note A)	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
The Company LNC AKMC	ANA AEU ACN AKMC A-DLoG AJP AKR Advanixs Corp. Advantech LNC Dong Guan The Company	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company	$ 1,583,644 1,645,391 1,537,404 610,524 301,188 113,961 105,444 184,399 216,377 1,968,478	5.72 3.38 5.87 Note B 4.31 5.96 10.49 5.44 1.43 7.35	$ - - - - - - - - - -	- - - - - - - - - -	$ - 350,511 496,043 555,039 - - - 82,281 25,519 400,599	$ - - - - - - - -

Note A: All intercompany gains and losses from investment have been eliminated from consolidation.

Note B: Sales revenue on materials delivered to subcontractors have been eliminated from consolidation.

78 -

TABLE 7

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars/Foreign Currency, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of June 30, 2018	Balance as of June 30, 2018	Balance as of June 30, 2018	Net Income (Loss) of the Investee	Investment Gain (Loss) (Note A)	Note
				June 30, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Value
The Company AKR Advantech Corporate Investment ATC	AAC (BVI) ATC Advanixs Corporate Advantech Corporate Investment Axiomtek AdvanPOS LNC Jan Hsiang AMX AEUH ASG ATH AAU AJP AMY AKR ABR Advantech Innovative Design Co., Ltd. AiST BEMC AIN AIMobile Co., Ltd. AKST Winmate AVN Nippon RAD Inc. AKST Cermate Deneng CDIB Innovation Accelerator Co., Ltd. AzureWave Technologies, Inc. Huan Yan, Jhih-Lian Co., Ltd. Yun Yan, Wu-Lian Co., Ltd. Nippon RAD Inc. iLink Co., Ltd. ATC (HK)	BVI BVI Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taichung, Taiwan Taipei, Taiwan Mexico Helmond, the Netherlands Techplace, Singapore Thailand Sydney, Australia Tokyo, Japan Malaysia Seoul, Korea Sao Paulo, Brazil Taipei, Taiwan Taipei, Taiwan Delaware, USA India Taipei, Taiwan Gangwon-do, Korea Taipei, Taiwan Hanoi, Vietnam Tokyo, Japan Gangwon-do, Korea Taipei, Taiwan Taichung, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Tokyo, Japan Taichung Hong Kong	Investment and management service Sale of industrial automation products Production and sale of industrial automation products Investment holding company Production and sale of industrial automation products Production and sale of POS system Production and sale of machines with computerized numerical control Electronic parts and components manufacturing Sale of industrial automation products Investment and management service Sale of industrial automation products Production of computers 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 Product design Design, develop and sale of intelligent services Sale of industrial network communications systems Sale of industrial automation products Design and manufacture of industrial mobile systems Production and sale of intelligent medical display Embedded System Modules Sale of industrial automation products R&D of IoT intelligent system Production and sale of intelligent medical display Manufacturing of electronic parts, computer, and peripheral devices Installment and sale of electronic components and software Investment holding company Wireless communication and digital image module manufacturing and trading Service plan for combination of related technologies of water treatment and applications of Internet of Things Industrial equipment Networking in Greater China R&D of IoT intelligent system Intelligent medical intergration Investment and management service	$ 1,000,207 998,788 226,000 1,400,000 249,059 266,192 428,244 3,719 4,922 1,219,124 27,134 47,701 40,600 15,472 35,140 73,355 43,216 10,000 81,838 1,968,044 19,754 135,000 83,313 540,000 76,092 251,915 55,579 71,500 18,095 75,000 544,629 5,000 5,000 45,732 10,067 1,212,730	$ 1,000,207 998,788 486,000 1,400,000 249,059 460,572 431,634 3,719 4,922 1,219,124 27,134 - 40,600 15,472 35,140 73,355 43,216 10,000 157,915 1,968,044 19,754 135,000 83,313 540,000 - - 55,579 71,500 18,095 75,000 - - - - - 1,212,730	29,623,834 33,850,000 36,000,000 150,000,000 20,537,984 1,000,000 24,350,000 655,500 - 25,961,250 1,450,000 51,000 500,204 1,200 2,000,000 600,000 1,794,996 1,000,000 10,000,000 6 3,999,999 13,500,000 17,280 12,000,000 8,100 850,000 11,520 5,500,000 658,000 7,500,000 27,810,000 500,000 500,000 154,310 1,000,000 57,890,679	100.00 100.00 100.00 100.00 25.86 100.00 80.60 28.50 100.00 100.00 100.00 51.00 100.00 100.00 100.00 100.00 80.00 100.00 100.00 60.00 99.99 45.00 36.00 16.62 60.00 16.08 24.00 55.00 39.69 17.86 18.42 50.00 50.00 2.92 25.00 100.00	$ 4,324,779 3,743,840 196,397 1,723,930 563,971 296,182 499,128 10,742 232 807,584 94,559 48,420 45,468 289,413 68,519 277,624 58,421 10,064 96,704 1,946,385 14,154 77,878 - 523,160 75,232 251,915 - 133,304 14,438 72,501 538,289 4,971 4,973 45,732 10,067 3,784,803	$ 98,590 239,810 23,255 43,490 193,039 (1,321) 16,056 996 645 (8,480) 6,543 4,140 198 11,181 15,994 59,926 2,410 22 977 42,168 3,443 (13,916) (12,529) 69,091 680 - (12,529) 20,560 (2,567) (10,152) (66,301) (58) (54) - - 271,271	$ 98,121 234,249 63,117 43,491 49,907 (219) 12,954 295 645 (8,572) 6,543 1,359 198 11,181 15,994 59,926 1,928 22 977 23,580 3,443 (6,262) - 13,088 53 - - 11,309 (1,019) (1,813) (6,340) (29) (27) - - 265,710	Subsidiary Subsidiary Subsidiary Subsidiary Equity-meth investee Subsidiary Subsidiary Equity-meth investee Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Equity-meth investee Subsidiary Equity-meth investee Subsidiary Equity-meth investee Subsidiary Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee Subsidiary Subsidiary Equity-meth investee Equity-meth investee Subsidiary

