Advantech — Interim / Quarterly Report 2019

Nov 12, 2019

Advantech Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2019 and 2018 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 March 31, 2019 and 2018 and the consolidated statements of comprehensive income, changes in equity and cash flows for the three-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 12 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 March 31, 2019 and 2018, the combined total assets of these non-significant subsidiaries were NT$10,469,707 thousand and NT$7,719,688 thousand, respectively, representing 22.34% and 18.24%, respectively, of the consolidated total assets, and the combined total liabilities of these subsidiaries were NT$1,590,719 thousand NT$968,900 thousand, respectively, representing 10.45% and 7.50%, respectively, of the consolidated total liabilities; for the three-month periods ended March 31, 2019 and 2018, the amounts of combined comprehensive income of these subsidiaries were NT$264,329 thousand and NT$301,378 thousand, respectively, representing 13.93% and 19.67%, respectively, of the consolidated total comprehensive income. Also, as stated in Note 13 to the consolidated financial statements, the investments accounted for using the equity method were NT$2,524,911 thousand and NT$1,903,051 thousand as of March 31, 2019 and 2018, respectively. The equities in earnings of the associates were NT$4,949 thousand and NT$21,507 thousand of the Company’s consolidated net income in the three months ended March 31, 2019 and 2019, respectively, and these investment amounts as well as additional disclosures in Note 32 “Information on Investees” were based on the investees’ unreviewed financial statements for the same reporting periods as those of the Company.

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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 financial position of the Group as of March 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the three-month periods then ended 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 Jr-Shian Ke and Meng-Chieh Chiu.

Deloitte & Touche Taipei, Taiwan Republic of China

May 3, 2019

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.

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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 28) Financial assets at amortized cost - current (Note 9) Notes receivable (Note 10) Trade receivables (Note 10) Trade receivables from related parties (Note 29) Other receivables Inventories (Note 11) Other current assets (Notes 3 and 17) Total current assets NON-CURRENT ASSETS Financial asset at fair value through other comprehensive income - non-current (Notes 8 and 28) Investments accounted for using the equity method (Note 13) Property, plant and equipment (Notes 14 and 30) Right of use assets (Notes 3, 4 and 15) Goodwill (Note 16) Other intangible assets Deferred tax assets (Notes 4 and 23) Prepayments for business facilities Prepayments for investments Long-term prepayments for leases (Notes 3 and 17) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 18 and 28) Financial liabilities at fair value through profit or loss - current (Notes 7 and 28) Notes payable and trade payables (Note 29) Lease liabilities - current (Notes 3, 4 and 15) Other payables (Note 19) Current tax liabilities (Notes 4 and 23) Short-term warranty provisions Current portion of long-term borrowings (Notes 18 and 28) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Lease liabilities - non-current (Notes 3, 4 and 15) Long-term borrowings (Notes 18 and 28) Deferred tax liabilities (Notes 4 and 23) Net defined benefit liabilities (Note 20) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital Ordinary shares Advance receipts for share capital Total share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translation of foreign financial statements Unrealized gain on financial assets at fair value through other comprehensive income Other equity - unearned stock based employee comprehensive Total other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		March 31, 2019 (Reviewed) Amount % $ 7,075,773 15 2,224,078 5 11,166 - 1,305,287 3 7,357,164 16 20,166 - 186,953 - 8,178,654 18 588,655 1 26,947,896 58 1,423,914 3 2,524,911 5 9,854,043 21 905,085 2 2,961,967 6 1,067,006 2 540,842 1 352,032 1 238,000 1 - - 48,078 - 19,915,878 42 $ 46,863,774 100 $ 424,096 1 8,171 - 5,755,560 12 201,334 1 3,272,813 7 1,872,843 4 193,461 - 7,220 - 838,604 2 12,574,102 27 393,299 1 45,784 - 1,807,949 4 254,206 - 146,399 - 2,647,637 5 15,221,739 32 6,986,955 15 3,800 - 6,990,755 15 7,179,266 15 5,655,613 12 369,655 1 11,632,709 25 17,657,977 38 (371,986) (1) (182,526) - 1,010 - (553,502) (1) 31,274,496 67 367,539 1 31,642,035 68 $ 46,863,774 100		December 31, 2018 (Audited) Amount % $ 6,633,161 15 2,098,552 5 157,426 1 1,461,404 3 6,870,878 16 18,969 - 45,956 - 7,557,820 17 522,407 1 25,366,573 58 1,300,267 3 2,431,522 6 9,782,781 22 - - 2,840,001 6 1,095,899 2 501,260 1 273,386 1 - - 297,665 1 47,718 - 18,570,499 42 $ 43,937,072 100 $ 87,581 - 6,139 - 5,810,904 13 - - 3,662,199 8 1,611,886 4 196,782 1 9,626 - 761,473 2 12,146,590 28 - - 45,784 - 1,798,914 4 255,545 1 149,653 - 2,249,896 5 14,396,486 33 6,982,275 16 4,680 - 6,986,955 16 7,073,348 16 5,655,613 13 369,655 1 10,015,895 23 16,041,163 37 (475,245) (1) (324,254) (1) 736 - (798,763) (2) 29,302,703 67 237,883 - 29,540,586 67 $ 43,937,072 100		March 31, 2018 (Reviewed)
						Amount % $ 4,927,686 12 3,895,678 9 37,871 - 1,219,752 3 6,562,536 16 14,958 - 22,866 - 6,817,517 16 435,481 1 23,934,345 57 1,870,546 4 1,903,051 5 9,915,571 23 - - 2,695,399 6 1,078,233 3 405,884 1 157,550 - - - 316,072 1 47,512 - 18,389,818 43 $ 42,324,163 100 $ 8,100 - 13,625 - 5,376,055 13 - - 3,148,922 7 1,486,641 4 180,440 - 27,982 - 809,936 2 11,051,701 26 - - 80,924 - 1,448,677 4 236,636 1 95,210 - 1,861,447 5 12,913,148 31 6,972,825 16 1,750 - 6,974,575 16 6,668,711 16 5,039,962 12 85,204 - 10,619,513 25 15,744,679 37 (449,665) (1) 296,033 1 - - (153,632) - 29,234,333 69 176,682 - 29,411,015 69 $ 42,324,163 100

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

(With Deloitte & Touche review report dated May 3, 2019)

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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 (Note 29) Sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 11, 22 and 29) GROSS PROFIT OPERATING EXPENSES (Notes 22 and 29) 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 13) Interest income Gains (or losses) on disposal of property, plant and equipment Gains on disposal of investments Foreign exchange gains (or losses), net (Note 22) Gains on financial instruments at fair value through profit or loss Other income (Note 29) Finance costs (Note 22) Losses on financial instruments at fair value through profit or loss Other losses Total non-operating income PROFIT BEFORE INCOME TAX INCOME TAX EXPENSES (Note 23) NET PROFIT FOR THE PERIOD		**For the Three Months Ended March 31 **	**For the Three Months Ended March 31 **	**For the Three Months Ended March 31 **
		2019 Amount % $ 11,974,873 97 325,717 3 12,300,590 100 7,576,536 62 4,724,054 38 1,227,670 10 664,775 5 973,440 8 2,865,885 23 1,858,169 15 4,949 - 9,002 - 45,348 - - - 69,744 1 70,708 1 25,597 - (6,175) - (21,346) - (1,447) - 196,380 2 2,054,549 17 (431,680) (4) 1,622,869 13		2018
				Amount % $ 11,058,097 97 297,098 3 11,355,195 100 7,016,964 62 4,338,231 38 1,176,676 11 594,200 5 924,762 8 2,695,638 24 1,642,593 14 21,507 - 4,535 - (3,037) - (307) - (2,756) - 92,964 1 15,563 - (1,222) - (27,367) - (981) - 98,899 1 1,741,492 15 (373,554) (3) 1,367,938 12 (Continued)

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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 Items that will not be reclassified subsequently to profit or loss (Notes 31 and 21) Unrealized gains on investments in debt instruments at fair value through other comprehensive income Share of the other comprehensive loss of associates accounted for using the equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements (Note 21) Share of the other comprehensive loss of associates accounted for using the equity method (Notes 13 and 21) Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 21 and 23) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET PROFIT 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 March 31 **	**For the Three Months Ended March 31 **	**For the Three Months Ended March 31 **
		2019 Amount % $ 120,818 1 20,366 - 154,726 1 3,951 - (25,815) - 274,046 2 $ 1,896,915 15 $ 1,617,358 13 5,511 - $ 1,622,869 13 $ 1,861,801 15 35,114 - $ 1,896,915 15		2018
				Amount % $ 161,517 1 (361) - 3,078 - (1,302) - 976 - 163,908 1 $ 1,531,846 13 $ 1,362,670 12 5,268 - $ 1,367,938 12 $ 1,537,640 13 (5,794) - $ 1,531,846 13

(Continued)

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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 24) Basic Diluted	**For the Three Months Ended March 31 **	**For the Three Months Ended March 31 **
	2019 Amount % $ 2.31 $ 2.29	2018
		Amount % $ 1.95 $ 1.95

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 3, 2019) (Concluded)

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ADVANTECH CO., LTD. AND SUBSIDIARIES

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

BALANCE AT JANUARY 1, 2018 Effect of retrospective application and retrospective restatement BALANCE AT JANUARY 1, 2018 AS RESTATED Recognition of employee share options by the Company Compensation cost recognized for employee share options Change in capital surplus from investments in associates accounted for by the equity method Difference between consideration paid and carrying amount of subsidiaries acquired or disposed of Recognition of employee share options by subsidiaries Net profit for the three months ended March 31, 2018 Other comprehensive income (loss) for three months ended March 31, 2018 Total comprehensive income (loss) for the three months ended March 31, 2018 BALANCE AT MARCH 31, 2018 BALANCE AT JANUARY 1, 2019 Recognition of employee share options by the Company Compensation cost recognized for employee share options Change in capital surplus from investments in associates accounted for by the equity method Difference between consideration paid and carrying amount of subsidiaries acquired or disposed of Recognition of employee share options by subsidiaries Net profit for the three months ended March 31, 2019 Other comprehensive income (loss) for the three months ended March 31, 2019 Total comprehensive income for the three months ended March 31, 2019 BALANCE AT MARCH 31, 2019					**Equity Attributable to Owners of the **	Company					Non-controlling Total Interests (Notes 21 and 27) $ 27,581,074 $ 179,366 - - 27,581,074 179,366 14,735 - 99,019 - 1,107 - 1,515 1,876 (757 ) 1,234 1,362,670 5,268 174,970 (11,062) 1,537,640 (5,794) $ 29,234,333 $ 176,682 $ 29,302,703 $ 237,883 31,737 - 84,673 - 1,311 - (7,729 ) 94,324 - 218 1,617,358 5,511 244,443 29,603 1,861,801 35,114 $ 31,274,496 $ 367,539	Total Equity $ 27,760,440 -
		Issued Capital (Notes 21and 25) Advance Receipts Share Capital for Ordinary Shares Total Capital Surplus (Notes 21 and 25) $ 6,970,325 $ 2,500 $ 6,972,825 $ 6,554,842 - - - - 6,970,325 2,500 6,972,825 6,554,842 2,500 (750 ) 1,750 12,985 - - - 99,019 - - - 1,107 - - - 1,515 - - - (757 ) - - - - - - - - - - - - $ 6,972,825 $ 1,750 $ 6,974,575 $ 6,668,711 $ 6,982,275 $ 4,680 $ 6,986,955 $ 7,073,348 4,680 (880 ) 3,800 27,937 - - - 84,673 - - - 1,037 - - - (7,729 ) - - - - - - - - - - - - - - - - $ 6,986,955 $ 3,800 $ 6,990,755 $ 7,179,266			Retained Earnings (Note 21)	Total $ 14,423,062 (41,053) 14,382,009 - - - - - 1,362,670 - 1,362,670 $ 15,744,679 $ 16,041,163 - - - - - 1,617,358 (544) 1,616,814 $ 17,657,977			Other Equity (Note 21)
								Exchange Differences on U Translating Foreign Operations A F $ (463,479 ) - (463,479 ) - - - - - - 13,814 13,814 $ (449,665) $ (475,245 ) - - - - - - 103,259 103,259 $ (371,986)	nrealized Gain Unrealized Gain or Loss on Financial Assets at Fair Value or Loss on through Other U vailable-for-sale inancial Assets Comprehensive Income B $ 93,824 $ - (93,824) 134,877 - 134,877 - - - - - - - - - - - - - 161,156 - 161,156 $ - $ 296,033 $ - $ (324,254 ) - - - - - - - - - - - - - 141,728 - 141,728 $ - $ (182,526)	nearned Stock - ased Employee Compensation $ - - - - - - - - - - - $ - $ 736 - - 274 - - - - - $ 1,010
		A Share Capital $ 6,970,325 - 6,970,325 2,500 - - - - - - - $ 6,972,825 $ 6,982,275 4,680 - - - - - - - $ 6,986,955	dvance Receipts for Ordinary Shares $ 2,500 - 2,500 (750 ) - - - - - - - $ 1,750 $ 4,680 (880 ) - - - - - - - $ 3,800
					Legal Reserve Special Reserve Unappropriated Earnings $ 5,039,962 $ 85,204 $ 9,297,896 - - (41,053) 5,039,962 85,204 9,256,843 - - - - - - - - - - - - - - - - - 1,362,670 - - - - - 1,362,670 $ 5,039,962 $ 85,204 $ 10,619,513 $ 5,655,613 $ 369,655 $ 10,015,895 - - - - - - - - - - - - - - - - - 1,617,358 - - (544) - - 1,616,814 $ 5,655,613 $ 369,655 $ 11,632,709
												27,760,440 14,735 99,019 1,107 3,391 477 1,367,938 163,908
												1,531,846
												$ 29,411,015
												$ 29,540,586 31,737 84,673 1,311 86,595 218 1,622,869 274,046
												1,896,915
												$ 31,642,035

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

(With Deloitte & Touche review report dated May 3, 2019)

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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 loss on credit impairment Net gain on financial assets or liabilities at fair value through profit or loss Compensation costs of employee share options Finance costs Interest income Share of (profit) loss of associates accounted for using the equity method Gain (or loss) on disposal of property, plant and equipment Gain on disposal of investments Changes in operating assets and liabilities Financial assets at fair value through profit or loss 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 Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortizes cost Proceeds from sale of financial assets at amortizes cost Purchase of investments accounted for using the equity method Increase in prepayments for investments		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 2,054,549 227,043 47,135 - 2,783 (49,362) 84,673 6,175 (9,002) (4,949) (45,348) - (74,132) 156,117 126,303 (1,197) (139,501) (173,361) (67,649) (486,063) (1,339) (482,393) (3,321) 57,083 (3,198) 1,221,046 9,002 (309) (181,660) 1,048,079 - 146,839 (63,214) (238,000)	2018 $ 1,741,492 144,177 42,499 2,236 9,964 (65,597) 99,019 1,222 (4,535) (21,507) 3,037 307 (784,332) 36,029 23,306 (891) 52,432 (575,266) 10,310 95,327 (589) (475,547) (535) 133,479 (51,503) 414,534 4,535 (1,463) (77,854) 339,752 (120) - (440,087) - (Continued)

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ADVANTECH CO., LTD. AND SUBSIDIARIES

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

Net cash flow on the acquisition of subsidiaries Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Payments for intangible assets Decrease (increase) in prepayments for business facilities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Repayments of long-term borrowings Decrease in guarantee deposits received Repayment of the principal portion of lease liabilities Exercise of employee share options Decrease in non-controlling interests Net cash generated from 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 Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ (542,156) (189,443) 68,260 (179) (11,809) 16,059 (813,643) 181,548 (2,406) (138) (54,857) 31,737 (29,998) 125,886 82,290 442,612 6,633,161 $ 7,075,773	2018 $ - (83,855) 5,238 (2,299) (12,984) (74,532) (608,639) - (750) - - 14,735 3,868 17,853 (25,499) (276,533) 5,204,219 $ 4,927,686

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

(With Deloitte & Touche review report dated May 3, 2019)

(Concluded)

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ADVANTECH CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (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 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 May 3, 2019.

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) IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies.

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Definition of a lease

The Group elects to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 are not reassessed and are accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group presents 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 are classified within financing activities; cash payments for the interest portion are classified within operating activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights in People’s Republic of China were recognized as prepayments for leases. Cash flows for operating leases were classified within operating activities on the consolidated statements of cash flows.

The Group elects to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized in retained earnings on January 1, 2019. Comparative information is not restated.

Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. The Group applies IAS 36 to all right-of-use assets.

The Group also applies the following practical expedients:

• a) The Group applies a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

• b) The Group accounts for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

• c) The Group excludes initial direct costs from the measurement of right-of-use assets on January 1, 2019.

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

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The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 2.99%. The difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases Less: Recognition exemption for leases of low-value assets Undiscounted amounts on January 1, 2019 Discounted amounts using the incremental borrowing rate on January 1, 2019 Lease liabilities recognized on January 1, 2019	$ 716,950 12,596 15,787 $ 688,567 $644,980 $ 644,980

The Group as lessor

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

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:

			Adjustments	Adjustments
	As	Originally	Arising from
	Stated on			Initial	Restated on
	January 1, 2019		Application		January 1, 2019
Prepayments for leases - current	$	8,673	$	(8,673)	$	-
Prepayments for leases - non-current		297,665		(297,665)		-
Right-of-use assets		-		951,318		951,318
Total effect on assets	$	306,338	$	644,980	$	951,318
Lease liabilities - current	$	-	$	201,344	$	201,344
Lease liabilities - non-current		-		443,636		443,636
Total effect on liabilities	$	-	$	644,980	$	644,980

• 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 has 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 Group expects to better predict the resolution of the uncertainty.

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

The amendments clarified that IFRS 9 “Financial Instruments” 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 Group’s net investment in an associate.

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

IFRS 9 stipulates 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 the 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 explain 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.

• 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.

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

New IFRSs Amendments to IFRS 3 “Definition of a Business” 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” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

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 Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

• 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, the gain or loss resulting from the transaction is recognized in full.

• 13 -

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 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.

2) Amendments to IFRS 3 “Definition of a Business”

The amendments clarify that, to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process applied to the input that together significantly contribute to the ability to create outputs. The amendments narrow the definitions of outputs by focusing on goods and services provided to customers, and the reference to an ability to reduce costs is removed. Moreover, the amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether or not an acquired set of activities and assets is a business.

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.

• 14 -

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.

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.

See Note 12 and Table 7 and Table 8 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 leases and the following, please refer to the consolidated financial statements for the year ended December 31, 2018.

• 1) Leases

2019

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease. For a contract that contains a lease component and non-lease components, the Group allocates the consideration in the contract to each component on the basis of the relative stand-alone price and accounts for each component separately. However, for the lease of offices in which the Group is a lessee and utility and management fee are included, the Group elects to account for the lease and non-lease components as a single lease component.

a) The Group as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.

b) The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

• 15 -

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in the amounts expected to be payable under a residual value guarantee, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

2018

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

• a) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

• b) The Group as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

• 2) 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.

• 16 -

3) 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 effect of a change in tax rate resulting from a change in tax law is recognized consistently with the accounting for the transaction itself which gives rise to the tax consequence, and the effect of the change in tax rate relating to transactions recognized outside of profit or loss is recognized in full in the period in which the change in tax rate occurs. The effect of the change in tax rate relating to transactions recognized in profit or loss is included in the estimation of the average annual income tax rate, consequently spreading the effect throughout the interim period.

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. Inventory write-downs

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 13 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.

• 17 -

6. CASH AND CASH EQUIVALENTS

7.

March 31, 2019 December 31, 2018 March 31, 2018 Cash on hand $ 109,880 $ 76,179 $ 70,883 Checking accounts and demand deposits 5,685,442 5,350,844 4,599,543 Cash equivalents (time deposits with original maturities less than three months) 1,280,451 1,206,138 257,260 $ 7,075,773 $ 6,633,161 $ 4,927,686 FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS March 31, 2019 December 31, 2018 March 31, 2018 Financial assets at FVTPL-current Financial assets mandatorily at FVTPL Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts 6,711 5,198 3,270 Non-derivative financial assets Domestic quoted shares 96,005 202,622 231,375 Foreign quoted shares 6,843 5,270 7,865 Mutual funds 2,114,519 1,885,462 3,653,168 $ 2,224,078 $ 2,098,552 $ 3,895,678 Financial liabilities at FVTPL-current Financial assets mandatorily at FVTPL Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts $ 8,171 $ 6,139 $ 13,625

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)
March	31,	2019
Sell			EUR/NTD	2019.04-2019.07	EUR11,400/NTD400,761
			USD/NTD	2019.04	USD2,100/NTD64,630
			JPY/NTD	2019.04-2019.09	JPY370,000/NTD102,818
			RMB/NTD	2019.04-2019.08	RMB89,000/NTD400,087
					(Continued)

• 18 -

Notional Amount (In Thousands)

			Notional Amount
	Currency	Maturity Date	(In Thousands)
December 31, 2018
Sell	EUR/NTD	2019.01-2019.04	EUR12,600/NTD448,286
	EUR/USD	2019.01-2019.02	EUR400/USD459
	JPY/NTD	2019.01-2019.05	JPY380,000/NTD104,301
	RMB/NTD	2019.01-2019.04	RMB67,000/NTD295,236
March 31, 2018
Sell	EUR/NTD	2018.04-2018.09	EUR15,500/NTD555,762
	EUR/USD	2018.04-2018.08	EUR1,500/USD1,838
	USD/NTD	2018.04	USD601/NTD17,589
	JPY/NTD	2018.04-2018.09	JPY490,000/NTD131,414
	RMB/NTD	2018.04-2018.06	RMB78,000/NTD355,391
			(Concluded)

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

		December 31,	December 31,
	March 31, 2019		2018	March 31, 2018
Non-current
Investments in equity instruments at FVTOCI	$ 1,423,914	$	1,300,267	$ 1,870,546
Investments in equity instruments at FVTOCI:
		December 31,
	March 31, 2019		2018	March 31, 2018
Non-current
Domestic investments
Listed shares and emerging market shares
Ordinary shares - ASUSTek Computer Inc.	$ 1,056,900	$	955,001	$ 1,308,091
Ordinary shares - Allied Circuit Co., Ltd.	246,117		226,501	477,429
Unlisted shares
Ordinary shares - BroadTec System Inc.	4,155		3,879	3,767
Ordinary shares - BiosenseTek Corp.	-		-	173
Ordinary shares - Juguar Technology	4,943		4,743	7,560
Ordinary shares - Taiwan DSC PV Ltd.	-		-	527
	1,312,115		1,190,124	1,797,547
Foreign investments
Shanghai Shangchuang Xinwei Investment
Management Co., Ltd.	109,919		107,328	69,704
JamaPro Co., Ltd.	1,880		2,815	3,295
	111,799		110,143	72,999
	$ 1,423,914	$	1,300,267	$ 1,870,546

• 19 -

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.

9. FINANCIAL ASSETS AT AMORTIZED COST

			December 31,
	March 31, 2019		2018	March 31, 2018
Current
Foreign investments
Time deposits with original maturity of more
than 3 months	$	11,166	$ 157,426	$	37,871

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

		December 31,
	March 31, 2019	2018	March 31, 2018
Notes receivable - operating	$ 1,305,287	$ 1,461,404	$ 1,219,572
Trade receivables
Amortized cost
Gross carrying amount	$ 7,443,723	$ 6,958,369	$ 6,661,574
Less: Allowance for impairment loss	(86,559)	(87,491)	(99,038)
	$ 7,357,164	$ 6,870,878	$ 6,562,536

Trade Receivables

For the three months ended March 31, 2019

 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 measures the loss allowance for trade receivables at an amount that equals to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience with the respective 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 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 different customer base.

• 20 -

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, e.g. when the debtor has been placed under liquidation, or when the trade receivables are over 1 year past due, 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, they are recognized in profit or loss.

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

March 31, 2019

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost December 31, 2018 Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost March 31, 2018 Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost	Not Past Due - $ 6,246,759 - $ 6,246,759 Not Past Due - $ 5,358,360 (21,319) $ 5,337,041 Not Past Due - $ 5,734,708 (4,659) $ 5,730,049	Less than 60 Days 61 to 90 Days 91 to 120 Days Over 120 Days - 20% 46% 100% $ 1,061,121 $ 33,574 $ 47,422 $ 54,847 (3,113) (6,715) (21,884) (54,847) $ 1,058,008 $ 26,859 $ 25,538 $ - Less than 60 Days 61 to 90 Days 91 to 120 Days Over 120 Days - 31% 69% 100% $ 1,488,386 $ 53,879 $ 34,029 $ 23,715 (2,056) (16,913) (23,488) (23,715) $ 1,486,330 $ 36,966 $ 10,541 $ - Less than 90 Days 90 to 180 Days 180 to 360 Days Over 360 Days 3% 31% 56% 100% $ 792,179 $ 69,986 $ 34,703 $ 29,998 (22,985) (21,867) (19,529) (29,998) $ 769,194 $ 48,119 $ 15,174 $ -	Total - $ 7,443,723 (86,559) $ 7,357,164 Total - $ 6,958,369 (87,491) $ 6,870,878 Total - $ 6,661,574 (99,038) $ 6,562,536

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

Balance at January 1 Add: Net remeasurement of loss allowance Less: Amounts written off * Business combination Foreign exchange gains and losses Balance at March 31		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 87,491 2,783 (4,360) (35) 680 $ 86,559	2018 $ 90,455 9,964 (1,605) - 224 $ 99,038

• 21 -

• The Group wrote off trade receivables and related loss allowance for the three months ended March 31, 2019 and 2018 of $4,360 thousand and $1,605 thousand, respectively, as the customers’ trade receivables have been aged more than 2 years and the legal attest letters were served without receivables collected.

11. INVENTORIES

		December 31,
	March 31, 2019	2018	March 31, 2018
Raw materials	$ 3,784,440	$ 3,773,265	$ 3,364,752
Work in process	1,978,173	1,533,978	1,448,128
Finished goods	1,446,656	1,531,644	1,271,200
Inventories in transit	969,385	718,933	733,437
	$ 8,178,654	$ 7,557,820	$ 6,817,517

The cost of inventories recognized as cost of goods sold for the three months ended March 31, 2019 and 2018 was $7,425,918 thousand and $6,920,365 thousand, respectively.

The costs of inventories were decreased by $759,458 thousand, $630,341 thousand and $598,658 thousand as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively, when stated at the lower of cost or net realizable value.