(Continued)

79 -

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of June 30, 2018	Balance as of June 30, 2018	Balance as of June 30, 2018	Net Income (Loss) of the Investee	Investment Gain (Loss) (Note A)	Note
				June 30, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Value
AAC (BVI) ANA AEUH AEU ASG Cermate LNC Better Auto BEMC Avtek B+B BBI B&B Electronics B+B (CZ)	ANA AAC (HK) SIoT (Cayman) BEMC AEU APL A-DLoG ATH AID LandMark Better Auto Famous Now Avtek B+B BBI Quatech IMC B&B Electronics B+B (CZ) Conel Automation B&B DMCC B+B (CZ) Conel Automation	Sunnyvale, USA Hong Kong Cayman Delaware, USA Eindhoven, The Netherlands Warsaw, Poland Munich, Germany Thailand Indonesia BVI BVI BVI Delaware, USA Delaware, USA Ireland Delaware, USA Delaware, USA Delaware, USA Czech Republic Czech Republic Dubai Czech Republic Czech Republic	Sale and fabrication of industrial automation products Investment and management service Design, development and sale of IoT intelligent system services Sale of industrial network communications systems Sale of industrial automation products Sale of industrial automation products Design, R&D and sale of industrial automation vehicles and related products Production of computers Sale of industrial automation products General investment General investment General investment Sale of industrial network communications systems Sale of industrial network communications systems Sale of industrial network communications systems Sale of industrial network communications systems Sale of industrial network communications systems Sale of industrial network communications systems Manufacturing automation Sale of industrial network communications systems Sale of industrial network communications systems Manufacturing automation Sale of industrial network communications systems	$ 504,179 539,146 165,520 1,328,004 431,963 14,176 553,536 7,537 4,797 28,200 244,615 US$ 4,000 US$ 99,850 US$ 99,850 US$ 39,481 - - US$ 1,314 - - - - -	$ 504,179 539,146 - 1,328,004 431,963 14,176 553,536 7,537 4,797 28,200 244,615 US$ 4,000 US$ 99,850 US$ 99,850 US$ 39,481 - - US$ 1,314 - - - - -	10,952,606 15,230,001 - 4 32,315,215 6,350 1 49,000 300,000 972,284 8,556,096 1 - 384,111 - - - - - - - - -	100.00 100.00 100.00 40.00 100.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 1.00 100.00 0.01 99.00	$ 2,595,951 1,804,229 169,935 1,315,544 934,807 29,720 513,842 47,945 6,556 111,478 45,795 39,562 3,261,929 3,261,929 109,239 - - - 256,241 (24) 2 - (2,412)	$ 112,531 (10,911) (1,795) 42,168 (11,401) 3,325 42,173 4,140 1,527 16,220 (3,053) (3,062) 42,168 42,168 (2,033) - - - 27,195 (9,526) 68 - (9,526)	$ 112,843 (11,691) (2,575) 16,867 (11,492) 3,325 42,081 2,068 1,527 15,826 (3,055) (3,062) 40,447 40,447 (2,033) - - - 27,195 (95) 68.00 - (9,431)	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Note A: The financial statements used as basis of net asset values had not been reviewed by independent CPAs, except those of AAC (BVI), AAC (HK), ANA, ATC, ATC (HK), AKMC, AEUH, AEU, and B+B.

Note B: All intercompany gains and losses from investment have been eliminated from consolidation

Note C: Refer to Table 8 for investments in mainland China.

(Concluded)

80 -

TABLE 8

ADVANTECH CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type (e.g., Direct or Indirect)	Accumulated Outflow of Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of June 30, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of June 30, 2018	Accumulated Inward Remittance of Earnings as of June 30, 2018
					Outflow	Inflow
Advantech Technology (China) Company Ltd. (“AKMC”) Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd. (“ACN”) Shanghai Advantech Intelligent Services Co., Ltd. (“AiSC”) Xi’an Advantech Software Ltd. (“AXA”) Hangzhou Advantofine Automation Tech. Co., Ltd. Advanixs Kun Shan Corp. Advantech LNC Dong Guan Co., Ltd. Shenzhen Cermate Technologies Inc.	Production and sale of components of industrial automation products Sale of industrial automation products Production and sale of industrial automation products Development and production of software products Processing and sale of industrial automation products Production and sale of industrial automation products Production and sale of industrial automation products Production and sale of Human Machine Interface	US$ 43,750 thousand (Note F) US$ 4,230 thousand US$ 8,000 thousand US$ 1,000 thousand RMB 3,000 thousand RMB 99,515 thousand US$ 4,000 thousand RMB 2,000 thousand	Indirect Indirect Indirect Indirect Indirect Indirect Indirect Indirect	$ 1,136,158 (US$ 37,300 thousand) 162,413 (US$ 5,332 thousand) 243,680 (US$ 8,000 thousand) (Note C) (Note D) (Note G) 97,289 (US$ 3,194 thousand) 9,382 (US$ 308 thousand)	$ - - - - - - - -	$ - - - - - - - -	$ 1,136,158 (US$ 37,300 thousand) 162,413 (US$ 5,332 thousand) 243,680 (US$ 8,000 thousand) (Note C) (Note D) (Note G) 97,289 (US$ 3,194 thousand) 9,382 (US$ 308 thousand)	$ 276,373 9,652 (27,351) (741) (325) - (3,062) 15,976	100 100 100 100 100 100 100 90	$ 270,812 8,933 (27,412) (741) (325) - (3,060) 14,345	$ 3,784,804 1,107,015 671,818 30,263 - - 39,720 81,502	$ - 342,126 (US$ 11,232 thousand) - - - - - 29,845 (US$ 717 thousand) (RMB 1,743 thousand)

(Continued)

81 -

Investee Company Name	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type (e.g., Direct or Indirect)	Investment Type (e.g., Direct or Indirect)	Accumulated Outflow of Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of June 30, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of June 30, 2018	Accumulated Inward Remittance of Earnings as of June 30, 2018
							Outflow	Inflow
Cermate Technologies (Shanghai) Inc. Advantech Service-IoT (Shanghai) Co., Ltd.	sale of Human Machine Interface Development, consulting and services in intelligent technology		US$ 5,200 thousand RMB 15,000 thousand	Indirect Indirect		$ 17,423 (US$ 572 thousand) -	$ - -	$ - -	$ 17,423 (US$ 572 thousand) -	$ 1,841 -	100 99	$ 1,841 -	$ 30,210 -	$ - -

Accumulated Investment i	n	Investment Amounts
Mainland China as of June 30, 2018		Authorized by Investment Commission, MOEA			Allowable Limit on Investment
$1,672,437 (US$54,906 thousand) (Note E)		$2,878,226 (US$94,492 thousand)			$15,885,101 (Note H)

Note A: The financial statements used as basis of net asset values had been reviewed by independent CPAs, except these of AAC (BVI), AAC (HK), ANA, ATC, ATC (HK), AKMC, AEUH, AEU, and B+B.

Note B: The significant events, prices, payment terms and unrealized gains or losses generated on trading between the Company and its investees in Mainland China are described in Table 6.

Note C: Remittance by ACN.

Note D: In the first quarter of 2018, Hangzhou Advantofine Automation Co., Ltd. was in the process of liquidation.