12. 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 Advantech Automation Corp. [AAC (BVI)] Investment and management service Advantech Technology Co., Ltd (ATC) Sale of industrial automation products Advanixs Corporation Production and sale of industrial automation products Advantech Corporate Investment Investment holding company Advantech Europe Holding B.V.(AEUH) Investment and management services Advantech Co., Singapore Pte, Ltd.(ASG) Sale of industrial automation products Advantech Australia Pty Ltd. (AAU) Sale of industrial automation products Advantech Japan Co., Ltd. (AJP) Sale of industrial automation products Advantech Co. Malaysia Sdn. Bhd (AMY) Sale of industrial automation products Advantech KR Co., Ltd. (AKR) Sale of industrial automation products Advantech Brasil Ltd (ABR) Sale of industrial automation products Advantech Industrial Computing India Private Limited (AIN) Sale of industrial automation products AdvanPOS Production and sale of POS systems LNC Technology Co., Ltd. (LNC) Production and sale of machines with computerized numerical controls Advantech Electronics, S. De R. L. De C. V.(AMX) Sale of industrial automation products

Proportion of Ownership (%) March 31, 2019 December 31, 2018 March 31, 2018 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 64.10 64.10 80.06 a, j 100.00 100.00 100.00 a

(Continued)

• 22 -

Investor Investee Nature of Activities Advantech Innovative Design Co., Ltd. Product design BEMC Holdings Corporation (BEMC) Sale of industrial network communications systems B+B Smartworx Inc. (B+B) Sale of industrial network communications systems Advantech Intelligent Services Co., Ltd. (AiST) Design, develop and sale of intelligent service Advantech Kostec Co., Ltd. (AKST) Production and sale of intelligent medical displays Advantech Corporation (Thailand) Co., Ltd. (ATH) Production of computers Advantech Vietnam Technology Company Limited (AVN) Sale of industrial automation products Limited Liability Company Advantech Technology (ARU) Production and sale of industrial automation products Advantech Technologies Japan Corp. (ATJ) Production and sale of electronic and mechanical device Advantech Turkey Teknoloji A.S. (ATR) Wholesale of computers and peripheral devices Advantech KR Co., Ltd. (AKR) Advantech Kostec Co., Ltd. (AKST) Production and sale of intelligent medical displays Advantech Japan Co., Ltd. (AJP) Advantech Technologies Japan Corp. (ATJ) Production and sale of electronic and mechanical devices Advantech Corporate Investment Cermate Technologies Inc. (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 Advantech Corporate Investment Ltd.(ACISM) General investment Advantech Technology Co., Ltd (ATC) Advantech Automation Corp. (HK)[ATC (HK)] Investment and management services HK Advantech Technology Co., Ltd. ATC (HK) Advantech Technology (China) Company Ltd. (AKMC) Production and sale of components of industrial automation products Advanixs Kun Shan Corp. Production and sale of industrial automation products Advantech Automation Corp. (BVI) (AAC Advantech Corp. (ANA) Sale and fabrication of industrial automation products (BVI)) Advantech Automation Corp. (HK) (AAC (HK)) Investment and management service Advantech Service - IoT Co., Ltd. (SIoT Cayman) Design, development and sale of IoT intelligent system service Advantech Corp. (ANA) BEMC Holdings Corporation (BEMC) Sale of industrial network communications B+B Smartworx Inc. (B+B) Sale of industrial network communications Advantech Automation Corp. (HK) (AAC (HK)) Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd. (ACN) Sale of industrial automation products Shanghai Advantech Intelligent Services Co., Ltd. (AiSC) Production and sale of industrial automation products Advantech Service - IoT Co., Ltd. (SIoT Cayman) Advantech Service-IoT (Shanghai) Co., Ltd. (SIoT (China)) Technology development consulting and services in the field of intelligent technology Advantech Service-IoT GmbH (A-SIoT) (former A-DLoG) Design, R&D and sale of industrial automation vehicles and related products Beijing Yan Hua Xing Ye Electronic Science & Technology Co., Ltd. (ACN) Xi’an Advantech Software Ltd. (AXA) Development and production of software products Shanghai Advantech Intelligent Services Co., Ltd. (AiSC) Advantech Service-IoT (Shanghai) Co., Ltd. (SIoT (China)) Technology development consulting and services in the field of intelligent technology Advantech Europe Holding Advantech Europe B.V. (AEU) Sale of industrial automation products B.V.(AEUH) Advantech Poland Sp z o.o. (APL) Sale of industrial automation products

Proportion of Ownership (%) March 31, 2019 December 31, 2018 March 31, 2018 Remark 100.00 100.00 100.00 a - - 60.00 k 60.00 60.00 k 100.00 100.00 100.00 a 76.00 76.00 36.00 a, b 51.00 51.00 51.00 a, c 60.00 60.00 - a, f 100.00 100.00 - a, l 50.00 - - a, n 60.00 - - a, o 24.00 24.00 24.00 a 30.00 - - a, n 55.00 55.00 55.00 a 50.00 50.00 50.00 a, d 50.00 50.00 50.00 a, d 100.00 - - a, p 100.00 100.00 100.00 100.00 100.00 100.00 - - 100.00 a, q 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - a, g - - 40.00 k 40.00 40.00 - k 100.00 100.00 100.00 100.00 100.00 100.00 a 99.00 99.00 - a, g 100.00 100.00 - a, h 100.00 100.00 100.00 a, e 1.00 1.00 - a, i 100.00 100.00 100.00 100.00 100.00 100.00 a (Continued)

• 23 -

Investor Investee Nature of Activities Advantech Europe B.V. (AEU) Advantech Service-IoT GmbH (A-SIoT) (former A-DLoG) Design, R&D and sale of industrial automation vehicles and related products Advantech Co., Singapore Pte, Ltd.(ASG) Advantech Corporation (Thailand) Co., Ltd. (ATH) Production of computers Advantech International. PT. (AID) Sale of industrial automation products Cermate Technologies Inc. (Cermate) LandMark Co., Ltd.(LandMark) General investment LandMark Co., Ltd.(LandMark) Cermate Technologies (Shanghai) Inc. (Cermate Shanghai) Sale of industrial electronic equipment Shenzhen Cermate Technologies Inc. Production of LCD touch panel, USB cable, and industrial computer LNC Technology Co., Ltd. (LNC) Better Auto Holdings Limited (Better Auto) General investment Better Auto Holdings Limited (Better Auto) Famous Now Limited (Famous Now) General investment Famous Now Limited (Famous Now) LNC Dong Guan Co., Ltd. Production and sale of industrial automation products BEMC Holdings Corporation (BEMC) Avtek Corporation (Avtek) General investment Avtek Corporation (Avtek) B+B Smartworx Inc. (B+B) General investment B+B Smartworx Inc. (B+B) B+B Smartworx Limited (BBIE) (former BBI) Sale of industrial network communications systems Quatech, LLC (Quatech) Sale of industrial network communications systems B&B IMC. LLC (IMC) Sale of industrial network communications systems B+B Smartworx Limited (BBIE) B&B Electronics Holdings LLC (B&B Electronics) Sale of industrial network communications systems (former BBI) Advantech B+B SmartWorx s.r.o.CZ (B+B (CZ)) Manufacturing of cellular and automation solutions Conel Automation s.r.o. CZ (Conel Automation) Sale of industrial network communications systems Advantech Technology DMCC (DMCC) (Former B&B DMCC) Sale of industrial network communications systems B&B Electronics Holdings LLC (B&B Electronics) Advantech B+B SmartWorx s.r.o.CZ (B+B (CZ)) Manufacturing of cellular and automation solutions Advantech B+B SmartWorx s.r.o.CZ (B+B (CZ) Conel Automation s.r.o. CZ (Conel Automation) Sale of industrial network communications systems

Proportion of Ownership (%) March 31, 2019 December 31, 2018 March 31, 2018 Remark - - 100.00 a, h 49.00 49.00 49.00 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 k - - 100.00 k 100.00 100.00 100.00 - - 100.00 m 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 fourth quarter of 2018, the Group acquired 40% of the equity of AKST; thus the Group’s equity investment in AKST increased from 36% to 76%.

• Remark c: In the first quarter of 2018, the Group acquired 49% of the equity of ATH; thus the Group’s equity investment in ATH increased 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.

• Remark f: In the second quarter of 2018, the Group acquired 60% of the equity of AVN.

• Remark g: In the second quarter of 2018, the Group founded SIoT (Cayman) and SIoT (China).

• 24 -

• Remark h: In the third quarter of 2018, the Group adjusted its investment structure; hence SIoT (Cayman) directly held 100% of the equity of A-SIoT (former A-DLoG).

• Remark i: In the third quarter of 2018, AiSC invested in SIoT (China) and held 1% of the equity of SIoT (China).

• Remark j: In the first and the third quarters of 2018, the Group respectively sold 1.11% and 15.96% of the equity of LNC, which led the Group’s equity investment in LNC to decrease from 81.17% to 64.10%.

• Remark k: In the fourth quarter of 2018, the Group adjusted its investment structure, and BEMC and Avetek were liquidated. The Company directly holds B+B at the moment.

• Remark l: In the fourth quarter of 2018, the Group founded ARU.

• Remark m: In the fourth quarter of 2018, Quatech was in the process of liquidation.

• Remark n: In the first quarter of 2019, the Group acquired 80% of the equity of ATJ. The Group and AJP held 50% and 30% of the equity of ATJ, respectively.

• Remark o: In the first quarter of 2019, the Group acquired 60% of the equity of ATR.

• Remark p: In the first quarter of 2019, Advantech Corporate Investment founded ACISM and acquired 100% of its equity.

• Remark q: In the second quarter of 2018, Advanixs Kun Shan Corp. were merged by AKMC. Advanixs Kun Shan Corp. ceased to exist and liquidation has been completed in the fourth quarter of 2018.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Associates that are not individually material
Listed companies
Axiomtek Co., Ltd. (“Axiomtek”)	$	649,934	$	619,411	$	644,887
Winmate Inc. (“Winmate”)		551,581		542,761		549,795
AzureWare Technologies, Inc. (“AzureWare”)		513,909		534,780		532,078
Nippon RAD Inc. (Nippon RAD)		306,603		298,700		-
Mildex Optical Inc. (“Mildex”)		200,381		183,210		-
Unlisted companies
AIMobile Co., Ltd. (“AIMobile”)		97,333		65,012		80,552
Deneng Scientific Research Co., Ltd.
(“Deneng”)		13,975		14,100		14,804
Jan Hsiang Electronics Co., Ltd. (“Jan
Hsiang”)		7,784		8,010		10,381
CDIB Innovation Accelerator Co., Ltd.
(“CDIB”)		149,003		147,109		70,554
						(Continued)

• 25 -

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
DotZero Co., Ltd. (“DotZero”)	$	4,573	$	4,629	$	-
iLink Co., Ltd. (“iLink”)		7,490		9,407		-
Shanghai Yanle Co., Ltd. (“Yanle”)		4,382		74,393		-
GSD Environmental Technology Co., Ltd.
(“GSD”)		17,963		-		-
	$ 2,524,911		$	2,431,522	$	1,903,051
						(Concluded)

In the first quarter of 2018, the Group subscribed the equity of AzureWave Technologies, Inc. through a private placement with the approval of the board of directors. In the second half of 2018, the Group subscribed for 19.65% of its equity and had 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 with the approval of the broad of directors.

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 the third quarter of 2018, the Group paid cash of $4,392 thousand for 45% equity of Shanghai Yanle Co., Ltd. The Group had significant influence over Shanghai Yanle Co., Ltd.

In the third quarter of 2018, the Group paid cash of $4,900 thousand for a 49% equity of DotZero Co., Ltd. The Group had significant influence over DotZero Co., Ltd.

In the fourth quarter of 2018, the Group paid cash of $202,948 thousand for a 15% equity of Mildex Optical Inc. The Group had significant influence over Mildex Optical Inc.

In the first quarter of 2019, the Group paid cash of $18,214 thousand for a 40% equity of GSD Co., Ltd. The Group had significant influence over Chuanyan Co., Ltd.

Aggregate Information of Associates That Are Not Individually Material

The Group’s share of Profit (loss) from continuing operations Other comprehensive loss Total comprehensive income (loss) for the period	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 4,949 24,317 $ 29,266	2018 $ 21,507 (1,663) $ 19,844

The Group’s investment in the above associate was accounted for using the equity method.

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.