Note E: Included is the outflow of US$200 thousand on the investment in Yan Hua (Guang Zhou Bao Shui Qu) Co., Ltd. located in a free trade zone in Guang Zhou. When this investee was liquidated in September 2005, the outward investment remittance ceased upon the approval of the Ministry of Economic Affairs (MOEA). For each future capital return, the Company will apply to the MOEA for the approval of the return as well as reduce the accumulated investment amount by the return amount.

Note F: For AKMC, there was a capital increase of US$6,450 thousand out of earnings.

Note G: The exchange rate was US$1=NT$30.46 and RMB1=NT$4.593.

Note H: The maximum allowable limit on investment was at 60% of the consolidated net asset value of the Company.

Note I: All intercompany gains and losses from investment have been eliminated from consolidation.

(Concluded)

82 -

TABLE 9

ADVANTECH CO., LTD. AND SUBSIDIARIES

ORGANIZATION CHART JUNE 30, 2018 AND 2017

Intercompany relationships and percentages of ownership as of June 30, 2018 are shown below:

==> picture [488 x 565] intentionally omitted <==

----- Start of picture text -----

100% 100% HK Advantech Technology Co., Ltd. 100% Advantech Technology (China)
Advantech Technology Co., Ltd. (“ATC”) ATC (HK) Company Ltd. (“AKMC”)
80% Advantech Brasil Ltd (“ABR”) Avtek Corporation (“Avtek”)
100% 100%
60% BEMC Holdings Corporation (“BEMC”) B+B SmartWorx Inc. (“B+B”) 1% Conel Automation s.r.o.
100% B&B IMC. LLC (“IMC”) CZ (“Conel Automation”)
40% 100% 99.99% 99%
Quatech, LLC (“Quatech”) Advantech B+B SmartWorx
s.r.o. CZ (“B+B (CZ)”)
100%
B+B SmartWorx Limited (“BBI”) 100% 0.01%
100% B&B Electronics Holdings LLC
Advantech Automation Corp. (BVI) 100% Advantech Corp. (“ANA”) (“B&B Electronics”)
(“AAC (BVI”)) 100%
B&B SmartWorx DMCC
100% 100% Beijing Yan Hua Xing Ye Electronic (“B&B DMCC”)
100%
Advantech Automation Corp. (HK) Science & Technology Co., Ltd. (“ACN”) Xi’an Advantech Software Ltd.
Limited (“AAC (HK)”) 100% (“AXA”)
Shanghai Advantech Intelligent Services
Co., Ltd. (“AiSC”) 99% Advantech Service-IoT
100%
Advantech Service IoT Holding Ltd. (Shanghai) Co., Ltd.
Advantech 100% Advantech Electronics, S. De R.L. De C.V. (“SIoT Cayman”) (“SIoT China”)
Co., Ltd. (“AMX”) 100% Advantech Europe B.V. (“AEU”) 100% DLOG Gesellschaft für
(the 100% elektronische Datentechnik mbH
Company) Advantech Europe Holding B.V. (“AEUH”) 100% (“A-DLoG”)
100% Advantech Poland Sp z o.o. (“APL”)
Advantech Innovative Design Co., Ltd. 50%
Huan Yan, Jhih-Lian Co., Ltd.
100%
Advantech Intelligent Service (“AiST”) 50%
Yun Yan, Wu-Lian Co., Ltd.
100%
Advantech Corporate Investment 55% Cermate Technologies Inc. (“Cermate”) Landmark Co., Ltd.
36% (“Landmark”)
Kostec Co., Ltd. 100%
24%
(“AKST”) Kostec Co., Ltd.
(“AKST”)
100%
Advantech KR Co., Ltd. (“AKR”) 90% Shenzhen Cermate
49% Advantech Corporation (Thailand) Technologies Inc.
100% Co., Ltd. (“ATH”) (“Cermate (Shenzhen)”)
Advantech Co., Singapore Pte, Ltd.
(“ASG”) 100% 100%
Advantech International, PT. (“AID”) Cermate Technologies
100% (Shanghai) Inc.
Advantech Japan Co., Ltd. (“AJP”)
(“Cermate (Shanghai)”)
100%
Advantech Australia Pty Ltd. (“AAU”)
100%
Advanixs Corp.
100% Advantech Co. Malaysia Sdn. Bhd
(“AMY”)
99.99% Advantech Industrial Computing India
Private Limited (“AIN”)
100%
AdvanPOS Technology Co., Ltd.
(“AdvanPOS”)
80.06% 100% 100%
LNC Technology Co., Ltd. (“LNC”) Better Auto Holdings Limited Famous Now Limited
(“Better Auto”) (“Famous Now”)
51%
Advantech Corporation (Thailand) Co., Ltd. 100%
(“ATH”)
Advantech LNC Dong Guan Co., Ltd
60%
Advantech Vietnam Technology Company
Limited (“AVN”)
----- End of picture text -----

(Continued)

83 -

Intercompany relationships and percentages of ownership as of June 30, 2017 are shown below:

==> picture [487 x 562] intentionally omitted <==

----- Start of picture text -----

100% 100% HK Advantech Technology Co., Ltd. 100% Advantech Technology (China)
Advantech Technology Co., Ltd. (ATC)
ATC (HK) Company Ltd. (AKMC)
80% Advantech Brasil Ltd (ABR) Avtek Corporation (Avtek) 100% Advanixs Kun Shan Corp.
100% 100% (formerly Yeh-Chiang
60% Technology Kun Shan Co., Ltd.)
BEMC Holdings Corporation (BEMC) B+B SmartWorx Inc. (B+B) 1% Conel Automation s.r.o.
100% B&B IMC. LLC (IMC) CZ (Conel Automation)
40% 100% 99.99% 99%
Quatech, LLC (Quatech) Advantech B+B SmartWorx
s.r.o. CZ (B+B (CZ))
100%
B+B SmartWorx Limited (BBI) 100% 0.01%
100% B&B Electronics Holdings LLC
Advantech Automation Corp. (BVI) 100% Advantech Corp. (ANA) (B&B Electronics)
(AAC (BVI)) 100%
B&B SmartWorx DMCC (B&B
100% 100% Beijing Yan Hua Xing Ye Electronic 100% DMCC)
Advantech Automation Corp. (HK) Hangzhou Advantofine
Science & Technology Co., Ltd. (ACN)
Limited (AAC (HK)) 100% Automation Tech. Co., Ltd.
Shanghai Advantech Intelligent Services
Co., Ltd. (AiSC)
100% Xi’an Advantech Software Ltd. (AXA)
Advantech 100% Advantech Electronics, S. De R.L. De C.V.
Co., Ltd. (AMX) 100% Advantech Europe B.V. (AEU) 100% DLOG Gesellschaft für
Company) (the 100% Advantech Europe Holding B.V. (AEUH) elektronische Datentechnik mbH (A-DLoG)
100% 100% Advantech Poland Sp z o.o. (APL)
Advantech Innovative Design Co., Ltd.
100%
Advantech Intelligent Service (AiST)
100% 55% Cermate Technologies Inc. (Cermate) Landmark Co., Ltd. (Landmark)
Advantech Corporate Investment 100%
36%
Kostec Co., Ltd.
(AKST)
100% 24% 90%
Advantech KR Co., Ltd. (AKR) 51% Advantech Corporation (Thailand) Shenzhen Cermate
100% Co., Ltd. (ATH) Technologies Inc.
Advantech Co., Singapore Pte, Ltd. (ASG) (Cermate (Shenzhen))
100% 100%
Advantech International, PT. (AID) Cermate Technologies
100% (Shanghai) Inc.
Advantech Japan Co., Ltd. (AJP)
(Cermate (Shanghai))
100%
Advantech Australia Pty Ltd. (AAU)
100%
Advanixs Corp.
100%
Advantech Co. Malaysia Sdn. Bhd (AMY)
99.99%
Advantech Industrial Computing India
Private Limited (AIN)
100%
AdvanPOS Technology Co., Ltd.
(AdvanPOS)
81.17% 100% 100%
Advantech-LNC Technology Co., Ltd. Better Auto Holdings Limited Famous Now Limited
(ALNC) (Better Auto) (Famous Now)
100%
Advantech LNC Dong Guan Co., Ltd.
----- End of picture text -----

(Concluded)