• 26 -

14. PROPERTY, PLANT AND EQUIPMENT

a. 2019

Cost Balance at January 1, 2019 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2019 Accumulated depreciation and impairment Balance at January 1, 2019 Disposals Depreciation expenses Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2019 Carrying amounts at March 31, 2019 2018 Cost Balance at January 1, 2018 Additions Disposals Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation expenses Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2018 Carrying amounts at March 31, 2018	Freehold Land $ 2,934,127 - (7,100 ) 39,543 - (488) $ 2,966,082 $ - - - - - - $ - $ 2,966,082 Freehold Land $ 2,943,980 - - - (1,673) $ 2,942,307 $ - - - - - $ - $ 2,942,307	Buildings $ 7,195,732 12 (13,147 ) 945,040 32,713 43,299 $ 8,203,649 $ 1,591,282 (5,673 ) 50,953 867,976 (580 ) 9,248 $ 2,513,206 $ 5,690,443 Buildings $ 7,274,546 9,555 - (2,766 ) 40,519 $ 7,321,854 $ 1,414,696 - 50,005 (551 ) 13,059 $ 1,477,209 $ 5,844,645	Equipment $ 1,709,936 20,495 (9,475 ) 130,912 (11,696 ) 11,804 $ 1,851,976 $ 1,172,613 (7,915 ) 51,975 109,364 8,947 6,111 $ 1,341,095 $ 510,881 Equipment $ 1,634,925 12,929 (58,578 ) 19,282 8,856 $ 1,617,414 $ 1,186,494 (52,916 ) 26,234 8,503 5,227 $ 1,173,542 $ 443,872	Office Equipment $ 850,021 14,879 (18,987 ) 15,916 (7,862 ) 4,344 $ 858,311 $ 654,746 (13,112 ) 23,105 9,952 (8,002 ) (371) $ 666,318 $ 191,993 Office Equipment $ 830,623 14,809 (2,934 ) (30,369 ) 2,845 $ 814,974 $ 651,244 (2,889 ) 19,199 (28,778 ) 2,214 $ 640,990 $ 173,984	Other Facilities $ 1,743,263 24,484 (19,821 ) 34,650 (4,192 ) 15,278 $ 1,793,662 $ 1,234,142 (19,349 ) 47,387 32,988 (1,441 ) 9,922 $ 1,303,649 $ 490,013 Other Facilities $ 1,729,582 32,901 (14,649 ) (8,931 ) 9,076 $ 1,747,979 $ 1,198,147 (13,389 ) 48,739 183 6,975 $ 1,240,655 $ 507,324	Construction in Progress $ 2,485 101,367 (431 ) 1 (104,744 ) 5,953 $ 4,631 $ - - - - - - $ - $ 4,631 Construction in Progress $ 4,257 13,661 (1,308 ) (13,257 ) 86 $ 3,439 $ - - - - - $ - $ 3,439	Total $ 14,435,564 161,237 (68,961 ) 1,166,062 (95,781 ) 80,190 $ 15,678,311 $ 4,652,783 (46,049 ) 173,420 1,020,280 (1,076 ) 24,910 $ 5,824,268 $ 9,854,043 Total $ 14,417,913 83,855 (77,469 ) (36,041 ) 59,709 $ 14,447,967 $ 4,450,581 (69,194 ) 144,177 (20,643 ) 27,475 $ 4,532,396 $ 9,915,571

b. 2018

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 30.

• 27 -

15. LEASE ARRANGEMENTS

a. Right-of-use assets - 2019

	March 31, 2019
Carrying amounts
Land	$ 311,514
Buildings	527,035
Machinery	2,694
Office equipment	13,546
Transportation equipment	50,296

$ 905,085

	For	the Three
	Months Ended
	March 31, 2019
Depreciation charge for right-of-use assets
Land	$	2,213
Building		42,454
Machinery		164
Office equipment		1,431
Transportation equipment		7,361
	$	53,623

Right-of-use land was classified as prepayments for lease under IAS 17. Refer to Notes 3 and 17 for information related to their reclassification and comparative information for 2018.

• b. Lease liabilities - 2019

	March 31, 2019
Carrying amounts
Current	$ 201,334
Non-current	393,299
	$ 594,633
Range of discount rate for lease liabilities was as follows:

	March 31, 2019
Buildings	0.25%-12.00%
Machinery	0.87%-5.46%
Office equipment	0.87%-4.75%
Transportation equipment	0.25%-5.90%

• 28 -

16. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 26) Effect of foreign currency exchange differences Balance at March 31 Accumulated impairment losses Balance at January 1 Effect of foreign currency exchange differences Balance at March 31 Carry amount at March 31		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 2,937,789 124,028 (2,062) $ 3,059,755 $ (97,788) - $ (97,788) $ 2,961,967	2018 $ 2,828,958 - (35,771) $ 2,793,187 $ (101,409) 3,621 $ (97,788) $ 2,695,399

The goodwill recognized in the acquisitions of ATJ, ATR, and AVN mainly represents the control premium included in the costs of the combinations. The accounting for the acquisition has been provisionally determined at the end of the reporting period. As of the date the consolidated financial statements were approved for issue, the market valuations and other calculations have not been finalized. Therefore, the amount was provisionally determined based on the best estimate made by the Group’s management.

17. PREPAYMENTS FOR LEASES

	December 31,	December 31,
		2018	March 31, 2018
Current assets (included in other current assets)	$	8,673	$	9,013
Non-current assets		297,665		316,072
	$	306,338	$	325,085

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

18. BORROWINGS

• a. Short-term borrowings

			December	December	31,
	March 31, 2019			2018		March 31, 2018
Secured borrowings
Bank loans	$	-	$		-	$	81,000
Unsecured borrowings
Line of credit borrowings		424,096		87,581			-
	$	424,096	$	87,581		$	81,000

• 29 -

The range of weighted average effective interest rates on bank loans was 0.19%-3.15%, 1.38%-3.15% and 2.98% per annum as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively.

• b. Long-term borrowings

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Secured borrowings
Bank loans	$	-	$	-	$	48,463
Other loans		53,004		55,410		60,443
		53,004		55,410		108,906
Less: Current portions		(7,220)		(9,626)		(27,982)
Long-term borrowings	$	45,784	$	45,784	$	80,924

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 March 31, 2018.

Other borrowings are loans from the government. As of March 31, 2019, December 31, 2018 and March 31, 2018, the effective interest rate was 2.91%-3.16%.

With demand of borrowings, the Group freehold land and buildings and payment guarantee (refer to Note 30).

19. OTHER LIABILITIES

		December 31,
	March 31, 2019	2018	March 31, 2018
Other payables
Payables for salaries or bonuses	$ 1,812,215	$ 2,143,770	$ 1,875,215
Payables for employee benefits	200,213	207,175	183,341
Payables for royalties	121,515	107,409	118,544
Others (Note)	1,138,870	1,203,845	971,822
	$ 3,272,813	$ 3,662,199	$ 3,148,922

Note: Including marketing expenses, and freight expenses.

20. RETIREMENT BENEFIT PLANS

Employee benefit expenses in respect of the Group’s defined benefit retirement plans were $1,339 thousand and $1,412 thousand for the three months ended March 31, 2019 and 2018, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.

• 30 -

21. EQUITY

a. Share capital

Ordinary shares

		December 31,
	March 31, 2019	2018	March 31, 2018
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)	699,076	698,696	697,458
Shares issued	$ 6,990,755	$ 6,986,955	$ 6,974,575

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.

b. Capital surplus

		December 31,
	March 31, 2019	2018	March 31, 2018
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	80,831	88,560	19,359
Share of changes in capital surplus of
associates	55	55	-
May be used to offset a deficit only
Changes in percentage of ownership interest
in subsidiaries (2)	4,263	4,263	4,246
Employee share options	1,615,779	1,519,818	1,291,394
Employees’ share compensation	78,614	78,614	78,614
Share of changes in capital surplus of
associates	28,927	27,890	26,392
Not note be used for any purpose
Employee share options	1,042,060	1,025,411	919,969
	$ 7,179,266	$ 7,073,348	$ 6,668,711

• 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 once a year).

• 31 -

• 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 22, 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.

An appropriation of earnings to a legal reserve should 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 2018 and 2017 which have been proposed by the Company’s board of directors on March 8, 2019 and approved in the shareholders’ meetings on May 24, 2018, respectively, were as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2018 2017 $ 629,466 $ 615,651 429,108 284,451 4,751,129 4,660,414	Dividends Per Share (NT$)
		For the Year Ended **December 31 **
		2018 2017 $ - $ - - - 6.8 6.6

The appropriations of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on May 28, 2019.

• 32 -

d. Special reserves

Beginning at January 1 Balance atMarch31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 369,655 $ 369,655	2018 $ 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 March 31 2) Unrealized gain or loss on Financial Assets at FVTOCI Balance at January 1 Recognized for the period Unrealized gain/(loss) - equity instruments Share of those of associates accounted for using the equity method Other comprehensive income recognized for the period Balance at March 31 3) Unearned employee benefits compensation Balance at January 1 Share from associates accounted for using the equity method Balance at March 31	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
	2019 2018 $ (475,245) $ (463,479) - 3,544 100,098 11,312 3,161 (1,042) 103,259 (13,814) $ (371,986) $ (449,665) For the Three Months Ended **March 31 **
		2019 2018 $ (324,254) $ 134,877 120,818 161,517 20,910 (361) 141,728 161,156 $ (182,526) $ 296,033 For the Year Ended December 31, 2019 $ 736 274 $ 1,010

• 33 -

f. Non-controlling interests

Balance at January 1 Share of profit (loss) for the year Other comprehensive income during the year Exchange difference on translation of foreign financial statements Partial disposal of subsidiaries (Note 27) Non-controlling interests arising from increasing investment in subsidiaries (Note 27) Non-controlling interests arising from acquisition of subsidiary, ATJ (Note 26) Non-controlling interests arising from acquisition of subsidiary, ATR (Note 26) Employees’ holding outstanding vest share option related non-controlling interests issued by subsidiaries Balance at March 31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 237,883 5,511 29,603 - (22,487) 102,770 14,041 218 $ 367,539	2018 $ 179,366 5,268 (11,062) 1,876 - - - 1,234 $ 176,682

22. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

Interest on bank loans Interest on lease liabilities Others b. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
	2019 2018 $ 778 $ 193 4,510 - 887 1,029 $ 6,175 $ 1,222 For the Three Months Ended March 31
		2019 $ 38,392 188,651 $ 227,043 $ 943 73 25,782 20,337 $ 47,135	2018 $ 34,930 109,247 $ 144,177 $ 914 16,891 17,041 7,653 $ 42,499

• 34 -

c. Employee benefits expense

Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 20) 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 **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 2,266,458 91,661 1,339 93,000 84,673 152,799 $ 2,596,930 $ 561,783 2,035,147 $ 2,596,930	2018 $ 2,049,696 76,788 1,412 78,200 99,019 145,631 $ 2,372,546 $ 492,718 1,879,828 $ 2,372,546

d. Employees’ compensation and remuneration of directors and supervisors

The Company accrued employees’ compensation at the rates of no less than 5% and remuneration of directors at the rates of no higher than 1%, of net profit before income tax, employees’ compensation, and remuneration of directors. For the three months ended March 31, 2019 and 2018, the employees’ compensation and the remuneration of directors were accrued of net profit after income tax.

Employees’ compensation Remuneration of directors	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 116,455 $ 2,650	2018 $ 68,250 $ 2,650

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

The appropriations of employees’ compensation and remuneration of directors and supervisors for 2018 and 2017 having been resolved by the board of directors on May 3, 2019 and March 2, 2018, respectively, were as below:

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2019 Cash $ 452,355 10,600	2018
		Cash $ 273,000 10,600

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, 2018 and 2017.

• 35 -

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

• e. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses Net gain (loss)	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 186,054 (116,310) $ 69,744	2018 $ 258,485 (261,241) $ (2,756)

23. INCOME TAXES

• a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of the current period Adjustment for prior years Deferred tax In respect of the current period Change in tax rate Income tax expense recognized in profit or loss	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 465,526 22,516 (56,362) - $ 431,680	2018 $ 362,256 (31,900) 4,641 38,557 $ 373,554

The Income Tax Act in the ROC was amended in 2018 and the corporate income tax rate is adjusted from 17% to 20%. The effect of the change in tax rate on deferred tax expense to be recognized in profit or loss is $185,530 thousand, for which $146,973 thousand has not been recognized as of March 31, 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 **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ - 25,815 $ 25,815	2018 $ (3,544) 2,568 $ (976)

• 36 -

• c. Income tax assessments

The Company’s tax returns through 2016 have been assessed by the tax authorities.

24. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 2.31 $ 2.29	2018 $ 1.95 $ 1.95

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

Earnings used in the computation of basic earnings per share Earnings used in the computation of diluted earnings per share		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 1,617,358 $ 1,617,358	2018 $ 1,362,670 $ 1,362,670

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 698,744 6,372 1,911 707,027	2018 697,404 936 1,211 699,551

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation 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.

• 37 -

25. SHARE-BASED PAYMENT ARRANGEMENTS

Qualified employees of the Company and its subsidiaries were granted 8,000 options in 2018, 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 2018, 2016 and 2014 are all valid for six years. All options are exercisable at certain percentages after the second anniversary year from the grant date. The options issued in 2018 were granted at an exercise price equal to the share price at 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 March 31 Options exercisable, end of the period Weighted-average fair value of options granted (NT$)	For the Three Months Ended March 31	For the Three Months Ended March 31
	2019 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 15,965 $ 143.64 (380) 83.52 15,585 - 7,585 84.58 -	2018
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 9,378 $ 95.15 (175) 84.20 9,203 - 2,703 84.20 -

The weighted-average share price at the date of exercise of share options for the three months ended March 31, 2019 and 2018 were from NT$223 to NT$249 and NT$213 to NT$226, respectively.

Information about outstanding options as of March 31, 2019 and 2018 was as follows:

Issuance in 2018 Issuance in 2016 Issuance in 2014	**For the Three Months Ended December 31 **	**For the Three Months Ended December 31 **
	2019 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 202.50 5.33 85.60 3.20 81.50 1.38	2018
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 88.5 4.20 84.2 2.38

• 38 -

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

	2018	2016	2014
Grant-date share price (NT$)	$202.5	$235	$239.5
Exercise price (NT$)	$202.5	$100	$100
Expected volatility	28.42%-28.73%	31.42%-32.48%	28.28%-29.19%
Expected life (in years)	4-5.5	4-5.5	4-5.5
Expected dividends yield	0%	0%	0%
Risk-free interest rate	0.67%-0.69%	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 $84,673 thousand and $99,019 thousand for the three months ended March 31, 2019 and 2018, respectively.