84 -

TABLE 10

ADVANTECH CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS BETWEEN ADVANTECH CO., LTD. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
0	Advantech Co., Ltd.	AAC(HK) AAU AAU AAU ABR ABR ABR ACN ACN A-DLoG A-DLoG A-DLoG AEU AEU AEU AID AID AID AIN AIN AIN AiSC AiSC AJP AJP AJP AKMC AKMC AKR AKR AKR AKST AKST AKST AMY AMY AMY	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties	$ 66 113,172 37,328 473 52,994 24,768 937 1,537,404 3,673,030 375,711 301,188 244 2,545,776 1,645,391 3,994 12,006 10,502 539 29,270 13,937 456 56,307 5,067 397,038 113,961 639 610,524 44 473,448 105,444 589 28,175 20,493 950 73,245 22,793 304	45 days EOM Normal 60-90 days 60-90 days Normal 90 days EOM 90 days EOM 45 days EOM Normal Normal 30 days after invoice date 30 days after invoice date Normal 30 days EOM 30 days EOM Normal 45 days after invoice date 45 days after invoice date Normal 60 days EOM 60 days EOM Normal 45 days EOM Normal 60-90 days 60-90 days 45 days EOM 45 days EOM Normal 60 days after invoice date 60 days after invoice date 30 days EOM 30 days EOM 30 days EOM Normal 45 days EOM 45 days EOM	- - - - - - - 3 15 2 1 - 11 4 - - - - - - - - - 2 - - 1 - 2 - - - - - - - -

(Continued)

85 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		ANA ANA ANA APL APL ASG ASG ASG ATC ATH ATH ATH AVN AVN B+B B+B B+B B+B (CZ) B+B (CZ) BBI DMCC Cermate Technologies Inc. Cermate Technologies Inc. Advansus Corp. Advansus Corp. Advansus Corp. LNC LNC LNC	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other receivables from related parties Sales revenue Other receivables from related parties Other receivables from related parties Other receivables from related parties Sales revenue Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Other receivables from related parties Sales revenue	$ 4,554,937 1,583,644 7,177 10,836 2,706 130,059 55,849 502 577 28,704 10,376 319 6,048 2,674 75,582 20,874 1,067 16 13 38 903 1,320 210 441,739 184,385 14 499 440 1,778	Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal 60-90 days 60-90 days Normal Normal 30 days after invoice date 30 days after invoice date 45 days EOM Normal Normal 60 days EOM 60 days EOM Normal 60 days EOM 45 days after invoice date 45 days after invoice date Normal 30 days EOM Normal 60-90 days 60-90 days 60-90 days EOM 60-90 days EOM Normal	19 3 - - - 1 - - - - - - - - - - - - - - - - - 2 - - - - -
1	AAC(HK)	Advantech Co., Ltd.	2	Other receivables from related parties	5	45 days EOM	-
2	AAU	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Sales revenue	25 415	60-90 days Normal	- -
3	ABR	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Other receivables from related parties	38 1,248	30 days after invoice date 30 days after invoice date	- -
4	ACN	AEU AEU AiSC AiSC AKMC AKMC AKR	3 3 3 3 3 3 3	Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue	3,748 8,051 72,279 16,237 13,989 4,155 18	30 days EOM Normal Normal Immediate payment Normal 60-90 days Normal	- - - - - - -
							(Continued)

86 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		ANA ANA Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 2 2 2	Receivables from related parties Sales revenue Receivables from related parties Sales revenue Other receivables from related parties	$ 15 317 263 1,625 980	30 days EOM Normal 30 days EOM Normal 30 days EOM	- - - - -
5	A-DLoG	AAU AAU AEU AEU AEU AEU AKMC AKMC AKR ANA ANA Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 2 2 2	Receivables from related parties Sales revenue Receivables from related parties Other revenue Sales revenue Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other receivables from related parties	671 1,045 1,214 4,882 32,721 1,214 147 496 446 20,790 25,206 37,460 17,684 68,014	30 days after invoice date Normal 30 days upon delivery Normal Normal 30 days EOM 60 days after invoice date Normal Normal 30 days after invoice date Normal Normal 30 days after invoice date 60 days EOM	- - - - - - - - - - - - - -
6	AEU	ACN A-DLoG AIN AIN AJP AKMC AKR AKR ANA ANA B+B B+B B+B (CZ) BBI BBI Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AKST	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 2 3	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties	32 4,404 19 33 8 101 190 3 5,701 2,094 22 22 36 875 141 13,760 5,521 51,539 1,057	Normal 30 days upon delivery Normal 45 days EOM Normal Normal Normal 30 days after invoice date Normal 30 days after invoice date 45 days EOM Normal 45 days EOM Normal 30 days after invoice date Normal 30 days EOM 30 days EOM 30 days EOM	- - - - - - - - - - - - - - - - - - -
7	AID	ASG ASG Advantech Co., Ltd.	3 3 2	Receivables from related parties Other revenue Other receivables from related parties	1,468 1,819 213	45 days after invoice date Normal 45 days EOM	- - -
							(Continued)