Qualified employees of LNC, a subsidiary of the Company, were granted 108 options in May 2018 and 1,092 options in June 2017. Each option entitles the holder to subscribe for one thousand common shares of LNC. These options were valid for five 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 March 31 Options exercisable, end of period Weighted-average fair value of options granted (NT$)	**For the Three Months Ended March 31 **	**For the Three Months Ended March 31 **
	2019 Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 814 $ 20 814 20 - $ -	2018
		Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 980 $ 20 980 20 - $ -

Information on outstanding options for the three months ended March 31, 2019 and 2018 was as follows:

Employee Share Options Issuance in 2018 Issuance in 2017	**March 31 **	**March 31 **
	2019 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 20 3.28 20 2.17	2018
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 20 3.42

• 39 -

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

	2018	2017
Grant-date valuation (NT$)	$17.29	$16.11
Exercise price (NT$)	$20	$20
Expected volatility	21.36%-25.43%	25.6%-29.45%
Expected life (in years)	2.5-4	2.5-4
Expected dividend yield	1.04	-
Risk-free interest rate	0.60%-0.67%	0.64%-0.74%

In August 2018, the Company modified all of its outstanding options. The valid life was adjusted from 4 to 5 years. The incremental fair values of NT$0.38 in June 2017 and NT$0.34 in May 2018 will be recognized as expenses in the rest of each of their vesting period within 2.42 and 3.33 years. LNC used the inputs noted above to measure the fair value of the old and new options.

Issuance in 2018

Issuance in 2018
	Before	After
	Adjustment	Adjustment
Grant-date valuation (NT$)	$17.86	$17.86
Exercise price (NT$)	$20	$20
Expected volatility	20.04%-23.67%	21.57%-24.70%
Expected life (in years)	2.17-3.67	2.67-4.17
Expected dividend yield	1.01	1.01
Risk-free interest rate	0.57%-0.65%	0.61%-0.67%

Issuance in 2017

Issuance in 2017
	Before	After
	Adjustment	Adjustment
Grant-date valuation (NT$)	$17.86	$17.86
Exercise price (NT$)	$20	$20
Expected volatility	19.35%-21.61%	19.89%-23.34%
Expected life (in years)	1.38-2.76	1.88-3.26
Expected dividend yield	-	-
Risk-free interest rate	0.49%-0.61%	0.54%-0.64%

26. BUSINESS COMBINATIONS

a. Subsidiaries acquired

			Proportion of
			Voting Equity
		Date of	Interests	Consideration
	Principal Activity	Acquisition	Acquired (%)	Transferred
Advantech	Production and sale of	January 31, 2019	80	$	517,008
Technologies	eletronical and
Japan Corp. (ATJ)	mechanical device
Advantech Turkey	Wholesale of computers	February 28, 2019	42	$	28,266
Teknoloji A.S.	and peripheral devices
(ATR)

• 40 -

The Group acquired 80% of the shares of Advantech Technologies Japan Corp. (ATJ) in order to expand its embedded systems and strengthen customization of design and production in the Japan market.

The Group acquired 42% of the shares of Advantech Turkey Teknoloji A.S. (ATR) in order to expand the sales of industrial automation products in the Turkey market. The Group increased capital; thus the Group’s equity investment in ATR increased to 60%.

b. Consideration transferred

Cash Assets acquired and liabilities assumed at the dates of acquisitions Current assets Cash and cash equivalents Trade receivables Inventories 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 tax liabilities Other current liabilities Non-current liabilities Other non-current liabilities	ATJ $ 517,008 ATJ $ - 600,641 437,154 7,220 145,020 4,426 73,782 - (157,819) (548,370) (32,436) (15,770) - $ 513,848	ATR $ 28,266 ATR $ 3,118 16,907 10,319 52 762 195 - 181 (311) (2,206) (444) (4,278) (86) $ 24,209

c. Assets acquired and liabilities assumed at the dates of acquisitions

The initial accounting for the acquisition of ATJ and ATR were only provisionally determined at the end of the reporting period. The tax bases of ATJ and ATR’s assets were required to be reset based on the market values of the assets. As of the date the consolidated financial statements were approved for issue, the market valuations and other calculations had not been finalized. Therefore, the amount of the likely tax values was provisionally determined based on the best estimate made by the Group’s management.

d. Non-controlling interests

The non-controlling interest (20% and 58% ownership interest in ATJ and ATR) recognized at the acquisition date was measured by reference to the identifiable net assets of the non-controlling interest and amounted to $102,770 thousand and $14,041 thousand for each.

• 41 -

• e. Goodwill recognized on acquisitions

Consideration transferred Less: Fair value of identifiable net assets acquired Goodwill recognized on acquisitions	ATJ $ 517,008 (411,078) $ 105,930	ATR $ 28,266 (10,168) $ 18,098

The goodwill recognized in the acquisitions of ATJ and ATR mainly represents the control premium included in the costs of the combinations. The accounting for the acquisition has been provisionally determined at the end of the reporting period. As of the date the consolidated financial statements were approved for issue, the market valuations and other calculations have not been finalized. Therefore, the amount was provisionally determined based on the best estimate made by the Group’s management.

• f. Net cash outflow on acquisitions of subsidiaries

Consideration paid in cash Less: Cash and cash equivalent balances acquired	ATJ $ 517,008 - $ 517,008	ATR $ 28,266 (3,118) $ 25,148

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	For the Three Months Ended March 2019	For the Three Months Ended March 2019	For the Three Months Ended March 2019
		ATJ $ 249,067 $ 17,419	ATR $ 9,858 $ 2,505

27. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

• a. In the first and third quarters of 2018, the Group sold 1.11% of the equity in LNC, which led the Group’s equity investment decreased from 81.17% to 80.06%.

• b. In the first quarter of 2019, the Group increase capital to acquire 18%of the shares of ATR, which led the Group’s equity investment in ATR increase from 42% to 60%.

• 42 -

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 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 Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 ATR $ (30,216) 22,487 $ (7,729) $ (7,729)		2018
				LNC $ 3,391 (1,876) $ 1,515 $ 1,515

28. FINANCIAL INSTRUMENTS

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

• 1) Fair value hierarchy

March 31, 2019 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	Level 1 $ - 96,005 6,843 2,114,519 $ 2,217,367 $ 1,303,017 - - $ 1,303,017 $ -	Level 2 $ 6,711 - - - $ 6,711 $ - - - $ - $ 8,171	Level 3 $ - - - - $ - $ - 9,098 111,799 $ 120,897 $ -	Total $ 6,711 96,005 6,843 2,114,519 $ 2,224,078 $ 1,303,017 9,098 111,799 $ 1,423,914 $ 8,171

• 43 -

December 31, 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 March 31, 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	Level 1 $ - 202,622 5,270 1,885,462 $ 2,093,354 $ 1,181,502 - - $ 1,181,502 $ - Level 1 $ - 231,375 7,865 3,653,168 $ 3,892,408 $ 1,785,520 - - $ 1,785,520 $ -	Level 2 $ 5,198 - - - $ 5,198 $ - - - $ - $ 6,139 Level 2 $ 3,270 - - - $ 3,270 $ - - - $ - $ 13,625	Level 3 $ - - - - $ - $ - 8,622 110,143 $ 118,765 $ - Level 3 $ - - - - $ - $ - 12,027 72,999 $ 85,026 $ -	Total $ 5,198 202,622 5,270 1,885,462 $ 2,098,552 $ 1,181,502 8,622 110,143 $ 1,300,267 $ 6,139 Total $ 3,270 231,375 7,865 3,653,168 $ 3,895,678 $ 1,785,520 12,027 72,999 $ 1,870,546 $ 13,625

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

• 44 -

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

For the three months ended March 31, 2019

Financial assets Balance at January 1, 2019 Recognized in other comprehensive income Balance at March 31, 2019 For the three months ended March 31, 2018 Financial assets Balance at January 1, 2018 Reclassification Recognized in other comprehensive income Balance at March 31, 2018	Financial Assets at Fair Value Through Other Comprehensive Income Equity Instruments $ 118,765 2,132 $ 120,897 Financial Assets at Fair Value Through Other Comprehensive Income Equity Instruments $ - 89,893 (4,867) $ 85,026	Total $ 118,765 2,132 $ 120,897 Total $ - 89,893 (4,867) $ 85,026

• 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 under the asset approach. In this approach, the fair value of net assets was used to capture the present value of the expected future economic benefits.

• 45 -

b. Categories of financial instruments

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Financial assets
Fair value through profit or loss (FVTPL)
Mandatorily at FVTPL	$	2,224,078	$	2,098,552	$	3,892,408
Financial assets at amortized cost (Note 1)		15,956,509		15,187,794		12,785,669
Financial assets at FVTOCI
Equity instruments		1,423,914		1,300,267		1,870,546
Financial liabilities
Fair value through profit or loss (FVTPL)
Mandatorily at FVTPL		8,171		6,139		13,625
Financial assets at amortized cost (Note 2)		9,505,473		9,616,094		8,641,983

• Note 1: 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 and other receivables.

• Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable and trade payables, other 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, borrowings, and lease liabilities. 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.

• 46 -

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.

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 31. 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 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 Three Months Ended March 31 2019 2018 $ 107,874 (Note 1) $ 81,837 (Note 1)	Euro Impact For the Three Months Ended March 31 2019 2018 $ 65,293 (Note 2) $ 66,026 (Note 2)	Renminbi Impact
			For the Three Months Ended March 31
			2019 2018 $ 53,088 (Note 3) $ 38,259 (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.

• 47 -

• 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 is exposed to interest rate risk because entities in the Group maintain both floating and fixed interest rates of bank deposits and borrowings. 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.

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,
	March 31, 2019	2018	March 31, 2018
Fair value interest rate risk
Financial assets	$ 1,291,616	$ 1,363,564	$	295,131
Financial liabilities	373,605	-		41,173
Cash flow interest rate risk
Financial assets	4,891,093	4,527,415		4,067,153
Financial liabilities	103,495	142,991		75,833

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 three months ended March 31, 2019 and 2018 would have increased by $5,984 thousand and $4,989 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 and borrowings.

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.

• 48 -

If equity prices had been 1% higher, pre-tax profit for the three months ended March 31, 2019 and 2018 would have increased by $1,028 thousand and $2,392 thousand, respectively, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the three months ended March 31, 2019 and 2018 would have increased by $14,239 thousand and $18,705 thousand, respectively, as a result of the changes in fair value of financial assets at FVTOCI. Had equity prices been 1% lower for the same year, the pre-tax profit and other comprehensive income would have decreased by the same respective amounts.

The Group had the lower sensitivity toward equity prices mainly because stock price fell in 2018.

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 March 31, 2019, December 31, 2018 and March 31, 2018, 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.

• 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.

• 49 -

March 31, 2019

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,912,073 Variable interest rate liabilities 30,172 Fixed interest rate liabilities 270 $ 6,942,515 December 31, 2018 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 7,036,567 Variable interest rate liabilities 337 $ 7,036,904 March 31, 2018 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,003,903 Variable interest rate liabilities 183 Fixed interest rate liabilities 63 $ 6,004,149	1-3 Months $ 1,182,308 275 250,741 $ 1,433,324 1-3 Months $ 1,601,148 20,649 $ 1,621,797 1-3 Months $ 1,443,831 366 127 $ 1,444,324	Over 3 Months to 1 Year Over 1 Year $ 933,992 $ - 21,727 64,165 125,085 - $ 1,080,804 $ 64,165 Over 3 Months to 1 Year Over 1 Year- 5 Years $ 835,388 $ - 70,407 67,039 $ 905,795 $ 67,039 Over 3 Months to 1 Year Over 1 Year $ 1,077,243 $ - 9,745 81,828 571 41,611 $ 1,087,559 $ 123,439

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.

• 50 -

• 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 gross cash inflows and outflows on derivative instruments that require gross settlement.

March 31, 2019

On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 299,707 Outflows 301,936 $ (2,229) December 31, 2018 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 245,998 Outflows 245,440 $ 558 March 31, 2018 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 299,342 Outflows 305,203 $ (5,861)	1-3 Months Over 3 Months to 1 Year $ 441,062 $ 227,528 440,601 227,220 $ 461 $ 308 1-3 Months Over 3 Months to 1 Year $ 410,248 $ 205,677 410,296 207,128 $ (48) $ (1,451) 1-3 Months Over 3 Months to 1 Year $ 503,236 $ 311,078 510,178 308,630 $ (6,942) $ (2,448)	Total $ 968,297 969,757 $ (1,460) Total $ 861,923 862,864 $ (941) Total $ 1,113,656 1,124,011 $ (10,355)

• 51 -

c) Financing facilities

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Unsecured bank overdraft facilities
reviewed annually and payable at
call:
Amount used	$	423,872	$	67,581	$	-
Amount unused		6,747,868		3,955,919		3,869,200
	$	7,171,740	$	4,023,500	$	3,869,200
Secured bank overdraft facilities:
Amount used	$	53,004	$	55,410	$	117,006

29. 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 Related Party Category Axiomtek Co., Ltd. Associate AIMobile Co., Ltd. Associate Deneng Scientific Research Co., Ltd. Associate Jan Hsiang Electronics Co., Ltd. Associate Winmate Inc. Associate AzureWave Technologies, Inc. Associate i-Link Co., Ltd. Associate Mildex Optical Inc. Associate Nippon RAD Inc. Associate Shanghai Yanle Co., Ltd. Associate Advantech Foundation Other related party K&M Investment Co., Ltd. Other related party AIDC Investment Corp. Other related party

• b. Sales of goods

For the Three Months Ended March 31 Related Party Categories/Name 2019 2018 Associates $ 23,179 $ 20,897 c. Purchases of goods

For the Three Months Ended March 31 Related Party Categories/Name 2019 2018 Associates $ 42,920 $ 19,667

• 52 -

• d. Receivables from related parties (excluding loans to related parties)

	Related Party	March 31,	December 31,	March 31,
Line Items	Categories/Name	2019	2018	2018
Trade receivables from	Associates	$ 20,166	$ 18,969	$ 14,958
related parties

The outstanding trade receivables from related parties are unsecured. For the three months ended March 31, 2019 and 2018, no impairment loss was recognized for trade receivables from related parties.

• e. Payables to related parties (excluding loans from related parties)

	Related Party	March 31,	December 31,	March 31,
Line Items	Categories/Name	2019	2018	2018
Trade payables	Associates	$ 37,206	$ 27,653	$ 21,284

The outstanding trade payables to related parties are unsecured.

• f. Other transactions with related parties

Related Party Category/Name Research and development expenses Associates	Operating Expenses	Operating Expenses	Operating Expenses
	For the Three Months Ended **March 31 **
		2019 $ 160	2018 $ 1,688

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
	For the Three Months Ended March 31
		2019 $ 15 $ 676	2018 $ 15 $ 676

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.

• 53 -

g. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 11,290 11 10,411 $ 21,712	2018 $ 11,794 50 7,378 $ 19,231

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

30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

Pledge deposits (recognized as debt investments with no active market) Property, plant and equipment		**March 31 **	**March 31 **
		2019 $ - 67,068 $ 67,068	2018 $ 28,912 67,068 $ 95,980

31. 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:

March 31, 2019

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 206,550 30.82 (USD:NTD) RMB 488,040 4.580 (RMB:NTD) EUR 28,349 34.61 (EUR:NTD) USD 15,813 6.7293 (USD:RMB)	Carrying Amount $ 6,365,871 2,235,209 981,159 487,355 $ 10,069,594 (Continued)

• 54 -

		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial liabilities
Monetary items
USD	$	126,877	30.82 (USD:NTD)	$	3,910,349
RMB		167,961	4.580 (RMB:NTD)		769,257
USD		24,384	6.7293 (USD:RMB)		751,514
				$	5,431,120
					(Concluded)
December 31, 2018
	Unit:	In Thousands	for Currencies, Except	Exchange Rates
		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial assets
Monetary items
USD	$	211,836	30.715 (USD:NTD)	$	6,506,543
RMB		493,302	4.472 (RMB:NTD)		2,206,044
EUR		24,059	35.200 (EUR:NTD)		846,877
USD		15,998	6.8683 (USD:RMB)		491,378
				$	10,050,842
Financial liabilities
Monetary items
USD		142,257	30.715 (USD:NTD)	$	4,369,424
RMB		246,686	4.472 (RMB:NTD)		1,103,178
USD		29,534	6.8683 (USD:RMB)		907,135
				$	6,379,737

• 55 -

March 31, 2018

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 196,259 29.105 (USD:NTD) RMB 437,651 4.6470 (RMB:NTD) EUR 39,600 35.870 (EUR:NTD) USD 16,312 6.2632 (USD:RMB) RMB 44,522 0.1597 (RMB:USD) Financial liabilities Monetary items USD 127,721 29.105 (USD:NTD) RMB 239,453 4.6470 (RMB:NTD) USD 29,215 6.2632 (USD:RMB)	Carrying Amount $ 5,712,118 2,033,764 1,420,452 474,761 206,907 $ 9,848,002 $ 3,717,320 1,112,738 850,303 $ 5,680,361

For the three months ended March 31, 2019 and 2018, realized and unrealized net foreign exchange gains (or losses) were $69,744 thousand and $(2,756) 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.

32. 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)

• 56 -

• 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 28)

• 10) Significant transactions between the Company and subsidiaries. (Table 9)

• 11) Name, locations, and other information of investees. (Table 7)

• 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)

33. 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 (AlliedDMS): 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.

• 57 -

Segment Revenue and Results

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

For the three months ended March 31, 2019 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Other revenue Other unamortized expense Other income and expense Finance costs Share of profits of associates for using the equity method Profit before tax (continuing operations) For the three months ended March 31, 2018 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Other revenue Other unamortized expense 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) $ 3,724,205 - $ 3,724,205 $ - - $ 858,618 $ 3,900,182 - $ 3,900,182 $ - - $ 880,113	Embedded Boards and Design-in Services (EIoT) $ 3,110,924 - $ 3,110,924 $ - - $ 496,686 $ 3,097,274 - $ 3,097,274 $ - - $ 517,321	Allied Design Manufacture Services (Allied DMS) $ 2,970,837 - $ 2,970,837 $ - - $ 427,537 $ 1,824,716 - $ 1,824,716 $ - - $ 281,221	Intelligent Services (SIoT) $ 1,145,359 - $ 1,145,359 $ - - $ 92,764 $ 1,028,811 - $ 1,028,811 $ - - $ 74,393	Global Customer Services (AGS & APS) $ 1,330,210 - $ 1,330,210 $ - - $ 170,423 $ 1,465,059 - $ 1,465,059 $ - - $ 164,080	Others $ 19,055 - $ 19,055 $ - - $ - $ 39,153 - $ 39,153 $ - - $ (994)	Total $ 12,300,590 - 12,300,590 - 12,300,590 2,046,028 34,599 (187,859 ) 163,007 (6,175 ) 4,949 $ 2,054,549 $ 11,355,195 - 11,355,195 - 11,355,915 1,916,134 20,098 (273,541 ) 58,516 (1,222 ) 21,507 $ 1,741,492

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ 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.

• 58 -

TABLE 1

ADVANTECH CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note A)	Lender	Borrower	Financial Statement Account	Related Parties	Credit Line (Note F)	Credit Line (Note F)	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	$ 16,476 (CZK 12,000 thousand )	$ 16,068 (CZK 12,000 thousand )	$ 16,068 (CZK 12,000 thousand )	2.00	Short-term financing	$ -	Financing need	$ -	None	None	$ 118,164 (Note C)	$ 118,164 (Note C)
2	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	6,865 (CZK 5,000 thousand )	6,695 (CZK 5,000 thousand )	6,695 (CZK 5,000 thousand )	2.00	Short-term financing	-	Financing need	-	None	None	118,164 (Note C)	118,164 (Note C)
3	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	4,119 (CZK 3,000 thousand )	4,017 (CZK 3,000 thousand )	4,017 (CZK 3,000 thousand )	2.00	Short-term financing	-	Financing need	-	None	None	118,164 (Note C)	118,164 (Note C)
4	AAC (BVI)	ATJ	Trade receivables - related parties	Yes	169,800, (JPY 600,000 thousand )	166,800, (JPY 600,000 thousand )	-	0.55	Short-term financing	-	Financing need	-	None	None	2,569,920 (Note D)	2,569,920 (Note D)
5	LNC	LNC Dong Guan	Trade receivables - related parties	Yes	30,000	30,000	-	-	Short-term financing	-	Financing need	-	None	None	32,308 (Note E)	129,232 (Note E)

Note A: Investee companies are numbered sequentially from 1.

Note B: The exchange rates as of March 31, 2019 were CZK1=NT$1.339 and JPY1=NT$0.278.

Note C: The financing limit for each borrower and for the aggregate financing were both 40%, of the B+B (CZ)’s net asset values, and were supervised by the Company.

Note D: The financing limit for each borrower and for the aggregate financing were both 40%, of the AAC (BVI)’s net asset values, and were supervised by the Company.

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

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

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

• 59 -

TABLE 2

ADVANTECH CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE THREE MONTHS ENDED MARCH 31, 2019 (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 AAC(BVI) Advantech Corporate Investment AJP ATJ AKST AKMC ACISM SIoT (Cayman) B+B ABR	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449	$ 924,600 (US$ 30,000 thousand) 308,200 (US$ 10,000 thousand) 308,200 (US$ 10,000 thousand) 308,200 (US$ 10,000 thousand) 278,000 (JPY1,000,000 thousand) 184,920 (US$ 6,000 thousand) 184,920 (US$ 6,000 thousand) 154,100 (US$ 5,000 thousand) 308,200 (US$ 10,000 thousand) 154,100 (US$ 5,000 thousand) 46,230 (US$ 1,500 thousand)	$ 924,600 (US$ 30,000 thousand) 308,200 (US$ 10,000 thousand) 308,200 (US$ 10,000 thousand) 308,200 (US$ 10,000 thousand) 278,000 (JPY1,000,000 thousand) 184,920 (US$ 6,000 thousand) 184,920 (US$ 6,000 thousand) 154,100 (US$ 5,000 thousand) 308,200 (US$ 10,000 thousand) 154,100 (US$ 5,000 thousand) 46,230 (US$ 1,500 thousand)	$ - - - 111,199 215,091 67,588 - - - - -	$ - - - - - - - - - - -	2.96 0.99 0.99 0.99 0.89 0.59 0.59 0.49 0.99 0.49 0.15	$ 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349	Y 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 N N Y N N N N

(Continued)

• 60 -

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-SIoT AVN Cermate Cermate (Shenzhen) B+B(CZ) ATR Advansus Corp. AdvanPOS AAU Advantech Innovative Design Co., Ltd AKR	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449 3,127,449	$ 34,610 (EUR 1,000 thousand) 30,820 (US$ 1,000 thousand) 30,820 (US$ 1,000 thousand) 30,820 (US$ 1,000 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 6,164 (US$ 200 thousand) 4,623 (US$ 150 thousand) 1,541 (US$ 50 thousand)	$ 34,610 (EUR 1,000 thousand) 30,820 (US$ 1,000 thousand) 30,820 (US$ 1,000 thousand) 30,820 (US$ 1,000 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 15,410 (US$ 500 thousand) 6,164 (US$ 200 thousand) 4,623 (US$ 150 thousand) 1,541 (US$ 50 thousand)	$ - - - - - - - - - - -	$ - - - - - - - - - - -	0.11 0.10 0.10 0.10 0.05 0.05 0.05 0.05 0.02 0.01 0.01	$ 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349 9,382,349	Y Y Y Y Y Y Y Y Y Y Y	N N N N N N N N N N N	N N N Y N N N N N N N

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 March 31, 2019 were US$1= NT$30.82, EUR1= NT$34.61, and JPY1=NT$0.278.

Note D: The latest net equity is from the financial statements for the three months ended March 31, 2019.

(Concluded)

• 61 -

TABLE 3

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		March 31, 2019	March 31, 2019		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 Share HwaCom System Inc. Phison Electronics Corporation Contec Allied Circuit Co., Ltd. BroadTec System Inc. BiosenseTek Corp. Juguar Technology Taiwan DSC PV Ltd., Fund Taishin 1699 Money Market FSITC 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 Same as above Financial assets at fair value through profit or loss - current Same as above Financial assets at fair value through profit or loss - current Same as above Same as above Financial assets at fair value through other comprehensive income or loss - non-current Same as above Same as above Same as above Same as above Financial assets at fair value through profit or loss - current Same as above Same as above Same as above Same as above	4,739,461 1,200,000 2,494,674 8,702,880 5,175,000 72,000 15,500 2,501,000 225,000 37,500 500,000 160,000 55,077,478 3,924,295 1,651,314 10,281,425 1,311,144	$ 1,056,900 79,800 31,278 140,396 74,261 21,744 6,843 166,317 4,155 - 4,943 - 745,004 700,004 24,461 128,907 19,422	0.64 2.41 - - 5.00 0.04 0.23 5.03 7.50 1.79 16.67 3.20 - - - - -	$ 1,056,900 79,800 31,278 140,396 74,261 21,744 6,843 166,317 4,155 - 4,943 - 745,004 700,004 24,461 128,907 19,422	Note A Note A Note B Note B Note A Note A Note A Note A Note C Note C Note C Note C Note B Note B Note B Note B Note B

(Continued)

• 62 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		March 31, 2019	March 31, 2019		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
AdvanPOS SIoT (Cayman) Advantech Innovative Design Co., Ltd. Cermate AiSC Yun Yan, Wu-Lian Co., Ltd Huan Yan, Jhih-lian Co.,	Fund Mega Diamond Money Market Fund FSITC Money Market Fund Capital Money Market Fund Mega Diamond Money Market Fund Shanghai Shangchuang Xinwei Investment Management Co., Ltd. Share Jama Pro Co., Ltd. Fund FSITC Money Market Fund FSITC Money Market	- - - - - - - -	Financial assets at fair value through profit or loss - current Same as above Same as above Same as above Financial assets at fair value through other comprehensive income or loss - non-current Same as above Financial assets at fair value through profit or loss - current Same as above	1,116,049 1,497,397 628,613 1,526,509 - 583,300 27,649 54,616	$ 13,993 267,100 10,141 19,139 109,919 1,880 4,932 9,742	- - - - 8.89 10.00 - -	$ 13,993 267,100 10,141 19,139 109,919 1,880 4,932 9,742	Note B Note B Note B Note B Note C Note C Note B Note B

Note A: Market value was based on the closing price on March 31, 2019

Note B: Market value was based on the net asset values of the open-ended mutual funds on March 31, 2019.