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Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
8	AiSC	AAC(HK) ACN ACN ACN ACN AKMC AKMC Advantech Co., Ltd.	3 3 3 3 3 3 3 2	Other receivables from related parties Other receivables from related parties Sales revenue Rental revenue Receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties	$ 4,609 35,277 5,245 3,040 2,266 18 1 1,455	90 days Immediate payment Normal Normal Immediate payment Normal 30 days EOM 60 days EOM	- - - - - - - -
9	AJP	ACN ACN AKMC AKMC Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 2 2 2	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Other receivables from related parties	20 20 8,888 6,039 8 251 335	Normal 45 days EOM Normal 45 days EOM 60-90 days Normal 30 days EOM	- - - - - - -
10	AKMC	ACN ACN ACN AEU AEU AiSC AiSC ANA ANA Advantech Co., Ltd. Advantech Co., Ltd. Cermate Technologies Inc. Cermate Technologies Inc. Cermate (Shenzhen) Cermate (Shenzhen) Advansus Corp. Advansus Corp.	3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3	Sales revenue Receivables from related parties Rental revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties	259,747 70,083 1,995 3,765 1,332 10,494 3,316 2,252 760 6,152,522 1,968,478 394 398 15,994 20,437 1,587 589	Normal 60-90 days Normal Normal 30 days after invoice date Normal Immediate payment Normal 60-90 days Normal 60 days EOM 60 days EOM Normal 60 days EOM Normal Normal Immediate payment	1 - - - - - - - - 26 4 - - - - - -
11	AKR	AKST AKST ASG ASG AVN AVN Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 2 2	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Other receivables from related parties	12,581 13,223 4 4 38 39 122 79	Normal 30 days EOM Normal 30 days EOM 30 days EOM Normal Normal 90 days EOM	- - - - - - - -
							(Continued)

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Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
12	AKST	AEU AKMC Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 2 2 2	Sales revenue Sales revenue Receivables from related parties Sales revenue Other receivables from related parties	$ 8,865 4,840 4,841 621 1,005	Normal Normal 30 days EOM Normal 30 days EOM	- - - - -
13	AMX	Advantech Co., Ltd.	2	Other receivables from related parties	457	Immediate payment	-
14	AMY	ATH Advantech Co., Ltd.	3 2	Sales revenue Other receivables from related parties	51 213	Normal 45 days EOM	- -
15	ANA	AAU A-DLoG AEU AEU AIN AIN AKMC AKMC AKR ASG ASG B+B B+B B+B (CZ) Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 2	Sales revenue Sales revenue Sales revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Sales revenue Receivables from related parties Other receivables from related parties	45 9 18,002 3,902 58 56 5,806 9,357 1,769 21 21 1,939 2,411 1,133 14,087 4,340 196	Normal Normal Normal 60-90 days 30 days after invoice date Normal Normal 30 days EOM Normal Normal Normal 60-90 days Normal Normal Normal 45 days EOM 45 days EOM	- - - - - - - - - - - - - - - - -
16	APL	ANA	3	Receivables from related parties	3	30 days after invoice date	-
17	ASG	AID AID AMY AMY ATH ATH ATH Advantech Co., Ltd.	3 3 3 3 3 3 3 2	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Other revenue Receivables from related parties Sales revenue	17 17 4,760 2,224 1,418 769 1,006 5	Normal 30 days upon delivery Normal 30 days EOM Normal Normal 30 days EOM Normal	- - - - - - - -
18	ATH	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	2 2 2	Sales revenue Receivables from related parties Other receivables from related parties	5 5 289	Normal 30 days after invoice date 30 days EOM	- - -
19	AXA	ACN	3	Other receivables from related parties	9,186	30 days EOM	-
							(Continued)