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

(Concluded)

• 63 -

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 THREE MONTHS ENDED MARCH 31, 2019

(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	Fund Mega Diamond Money Market Share ATJ Fund FSITC Money Market Taishin 1699 Money Market	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 Financial assets at fair value through profit or loss - current	- - - -	- Subsidiary - -	97,030,420 - - -	$ 1,212,819 - - -	- 500,000 3,924,295 55,077,478	$ - 323,130 700,004 745,004	94,535,746 - - -	$ 1,185,000 - - -	$ 1,181,637 - - -	$ 3,363 - - -	2,494,674 500,000 3,924,295 55,077,478	$ 31,182 323,130 700,004 745,004

• 64 -

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 THREE MONTHS ENDED MARCH 31, 2019

(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 AJP ACN AKR ANA Advanixs Corp. SIoT (Cayman) SIoT (Cayman) SIoT (Cayman) ACN AEU ANA SIoT (Cayman)	AEU AJP ACN AKR ANA Advanixs Corp. SIoT (Cayman) AKMC The Company The Company The Company The Company The Company The Company AEU ANA SIoT (Cayman) SIoT (Cayman) SIoT (Cayman) ACN	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Related enterprise Related enterprise Related enterprise Related enterprise Related enterprise Related enterprise	Sale Sale Sale Sale Sale Sale Sale Purchase Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale Sale Purchase Purchase Purchase	$ 1,318,372 230,948 1,649,813 239,199 2,350,363 165,220 253,904 (2,693,226) 2,693,226 (1,318,372) (230,948) (1,649,813) (239,199) (2,350,363) (165,220) (253,904) 146,402 166,767 104,870 (146,402) (166,767) (104,870)	15.32 2.68 19.18 2.78 27.32 1.92 2.95 46.51 94.91 71.87 100.00 79.78 66.30 79.78 100 49.04 20.00 23.46 4.42 7.98 5.66 20.26	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 Usual trade terms Usual trade terms Usual trade terms 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 Usual trade terms Usual trade terms Usual trade terms Usual trade terms Usual trade terms 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	$ 1,114,951 182,688 1,603,560 70,981 1,746,313 134,120 305,735 (1,184,178) 1,184,178 (1,114,951) (182,688) (1,603,560) (70,981) (1,746,313) (134,120) (305,735) 111,225 60,764 42,793 (111,225) (60,764) (42,793)	15.63 2.56 22.49 1.00 24.49 1.88 4.29 23.91 93.52 66.77 92.95 85.37 52.48 84.43 98.50 67.70 26.08 14.25 1.92 6.66 2.94 8.30	Note A

Note A: Unrealized gain for the period was $1,726 thousand.

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

• 65 -

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 THREE MONTHS ENDED MARCH 31, 2019

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
The Company AKMC LNC AKMC SIoT (Cayman)	ACN AEU SIoT (Cayman) AJP AKMC ANA Advanixs Corp. The Company LNC Dong Guan SIoT (Cayman) AEU	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Related enterprise Related enterprise	$ 1,603,560 1,114,951 305,735 182,688 409,919 1,746,313 134,120 1,184,178 220,291 169,138 111,225	4.72 4.02 6.64 10.11 (Note 1) 4.93 4.62 7.85 1.41 1.19 10.53	$ - - - - - - - - - - -	- - - - - - - - - - -	$ 586,239 335,406 162,206 70,894 289,457 - 64,964 402,810 23,486 - 61,334	$ - - - - - - - - - - -

Note 1: Sales revenue on materials delivered to subcontractors have been eliminated from consolidation.

Note 2: All intercompany gains and losses from investment have been eliminated from consolidation.

• 66 -

TABLE 7

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars/Foreign Currency)

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of March 31, 2019	Balance as of March 31, 2019	Balance as of March 31, 2019	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				March 31, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
The Company AKR AJP Advantech Corporate Investment	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 B+B AIN AIMobile Co., Ltd. AKST Winmate AVN Nippon RAD Inc. ARU ATJ ATR AKST ATJ 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. i-Link Co., Ltd. DotZero Co., Ltd	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 Tokoyo, Japan Moscow Fukuoka, Japan Turkey Gangwon-do, Korea Fukuoka, Japan Taipei, Taiwan Taichung, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Tokyo, Japan Taichung, Taiwan Taichung, Taiwan	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 industrial automation products Production and sale of electronic and mechanical devices Wholesale of computers and peripheral devices Production and sale of intelligent medical display Production and sale of electronic and mechanical devices 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 integration Intelligent metal processing integration	$ 2,332,397 998,788 226,000 2,900,000 249,059 266,192 304,865 3,719 4,922 1,219,124 27,134 47,701 40,600 15,472 35,140 73,355 43,216 10,000 81,837 1,968,044 19,754 180,000 83,313 540,000 76,092 251,915 23,822 323,130 58,482 55,579 193,878 71,500 18,095 150,000 578,563 5,000 5,000 49,733 10,067 4,900	$ 2,332,397 998,788 226,000 1,400,000 249,059 266,192 304,865 3,719 4,922 1,219,124 27,134 47,701 40,600 15,472 35,140 73,355 43,216 10,000 81,837 1,968,044 19,754 135,000 83,313 540,000 76,092 251,915 23,822 - - 55,579 - 71,500 18,095 150,000 578,563 5,000 5,000 49,733 10,067 4,900	74,623,834 33,850,000 10,000,000 300,000,000 20,537,984 1,000,000 19,230,000 655,500 - 25,961,250 1,450,000 51,000 500,204 1,200 2,000,000 600,000 1,794,996 1,000,000 1,000,000 230,467 3,999,999 18,000,000 69,740 12,000,000 8,100 850,000 500,000 500,000 260,870 22,023 300,000 5,500,000 658,000 15,000,000 29,599,000 500,000 500,000 154,310 1,000,000 490,000	100.00 100.00 100.00 100.00 25.77 100.00 64.10 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 76.00 16.62 60.00 16.08 100.00 50.00 60.00 24.00 30.00 55.00 39.69 17.86 19.65 50.00 50.00 2.92 25.00 49.00	$ 6,086,683 3,862,357 256,125 3,153,612 649,934 297,314 432,842 7,784 894 860,905 47,951 54,836 45,209 332,806 73,181 288,897 62,055 10,080 97,210 1,927,273 13,943 97,333 (31,105) 551,581 75,852 260,870 20,543 332,641 49,643 - 199,585 129,914 13,975 149,003 513,909 4,978 2,593 45,733 7,490 4,573	$ 90,658 5,871 16,915 24,769 116,505 18 (1,241) (791) 674 (20,687) 6,787 3,195 2,187 12,942 2,961 13,701 (1,404) 13 1,026 (18,725) (95) (28,175) (4,058) 33,493 (678) 37,712 (2,299) 45,511 4,076 (4,058) 45,511 891 (314) (5,465) (112,468) 14 (946) 37,712 (7,668) (113)	$ 95,283 3,260 18,532 24,596 30,014 18 (802) (226) 674 (17,825) 6,787 1,630 2,187 12,942 2,961 13,701 (1,123) 13 1,026 (14,739) (95) (12,678) (4,070) 8,342 (407) 7,165 (2,299) 13,396 1,503 - 8,038 318 (125) (976) (22,096) 7 (473) - (1,917) (56)	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 Subsidiary Subsidiary Subsidiary Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee Subsidiary Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee

(Continued)

• 67 -

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of March 31, 2019	Balance as of March 31, 2019	Balance as of March 31, 2019	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				March 31, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
ATC AAC (BVI) SIoT (Cayman) ANA AEUH ASG Cermate LNC Better Auto B+B BBIE B&B Electronics B+B (CZ)	Mildex Optiocal Inc. ACISM ATC (HK) ANA AAC (HK) SIoT (Cayman) A-SIoT (Former A-DloG) B+B AEU APL ATH AID LandMark Better Auto Famous Now BBIE (Former BBI) IMC B&B Electronics B+B (CZ) Conel Automation DMCC (Former B&B DMCC) B+B (CZ) Conel Automation	Kaohsiung, Taiwan Samoa Hong Kong Sunnyvale, USA Hong Kong Cayman Munich, Germany Delaware, USA Eindhoven, The Netherlands Warsaw, Poland Thailand Indonesia BVI BVI BVI Ireland Delaware, USA Delaware, USA Czech Republic Czech Republic Dubai Czech Republic Czech Republic	Manufacturing of electronic parts General investment Investment and management service Sale and fabrication of industrial automation products Investment and management service Design, development and sale of IoT intelligent system services Design, R&D and sale of industrial automation vehicles and related products Sale of industrial network communications systems Sale of industrial automation products Sale of industrial automation 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 Manufacturing automation Sale of industrial network communications systems Sale of industrial network communications systems Manufacturing automation Sale of industrial network communications systems	$ 202,948 18,214 1,212,730 504,179 539,146 US$ 50,000 522,719 1,328,004 431,963 14,176 7,537 4,797 28,200 244,615 US$ 4,000 US$ 39,481 - US$ 1,314 - - - - -	$ 202,948 - 1,212,730 504,179 539,146 US$ 50,000 522,719 1,328,004 431,963 14,176 7,537 4,797 28,200 244,615 US$ 4,000 US$ 39,481 - US$ 1,314 - - - - -	15,710,000 1 57,890,679 10,952,606 15,230,001 30,000,000 1 153,644 32,315,215 6,350 49,000 300,000 972,284 7,900,000 1 - - - - - - - -	15.00 100.00 100.00 100.00 100.00 100.00 100.00 40.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 1.00 100.00 0.01 99.00	$ 200,381 17,962 3,872,057 2,778,541 1,936,066 1,724,088 571,974 1,310,751 999,032 33,025 53,797 8,934 114,451 15,143 23,897 97,798 - - 295,406 (168) 3,907 - (16,596)	$ (16,697) - 5,935 38,270 (1,491) 64,350 28,543 (18,725) (22,318) 1,899 3,195 190 2,142 (5,656) (5,656) (4,130) - - 9,943 (3,222) 516 9,943 (3,222)	$ (2,472) - 3,324 38,289 (1,513) 71,838 31,405 (7,490) (22,318) 1,899 1,566 190 1,805 (5,751) (5,656) (4,130) - - 9,943 (32) 516 - (3,190)	Equity-meth investee 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)

• 68 -

TABLE 8

ADVANTECH CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE THREE MONTHS ENDED MARCH 31, 2019 (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, 2019	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of March 31, 2019	Accumulated Inward Remittance of Earnings as of March 31, 2019
					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”) LNC Dong Guan Co., Ltd. Shenzhen Cermate Technologies Inc. Cermate Technologies (Shanghai) 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 Production and sale of industrial automation products Production and sale of Human Machine Interface Sale of Human Machine Interface	US$ 43,750 thousand (Note E) US$ 4,230 thousand US$ 8000 thousand US$ 1,000 thousand US$ 4,000 thousand RMB 2,000 thousand US$ 520 thousand	Indirect Indirect Indirect Indirect Indirect Indirect Indirect	$ 1,149,586 (US$ 37,300 thousand) 164,332 (US$ 5,332 thousand) 246,560 (US$ 8,000 thousand) (Note C) 98,439 (US$ 3,194 thousand) 9,493 (US$ 308 thousand) 17,629 (US$ 572 thousand)	$ - - - - - - -	$ - - - - - - -	$ 1,149,586 (US$ 37,300 thousand) 164,332 (US$ 5,332 thousand) 246,560 (US$ 8,000 thousand) (Note C) 98,439 (US$ 3,194 thousand) 9,493 (US$ 308 thousand) 17,629 (US$ 572 thousand)	$ 8,445 1,457 (4,063) 2 (5,656) 2,129 225	100 100 100 100 100 90 100	$ 5,834 1,486 (4,113) 2 (5,751) 1,580 225	$ 3,872,057 1,234,569 674,413 30,611 23,796 83,385 31,620	$ - 346,170 (US$ 11,232 thousand) - - - 30,081 (US$ 717 thousand) (RMB 1,743 thousand) -
												(Continued)

• 69 -

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, 2019	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of March 31, 2019	Accumulated Inward Remittance of Earnings as of March 31, 2019
							Outflow	Inflow
Advantech Service-IoT (Shanghai) Co., Ltd. (“SIoT (China)”) Shanghai Yanlo Co., Ltd. (“Yanlo”) GSD Environmental Technology Co., Ltd. (“GSD”)	Development, consulting and services in intelligent technology Retail of intelligent technology Development, consulting and services in environmental technology		RMB 15,000 thousand RMB 2,200 thousand RMB 10,000 thousand	Indirect Other Indirect		(Note F) (Note G) (Note H)	$ - - -	$ - - -	(Note F) (Note G) (Note H)	$ (6,593) (58) (867)	100 45 40	$ (6,593) (26) -	$ 54,785 4,382 17,963	$ - - -
Accumulated Investment in		Investment Amounts
Mainland China as of March 31, 2019		Authorized by Investment Commission, MOEA			Allowable Limit on Investment
$1,692,203 (US$54,906 thousand) (Note E)		$2,912,243 (US$94,492 thousand)			$18,985,221 (Note I)

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

Note F: Remittance by AAC (BVI) and AiSC.

Note G: Remittance by AiSC; AiSC’s investments in associate accounted for using the equity method

Note H: Awaited for the Investment Commission’s approval.

Note I: The exchange rate was US$1=NT$30.82 and RMB1=NT$4.58.

• Note J: 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)

• 70 -

TABLE 9

ADVANTECH CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS BETWEEN ADVANTECH CO., LTD. AND SUBSIDIARIES FOR THE THREE MONTHS ENDED MARCH 31, 2019 (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	Payment Terms	% to Consolidated Assets/Revenue (Note C)
0	Advantech Co., Ltd.	AAC (HK) AAU AAU AAU AAU ABR ABR ABR ABR ACN ACN ACN AEU AEU AEU AEU AID AID AID AID AIN AIN AIN AiSC AJP AJP AJP AJP AKMC AKMC AKMC AKR AKR AKR AKR AKST AKST	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 revenue Other receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Receivables from related parties Sales revenue Other revenue Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Other revenue Sales revenue Receivables from related parties Other receivables from related parties Other receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Receivables from related parties Sales revenue Other receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties	$ 72 65,354 52,969 543 599 28,275 23,976 1,084 2,185 1,603,560 1,649,813 92 1,318,372 1,114,951 6,852 1,978 6,016 2,764 245 368 19,754 33,034 34 92 230,948 182,688 1,542 292 253,302 1 44 239,199 70,981 1,965 46,708 87 87	45 days EOM Normal 60-90 days Normal 60-90 days Normal 90 days EOM Normal 90 days EOM 45 days EOM Normal Normal Normal 30 days EOM Normal 30 days EOM Normal 45 days after invoice date 45 days after invoice date Normal Normal 60 days EOM 60 days EOM 45 days EOM Normal 60-90 days Normal 60-90 days 45 days EOM Normal 45 days EOM Normal 60 days after invoice date Normal 60 days after invoice date Normal 30 days EOM	- 1 - - - - - - - 3 13 - 11 2 - - - - - - - - - - 2 - - - 1 - - 2 - - - - -
							(Continued)

• 71 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		AMY AMY AMY AMY ANA ANA ANA ANA APL APL ARU ARU ASG ASG ASG ASG A-SIoT A-SIoT A-SIoT A-SIoT ATH ATH ATH ATH ATR ATR AVN AVN B+B B+B B+B B+B B+B (CZ) B+B (CZ) BBIE BBIE SIoT (Cayman) SIoT (Cayman) SIoT (Cayman) Cermate Technologies Inc. Cermate Technologies Inc. Cermate Technologies Inc. Advansus Corp. Advansus Corp. Advansus Corp. 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 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 revenue Other receivables from related parties Receivables from related parties Other revenue Other receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other revenue Other receivables from related parties Other revenue Other receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Other revenue Sales revenue Other receivables from related parties Sales revenue Receivables from related parties Other receivables from related parties Other revenue Other receivables from related parties	$ 28,651 18,793 492 320 1,746,313 5,569 5,815 2,350,363 4,485 2,977 14 14 76,328 60,948 658 695 90,995 80,469 798 485 24,656 20,567 501 359 6,690 6,623 9,937 12,146 81,980 50,242 1,130 730 520 509 236 227 253,904 305,735 2,174 300 5 210 165,220 134,120 645 400 440	Normal 45 days EOM Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal Normal 45 days EOM Normal 45 days EOM Normal 60-90 days Normal 60-90 days Normal 30 days after invoice date Normal 30 days after invoice date Normal 30 days after invoice date Normal 30 days after invoice date Normal 45 days EOM 45 days EOM Normal Normal 60 days EOM Normal 60 days EOM Normal 60 days EOM Normal 45 days after invoice date Normal 30 days EOM 30 days EOM Normal Normal 30 days EOM Normal 60-90 days 60-90 days Normal 60-90 days EOM	- - - - 4 - - 19 - - - - 1 - - - 1 - - - - - - - - - - - 1 - - - - - - - 2 1 - - - - 1 - - - -

(Continued)

• 72 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		LNC LNC	1 1	Sales revenue Receivables from related parties	$ 26 28	Normal 60-90 days EOM	- -
1	AAC (HK)	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Other receivables from related parties Other revenue	4,066 2,033	45 days EOM Normal	- -
2	AAU	Advantech Co., Ltd.	2	Sales revenue	171	Normal	-
3	ABR	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Sales revenue	846 2	30 days after invoice date Normal	- -
4	ACN	AEU AEU AiSC AiSC AKMC AKMC AKR AKR AMY ANA AXA SIoT (China) SIoT (China) Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 3 2 2	Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Sales revenue Other receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue	1,295 3,999 10,860 2,900 6,037 5,638 1 5 2 229 63 42,793 104,870 107 1,202	30 days EOM Normal Normal Immediate payment Normal 60-90 days 45 days EOM Normal Normal Normal 60 days EOM 30 days EOM Normal 30 days EOM Normal	- - - - - - - - - - - - 1 - -
5	AEU	ACN ACN AIN AJP AKMC AKR ANA ANA APL APL A-SIoT A-SIoT B+B B+B (CZ) B+B (CZ) SIoT (Cayman) Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 2	Receivables from related parties Sales revenue Receivables from related parties Sales revenue Unearned revenue Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other revenue	69 63 14 19 7 10 2,288 22 1,056 792 4,007 1,390 34 92 13 17 7,467 2,626 56	30 days after invoice date Normal 45 days EOM Normal 30 days EOM Normal Normal 30 days after invoice date Normal 30 days after invoice date Normal 30 days after invoice date 45 days EOM 45 days EOM Normal Normal Normal 30 days EOM Normal	- - - - - - - - - - - - - - - - - - -
							(Continued)

• 73 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
6	AID	ASG ASG	3 3	Receivables from related parties Other revenue	$ 129 392	45 days after invoice date Normal	- -
7	AIN	Advantech Co., Ltd.	2	Receivables from related parties	511	60 days EOM	-
8	AiSC	AAC (HK) ACN ACN ACN ACN SIoT (China) SIoT (China) 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 Receivables from related parties Sales revenue Receivables from related parties	4,733 38,299 27 4,918 1 232 42 3,390	90 days Immediate payment Normal Normal Immediate payment 30 days EOM Normal 45 days EOM	- - - - - - - -
9	AJP	ACN AKMC AKMC AKMC ATJ ATJ Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 2 2	Receivables from related parties Receivables from related parties Sales revenue Other receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue	62 938 1,802 18 37 46 413 517	45 days EOM 45 days EOM Normal 60 days EOM 45 days EOM Normal 60-90 days Normal	- - - - - - - -
10	AKMC	ACN ACN ACN AEU AEU AiSC AiSC AKST AKST ANA ANA SIoT (Cayman) SIoT (Cayman) SIoT (China) SIoT (China) Advantech Co., Ltd. Advantech Co., Ltd. Cermate Technologies Inc. Cermate (Shenzhen) Cermate (Shenzhen) Advansus Corp. Advansus Corp.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 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 Receivables from related parties Sales revenue Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue	72,872 44,527 981 1,279 747 60 51 301 3,447 715 462 169,138 25,141 777 504 2,693,226 1,184,178 25 5,643 4,849 382 526	Normal 60-90 days Normal Normal 30 days after invoice date Normal Immediate payment 30 days EOM Normal Normal 60-90 days 30 days EOM Normal 30 days EOM Normal Normal 60 days EOM Normal 60 days EOM Normal 30 days EOM Normal	1 - - - - - - - - - - - - - - 22 3 - - - - -
11	AKR	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Other revenue	24 24	90 days EOM Normal	- -
							(Continued)

• 74 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
12	AKST	AKMC AKMC Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 2 2 2	Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue	$ 497 584 2,225 6,050 556	Normal 30 days EOM 30 days EOM 30 days EOM Normal	- - - - -
13	AMX	Advantech Co., Ltd.	2	Other revenue	2,462	Normal	-
14	ANA	AEU AKMC AKR A-SIoT B+B B+B B+B Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 2 2 2	Sales revenue Sales revenue Sales revenue Sales revenue Rental revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other revenue	3,025 1,728 21 23 37 986 2,171 40,094 9,409 71	Normal Normal Normal Normal Normal 60-90 days Normal Normal 45 days EOM Normal	- - - - - - - - - -
15	APL	AEU AEU A-SIoT Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 2 2	Sales revenue Receivables from related parties Receivables from related parties Receivables from related parties Other revenue	27,374 16,142 990 137 88	Normal 30 days after invoice date 30 days after invoice date 30 days after invoice date Normal	- - - - -
16	ASG	AKMC AKMC AMY AMY ANA ATH ATH ATH Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 2 2	Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Other revenue Receivables from related parties Receivables from related parties Other revenue	16 16 1,048 419 1,713 2,445 386 94 6 148	30 days after invoice date Normal Normal 30 days EOM Normal Normal Normal 30 days EOM 60-90 days Normal	- - - - - - - - - -
17	A-SIoT	AAU AEU AEU AKMC AKMC AKR ANA ANA APL APL Advantech Co., Ltd.	3 3 3 3 3 3 3 3 3 3 2	Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Unearned revenue Sales revenue Receivables from related parties Sales revenue Sales revenue	7 272 208 26 16 78 229 1,046 13,710 17,839 10,003	30 days after invoice date 30 days after invoice date Normal 60 days after invoice date Normal Normal 30 days after invoice date Normal 60 days after invoice date Normal Normal	- - - - - - - - - - -
							(Continued)

• 75 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Other receivables from related parties	$ 9,948 29,034	30 days after invoice date 60 days EOM	- -
18	AVN	AKR	3	Sales revenue	5	Normal	-
19	B+B	AEU AEU AEU AIN ANA B+B (CZ) BBIE BBIE Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 2 2	Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties Receivables from related parties Other revenue Receivables from related parties Sales revenue Receivables from related parties	5,540 8,075 2,500 4 2,402 271 685 530 24,337 18,368	Normal 90 days EOM Normal Normal 30 days EOM 45 days EOM Normal 45 days EOM Normal 90 days EOM	- - - - - - - - - -
20	B+B (CZ)	AEU AEU AEU AEU B+B B+B Conel Automation Conel Automation Advantech Co., Ltd. Advantech Co., Ltd.	3 3 3 3 3 3 3 3 2 2	Receivables from related parties Sales revenue Other revenue Other receivables from related parties Receivables from related parties Sales revenue Other revenue Other receivables from related parties Sales revenue Receivables from related parties	40,599 58,651 2,554 1,462 4,948 8,003 136 162 15,554 15,396	45 days EOM Normal Normal 45 days EOM 45 days EOM Normal Normal 45 days EOM Normal 45 days EOM	- - - - - - - - - -
21	BBIE	AEU AEU AEU APL B+B B+B B+B (CZ) Advantech Co., Ltd.	3 3 3 3 3 3 3 2	Commission revenue Sales revenue Receivables from related parties Receivables from related parties Unearned revenue Other revenue Other revenue Receivables from related parties	163 14,312 12,308 5 1,308 1,343 5,356 5,533	Normal Normal 60 days after invoice date 30 days after invoice date 60 days after invoice date Normal Normal 60 days after invoice date	- - - - - - - -
22	DMCC	Advantech Co., Ltd.	2	Other revenue	6,221	Normal	-
23	SIoT (Cayman)	AAU AAU AEU AEU AJP AJP AKR AKR ANA ANA	3 3 3 3 3 3 3 3 3 3	Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue	85 83 111,225 146,402 1,076 1,039 277 265 60,764 166,767	60 days EOM Normal 45 days EOM Normal 60 days EOM Normal 60 days EOM Normal 30 days EOM Normal	- - - 1 - - - - - 1

(Continued)

• 76 -

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		**Transaction **	Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
		ASG ASG	3 3	Receivables from related parties Sales revenue	$ 420 410	60 days EOM Normal	- -
24	LNC Dong Guan Co., Ltd	LNC LNC	3 3	Sales revenue Receivables from related parties	2,084 3,331	Normal 90 days EOM	- -
25	Cermate (Shanghai)	Cermate (Shenzhen)	3	Sales revenue	240	Normal	-
26	Cermate Technologies Inc.	AKMC AKMC Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Cermate (Shenzhen) Cermate (Shenzhen)	3 3 2 2 2 3 3	Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other revenue Receivables from related parties Sales revenue	1,856 1,859 978 443 15 11,610 15,301	Normal 60 days EOM Normal 30-60 days Normal 30 days EOM Normal	- - - - - - -
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	3 7,509 5,100 6,281 17,331 10,964	Normal Normal 40 days EOM Normal Normal 60 days EOM	- - - - - -
28	Advansus Corp.	Advantech Co., Ltd. Cermate Technologies Inc.	2 3	Receivables from related parties Sales revenue	506 335	60-90 days Normal	- -
29	LNC	Advantech Co., Ltd. Advantech LNC Dong Guan Co., Ltd Advantech LNC Dong Guan Co., Ltd	2 3 3	Receivables from related parties Receivables from related parties Sales revenue	168 220,291 76,484	60 days EOM 90 days EOM Normal	- - 1

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

1. “0” for Advantech Co., Ltd.

2. Subsidiaries are numbered from “1”.

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

1. From the parent company to its subsidiary.

2. From the subsidiary to its parent company.

3. Between subsidiaries.

Note C: For assets and liabilities, amounts are shown as a percentage to consolidated total assets as of March 31, 2019, while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the three months ended March 31, 2019.

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

(Concluded)

• 77 -