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Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
20	B+B	AEU AEU AKMC AKMC ANA BBI BBI BBI Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 2 2	Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Other revenue Receivables from related parties Sales revenue Receivables from related parties	$ 36,252 10,434 21 28 5,135 4,415 2,451 6,416 27,091 13,892	Normal 90 days EOM 60 days after invoice date Normal 30 days EOM Normal Normal 45 days EOM Normal 90 days EOM	- - - - - - - - - -
21	B+B (CZ)	AEU AEU AEU AEU ANA B+B B+B Conel Automation Conel Automation Conel Automation Conel Automation Conel Automation Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 2	Sales revenue Other revenue Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Interest revenue Receivables from related parties Sales revenue	114,872 2,664 1,108 39,493 6,671 20,498 7,194 395 566 58 222 13 37,619	Normal Normal 45 days EOM 45 days EOM Normal Normal 45 days EOM 45 days EOM 45 days EOM Normal Normal 45 days EOM Normal	- - - - - - - - - - - - -
22	BBI	AEU AEU B+B Advantech Co., Ltd.	3 3 3 2	Sales revenue Receivables from related parties Receivables from related parties Receivables from related parties	29,449 10,354 18,837 5,660	Normal 60 days after invoice date 60 days after invoice date 60 days after invoice date	- - - -
23	Conel Automation	Advantech Co., Ltd.	2	Receivables from related parties	13,346	45 days EOM	-
24	Advantech LNC Dong Guan Co., Ltd.	LNC LNC	3 3	Sales revenue Receivables from related parties	1,242 1,229	Normal 90 days EOM	- -
25	Cermate (Shanghai)	Cermate (Shenzhen) Cermate (Shenzhen)	3 3	Sales revenue Receivables from related parties	572 96	Normal 60 days EOM	- -
26	Cermate Technologies Inc.	AKMC AKMC Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Cermate (Shenzhen) Cermate (Shenzhen) LNC LNC	3 3 2 2 2 3 3 3 3	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties	5,940 6,039 1,573 541 6 2,083 53,584 5 5	Normal 60 days EOM Normal 30-60 days 30-60 days 30 days EOM Normal Normal 60 days EOM	- - - - - - - - -

(Continued)

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Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction	Details
				Financial Statement Account	Amount (In Thousand)	Payment Terms	% to Consolidated Assets/Revenue (Note C)
27	Cermate (Shenzhen)	ACN AKMC AKMC Cermate (Shanghai) Cermate Technologies Inc. Cermate Technologies Inc.	3 3 3 3 3 3	Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties	$ 4 34,306 11,760 18,478 12,462 3,843	Normal Normal 40 days EOM Normal Normal 60 days EOM	- - - - - -
28	Advansus Corp.	AKMC Advantech Co., Ltd. Advantech Co., Ltd.	3 2 2	Sales revenue Sales revenue Receivables from related parties	343 4,175 115	Normal Normal 60-90 days	- - -
29	LNC	Advantech Co., Ltd. Advantech Co., Ltd. Advantech LNC Dong Guan Co., Ltd. Advantech LNC Dong Guan Co., Ltd.	2 2 3 3	Receivables from related parties Sales revenue Receivables from related parties Sales revenue	3 2,253 216,377 142,854	60 days EOM Normal 90 days EOM Normal	- - -

Note A: The parent company and its subsidiaries are numbered as follows:

“0” for Advantech Co., Ltd.
Subsidiaries are numbered from “1”.

Note B: The flow of related-party transactions is as follows:

From the parent company to its subsidiary.
From the subsidiary to its parent company.
Between subsidiaries.
Note C: For assets and liabilities, amounts are shown as a percentage to consolidated total assets as of June 30, 2018, while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the six months ended June 30, 2018.

Note D: All intercompany transactions have been eliminated from consolidation.

(Concluded)

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AI assistant

Advantech — Interim / Quarterly Report 2018

52053_rns_2018-11-02_b1292cbc-cfe6-4cd1-b97c-40445882c9a5.pdf

Advantech Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Notice to Readers

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

ADVANTECH CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

Classification, measurement and impairment of financial assets

Definition of a lease

The Group as lessee

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

b. Basis of preparation

c. Basis of consolidation

d. Other significant accounting policies

1) Impairment of tangible and intangible assets other than goodwill

2) Financial instruments

a) Financial assets

ii) Financial assets at amortized cost

2017

ii) Available-for-sale financial assets

iii) Loans and receivables

ii. Impairment of financial assets

2018

2017

iii. Derecognition of financial assets

b) Equity instruments

c) Financial liabilities

i. Subsequent measurement

Financial liabilities at FVTPL

3) Revenue recognition

Contracts applicable to IFRS 15

Contracts prior to 2018 not retrospectively application of IFRS 15

4) Retirement benefits

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

a. Write-down of inventories

c. Impairment of goodwill

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

13. NOTES RECEIVABLE AND TRADE RECEIVABLES

Trade Receivables

At amortized cost

June 30, 2018

For the six months ended June 30, 2017

14. INVENTORIES

15. SUBSIDIARIES

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

Aggregate information of associates that are not individually material

17. PROPERTY, PLANT AND EQUIPMENT

18. GOODWILL

19. PREPAYMENTS FOR LEASES

20. BORROWINGS

a. Short-term borrowings

21. OTHER LIABILITIES

22. RETIREMENT BENEFIT PLANS

23. EQUITY

b. Capital surplus

c. Retained earnings and dividend policy

Advantech Interim / Quarterly Report 2018